The U.S. cannabidiol (CBD) market is a rapidly growing industry. Sales are expected to reach an all-time high of 1.8 billion U.S. dollars in 2022. As the industry grows, so does the opportunity for CBD sellers across the country. However, as a business owner, you are well aware of the frustrations that come with setting up payment processing solutions for your CBD business.
As a CBD merchant, it is extremely frustrating when your merchant account cannot support the sale of CBD products. Many times, merchant account providers may not want your business on the basis that you are a high-risk merchant.
A lot of businesses resort to cash-only instead of credit cards for CBD products, which can turn a lot of customers away from the sale if they do not have cash with them. Additionally, it is extremely frustrating when your merchant account provider decides to drop your business because you are considered too high-risk for their processing services. Even though your business sells legal CBD or hemp products that are age-restricted, payment processing providers are hesitant to do business with high-risk industries.
At PayFrog, a family-owned and operated company, we make payment processing easy. We help the people in businesses get simple, secure, and cost-effective payment processing solutions backed by stellar customer support. With merchant services from PayFrog’s processing partners, CBD payment processing has never been easier.
What is CBD?
Hemp is a class of the cannabis plant, and CBD comes from hemp. CBD products derived from hemp are not psychoactive and usually contain less than 0.3% of tetrahydrocannabinol (THC), which is the psychoactive substance most commonly found in marijuana. While derived from the plant, CBD is not psychoactive nor intoxicating because of the low concentration of THC.
CBD is known for helping many conditions, like epilepsy, anxiety, chronic pain, migraines, and more. The health benefits of CBD continue to be explored by researchers and scientific organizations, and the cannabidiol market faces large periods of growth in the next few years.
There are various types of CBD products on the market from skincare, oils, drinks, supplements, and so much more. As CBD becomes more popular, more and more individuals are finding benefits with CBD while CBD merchants find opportunities to conduct business in a period of booming CBD sales.
Is CBD Legal?
Although cannabis remains federally illegal, the 2018 Farm Bill reclassified hemp — the plant from which CBD is derived — and removed it from the Department of Justice and Drug Enforcement Agency’s list of controlled substances.
CBD products have been available for several years, but the market for CBD products has recently become very popular with the passing of the 2018 Farm Bill, which legalized industrial hemp. As a result of the 2018 Farm Bill, CBD products have since become extremely popular throughout the United States due to the perceived benefits of CBD, such as anxiety and depression reducing effects, pain relief, and much more.
As a result, many CBD merchants have started to sell these products to keep up with the intense demand. Although CBD is legal in the majority of states, banks and credit card processors have been slow to approve merchant accounts for sellers of CBD products. In addition, many CBD sellers have had their merchant accounts closed due to being a “high-risk” industry. This has left many CBD businesses without a way to conduct e-commerce business or accept credit or debit cards from their customers to process payments.
Why is CBD Payment Processing High-Risk?
The reason why merchant account providers are so hesitant to do business with high-risk accounts for CBD processing depends largely on the legislative environment surrounding cannabis products, high chargeback rates, and unsupported claims about CBD products. Even with CBD products being legalized in most states and the increasing popularity of these products, financial institutions are slow to approve CBD merchant accounts.
For example, PayPal does not allow high-risk industries to have merchant accounts on the platform. As CBD is considered a high-risk business, a CBD merchant account cannot be set up on PayPal for payment processing.
This leaves CBD merchants with very few options to conduct business. Every business owner understands the importance of payment gateways for online payments and processing credit and debit cards for customers. Without a CBD merchant account for sellers, customers are limited to cash-only, which can mean poor business and upset customers for CBD businesses.
What is a CBD Merchant Account?
A CBD merchant account is a merchant account designed for CBD sellers and businesses. As CBD merchants are considered high-risk businesses, many credit card processing providers and payments processors will not allow CBD merchant accounts.
This requires that CBD businesses set up a CBD merchant account specifically for the sale of CBD products. A CBD merchant account has been specifically approved for merchants who sell CBD products.
How Can CBD Payment Processing Help Businesses?
The payment processing industry is very strict with the industries that are allowed to operate on their platforms. As CBD payment processing is a high-risk business, you may find it extremely difficult to get approved for a merchant account, or you may have experienced a payment processor who suddenly shut down your merchant account.
CBD business owners know how difficult it can be to find merchant account providers who accept businesses selling CBD. Additionally, as a business owner, you understand the necessity of merchant accounts for payment processing to sell CBD online and accept credit and debit cards. Without the ability to set up a payment processing account to start accepting payments, it is extremely difficult to do business and cater to your customers.
These are just a few of the reasons why all CBD merchants need a CBD merchant account for their business:
Accept Credit Cards and Debit Cards
A credit card and a debit card are the most popular ways for customers to pay for products and services. Being able to accept card payments is vital for business owners to retain their customers and attract new ones. Without a way for CBD merchants to accept CBD card payments, customers may be willing to take their business elsewhere.
This is why it is necessary for CBD merchant processing to be able to handle CBD credit card processing and debit card processing for hemp-derived CBD products.
Lessen the Chances of Discrepancies
CBD merchants are extremely busy helping customers, managing an online store, and doing the daily administrative tasks it takes to run a business. A CBD payment processor can help you save time dealing with discrepancies and mistakes. With CBD payment processing, you will never have to spend hours reconciling accounting errors again.
