With the growth of the cannabidiol (CBD) industry, businesses need to find a reliable payment processor that can handle the sale of their products.
The market size of hemp-derived CBD was $9.1 billion in 2021. It’s forecasted to reach $59.3 billion by 2030, with an 18.2% CAGR from 2022-2030.
This means that more businesses than ever need to be able to process CBD payments safely and securely for their customers.
Payment processing is crucial to any business—especially in the CBD space—as it involves handling sensitive customer data and secure online transactions.
But finding a high-risk payment processor and CBD merchant account provider is easier said than done.
CBD businesses have limited options for processing payments safely and securely for their customers. Many banks and traditional payment processing companies are still reluctant to provide services for this type of business due to its legal status in many countries.
This article will explain why finding an appropriate payment processor is crucial for businesses selling CBD products and how you can identify and select a reliable CBD payment processor that offers secure transactions.
We will also discuss the basics of CBD payment processing and why selling CBD requires a high-risk payment processor.
What is CBD?
Cannabidiol (or CBD) is a naturally occurring compound found in cannabis from the hemp plant.
Unlike its cousin tetrahydrocannabinol (THC), CBD has no psychoactive properties and will not get you “high.”
While it isn’t backed by the FDA, it has recently gained popularity for its potential therapeutic effects without experiencing any mind-altering consequences. Many people use it for the following:
- Depression and anxiety relief
- Chronic pain management
- Improved sleep
- Inflammation reduction
- Stress reduction
- Tobacco and heroin addiction
Studies into CBD are still ongoing, and further research may uncover more potential therapeutic benefits of this compound.
Due to the lack of psychoactive content associated with CBD-based products, they are legal in many parts of the world at various concentration levels.
The THC concentration must be 0.3% or less to be classified as a legal hemp product in most countries, including the United States of America. And for CBD products to be considered legal in America, they must come from the hemp plant.
The popularity of CBD products continues to grow, and more businesses are beginning to offer them as part of their product lineup.
This might make finding a reliable CBD payment processor more critical than ever.
Selling CBD Requires a High-Risk Payment Processor
Traditional payment processors view CBD as a risky venture due to the legality of its business.
CBD companies require a high-risk payment processor and CBD merchant account that can accept payments for their products—enabling them to conduct business like any low-risk company.
High-risk payment processors are accustomed to dealing with unpredictable industries like adult entertainment, gaming, eCommerce, travel, and cryptocurrency.
The requirements for each high-risk merchant account will vary. But specific criteria must be met based on the following:
- Country and location
- Company size
- Currencies you will accept on orders
- Credit history
- Your background in credit card processing
- Whether you have high chargeback ratios
- Whether you’re purely e-Commerce or will have a brick–and–mortar shop
The Basics of CBD Payment Processing
CBD payment processing is complex, but understanding the basics can help navigate the elaborate network.
Payment processing for CBD sales involves working with banks, processors, and gateways to facilitate payments.
Banks accept funds from customers’ accounts during transactions.
Banks handle the funding process when customers make debit or credit card payments, which involve transferring money from their account into the merchant’s account after all other checks have passed.
Banks also manage disputes that customers may file when they believe they have been overcharged or otherwise dissatisfied with their purchase transaction.
Payment processors act as a middleman between the merchant, its bank, and the customer’s banking institution. They are the front-facing part of the payment network, as you’ll often see their logos on point-of-sale (POS) terminals at in-person shops.
Payment processors execute the transaction. They are responsible for authorizing, validating, and settling the customer’s payment. This usually involves verifying the payment information provided by the buyer.
In addition, processors are also responsible for managing fraud prevention measures and handling chargebacks and refunds that may arise from transactions.
Payment gateways facilitate the transmission of payment data from the customer’s bank to the payment processor.
They also provide a layer of security within the payment processing framework.
Payment gateways collect and protect customer information sent through by encrypting it using secure socket layers (SSL). This ensures that customer data remains secure during transmission from one point to another.
Payment gateways also serve as the virtual terminal and are used for online transactions that do not use cards—such as PayPal, Stripe, or Square.
The entire process requires verification from all sides:
- From banks ensuring sufficient funds are available on customers’ accounts
- From credit card companies confirming their identities
- From processors verifying that all requirements have been met
- From gateways transferring data securely between institutions involved in the transaction process
This complex network ensures e-commerce businesses dealing with CBD products have access to secure methods for accepting payments online without the risk of fraud or other security issues arising during transactions.
What to Look for in a CBD Payment Processor
Here’s what to look for in a payment processor specializing in high-risk credit card processing for CBD companies.
- Allows you to sell various CBD items – A CBD payment processor must allow you to sell different CBD products, such as CBD oil, tinctures, edibles, creams, vapes, topicals, supplements, and more.
- Security for both the seller and buyers – Ensure that the processor uses secure payment technology and has fraud prevention tools.
- Discusses your processing history and helps startups – Understand their background in helping startups get off to a fast start. The payment processor should be willing to discuss your processing history and help you get started, even if you’re a new business.
The processor should also identify the compliance requirements that must be met by CBD e-commerce businesses and provide clear guidance on how to meet them.
- Pricing and approvals – Look for a payment processor that offers competitive rates to ensure you get the best value for your money. Additionally, the processor should have a fast approval process so you can start selling your CBD products right away.
- Has a history of working with CBD companies – Choose a quality, high-risk payment processor tested in this field that can help ensure your CBD transactions run smoothly. They should have experience working with what’s considered high-risk industries as it suggests lower rates of account shutdowns.
- Gets sustainable accounts that won’t shut down – Find a payment processor that can provide sustainable accounts so you don’t have to worry about your account being shut down or frozen.
Get Help With Your CBD Payment Processing With Von Payments
As a high-risk business within the cannabidiol industry, finding the right provider to handle your needs is essential.
Von Payments is experienced in providing specialized payment processing services and solutions for small and mid-sized high-risk businesses like those within the CBD industry.
Von Payments provides comprehensive processing solutions tailored to the specific needs of CBD businesses. Our payment solutions include high-risk merchant processing, chargeback management, extensive banking/BIN options, tailored solutions for clients’ needs, and more.
With fast and easy approvals and no requirement for processing history, we are here to help business owners hit the ground running.
Looking for a reliable payment processor for your CBD business? Contact Von Payments today.