Have you taken the first steps in starting your very own CBD business? Perhaps you have ordered your stock and you’re building your online store, but you have hit a speed bump – how do I process CBD payments? You might have realised that many financial institutions choose not to support the cannabinoid industry at the moment, and you’re wondering what the next step is. Well, the good news is that times are changing and there are more CBD payment processor options available than ever before.
Here, we’re going to take a look at some factors that you should take into consideration when choosing the right payment processor for your business.
Before we get into the nitty-gritty of how to find the perfect CBD payment processor for your business, let’s take a brief look at what a payment processor actually is, and why it’s important for your online business.
Essentially, a CBD payment processor is a middleman that facilitates online transactions, allowing customers to use payment cards to pay for goods and services on your e-commerce store. The payment processor communicates with the customer’s payment card and their personal bank account, as well as your merchant account. This allows funds to move from the customer’s account to yours when they make a purchase.
Payment processing companies are not just responsible for managing transactions, they also provide security. For instance, they conduct security checks to make sure that the customer’s card data is correct, and they have sufficient funds in their accounts. They also protect against fraudulent activity.
If there is an error with a transaction and the customer is over-charged, or they have returned an item and need to be refunded, payment processors will take care of this too. For each transaction managed by the company, you will have to pay a small fee. However, chargebacks, where funds are transferred from your merchant account to a customer’s, may incur additional fees – this will differ depending on the company that you choose to work with.
A merchant account is simply a bank account for your business. This will allow you to accept payments from your customers. Some CBD payment processors will also provide a payment gateway. This connects your merchant account with your payment processors, and credit/debit card companies, such as Visa or Mastercard. A payment gateway is necessary so that the processor can communicate with both your bank account and your customer’s so that you can receive payments.
As you know, the CBD industry is a relatively new sector, and regulations are constantly changing. Up until recently, there were very few regulations in place to protect consumers, and this meant financial risk for payment processing services. In addition, new industries are often associated with a higher risk of payment card fraud and chargebacks. Therefore, many financial institutions categorise the CBD industry as “high risk” and do not offer their payment processing services for companies within the industry.
However, things are changing. Recently, authorities have put a framework of legal regulations in place, mostly with the aim of consumer protection. This means that there are more CBD payment processor options than before. But how do you know which one to choose? Here, we’ll outline some factors that you should take into consideration when choosing the right provider for your business.
As mentioned above, many payment processing providers categorise the CBD industry as “high risk”, therefore we recommend doing your research before you dive right in. Some providers will refuse to work with your business from the start, due to their company policy.
However, you may be able to work with others for some time before any issues arise. In this case, when they find that your type of business isn’t supported by their company, they might freeze your account or withhold funds. Equally, you may face more severe penalties. Thus, we recommend doing your homework to protect yourself and your business.
We recommend partnering with a CBD payment processor who has experience working with “high risk” industries. They don’t necessarily need to have experience within the CBD sphere, but experience with other “high risk” industries will be beneficial. Some other such industries include:
Building an e-commerce platform can be time-consuming and expensive. The last thing you want is to find out that your payment processor of choice isn’t compatible with your online platform. Therefore, we suggest looking into integration options fairly early on in your research. Ideally, you should opt for a CBD payment processor that integrates with your existing site, rather than choosing a company that requires you to use their platform. You will have far more freedom using your own.
We also suggest opting for a provider that can be integrated into a range of e-commerce platforms, supporting your business as it grows. You might want to change to a different platform over time, as your business evolves and flourishes. You should also consider choosing a CBD payment processor that operates using API integration. This is an extremely common payment gateway that you can monitor. This will provide you with valuable customer insights.
If you have chosen to build your online store using Shopify, you might be wondering “can I use Shopify payment for CBD?” Unfortunately, you cannot. Shopify payment is not available for CBD-related or hemp products at the moment. However, there are several third-party CBD payment gateways that you can integrate instead.
