Generating a whopping $16 billion in sales in the year 2020, the US cannabis market is the largest in the world. Today, thousands of vendors have joined the industry hoping to cater to the demand in one way or another. While most focus on cannabis-infused and derived products, others take on the angle of cannabis supply.
Cannabis seeds merchants provide farmers and cultivators with what they need in order to grow quality hemp or marijuana. The problem however is that the cannabis seeds industry is mainly seen as high-risk, making merchant account services difficult to access.
Whether you’re operating online or in-store, a merchant account should come in handy. Banks and financial institutions offer these specialized accounts only to businesses. The reason is that merchant accounts allow holders to accept digital payments.
For almost every business, the ability to accept cashless transactions makes up a huge chunk of its success. That’s because customers often strongly cling to their payment preferences. So if you can’t accommodate their method of choice, you can bet they’ll step out and find someone who will.
The problem however is that merchant acquirers don’t just hand out merchant accounts. That’s because when customers pay with a card, they have the option to initiate a chargeback if the products and services paid for don’t meet expectations.
Chargebacks cost loads of penalties not only for merchants but also for acquirers and card issuers. So to avoid getting slapped with expensive fees and charges, banks opt to steer clear of partnerships with vendors that risk frequent chargebacks.
And that’s how they decide who is high risk and who isn’t.
Merchant acquirers use a long list of factors to measure a potential client’s risk. The more items you tick on the list, the higher your perceived chances of financial failure. Some of these items might be within your control, but others (like industry-related risks) are tougher to resolve.
|FACTOR||LOW RISK||HIGH RISK|
|Location||Within the US, EU, Canada, Japan, or Australia||Everywhere else|
|Average transaction cost||Under $500||More than $500|
|Average monthly revenue||Under $20,000||Over $20,000|
|Transaction type||Card present||Card not present|
|Payment scheme||One-time||Subscription or recurring|
|Industry||Low risk industries include furniture, apparel, groceries, food, etc.||High risk industries include cannabis, hemp, online casinos, adult products and services, etc.|
In general, the cannabis industry (otherwise termed cannabis-related businesses or CRBs) falls into the high-risk industry category. Here’s why:
Presently, cannabis remains illegal on a federal level, but some states have levied their own regulations and laws to control the movement, sale, and use of cannabis products within their jurisdiction.
The problem however is that cannabis-related laws are ever-changing, and new regulations could change the landscape for vendors entirely. That said, banks try to avoid the risks involved in a volatile industry atmosphere.
Another reason is that most traditional, conventional banking institutions avoid litigation like a disease. Onboarding merchants that operate in highly regulated industries put these financial institutions at risk of getting involved in messy legal battles.
Let’s face it — cannabis remains shrouded in controversy and notoriety. Many people still hold onto preconceived notions about cannabis and cannabis-related products. This gives it something of a negative reputation not only among private individuals but also across various other industries and businesses.
Remember that banks have a reputation to protect. When merchants carry reputation risk, they might negatively impact the merchant acquirer’s image, affecting the way other stakeholders perceive their brand.
That said, traditional banks try to distance themselves from merchants that carry these unique reputation challenges.
For retail cannabis seed merchants, this might not be an issue. But since most of these vendors operate at the level of a wholesale supplier, transactions can cost upwards of a thousand bucks each.
When the average transaction cost exceeds $500, banks tend to get a little nervous. That’s because if even just one of those transactions turns into a chargeback, they would owe over $500 plus penalties and fees.
Merchant acquirers tend to shy away from businesses with such steep single average transaction costs because of the risk of having to pay large sums of money for just a single chargeback. That said, if more than one transaction results in a chargeback, you can imagine the size of the money they would owe.
You’ve probably tried your luck with a conventional banking institution only to be met with rejection. Don’t worry — you’re not alone. Very rarely will these conservative institutions accept a hard-to-place merchant. And even when they do, they impose restrictive contract terms and expensive fees that limit your chances of growth.
For high-risk merchants, traditional merchant acquirers might not be the best way to go. Although they could serve you an approval letter (after some time of negotiating and perhaps even begging), there’s no guarantee that the merchant account you’ll get will come with terms that put your best interest forward.
So what’s a high-risk cannabis seeds merchant to do? You could get much better luck working with a high-risk merchant account placement specialist. And that’s where Shark Processing comes into the picture.
Working closely with a network of merchant acquirers that accept hard-to-place partners, Shark Processing delivers tailored solutions that speed up the application process.
Our simple, easy, three-step application procedure allows high-risk merchants to skip the long wait and enjoy fast, guaranteed placement in as little as 24 hours.
For every high-risk cannabis seeds merchant account, there’s a fitting merchant service provider. All you need are the professionals who can find them for you.
Contact Shark Processing today to get started on your high-risk cannabis seeds merchant account, or fill up our web-based pre-application form and get a response in 24 hours or less.