2019 has been dubbed the “CBD Gold Rush” with thousands of new CBD companies all vying to enter the increasingly crowded market. The problem is, each new CBD company needs a merchant account to process customer’s payments— and there isn’t enough to go around. It’s simple supply and demand. Moreover, in this type of climate most banks do not want to take on the risk of working with inexperienced companies that are solely profit-driven, with little regard for their customer’s safety. Making matters even more fraught for new companies, is that there is only one real bank accepting CBD merchants at the moment.
This single bank is being inundated with applications, allowing them to leverage the glut to their advantage so that they can be highly selective with their new applicants. The bank is only selecting the companies generating the highest revenue and saying “no” to those who are pushing bold product claims. All other companies are being left in the dust. Some startups may receive a notification that their application will be processed in a matter of months. For a startup company not generating any revenue, those extra 3-4 months could be an-all-but-certain death sentence.
The cold truth is that some of the newer companies that can’t sustain themselves until 2020 will be out. What are the other companies with an actual shot at gaining a merchant account doing to set themselves apart? These companies are publishing their lab reports, avoiding making any egregious claims on their product, and actually generating revenue through whatever means they currently have. A combination of being squeaky clean, reputable, and profitable seems to give these companies a competitive edge, allowing them to win-out over the new kids on the block.
Industry-wide, this can be seen as a positive because it will weed out companies with lower quality products, or those who inflate claims and are purely profit-driven. All-in-all it will make for a safer industry that is guided by self-regulation, largely for survival purposes.
As the lucky few CBD companies are granted merchant accounts within the next couple of months, it’s still important for consumers to know what to look for when purchasing a CBD product. Even though some will have passed the “merchant account” test, a reputable company will have maintained the following criteria prior to the process of obtaining a payment processor, and continue these practices thereafter. We use the following as a guideline in determining safely-produced CBD products:
- Company has been in business for at least 5 years.
- Hemp is grown in the US, and hemp oil products are manufactured in domestic GMP certified facilities.
- Clean extraction techniques without the use of dangerous solvents.
- Organically-grown hemp, that is verified to be free of pesticides, heavy metals, mold, or toxins.
- 3rd party lab tested for quality and purity.
You can read product reviews here to see where different companies fall within these guidelines.