The CBD business is booming in the UK. In 2021 alone, it was estimated that the industry would generate £690m in sales. However, despite the financial potential of the industry, securing a merchant account has been a consistent problem.
Although you might have suppliers lined up and a working marketing strategy, if you need the ability to process payments, your progress is still in the water.
The source of CBD is the bone of contention. Any business or industry that borders on the legality or has a high number of chargebacks is considered high risk. This is not just for the CBD industry but also other digital products with higher rates or chargebacks.
In the case of CBD, the problem is the remarkable plant from which it is harvested. Different regulations in different territories create the perfect storm for payment processing in the CBD business.
These payment processors are liable to close a business account if that business is likely to undermine its relationship with a bank. As a result, it’s easier for them to close small business accounts that negotiate a deal with a large financial institution to cover the small CBD businesses.
Most traditional payment processors have opted to avoid risk by not going there at all. Luckily, specialist CBD merchant accounts have sprung up and are suited to fill the gap.
What is CBD?
Before getting carried away with the financial talk, what exactly is CBD, and why is it so controversial?
CBD, or cannabidiol, is a popular naturally occurring chemical compound extracted from the hemp plant. It is used for various conditions and is thought to have certain medicinal benefits. It comes in many forms, including tinctures, gummies, CBD oils, and body products like lotions, balms, and edibles.
CBD is closely related to THC or Tetrahydrocannabinol, a mind-altering substance in the cannabis plant that also occurs in minute traces in the hemp plant. However, the hemp plant is more abundant in CBD than THC.
CBD lies in a legal grey area, and most banks frown against CBD businesses, which creates a difficult environment for businesses in this industry and jeopardises their liquidity and cash flow.
CBD Requires a High-Risk Payment Processor
Although CBD is legal in the UK under certain requirements, CBD is still considered a high-risk industry. Finding a payment processor can be challenging, especially regarding consistency and reliability.
Still, it’s possible to succeed with your online CBD store if you can find a high-risk payment processor. Many payment processors will be reluctant to onboard your business, But the number of high-risk payment gateways willing to conduct business with you is increasing. Some companies will run business with you just like any low-risk company.
Understanding the Basics of CBD Payments
Before jumping into the nitty gritty of high-risk payment processors, let’s go through the typical process of getting a CBD payment processor to help you understand the basics of CBD payments.
Processor
First, you need to know what a payment processor is when starting a CBD business. Depending on the CBD business you set up, you should know which payment processor you can use.
The golden rule here is to offer potential customers as many options as possible. With more options, you have higher opportunities of closing a sale. With a growing number of CBD payment processors out there, you only need to choose the right one.
Gateway
The payment gateway is a merchant service provided through an e-commerce application service provider. The role of the gateway is to authorise credit and debit card payments and direct payment processing.
Although there’s no shortage of payment gateways, when dealing with CBD, you will need to find one that can handle high-risk products. It may involve paying extra, but if it means running your business efficiently and safeguarding you from the risk of random removal, it might be worth the extra fee.
Bank
Finally, there are banks. These institutions thrive on bureaucracy and conservativeness as far as money goes. Although CBD might be legal in the UK, most banks still struggle with businesses in this industry.
With CBD being classified as a high-risk product, most banks are still reluctant to add CBD businesses as their clients. So it’s vital to ensure you partner with a bank that understands the CBD business and won’t put bottlenecks in your account that make it hard for you to run or grow the business.
As you work through your CBD payment processing options, you need to pay special attention to these three elements. Ensuring you work with the right platforms, services and institutions at every corner will make the final product more seamless and convenient.
What is a CBD Merchant Account?
A CBD retail merchant account allows you to accept credit and debit card payments for CBD products bought from your online store. Merchant service providers willing to take on CBD accounts are harder to find, but they exist. You just need to dig a little deeper and search a little wider.
Benefits of a Specialist CBD Merchant Account Service?
Most merchant account service providers drop CBD businesses after a few months. If your business can’t process payments, your customers might look elsewhere and never return. That’s why a specialist CBD merchant account service is crucial. Here are some of the benefits you stand to gain from working with a specialist CBD merchant account service:
They accept debit and credit cards
Most people are increasingly turning to credit and debit cards. However, if your CBD store is mainly online, you have no option. You need a payment processor that accepts debit and credit cards. SpecialisedSpecialised CBD merchant accounts give you this vital feature allowing you to gain and retain more customers by supporting more payment options and making the checkout process easier.
Working payment integrations
SpecialisedSpecialised CBD merchant account payment processors provide easy integrations that allow you to continue using the same services with a reputable provider. Most high-risk CBD payment processors allow payment integrations that connect to a merchant’s CRM tools to help them keep track of customer profiles, billing data and much more.
