The CBD market is not just booming in North America; it’s going global, but while the demand for CBD products continues to grow every day, the regulatory roadblocks continue to frustrate merchants across the world. This challenge is especially more difficult for those merchants that want to sell internationally. This is where offshore CBD merchant accounts come into play.
If you are ready to take your CBD business to international countries, then this guide will break down how offshore CBD merchant accounts work. We will also discuss the advantages, the associated risks, and how you can get one for yourself.
What Is an Offshore CBD Merchant Account?
An offshore CBD merchant account is a payment processing solution that is established by a foreign acquiring bank outside the country of incorporation of the merchant. These accounts enable CBD businesses to accept credit card payments from international customers. Some offshore CBD payment processors operate in jurisdictions that are more tolerant towards CBD products; they diversify the risk across multiple banking partners.
Why Consider Offshore Processing for CBD?
There are many reasons why CBD businesses can consider offshore processing; some of these are listed below.
1. Access to Global Markets
When you work with an offshore payment processor, you can tap into booming CBD markets like Europe, Asia, Latin America, and Australia. These accounts can certainly help you to make your brand’s presence felt in different countries.
2. Greater Regulatory Flexibility
The regulatory restrictions around CBD products vary based on the jurisdiction in which the acquiring bank is registered; some jurisdictions are more flexible, while some have stricter rules. When merchants get a payment processing account from processors located in jurisdictions that are flexible in onboarding CBD businesses, that means fewer restrictions for certain product types such as edibles and topicals.
3. Higher Approval Rates for High-Risk Categories
If domestic payment processing companies have declined your application, then you can approach an offshore bank, which may approve your product that the domestic bank has routinely declined.
4. Multiple Currency Support
To make your brand global, you will have to accept payment from international customers, and to offer them convenience, you must allow them to pay in their local currency. Your merchant account must allow you to accept payments in international currencies like US dollars, euros, GBP, CAD, and JPY.
5. Backup Processing Stability
Some merchants always maintain two accounts, one from a domestic payment processor and one from an offshore processor. This is done to have a backup option and ensure stability for the business. Offshore merchant accounts can be expensive, but they can always be used as a backup option if the domestic solution stops working. Basically, the offshore merchant account works as a safety net against sudden domestic merchant account shutdown.
The Key Risks You Must Understand
While many claim that offshore merchant accounts are the best for CBD businesses, at QuadraPay, we disagree with it. When you choose an offshore CBD processor, then there are certain risks that are associated with it.
Higher fees: Offshore payment processors generally charge higher processing rates when compared to domestic payment processors.
Longer onboarding times: The onboarding time frame for offshore merchant accounts is significantly higher when compared to a domestic solution. In most cases, offshore merchant accounts take weeks for approval.
Stricter compliance: Some merchants believe that when they apply for an offshore CBD merchant account, the compliance requirement will be simpler, but in reality, it is not the case. Irrespective of where the payment processor is located, the underwriters must follow the industry guidelines, and that means you will have to provide the full KYC, COA lab reports, and your account will go through a full risk assessment, and if approved, it will be subject to ongoing monitoring.
Reputation risks: Most of the ripoffs that happen with CBD merchants are actually because they were working with some offshore solution. While not all solutions have the same quality of service, it is important for you to work only with vetted institutions.
How to Successfully Secure an Offshore CBD Merchant Account
If you really need an offshore account because none of the domestic payment processors are ready to onboard you, then you must be prepared to face the underwriting and risk assessment.
1. Prepare Comprehensive Documentation
You will be presenting the same KYC document to the offshore processor that you will share with a domestic PSP. These include the company formation papers. Remember when you approach an offshore processor, in most cases they will need a local business registration.
They will also need a bank reference letter. The account where the processor will make settlements must belong to the applicant company.
You must share the updated COA from ISO Certified Labs. These reports will be checked by underwriters.
To represent yourself or your company as the owner of the applied domain, you must provide the domain ownership proof, which can be the WHOIS information.
Even though you are applying to an offshore payment processor, they will still need your personal identification documents. These include your latest photo ID and utility bills.
2. Partner with a CBD Processing Specialist
Remember offshore banking requires deep expertise and solid connections. You should work with the processor that specializes in both domestic and offshore high-risk CBD processing. If any provider guarantees you instant approval for an offshore CBD merchant account, then it is a red flag, and you should not continue with them.
3. Demonstrate Full Compliance
You have to present full compliance with the payment processor’s requirements, and for that, you must have transparent labeling. You should not be selling any illegal products that go beyond the approved THC limit. Your website must have clear refund and shipping policies, and these must be customer-friendly. Age verification and disclaimers are a must to get approval of such merchant accounts.
4. Diversify Processing Across Multiple Jurisdictions
If you are a large business that sells CBD products across different countries, then we suggest you diversify and not rely on one processor. You should have a redundancy in your payment infrastructure so that if one goes down, the other one is there to support you.
QuadraPay Is Your Partner for Offshore CBD Merchant Accounts
We have access to trusted processing partners in different jurisdictions. Many of these are offshore processors that offer fully compliant solutions to global CBD businesses. When you work with these processors, you get direct support throughout the onboarding. The rates are highly competitive when you compare them with other solutions. Our partner solutions offer a multi-language gateway interface.
Ready to Expand Internationally? Request your offshore CBD merchant account evaluation and discover global CBD processing opportunities.
Frequently Asked Questions (FAQ)
Q1: Do I need a foreign company to apply for an offshore CBD merchant account?
While in the past it was not mandatory, now if you are applying for an offshore CBD merchant account, you must have a local company; without that, you will not be able to get the account approval. This is because the payment processors can only onboard businesses registered in the same jurisdiction. It may sound complex initially, but there are consultants available that can assist you in getting it sorted. We can introduce them to you.
Q2: Are offshore merchant accounts legal?
If you work with reputed payment processors, then you can rest assured that the solutions are legal and fully compliant.
Q3: Is offshore processing more expensive?
Yes, the rates you will pay for an offshore CBD processing account will be slightly higher than what you would pay to a domestic payment processor.
Q5: How long does offshore onboarding take?
Grade one quality offshore merchant accounts take a few weeks for approval; you cannot expect fast onboarding with offshore solutions. It’s a complex solution and requires a lot of back-and-forth communication, and this takes time.