CBD is arguably one of the fastest-growing markets ever to come out of the woodwork — or, to be specific — soil.
This cannabinoid is a highly sought after derivative of the cannabis plant and its abbreviated version — CBD — is short for ‘cannabidiol’.
By 2022, Statista predicts that the U.S. CBD market is on-track to earn $1.8 billion in legal sales.
Elsewhere around the world, CBD markets are also cropping up. Globally, the CBD industry looks set to earn $22,07,162.54 million by 2026, growing at a 58% CAGR between 2019 and 2026.
As the consumer demographic grows, so do the opportunities for sellers. Making a profit by selling CBD oil online is an appealing choice for business owners who don’t want to run the overhead costs associated with a brick-and-mortar store. Plus, according to recent reports, 1.6 billion people use their smartphone to shop online — indicating the power of running an ecommerce store.
However, as a Schedule I substance that has not yet been legalized at the federal level, suppliers are limited in regards to CBD payment options. After all, banks and financial institutions run the risk of federal intervention if their clients are accepting payments for cannabis-derived products like CBD.
The good news is that some payment processing companies are willing to take the risk, thus granting online business owners swift entry into the evolving space.
Setting up a CBD merchant account is essential because if you cannot accept payments, you won’t be able to ship CBD orders. As a result, you cannot build a list of positive customer testimonials, make a profit, keep the business running… (you can see where this is going).
A payment processor will facilitate all transactions and provide online CBD stores with a software platform from which they can monitor analytics for sales, shipments, stock, etc.
In this piece, we’ll deep-dive into what CBD is, how you can sell it online, and the role that payment processing will play in your success.
A recent timeline of CBD legalization and legislation
Cannabidiol — otherwise known as CBD — is a phytocannabinoid that was initially discovered in 1940. The compound is one of 113 cannabinoids to be discovered so far and it accounts for 30% of the plant’s extract.
1990s: Medical marijuana on the rise
The nation began to take a more progressive stance on cannabis, as marijuana became legalized in Oregon, Alaska, Washington, Maine, Hawaii, Nevada, and Colorado in the late 90s.
2004: Charlotte’s Web
Charlotte Figi, a young girl reduced her 300 seizures a week and became almost seizure-free, thanks to CBD oil. This sparked the famous CBD business “Charlotte’s Web” and gave CBD a spotlight in the medical field.
2012 and onwards: Recreational cannabis becomes legal
In 2012, Colorado and Washington became the first states to fully legalize marijuana in a recreational view.
2018: Farm Bill is passed
In 2018, President Trump signed in the Farm Bill, which legalized the use of industrial hemp, opening up the floodgates for CBD sales.
Present day: A plethora of CBD
Ever since CBD’s full legalization in 2018, CBD has become hugely popular throughout the United States. Many ecommerce shops have begun selling CBD to meet demands.
Is CBD legal?
Hemp — a non-psychotropic species of the Cannabis Sativa L. family bed — is a plant that CBD can be derived from. While cannabis remains illegal at the federal level, hemp underwent reclassification following the signing of the 2018 Farm Bill, which eliminated it from the Department of Justice and Drug Enforcement Agency’s Controlled Substance Schedules.
When derived from hemp, CBD products generally contain less than 0.3% THC. Since THC (tetrahydrocannabinol) is a psychoactive substance that cannabis can yield in large quantities, anything that exceeds the threshold is deemed to be illegal.
Despite a lack of research, efforts are being made to confirm CBD’s therapeutic efficacy in the medical field. Between 2014 and 2018, $16 million had been funneled into research initiatives by the National Institutes of Health (NIH). The funding was designated for a number of small trials into CBD’s effects on anxiety, addiction, depression, opioid addiction, and other various health issues.
What are high-risk payment processors?
Cannabis-derived products like CBD are becoming more widely accepted across the globe. Although the stigma is dissipating, all CBD products — no matter which plant they have been derived from — are associated as “high-risk.” This means that financial institutions and commonly used payment processors, such as PayPal, do not accept CBD transactions.
