What to look for in a CBD payment processor

As evidenced by the plethora of products being sold online, and the increasing number of brick-and-mortar shops popping up across the country, CBD business is feeling good. With estimated U.S. revenue of at least $16 billion by 2025, and similarly eye-popping predictions for the global industry, CBD is an astonishingly fast-growing market.

Cannabidiol, or CBD, has become enormously popular in health and wellness spheres in recent years. Derived from the hemp plant (Cannabis sativa), the main distinction between CBD and marijuana is the former’s lack of psychoactive ingredients like THC (tetrahydrocannabinol).

While the CBD industry is extremely high growth, it is also problematic because of its association with marijuana, variations in state laws and ambiguous federal legal and regulatory status. Therefore, while cannabis-derived products are now legal in most states and more widely accepted across the country, many banks and payment processors still do not accept CBD transactions or approve CBD businesses for merchant accounts, meaning suppliers are constrained in their payment options.

Why is CBD a special case?

The passing of the 2018 Farm Bill removed hemp-based products — those containing less than 0.3% THC — from the Schedule I list of controlled substances. This was expected to open legal payment opportunities for CBD shop proprietors to acquire merchant accounts and accept credit cards like any other business. 

However, due to the legal gray area and other issues — including product efficacy and quality control, as well as lack of full Federal Drug Administration approval — CBD businesses remain marginalized in the high-risk category, struggling for easy and affordable payment solutions.

With a growing number of eCommerce CBD businesses entering this evolving marketplace, some payment processing companies have recognized the need and taken on the risk, providing gateway systems that allow merchant processing. 

Until cannabis is fully legal and federally regulated, businesses will have to rely on CBD payment processors to securely, efficiently, and compliantly handle high-risk transactions.

Why use a payment processor? 

There are many reasons for your CBD business to use a trusted processor to facilitate transactions, support ecommerce and help manage day-to-day operations: 

Expanded payment options

CBD processors accept credit and debit cards, allowing you to acquire and serve customers who prefer these common types of transactions. A processing system also enables customers to buy products through alternative payment gateways, such as prepaid cards, gift cards and bank transfers.

Easy payment integration

Processors can be incorporated into your existing eCommerce store and product purchases combined with your other workflow payments, such as accounting, billing and customer relationship management.

Improved customer service

The right provider will include customer service, troubleshooting, data security and fraud protection in your package. Fraud protection is particularly important when you are dealing with chargebacks, alternative payments and other unconventional business operations.

Great for scaling

CBD processors constantly update their software and adapt their programs, in case of changes in the payment market, ensuring your online store is an up-to-date, well-oiled machine.

Fewer headaches

A CBD processor that handles administrative, accounting and billing issues not only reduces the chance for mistakes and discrepancies related to running your business, it also frees you up to concentrate on what matters most: attracting and retaining customers. 

What to look for in a CBD payment processor? 

First and foremost, you need a processor that securely handles high-risk merchant transactions. Here are five other considerations for selecting a payment solutions provider for your CBD business:

1. Lower prices

Any high-risk merchant account is going to cost more than a similar low-risk one. Be prepared for tiered pricing; higher statement, compliance, monthly and annual fees; and, often, rolling reserve restrictions and other expenses. Business owners should shop around to find the best prices for their needs.

2. Reasonable contracts

The unfortunate reality for CBD merchants is they usually must deal with longer-term contracts and early termination fees, as well as automatic renewal clauses and other unfavorable terms. Being aware of your options and contract terms can help you make better, more sustainable decisions.

3. The right hardware

You will need a countertop credit card terminal or mobile point of sale system with card reader if you’re going to sell CBD products from a brick-and-mortar shop. Your system should be equipped to take both magstripe and EMV cards, and if it is NFC-capable you can also accept contactless payments like Apple Pay.

4. Integrated eCommerce 

To expand your potential customer base, you’ll want to sell your products online, especially given the growing number of people who use their smartphone to shop. While the legal issues around CBD sales complicate that, dedicated high-risk processors can provide your business with trusted payment gateways that securely handle internet transactions and can exclude customers who live in places where CBD products are illegal.

5. Customer support

Above all else, what truly separates the ordinary processors from the outstanding ones is customer service. CBD and other merchants considered high-risk experience more frequent customer support issues, so you’ll want to find a provider with a good reputation for effectively resolving them.

How FLEX Payment Solutions can help

Selecting a CBD payment solutions provider is a significant decision. You want a processor known for fair prices, honest service, and great customer service.

Because of the classification by financial institutions and legal issues surrounding CBD, it’s important for you to understand your best options in order to find a trustworthy, knowledgeable payment solutions partner that is capable of serving your specific needs and helping your business grow. 

Despite changing policies, numerous restrictions and few proficient providers, FLEX Payment Solutions is here for CBD merchants. With a unique compliance background, innovative business model and special banking relationships, we are ready and able to help you navigate this complex legal and regulatory landscape. 

Our custom payment solutions and first-class customer service can help any legal business — such as hemp-derived CBD shops and Native American tribal lending — to operate efficiently as a high-risk merchant and succeed in a high-growth industry.

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