Have you ever wondered why CBD businesses find it hard to get reliable payment processors? The CBD market is growing fast, with a projected revenue of $16 billion by 2025. But, finding secure ways to handle payments is key for growth. Legal issues, potential chargebacks, and stigmas make it tough.
After the 2018 Farm Bill made hemp-derived CBD legal, the need for compliant payment gateways grew. Businesses face a complex landscape of rules and fees to find good payment processors. They need payment methods that are stable and flexible, so it’s important to know their options.
Understanding CBD payment processing is crucial for managing money and following the law. It’s important to know why CBD is considered high-risk and why choosing the right payment processor matters. Let’s look at some key points in the next sections.
Understanding the Basics of CBD Payment Processing
Starting a CBD business needs a good grasp of credit card processing for CBD. It’s a high-risk industry. Knowing the basics of CBD payment processing is key.
What is a Payment Processor?
A payment processor handles transactions from different payment methods, like credit cards. They ensure these transactions are secure and follow the rules. For CBD merchants, this means making sure transactions meet federal and state laws. Companies like PayPal don’t support CBD merchants, but Vendo offers services for CBD products.
These services help CBD merchants make legal and smooth transactions.
Why is CBD Considered High-Risk?
CBD is seen as high-risk because it comes from the cannabis plant. The rules around it keep changing. High-risk payment gateways are key for CBD businesses to deal with fraud and chargebacks.
They also need to follow rules like disclaimers and age checks. Big names like Stripe and Shopify don’t allow CBD sales.
Importance of Choosing the Right Payment Processor
Finding the right payment processor is crucial for CBD businesses. A good processor handles high-risk categories and works well with online stores. For example, Vendo supports many CBD products.
It’s also important to know the fees, like online rates at 3.8% + 30¢ per transaction. This helps make smart choices.
Here’s a table comparing different CBD payment processors and their features:
| Payment Processor | Supported Products | Online Rate | In-Person Rate | Additional Features |
|---|---|---|---|---|
| Vendo | Oils, Seeds, Plant Material, Extracts, Smoking Peripherals, Branded Products | 3.8% + 30¢ | 3.5% + 10¢ | Custom Pricing Based on Volume |
| PayPal | Does Not Support CBD Products | N/A | N/A | N/A |
| Stripe | Does Not Support CBD Products | N/A | N/A | N/A |
Challenges Faced in CBD Payment Processing
The CBD market is expected to hit $50 billion in the next five years. But, CBD businesses face big problems with payment processing. These problems include unclear rules, high chargeback rates, and payment processors’ doubts.
Regulatory Issues
Regulatory uncertainty is a big problem for CBD payment processing. The FDA’s rules on CBD can change, making it hard for banks to help. This forces CBD companies to look for special banking options or high-risk accounts, which cost more and have tough rules.
Risk of Chargebacks
Chargebacks are a big worry for CBD sellers. They happen when customers are unhappy or confused about CBD products. High chargeback rates can lead to more fees and even losing your account. Since most sales are made with cards, the risk of chargebacks is higher.
Reputation Concerns
Reputation issues also make CBD payment processing tough. Because CBD is linked to cannabis, many payment processors are cautious. This can mean higher fees, strict application rules, and needing high-risk accounts. So, CBD businesses look for payment solutions that help them grow and make transactions smooth.
High-risk merchant accounts are key for CBD, hemp, delta-8, and THCa businesses. They face strict rules and are more likely to face chargebacks and fraud. These accounts have higher fees, need reserve accounts for chargebacks, and may delay payouts.
Despite these hurdles, new solutions like KORONA POS help. They offer easy connections with CBD-friendly payment processors. It’s crucial to pick a payment processing company that knows CBD rules, is clear about fees, and has good customer support. This ensures payments are done right, boosts the industry’s image, and helps it grow.
Why Do CBD Businesses Need High-Risk Payment Gateways?
The CBD industry is growing fast, reaching $5.18 billion in 2021. It’s expected to grow even more, at 16.8% each year until 2030. This growth means CBD businesses need special payment gateways to deal with complex laws and keep transactions safe.
CBD companies face many challenges to succeed. They need high-risk payment gateways for several key reasons.
Legal Gray Areas
One big reason is the legal uncertainty around CBD products. With laws changing at the federal and state levels, finding a payment processor that gets it is crucial. CBD’s link to cannabis makes things even more complicated. So, a payment gateway that can handle these issues is essential.
