Despite several states legalizing marijuana, most U.S. banks do not service cannabis companies because marijuana remains federally illegal. On the other hand, dietary supplements ARE legal, yet nutraceutical companies can also have a hard time finding a financial institution that will process online payments for their products.
Drew Brasiel is an account representative at TouchSuite, which specializes in providing payment processing solutions and e-commerce for businesses within the nutraceutical space. He says most people aren't even aware that payment processing is an issue until it's too late.
“Traditional financial institutions don't necessarily want to be associated with the sale of certain nutraceutical products because they're considered more of a high-risk business. And some of the reasons that they're considered of higher risk is they tend to be subject to higher amounts of fraud, chargebacks, and just certain regulatory uncertainties, despite their legality that have to do with the FDA and FTC. It's an ever-changing landscape and quite frankly, it's a lot to keep up with, and a traditional financial institution would rather just not deal with all of the updates and changes,” Brasiel explained.
Brasiel said while it’s tempting to jump into business, being paired with the right financial institution is worth the extra time and legwork.
“It may be great to get an instant approval, but you want to be aligned with an organization that is going to properly vet you up front and when you call them pick up the phone. Do a little bit of testing, call them a couple times here and there and see what their response rates are and things like that. I highly encourage that you test these individuals out before pairing with them. That way, if you find yourself in an adverse situation, you know, you can actually depend on them to resolve something.”
Brasiel noted that the problem often doesn’t come to the surface until businesses are already knee deep in their online business.
“A lot of these companies you'll see don't really even have a firm stance on a lot of products. It's kind of in a gray area and at any point in time you could have the lights shut off on you,” cautioned Brasiel.
To hear more on how to go about online payment processing and what you can do to avoid getting the lights unexpectedly shut off, listen to the NutraCast.