Over the last few years, CBD products have become extremely popular. In fact, the global industry is estimated to be worth around $23.94 billion currently, with a forecast to reach $77.48 billion by 2034. As you can imagine, this has created a lot of noise and many new opportunities for businesses working within this niche. Yet, opportunities also create challenges, and one is CBD payment processing.
Finding the ideal CBD payment processor takes time and effort but with a little insight, the choice becomes easier. Let’s dig into the world of CBD payments to give you all the information you need to ensure the smooth running of your business.
The Unique Landscape of CBD Payments
Paying for goods and services sounds like it should be easy, but payment processing for CBD is made more difficult due to the high-risk nature of the items themselves. There are several legal issues to consider, and the fact that such products have a high-risk classification attached to them. For these reasons, a deeper understanding is vital.
Legal Gray Areas and Their Impact
There are various legal regulations attached to CBD products, not only from country to country but also from state to state. This inconsistent picture makes it extremely difficult for businesses to find a reliable payment method. That’s where a CBD payment processor comes into play, easing the challenges and allowing for smoother transactions. Additionally, staying up-to-date with new regulations also clears the way.
Understanding the CBD industry in full is helpful to ensure your business doesn’t meet any unnecessary issues. Our article on navigating high-risk payment processing challenges will help you learn more.
THC Content Considerations
The biggest issue with CBD products is that it contains THC, or Tetrahydrocannabinol, although in low amounts. Yet, it is this ingredient that contributes to legal restrictions on not only its sale but its production too. When choosing a CBD processor for payments, this is another aspect to consider carefully.
High-Risk Classification Implications
We’ve established that CBD has a high-risk category, which is what causes many of the issues in terms of its sale and payment processors. It is this label that influences how different CBD pay options work, and indeed whether your chosen payment method accepts these transactions at all.
Let’s take a look at how this high-risk classification creates specific challenges for CBD merchants. Then, you will know what aspects to consider when choosing the best CBD payment processor for your specific needs.
Elevated Chargeback Rates
In most cases, businesses selling CBD products encounter increased chargeback rates. This issue creates the need for specific chargeback prevention strategies, along with customer education on the same matter.
Businesses must not only be aware of this, but also manage risks to ensure payment processing continues without additional problems. The table below gives some useful strategies you can use.
| Chargeback Risk Factors | Mitigation Strategies |
| Product misunderstanding | Detailed product descriptions |
| Unclear billing descriptors | Use recognizable business names |
| Delivery issues | Provide tracking information |
| Quality concerns | Offer satisfaction guarantees |
Underwriting Challenges
Another issue many CBD merchants face is connected to underwriting. As a business dealing with these products, you’re no doubt aware of the thorough documentation required and this often creates higher fees and rolling reserves. Again, understanding these specific niche requirements can ensure that your chances of approval increase.
Unconventional Payment Solutions for CBD
One of the most common questions posed when learning about CBD payment processing is “Does PayPal allow CBD sales?” This question often relates to other common payment processing companies, but the answer isn’t straightforward. All payment businesses have their own policies in relation to these types of products; for instance, the Stripe CBD policy will be different to the PayPal CBD policy. Understanding these differences is a key step.
Because many traditional payment methods often cause a problem for CBD businesses, let’s take a look at some alternative options to consider.
Cryptocurrency Integration
As cryptocurrency and blockchain technology have increased in prevalence over the last few years, it’s probably no surprise that they’re also explored as a means of payment for CBD products. This could be a potential workaround for businesses who face limitations in traditional payment methods.
Our article on choosing the right high-risk merchant service provider for your CBD business is a great place to start if you want to explore cryptocurrency in more detail.
Stablecoin Transactions
Within this umbrella topic, we can also talk about stablecoins. These offer a slightly more stable alternative to cryptocurrency, which is renowned for its volatility. However, it still ensures that you can grab the benefits of blockchain.
Stablecoin is a useful alternative to cryptocurrency for CBD merchant accounts. Source: globalxetfs.com
Cash-Based Solutions
Of course, sometimes the most basic options work the best, and in this case, we can also look at different approaches to cash-based payments. These are a useful option to explore as they can give an alternative to extremely challenging digital payments.
Smart ATMs for CBD
One such method is using specialized ATMS for CBD product payments. These are a cash-based choice that ensure security but also compliance. They’re also useful for businesses that have a physical retail store.
Navigating Policies of Major Payment Platforms
We briefly mentioned PayPal and Stripe, so now let’s look in more detail at the major payment platforms and their stance on CBD payment processing.
PayPal's Approach to CBD
Despite its widespread use as a regular payment platform, PayPal avoids any high-risk accounts, which means it does not accept payments for CBD products. While policies regularly evolve and change, this has been the case for many years now. Is there a workaround? It’s possible to consider the use of a third-party facilitator but alternatives may provide a smoother and less complicated route forward. Of course, PayCompass is also a quality PayPal alternative.
Stripe's CBD Policy Evolution
If you’re wondering “Does Stripe accept cbd payments,” the answer is disappointing yet again. This commonly-used payment platform has the same policy as PayPal when it comes to CBD transactions. As these transactions are considered high-risk, Stripe does not accept them. Again, this may change in the future but for now, it’s important to look at Stripe alternatives.