As a result, many CBD brands and online store owners have been left scrambling for payment processing solutions that ensure they don’t miss out on the “Green Rush.” Examples of some other high-risk industries that require gateway payment systems include adult products/services, Bitcoin trading, e-cigarettes, online gaming/dating, pharmaceuticals, travel services, telemarketing, and vape companies.
How can CBD payment processing benefit my business?
Take a moment to evaluate which products and services are vital for the success of your business. Chances are, your mind will go straight to thoughts about customer service and payment processing; and, let’s face it, you can’t have one without the other.
If you really want to hit your sales target in 2020 — without risking delays and difficulties in conducting CBD transactions — find out why your business needs CBD payment processing:
1. CBD payment processors accept credit cards and debit cards
Paying by credit or debit card is one of the most popular ways to carry out online transactions. According to a survey of over 2,000 people that was carried out by Harris Poll in August 2017, 44% of people preferred paying by debit card. If you can’t provide this, chances are your customers will seek out alternative suppliers.
CBD payment processing will aid you in attracting and retaining customers, since processors accept these favored types of transactions.
2. Customers have access to alternative payment options
In addition to providing credit and debit card payment processing, a sophisticated system will grant your customers the freedom to buy CBD products with a variety of alternative payment gateway options, such as gift cards, prepaid cards, bank transfers, and even buy-now-pay-later options.
3. Easy payment integration with your existing systems
CBD payment processing systems can be integrated into your existing ecommerce store. Better yet, payments can be merged with other payments included in your workflow, such as accounting, billing, customer relationship management (CRM), and more.
4. Improved customer service
The great thing about CBD payment processing services is that 24/7 troubleshooting and customer service can be included in the bundle, so long as you select the right processor. A dependable provider will also be able to assist with data security and fraud protection, thus safeguarding your customers when they buy CBD products online.
5. Ideal for taking a business to new heights
If scaling your business is of importance to you (and why shouldn’t it be?) then you need to use CBD payment processing. Service providers will continuously update their software to ensure your online CBD store is operating at lightning-fast speeds.
A full-service CBD payment processor will also be able to tweak their programs, should any changes occur in the payment market.
6. Less chance of mistakes and discrepancies
You’ll have enough on your plate dealing with customer inquiries and introducing new CBD products to your ecommerce inventory — don’t risk the chances of having to deal with discrepancies, too. Forget about spending hours training staff to reconcile any accounting errors that may have arisen and, instead, rely on CBD payment processors.
Considerations for CBD payment processing
CBD products are being tightly regulated by the Food and Drug Association (FDA). Because of this, CBD is considered a high-risk category and, consequently, ecommerce store owners must adopt suitable payment options if they are to reap the rewards.
Even though the big banks might not be able to collaborate with you for CBD payment processing, there are a number of gateways that will enable you to carry out transactions just like low-risk companies do.
Nonetheless, a few considerations should be taken into account before choosing a service. For example, pay attention to the CBD payment processors that are compatible with your ecommerce site design. You should also be on the lookout for a company that offers point-of-sale (POS) availability, as this will reduce the in-office workload and administrative tasks required of your team if you have a physical store location.
Reasonable contracts are a must, as well as customer support. Don’t forget that you’ll need to take into account a number of fees that are mandatory in determining a payment processor, including statement fees, compliance/non-compliance fees, monthly/annual fees, and terminal fees.
It’s also important to remember that you may incur higher fees for credit card processing and debit card transactions.
Building a presence online with your CBD business depends on how well you can satisfy customers. Utilizing a CBD payment processor will ensure that high-risk merchant transactions can be dealt with securely, thus giving your customers the opportunity to browse and buy with ease. Until cannabis’ federal restrictions are lifted — it is currently a Schedule I substance — online CBD sellers will need to find a provider of high-risk transaction services.
Learn more about how BigCommerce supports CBD sellers here.