Since 2018, hemp has been removed from the legal definition of marijuana under the Controlled Substances Act (CSA). This has led to a major influx of ecommerce businesses selling CBD products. In fact, the CBD (cannabidiol) global market size is predicted to increase by USD 29.91 billion from 2020 to 2025. Despite this market’s lucrative growth, strict regulations along with general perception and stigma put it in the high-risk category, making it difficult for new entrant CBD merchants to find payment gateway providers who will help them out.
That being said there are still a few high-risk payment gateway providers, but then the question that arises is -which one should CBD merchants choose?
CBD merchants must take into account a few key factors when choosing the perfect payment processor for their transactions. Let’s take a look at what these factors are:
1. High-Risk Appetite & Experience
CBD merchants must strive to find payment processors that not only deal with high-risk transactions but also have a substantial amount of experience in the field. As a fairly new industry, transactions will be more prone to payment card fraud and charge-backs. Hence its imperative for the payment processors to specialize in providing payment solutions specifically catering to high risk industries such as online gaming, crypto trading, online dating, etc. Payment processors with this experience are usually backed by a sponsor bank with a set policy for approving CBD businesses. Having an established relationship with these like-minded banks is always a good sign. Overall, processors with good bank relationships, expertise, and experience in the field make CBD payment processing simple.
2. Seamless Integrationsmake CBD payment processing simple.
CBD merchants should not settle for payment processors that require them to switch their current ecommerce site onto a brand new platform. Not only is this a waste of time but also of resources spent on perfecting the merchant’s current website. Merchants should only accept payment processors that enable card processing from their existing website.
The best form of integration for CBD merchants is an API based integration. This allows them to process payments on their existing platform as well as monitor and gain more insight into customer transactions.
3. Reasonable Fees
On average CBD payment processing fees start at around 4.2% + $0.30 per transaction- that is quite a hefty amount and simply out of budget for CBD businesses who are just starting out. As a CBD merchant, one must compare what different payment processors offer in terms of fees and choose what works best for their profit margins. Note that credit card transactions tend to be more expensive than debit card ones. Also, chargebacks can lead to additional fees that one should discuss with the payment processor before agreeing to a partnership.
Other types of fees for merchants to look out for are compliance fees, non-compliance fees, statement fees, monthly/annual fees and terminal fees. Essentially the point we are trying to make is- CBD merchants must be aware of how much each payment processor is going to charge and take into account less obvious and hidden fees as well.
4. Great Customer Support
Customer support is often an overlooked factor when considering payment processors. However, when it comes to a high risk industry like CBD it is of utmost importance. CBD companies have a much greater incidence of chargebacks and fraud. In order to minimize the financial impact this causes, it is crucial to get fast and thorough responses from the payment processor.
Merchants should inquire with payment gateway providers about their hours of live support and the way they handle disputes and fraud threats. Some payment processors may even provide extra measures to prevent such situations from occurring in the first place.
Here is a quick checklist of questions for CBD merchants to ask potential payment providers:
- How do you handle disputes?
- What level of fraud protection do you provide to minimize the chances of disputes?
- How many hours a day do you provide live customer service?
5. Wide Range of Payment Options and Quick Updates
It goes without saying, CBD merchants shouldn’t have to lose out on customers simply because their partnered payment processor doesn’t accept a particular credit or debit card. Being able to accept all major credit/debit cards is a necessity. However, it is equally crucial for merchants to look at how they accept payments not only online but offline as well. A good payment processor should be able to provide point-of-sale (POS) devices for secure in-store purchases. Some great POS software can also aid CBD merchants in making better business choices as they store customer data and generate accurate reports for analysis.
Not only must a payment processor offer a wide range of payment acceptance options but they should also be able to consistently update their software and make way for newer payment trends, for eg: contactless transactions. If a CBD merchant plans on scaling their business in the future their payment processor must be able to stay up to date with the newest programming and be prepared for changes in the payment market.
Opinions expressed in this article are those of the guest author and not necessarily WeSay.