Better customer experience
When thinking about business growth, you think of payment processing and customer satisfaction. The truth is, you can’t have one without the other. Having a reliable and diverse payment processor substantially affects the customer experience. Most CBD payment providers offer 24/7 customer support and can help you troubleshoot any malfunctions in record time. The best platforms will also provide the tools you need to protect your business from fraud and build customer trust.
What to Look for in a CBD Payment Processing Gateway
Seeing how vital a payment processor is in the CBD market and how hard it can be to find the right one, you shouldn’t take any chances. Instead, you should take every precaution possible to find the right service provider to support your CBD business now and in the future. Here are a few things you should consider when looking for CBD payment processing.
Thorough merchant account approval process
In most cases, when looking for a merchant account, the onboarding process is relatively fast. That’s excellent for most businesses but not for a CBD merchant account. Some companies will hurriedly process applications for new merchant accounts only to realise later that you specialise in CBD outside their risk appetite. As a result, they might terminate your account, making it impossible for your business to process payments.
When applying for a CBD merchant account, go for a payment processor that thoroughly underwrites new accounts and does its due diligence. Then, provide them with additional information about the products you sell and how you market them. It seems like a lot of work, but it bears fruit in the long run.
Instant approvals are excellent for other types of businesses, but for the CBD market, it could mean oversight which could later hurt your business when the payment processor drops your account.
Is the payment processor backed by a CBD-friendly sponsor bank?
It’s vital to ensure you have confidence in all the parties responsible for facilitating your online CBD business transactions.
One of the reasons not all payment processors can offer CBD merchant accounts is the sponsor banks. If the sponsor bank has a low-risk tolerance, chances are the payment processor won’t approve your account.
Sponsor banks have various vital roles in the payment process. They ensure that business owners get their money and that the issuing banks and card brands get their share of interchange fees to cover the cost of providing secure payment processing services.
That’s why you should ensure the sponsor bank backing your selected payment processor is CBD-friendly. If they are, your customers will have a smoother time processing payments at checkout.
The payment process should understand CBD industry regulations
This is not a compulsory requirement but an important one to have. The CBD market is volatile. Although not illegal, there are various requirements that the payment processor should be aware of to ensure you don’t engage in anything illegal without knowing.
The payment process should be up to speed with the legal advancements in the CBD industry, and ensure that you understand them to avoid unexpected payment processing shutdowns and surprise fines. You can tell if the platform knows its stuff by the questions they ask during the approval process.
Transparent and competitive rates
Because there are limited specialised payment processors for CBD businesses, it’s easy for some of them to get overzealous with their rates because there isn’t too much competition. Some might make their rates a mystery until it’s too late and you’ve already signed up.
This is where the reputation of the processor comes into play. You need a trustworthy, honest, transparent, and upfront partner. All relevant costs should be upfront with no hidden fees. You should always be able to tell how much you’re paying and why.
Offer multiple solutions
As a forward-thinking CBD business, you should be able to meet your customers where they are and accommodate the different payment processes at their disposal. Unfortunately, not all CBD payment processors support all payment channels. You need to have a clear plan of where you want to sell your product and work with a partner that can help you meet your goals by supporting the most common payment methods in that sector.
The payment processor should be forward thinking
The CBD industry is falling behind in payment processing. As legislation changes, your CBD payment processor should be willing to evolve and expand its technology and programs to give you the best chance at success.
The Best CBD Payment Processors
Up to this point, you clearly understand what a good payment processor means for you, your CBD business and your customers. Here are some great options to get you started, beginning with our very own Pay iO.
Pay iO
Pay iO is a leading payment processor with special CBD merchant accounts. The platform offers cutting-edge technology and features that help cut costs, fight fraud, and move money faster and more seamlessly.
What separates Pay iO from other payment processors is that it doesn’t assume all CBD businesses require the same solutions. It is designed to cater for small and large businesses. It can take care of online CBD shops within the UK or large businesses that need to receive global payments in multiple currencies.
With our understanding of the CBD industry and payment processing, you have everything you need to unlock the full potential of the CBD business.
We also have other features like open banking that can help you move your money easily and grow your business faster. With rapid but keen onboarding, we take time to understand your business and its needs and help you start processing payments in the shortest time possible.
Closing Remarks
CBD payment processing doesn’t have to be a nightmare. It only requires time and patience to understand the available options and carefully select what works best. It’s critical to remember that you shouldn’t only focus on the payment processor and their sponsor bank because that will significantly impact the efficiency and customer experience your online store delivers.
