Payment Processing for CBD Merchants

Written by Fernando Latorre | Mar 8, 2023 4:21:30 PM

CBD is a rapidly expanding market and the number of CBD products available is skyrocketing. However, there are important factors that can influence the merchant’s success, especially when it comes to their CBD payment processor.

Online sales of CBD are rapidly expanding. From oils and extracts to flowers, the number of CBD products available is skyrocketing. However, there is no guarantee that a CBD merchant will succeed or maximize their revenue potential, even if they are selling high-quality products. There are other important factors that can influence the merchant’s success, especially when it comes to their CBD payment processor.

Challenges and Solutions for Online CBD Merchants

Contrary to popular belief, CBD by itself is not considered a high-risk industry. The most common MCC code CBD merchants are assigned is 5499, which is related to food stores, specialty markets and convenience stores. However, an online CBD merchant will be designated as high-risk if they are selling both CBD and tobacco/vaping products. Therefore, if those smoking products do not comprise a significant portion of revenue, the merchant should consider removing them from their product offerings, which avoids the challenges that accompany being a high-risk merchant.

Not having the high-risk designation is favorable for securing a merchant account. There are fewer hoops to jump through. However, many banks are still hesitant to offer services to online CBD merchants due to their historical reputation.

In Europe recently, many CBD merchants who had existing accounts with their banking partners and/or payment processors had their merchant accounts closed and lost their payment processor; once those entities saw the dramatic increase in online CBD sales, they started to shut down the merchants’ accounts.

There are also critical validation and disclaimer components online CBD merchants must include on their website and in the checkout process. Working with a payment processor that does not have extensive experience with all of the rules and regulations around CBD could be jeopardizing a merchant’s success.

In order to prevent that from happening, merchants must understand their compliance requirements—and how the right payment processor can help them. Standard compliance requirements for CBD merchants include:

Age Verification. Merchants must ensure they are only selling their CBD products to of-age customers. The online store needs to have a way to capture that information; for example, via a pop-up question when a visitor enters the website.
Terms and Conditions. These must include cancellation, return/refund, and shipping policies. Shipping is a key piece. Where will the merchant ship? Where won’t they? There needs to be a way to block customers in the latter geographies.
Deceptive Statements. The merchant’s website cannot contain any statements that the product has any physiological effect. General information about the benefits and properties of CBD is allowed, but it may not be linked to information that states that a specific item cures diseases.
Disclaimers. The following specific disclaimers must be included in the footer of the merchant’s website:

CBD products are not medicines and cannot diagnose, treat or cure diseases. Always consult your own doctor before consumption and/or starting a new dietary program.

Information on this website does not replace the professional advice of a doctor or pharmacist and cannot be used as a basis for independent diagnosis or the initiation, modification, or termination of disease treatment.

CBD + THC Concentration. All products that contain CBD must provide the percentages of CBD and THC levels both in the product description and on the product page. Different European countries have different requirements surrounding CBD and THC percentages, which can make adherence confusing and problematic.
Lab Reports. All products containing CBD must have a lab report available for download. The reports must be less than 12 months old, contain the THC content, and be updated when there is a new batch of the product.
Customer Support. The “Contact Us” page must contain one or more points of contact through which customers may reach the merchant. This could be a phone number, email address, or form. It’s imperative for merchants to respond as quickly as possible to avoid disgruntled customers. With the rise in the number of CBD online merchants, customer retention needs always to be top of mind.

How Can a CBD Payment Processor Help?

A payment processor who is knowledgeable about the CBD e-commerce space can be an effective partner and help navigate payment complexities, allowing the merchant to focus on doing what they do best: running their business.

Here are some of the key considerations a CBD merchant should look for when choosing a payment processor partner.

The processor processes transactions for the type of CBD products that the merchant is selling. For example, Vendo provides payment processing for CBD oils, plant materials, and extracts, but not magic mushrooms, bongs, related paraphernalia, and grow items, or nutraceuticals such as CBD gummies.
They should be knowledgeable about the special website information and product description compliance requirements for CBD merchants. As mentioned above, CBD sales websites need to have specific information surrounding regulatory disclaimers. Product description and labeling also need to follow certain regulations regarding ingredients.
Processors must be experts at handling chargebacks. Within any e-commerce business, particularly those in high-risk industries, chargebacks are a primary concern. Enlisting a payment processor that can mitigate the impact of chargebacks ensures greater profitability.
They should provide you with excellent merchant support. Aside from chargebacks, there are other elements e-commerce CBD businesses need to consider, such as securing a merchant account and ensuring a seamless transaction process. There are a lot of steps that go into credit card processing and a payment processing vendor can help avoid hiccups along the way.
They should provide high quality (and timely) customer support. E-commerce businesses know how important customer support is for their own operations. They should expect nothing less from their payment processor. Timely customer support is a must.
You should expect reasonable transaction fees for you, the merchant. Some payment processors charge significantly higher rates to CBD merchants because they know it’s difficult for them to find a payment processor.
They should have experience working with CBD merchants. A payment processor can claim to do all of the above, but if they have zero experience working in the CBD market, how do they know they can actually deliver?

Finally, it’s important to know which payment processors will even work with CBD merchants. Some of the most well-known ones will not. For example:

PayPal does not work with any CBD merchants. Statements made about this decision cite constantly changing regulations as the primary reason for banning CBD sales.
Stripe’s CBD policy is also “zero tolerance” when it comes to CBD sales. If Stripe discovers a company is violating that agreement, its account will be frozen immediately. It’s up to the merchant to establish a high-risk merchant account in order to regain their funds.
Shopify does not process CBD or hemp product payments. Again, the risk associated with CBD sales is too much of a burden.

Vendo currently provides payment processing for the following CBD and related products:

CBD Products

CBD Oil
CBD Seeds
CBD Plant Material (bud, hemp products)
CBD Extracts (solid, hash, jelly, crystals, moon rocks)

Non-CBD Products

Certain smoking peripherals (rolling papers, trays, ashtrays, grinders, etc.)
Branded shop products (t-shirts, tumblers, etc.)

Learn more about our payment processing services for CBD merchants, including those in the high-risk category.

About Vendo: Vendo offers comprehensive payment processing services to high-risk e-commerce merchants. Our innovative, AI-powered tools offer merchants simple, secure, and seamless payment solutions, along with expert customer support from integration to end-user concerns. Our expert team works 24/7 to shape your vision into reality.

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