Merchant processing companies and the banks they’re partnered with like to ascribe the term ”high risk” to several business industries, allowing them to charge those who sell any products related to that industry at higher rates, or even refuse them service altogether.
High risk companies tend to be in industries in which the government has some form of regulatory power; the pharmaceutical, firearm, and cannabis industries are perfect examples of this. The list of business types considered high risk extend far beyond that, but a good estimation of whether your business will be labeled as such can be based on the following –
- If you have a high fraud rate or number of chargebacks –
- A chargeback is at its base exactly what it sounds like; the amount charged to the customer by the company is reversed and sent back to the customer’s account.
- It is important to note the difference between a chargeback and a return. A return is of no concern to a merchant processing company. A chargeback however, is ia reversal initiated by the bank rather than a furthering of customer/merchant relationship, generally caused by a disputed charge.
- Products (or services) of uncertain legality –
- This pertains directly to practices such as those who sell drug paraphernalia or are in the sex industry.
- Questionable marketing programs and sales –
- For most banks, this means those companies that participate in some form of multi-level marketing. Most classically, this includes business like Avon,rr It Works!, and Rodan & Fields. If it’s an old friend from high school contacting you on Facebook, it’s probably multi-level marketing.
- If your company has a high sales average per ticket.
- If each of your general transactions is for a large amount, you may be considered high risk. Generally, this is more common with companies with a business-to-business campaign.
- Bad credit –
- Depending on the bank, your company’s credit history may not be enough. If you personally have bad credit, you merchant processing company may label you high risk.
Being designated high risk is not the end of the world, or the end of your business. With a little research, it is extremely possible to find a merchant processing company to suit your needs.
Our competitors pricing is really quite simple; they all partake in the same system, the only variance being their individual level of greed. When signing up a new client, they shave a small amount off their best rate and compensate themselves for this with incremental price hikes over the years of contracted service, usually leaving the customer right back where they started, or worse. Those of you who have worked with these companies and their sales reps will most likely agree it’s a problem. Like a cut spilling out cashflow every credit purchase, high risk credit processing can drain a businesses operating expenses.
Now, in terms of who is responsibility for these ridiculously high fees to start with I recommend looking at the banks and government. Regulations by the government cause the banks to label a business as high risk, the card companies are not so much to blame being they have set costs per plan to use their service, but nothing is done on their part to relieve the businesses of these high service rates. I really boils down to, as it usually does, government regulations and bank greed. Some of these “high risk” labels are understandable; industries where high chargebacks are common, businesses with a large number of fraud complaints – ok, we get it. But cbd? Cannabis? That we do not get, how many consumers are really going to bring back that flower? Or tincture? Now granted many of these processing companies are working out deals with the banks to be able to accept CBD businesses as clients, but they are still falling into outrageously high rates – in some cases, as high as 7%.
The truth is the bank has to get paid, but so does the processing company, ISO, the marketing company working the sales campaign and their sales reps; merchant processing is an industry, just like any other. However, what most companies don’t tell you is the breakdown of how their structure is affecting your bill, thereby allowing themselves to get away with taking as much as possible by keeping their clients in the dark.
It works like this: Most high risk companies pay a base rate of at least 1-1.5% (compared to 0.3 – 0.5% for non-high-risk industries), and that’s if they’re moving higher volume and/or have multiple locations. The processing sales rep will share a small portion off the customer’s base rate (most sales reps are paid only by this commission, so this amount is their livelihood), which raises processing costs incrementally. However, what they fail to mention while trying to achieve the sale are any fees above the base rase, leading the business owner to an unhappy surprise when they receive their bill and see their total effective rate. These fees include miscellaneous authorization, processing, and interchange fees that also factor in, and raise the total cost of service. It gets even worse when expensive equipment and their fees are added in, each party adding more to your base rate, until you’re eventually paying 3.7-6% and understandably at odds with your “trusted provider”.
It’s a messed up system because everyone along the chain wants “more”; not more relationships, but more money, and they want it at the sale rather then through respectable service. Naturally, with this motivation the focus very quickly shifts from providing the quality service the customer is due, to filling up the pockets of those in the system.
We know how it works well and believe it needs to change. Our purpose as a company and, including you, as a community, is to fight against this system of greed and focus on the people and business relationships that make this industry great. Team up with The CBD Processors to take the power of profits back for your business and industry.
As we explored in our introductory article,“‘High Risk’?,” an industry being considered high risk is usually grounds for many merchant processing companies to charge higher rates, or even drop them as a client altoghether.
The CBD industry is subject to this unfortunate label for several reasons.
First and foremost, it is not legal to a national extent, which is the level on which almost every bank that serves merchant processing companies operate. Secondly, it is highly subject to regulation; for corporations, any question of the legality (or even the possibility of a future illegality) is enough for them to consider themselves at risk. To compensate themselves in case of any possible future liability, they charge you more. Partnered with staunch government regulation, this only serves to put a limit on the growth of the CBD industry.
To put it simply: If you’re not paying some merchant processing company out the nose simply to be able to take the money you already made, you can take those funds and put them towards growing your business.
We can make that happen.
For a quick reference, see our “competitors prices” tab and compare it to the guide on the “our prices” tab. Or, if you would like to learn what discounted rates your business may qualify for, send us a copy of three month’s merchant statements, and we can give you a direct comparison of what your bill would be with us. We’re so confident in our abilities that we offer you this promise – if we can’t beat your current rates, we’ll pay you $250.
Click here to join The CBD Processors in our pursuit of taking back control of the CBD market.
This message was brought to you proudly in partnership with The TN CBD Association.