Fraud Protection
Fraud and chargebacks are big problems for CBD businesses. Regular payment processors often shy away from CBD due to fraud risks. But, high-risk merchant services have fraud protection that helps avoid these issues. They use advanced tools to keep transactions safe.
Compliance with Federal and State Laws
Following federal and state laws is key for CBD businesses. High-risk payment gateways help by ensuring transactions are secure and follow the law. This is important because laws vary a lot, with 33 states and Washington, D.C., allowing CBD for medical use, and 10 states plus Washington, D.C., for recreational use.
Having the right payment solutions is crucial for CBD businesses to operate well and legally. High-risk payment gateways offer tailored services that keep up with changing laws and protect against fraud. For more help, Epic CBD Marketing provides services like web design and payment gateway advice: Epic CBD Marketing.
| Payment Processor | Recommended For | Features |
|---|---|---|
| Square | Small to medium-sized CBD businesses | Fraud protection, tailored services, and quick approvals |
| Authorize.net | CBD businesses needing robust security | High-level fraud protection, adaptable integrations |
| PayKings | High-risk transactions | Chargeback prevention, fast approvals, industry specialization |
Choosing the Best CBD Payment Processor
When picking a payment processor for your CBD business, look at several key factors. It’s vital to see how well they handle high-risk transactions. CBD companies face unique challenges like chargebacks and regulatory hurdles. Epic CBD Marketing offers tailored solutions to meet these needs.
Processing High-Risk Transactions
CBD payment processing can be tough due to its high-risk nature. Companies like PaymentCloud and PayKings specialize in high-risk industries. They provide solutions to manage risks and ensure smooth transactions.
Platform Integration
Another important factor is the payment processor’s integration capabilities. Whether you use Shopify, WooCommerce, or another platform, seamless integration is key. High-reputation processors like Square and PayKings offer robust API integration features.
POS Availability
For businesses with physical locations, a reliable Point of Sale (POS) system is crucial. Providers like Bankcard International offer POS solutions for high-risk industries like CBD. They ensure secure and efficient transactions.
Low Fees and Reasonable Contracts
High-risk merchant accounts often have higher fees. But, it’s important to find a provider with clear and reasonable pricing. Companies like National Processing and Corepay are known for their straightforward fee structures.
Customer Support
Exceptional customer support is essential. Issues can pop up anytime, and having 24/7 support is crucial. PaymentCloud and PayKings are known for their around-the-clock assistance.
In summary, choosing the best CBD payment processor involves several factors. Look at their ability to handle high-risk transactions, integration capabilities, POS availability, fee transparency, and customer support. With the right choice, you can streamline your payment processing and grow your CBD business. Visit Epic CBD Marketing’s offerings to learn more about optimizing your CBD eCommerce operations.
FAQ
What is a Payment Processor?
Why is CBD Considered High-Risk?
What Are the Important Factors When Choosing the Right Payment Processor?
What Regulatory Issues Affect CBD Payment Processing?
What is the Risk of Chargebacks in CBD Transactions?
How Do Reputation Concerns Impact CBD Payment Processing?
Why Do CBD Businesses Need High-Risk Payment Gateways?
Why is Fraud Protection Important for CBD Payment Processing?
How Do High-Risk Payment Gateways Ensure Compliance with Laws?
What Should CBD Retailers Look for in a Payment Processor?
Source Links
- https://www.bigcommerce.com/articles/selling-cbd-online/cbd-payments/
- https://www.ecspayments.com/cbd-payment-processing/
- https://cannabisindustryjournal.com/column/payment-processing-cbd-products-what-to-know/
- https://vendoservices.com/blog/payment-processing-cbd/
- https://squareup.com/us/en/solutions/cbd
- https://www.ecspayments.com/payment-processing-for-cbd/
- https://goftx.com/blog/cbd-payment-processing/
- https://paymentcloudinc.com/blog/cbd-high-risk/
- https://saucal.com/blog/cbd-payment-processor/
- https://bankful.com/blog/cbd-payment-processing-requires-high-risk-processors/
- https://growthlogiq.co/cbd-payment-processing/
- https://www.merchantmaverick.com/best-cbd-oil-merchant-account-providers/
- https://ecomposer.io/blogs/shopify-knowledge/cbd-payment-processor
