Payment processing for CBD merchant accounts

Getting a CBD merchant account can be a challenge. It is, however, a challenge well worth accepting. The alternative forces business to use legacy payment channels (such as bank transfers) and/or cryptocurrency, which modern customers do not want.

Understanding CBD merchant accounts

Although there are numerous payment channels available today, they can all be grouped into one of two categories. These are payment channels that have some form of consumer protection system and payment channels that don’t. Customers vastly prefer the first group, particularly when dealing with merchants they don’t know.

Merchants wishing to support these schemes need to go through a merchant account provider. The merchant account provider may run the payment channel themselves or may contract with the organisation that does. Either way, they will take responsibility for the merchants that use the channel.

Firstly, merchant account providers have to take ultimate responsibility for making good on any customer claims. If the merchant is still in business, the cost of any claim is usually passed on to them. If, however, a merchant goes out of business, the merchant account provider takes the financial hit themselves.

Secondly, the merchant account provider ensures that their merchants act within the law. If they are negligent about this, they can be held legally accountable for their failures. For these reasons, merchant account providers have to vet merchants thoroughly before deciding whether to take them on.

The strategy for getting a CBD merchant account

There are two main steps to securing a CBD merchant account. Firstly, choose one payment channel and focus on that. Secondly, be prepared to show that payment channel that you are a responsible merchant.

Choosing the right payment channel

Most CBD products are sold online. This means you need a payment channel that’s online-friendly. In the UK, the main options are payment cards, e-wallets, direct debits, instant bank payments and cryptocurrency. However, cryptocurrency can be ruled out in most cases as consumers are often wary about its lack of protection.

Credit cards and e-wallets both have notoriously expensive processing costs. Transaction costs for debit cards tend to be lower. The problem is that merchants who accept debit cards have to accept credit cards, making pricing and checkout unnecessarily complicated.

Direct debits also used to be too expensive and complex for smaller merchants to process. Thanks to GoCardless, however, this has changed. As a result, direct debits are often the ideal way to process recurring payments, such as the costs of repeat prescriptions. 

Direct debits can also be used for one-off payments; however, instant bank payments may be more appropriate. As the name suggests, instant bank payments provide instant confirmation of funds. This means you can send/hand over goods securely, knowing that you will get your payment, usually by the next working day.

Convincing a CBD merchant account provider to accept you

Once you’ve decided which payment channels you want to use, your next step is to persuade a CBD merchant account provider to accept you. There are generally two steps to making this happen. Firstly, you need to look for a merchant account provider that accepts higher-risk merchants. Secondly, you need to convince them that you’re an acceptable risk. 

The way to do this is to think about the situation from their perspective. Think about what could make them nervous and show how you might address it. For example, how will you ensure that your customers are old enough to buy CBD products?  How will you ensure that all your products are free of THC?  How will you protect yourself against consumer fraud?

Going through this process can actually be a helpful exercise for you too. It can highlight areas where you have left yourself at risk and allows you to address them.

We can help

GoCardless is a global payments solution that enables you to automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.