When Square Goes Away — Where Does a CBD Merchant Go Next?
MRB Compliance Group is a financial and marketing compliance company that serves the cannabis, hemp, and CBD industries. From the moment the Farm Bill passed, CBD began to shine in its potential as the gentler, federally legal, all-natural panacea cousin of cannabis. However, in banking and merchant processing terms, it is still considered “marijuana-related” and, therefore, a high-risk business. Here we offer the common problems dispensaries often run into with compliancy and their solutions.
About a year ago, in the Fall of 2019, Square expanded its CBD beta program. That was a welcome relief to many CBD eCommerce and retail merchants who had been through the drama of T1, Elavon, and GreenBox from either before or since the Farm Bill was signed at the end of 2018. Even larger players like Esquire were having trouble taking Visa payments, and others completely flatlined after the acquiring bank saw the processor was failing in their ongoing compliance reviews. Given what I’ve seen, I refer to the last 18 months as the roller coaster ride for CBD business owners.
With Square’s CBD program, things stabilized for many companies. It remains a preferred option for those who don’t want the hassle of in-depth applications and additional onboarding and monthly fees, not to mention higher rates and transaction fees. Not to mention it is a recognizable brand with a robust interface that allows for eCommerce, in-store, and on-the-go payments. This is not to say it doesn’t have its own high-risk rates and fees, but on the whole, they are wholly competitive with other options in the industry that allow CBD business owners to accept credit cards online or in person.
3 Main Problems with Square
From what we’ve seen in talking to hundreds of CBD merchants and fellow merchant processing professionals, Square has three main problems.
The first is that there is no time scale for when they will board your company — and in a few cases, even if they will accept your CBD business. We often recommend early stage CBD companies apply and see where they land. If they still need help after some time that Square is not proving to be a good option for them, and want to look into other solutions, we would be more than happy to help.
The second is that companies can be randomly shut down. Sometimes, there is a logic in this universe like the website was out of compliance, or a company was failing to meet certain revenue thresholds within a certain time period. In some instances, the merchant is alerted to the breach and is allowed to fix it. In others, as we often hear, they find themselves with no ability to get a response from Square and no court of appeals to dispute why they have been shut down. This leaves many a CBD merchant scrambling to get onto another solution.
The third is that companies are aware that Square is not the most secure option, and once they have exceeded a certain revenue, it would put their business in jeopardy not to accept credit card payments. If they were to get shut down, it would bring their entire operation to a grinding halt. Other merchants have also seen large and unanticipated reserves (a percentage of money held by a processor in anticipation of chargebacks — typically with any processor can be anywhere from 1% for 3 months to 30% for 6 months) imposed on their account. Therefore, they want to get ahead of it. With a few months of banking and merchant processing statements, and having already met certain monthly revenue requirements, more CBD credit card processing options become available.
When Square Works and When It Doesn’t
We definitely endorse Square for everyone who is starting or who are either just getting started and don’t want any additional upfront or monthly fees, prefer the turn-key nature of Square, and sustain an unexpected shutdown or the imposition of a sizable reserve increase. We would recommend looking into applying to other more sustainable and secure CBD merchant processing options for everyone else. MMJ FinSol can help. We work with a network of processors and agents and recommend a solution right for your needs — based on the best options the industry has to offer at any given time.
CBD Merchant Processing and Compliant Banking
For more information about merchant services, visit us at www.mrbcompliancegroup.com.
In addition to providing merchant services, we can also provide compliant and secure banking so that your business never goes without a checking account. Even if your processing solution is strong, getting your bank account shut down will instantly seize up your ability to accept payments. Therefore secure banking and processing are both important.