Grow Your CBD Business
Every business owner knows that an important aspect of growing your business means a great payment processor system. For CBD businesses, this means a fast processing system that allows your customers to pay in-store with their credit or debit cards, a lightning-fast payment gateway for online transactions, and a payment processor for purchases in your app.
With a CBD merchant account, you can meet customers where they are looking for CBD products. You never have to worry about not accepting payments from your customers ever again.
Improve Your Customer Support
With a CBD payment processor, you will be able to provide improved support to your customers. Troubleshooting and customer service can be included in your merchant account depending on the payment processing companies you select to handle your merchant account services.
Additionally, a merchant account allows for better security and protection against fraud for your customers when buying CBD or hemp products.
Easy Payment Processing
With CBD payment processing services, it will never be easier for your customers to purchase your products in-store, online, or through your app. The best part about CBD payment processors is that they can be integrated into your existing online stores. Additionally, payment processing can be combined with other processes for your business, such as billing and accounting.
Alternative Payment Options for Your Customers
CBD credit card processing systems and payment gateways for online purchases to process payments are essential for your customers and your business. The more payment options for your customers, the better the chances of you doing business. The goal of a CBD merchant account is to provide your business with a range of options for customers to purchase your CBD and hemp products.
Alternative payment options, like cash, credit cards, gift cards, and even buy-now-pay-later options, will encourage your customers to buy CBD products. The best CBD merchant will have a variety of ways for customers to pay for their products.
Benefits of Opening a CBD Merchant Account
A merchant account is necessary for all businesses looking to grow their business, support their customers, and process payments as easily as possible.
While CBD merchants have a more difficult time opening a merchant account due to the high-risk nature of CBD businesses according to financial institutions, this should not stop CBD businesses from investing in a merchant account for their customers.
There are many benefits to merchant processing services for CBD businesses, such as:
- Accept and process major credit cards and debit cards, like Visa, Mastercard, Discover, and American Express.
- Integrate in-store terminals, virtual terminals, and online shopping carts with other areas of the business.
- Easy processing for CBD businesses.
- Integrate processing services with third-party platforms, like Shopify, WooCommerce, WordPress, and more.
- Strengthen your customer support by working with representatives in the financial sector that know about the CBD industry.
- Keep your merchant account secure with security and fraud protection from merchant services.
- Keep up-to-date with changing legislation surrounding high-risk merchants.
How to Select a Merchant Account Provider
Selecting the right merchant account provider is the same process for low-risk industries as it is for CBD businesses. There are many factors that should be considered before committing to a merchant account. Here are a few factors that you should consider as a business owner:
For any merchant who sells CBD products, it can be extremely difficult to get approved for a merchant account. For example, the merchant account provider, Stripe, does not allow CBD products to be sold on the platform.
It is always important to do as much research as possible before going through the long and tedious process of waiting for your merchant account to be approved. Additionally, researching to ensure the platform you use allows CBD businesses is better than the stress of learning your merchant account provider shut down your payment processing account due to your business being a high-risk merchant.
A CBD business is considered a high-risk merchant. This means that the price of a merchant account may be significantly higher as compared to a low-risk merchant. When looking for a payment provider, it is important to be aware of these pricing considerations.
It is always a good idea to research and ask your merchant provider about pricing differences between high-risk and low-risk businesses, annual fees, processing rates, and rolling reserve for your business.
Depending on your merchant account provider, you may have to sign a long-term contract. As CBD merchants are high-risk, a payment processor company may have you sign an extended contract over a few years. Before committing to an account, make sure you understand the length of your contract and any renewal clause that may extend your account.
A great question to ask your merchant services agent is “how many days will it take to receive my money from a credit card batch?” Some CBD processors reduce their risk with slower funding times taking a few days or a week to get each day of sales. However, for CBD merchants with good credit, next day funding is available.
If you own a brick-and-mortar CBD store, a credit card processor will be extremely important. Your credit card terminal should be able to accept EMV payments at the bare minimum. Contactless payments and mobile payments should also be considered to allow your customers to have a wide array of payment options.
Additionally, you may have the option of leasing or buying hardware for your business. Depending on your contract and the price you are willing to pay, buying your terminals may be more cost-effective over a longer time period.
Growing your business means setting up e-commerce capabilities for your customers. A high-quality gateway payment processor will allow your business to sell to your customers online. This will extend the reach of your business, but be careful of selling CBD products over the internet, as not all states have legalized CBD.
As a high-risk merchant, customer support is one of the most important factors in determining a merchant account provider to use for your business. Great customer support will allow you to resolve issues quickly and get back to what matters most: running your business.
Get the Best CBD Payment Processor with PayFrog
At PayFrog, we specialize in providing simple, secure, and cost-effective payment processing solutions backed by our stellar customer support. We know the hassle that goes into setting up a merchant account for CBD businesses across the country. We work to make it as easy as possible for CBD merchants to sell their products to their customers.
As a leader in the merchant services industry, PayFrog is here to help businesses succeed. We have the knowledge and resources to help you decide what merchant services will be best for your CBD business. We offer various hardware and payment processing solutions to help your business be as efficient as possible. To learn more about how PayFrog can help you and your business, contact us today!