Payment processing providers do not operate for free, they take a small percentage of each sale that they process. This percentage will differ from provider to provider, so we suggest shopping around for the best price.
You will need to incorporate this transaction fee into your product pricing and budget to make sure it doesn’t eat into your profit margins. It is worth noting that some providers charge more for credit card transaction fees than debit card fees, and they may charge more for chargebacks.
In addition, some companies will require up-front registration fees and other recurring fees. These may include:
You should confirm all of the expected fees with your potential CBD payment processor before you enter into a contract. This will help you avoid any unexpected fees later on.
Each company will offer a different contract. They may have different terms and conditions, but they might also differ in length.
If you are a budding business, we suggest avoiding long-term contracts, especially if the company cannot provide you with genuine testimonials from their other clients. Many providers will charge you an Early Termination Fee (ETF) if you wish to leave the contract early. As your business grows, the original terms of the contract may no longer be suitable for your business. Therefore, sticking to short-term contracts may be beneficial.
When it comes to customer support, you should always keep the motto “fail to prepare, prepare to fail” in mind. This is especially important when you’re operating in a new industry, whether you’re selling online or in a brick and mortar store. Therefore, you will need to choose a CBD payment processor that offers exemplary customer service, chargebacks, and dispute resolution. The level of service this customer service team offers will reflect on your business, as they will be dealing with your customers directly.
Before signing a contract, you should always discuss, in detail, how your provider handles disputes and what their customer service policy is. You should also ask what anti-fraud measures they have in place to prevent disputes and fraudulent activity in the first place.
Not every provider will have an in-house customer service team, and that’s okay. Sometimes, it is better to outsource customer service to dedicated teams who are highly trained and have the necessary skills to ensure your customers have the best experience possible.
Point of Sale (POS) systems can save a lot of time and energy as they help you manage online and offline transactions. You can use these systems to take payments, track inventory, track revenue and tax. It correlates all of the information gathered into a report that you can easily review when you need it.
If this is something that you would find useful for your business, you should consider it when choosing a CBD payment processor. May providers will have an integrated POS system that will help you organise and store this information in one location.
Finding the right CBD payment processor is not an easy task, and it can take some time to research. However, we do have one recommendation that could help you save time and effort.
Lumipay offers payment processing services and a CBD payment gateway in the UK. They offer their services to all industries, but they have a wealth of experience working with “high risk” companies, particularly CBD brands. This means that they have experience working with regulatory requirements, in addition to providing exemplary data security, fraud protection, and customer service.
Lumipay’s CBD payment processor can be used with a wide range of e-commerce platforms, including Shopify, WordPress/WooCommerce, Magento, Prestashop, and Joomla. Customers can even choose from over 200 payment options, including Apple Pay, so they can shop in a way that suits their individual needs.
Lumipay supports growing businesses and accepts subscription and instalment payments. Therefore, we recommend them if you’re searching for a CBD payment processing provider in the UK.
Finding the right CBD payment processor is imperative for your business. Without one, you cannot receive payments from customers in exchange for your goods or services.
As the CBD industry is relatively new and still evolving, many financial institutions categorise it as a “high risk” industry. This means that your options are somewhat limited. However, things are changing and there are more options now than ever.
When choosing a payment processor, you should opt for a company that has experience working with “high risk” industries – if they have experience working with CBD companies, that’s even more beneficial. You should always make sure that their software integrates well with your chosen online platform, and their fees are compatible with your budget.
If you are a newer business, we suggest avoiding long-term contracts, as your business needs may change rapidly over time. In addition, we recommend only working with payment processors who offer top-tier customer services, as their ability to assist your customers will reflect directly on your company.
Choosing the right payment processor is vital for your business. Not sure where to start? Cannmed is here to help. Contact our expert team today and we can get you on the right track!
You may also like to read: Cannabis Hemp Business – Sell CBD in 9 Simple Steps