Square's CBD Program
Next, we have Square. The good news is that Square’s CBD policy is slightly less stringent although to make use of it, you must sign up for their CBD program. This is designed for high-risk businesses and the sign-up process is extensive and rigorous, meaning many merchants still look for a Square alternative.
To simplify, if you’re wondering “Does Square allow CBD sales,” the answer is yes but only for customers within this program and not outside of it. Eligibility for this program is assessed on a case-by-case basis with the need to submit in-depth information.
The table below outlines the Square CBD Program features in more detail.
| Square CBD Program Features | Requirements |
| Flat-rate pricing | U.S. business only |
| Chargeback protection | Hemp-derived CBD products |
| POS integration | THC content below 0.3% |
| Online payment processing | Updated lab reports |
| 24/7 customer support | Compliance with state laws |
The Role of Specialized CBD Payment Processors
From reading about regular payment platforms and their limitations, it makes sense to consider a specialized payment processor for CBD transactions.
These are tools that are specifically tailored to the CBD industry, with the aim to minimize challenges that work alongside it. They offer a range of different features, along with protections for peace of mind. Let’s explore these in more detail.
Features of CBD-Specific Processors
Before making a choice of the best CBD payment processor, it’s important to learn more about the service and protections they typically offer. For instance, PayCompass tailors its services for CBD merchants, offering specialized features and protections to ease the way and add extra reliability.
Enhanced Compliance Tools
One of the main highlights of choosing a payment processor such as PayCompass CBD Merchant Account is the range of tools that help your business adhere to regulations, both state and federal. Of course this adds peace of mind because you know you’re complying on all fronts.
Features include real-time transactions monitoring, KYC (Know Your Customer) protocols, and automated reporting. Some payment processors also have compliance software that helps to track regulations and give alerts to help you stay up-to-date.
Industry-Specific Fraud Prevention
The fact that the CBD industry is so complex means there is an increased need for fraud protection that is tailored to this particular area. Thankfully, many CBD credit card processing options take this into account. Features include specialist tools that aim to reduce the chance of identity theft, fraudulent transactions, and chargebacks, through customer verification processors, advanced risk scoring algorithms, and real-time transaction monitoring.
Comparing CBD Payment Processors
When looking to choose a CBD Merchant Account, it’s important to do your research and compare the pros and cons. This will help you make a strong decision that is specific to your needs alone.
Fee Structures and Pricing Models
One of the most important aspects to consider is fee structures and pricing models. These vary across CBD payment processors and can have a strong impact on profitability.
Integration Capabilities
It’s also important to look at how easily a processor integrates with your e-commerce platform and systems. Smooth integration helps you remain efficient and reduces the chance of problems further down the line.
The table below will help you assess and compare some of the most common payment processors.
| Payment Provider | CBD Policy | Accepts CBD Payments? | Restrictions | Additional Notes |
| PayCompass | Allowed | Yes | Only allows CBD sales where permitted by law. The merchant must verify compliance. | PayCompass is more flexible with CBD, allowing transactions for both online and in-person sales as long as legal guidelines are followed. |
| PayPal | Prohibited | No | CBD products are considered restricted items, and PayPal does not generally allow transactions related to CBD products. | PayPal has strict policies that prohibit the sale of CBD products unless the vendor has special approval. |
| Stripe | Prohibited | No | CBD products are considered restricted items, and PayPal does not generally allow transactions related to CBD products. | Stripe has strict policies that prohibit the sale of CBD products unless the vendor has special approval. |
| Square | Allowed | Yes | Merchants must ensure compliance with local regulations for the sale of CBD products. They must also register with the CBD Program. | Square allows CBD sales for merchants in states where it’s legal and when products comply with the 2018 Farm Bill, provided the vendor is registered with the CBD Program. |
Innovative Approaches to CBD Merchant Accounts
As technology develops, new answers to common challenges arise, and this is particularly useful for CBD businesses who want to ensure their payments are processed efficiently and safely. Let’s explore some new innovative approaches that may bring extra benefit to your business over time.
Virtual Merchant Accounts for CBD
Virtual Merchant Accounts are a potential alternative if you’re struggling with regular options. By this point, we know that many banks don’t allow payment processing for CBD products, but virtual merchant accounts allow for the secure processing of payments online without banks or other financial institutions getting involved.
Cross-Border Transactions
A particularly useful aspect of virtual merchant accounts is in cross-border sales. Here, CBD products can be paid for beyond borders without issues related to the high-risk nature of these sales. Of course, this also creates the opportunity for business growth beyond domestic markets.
Aggregator Models for CBD Payments
Another option includes payment aggregator models that are tailored for CBD businesses. These offer many benefits but also a few challenges. The biggest plus point is that they significantly simplify the payment process by combining several payment methods into one platform. This cuts down on complexity and costs. However, these models often have higher transaction fees.
Shared Risk Pools
Shared risk pools are a good way to reduce merchant risk. It works by pooling risk across several different merchants, distributing uncertainties without it all being in one specific place. This approach can help small businesses in particular, especially acting as a safety net against large losses, issues with compliance, or fluctuations in the market.
Compliance Automation
Another area for consideration within aggregator models is compliance automation. This can help to streamline payment processing by ensuring that legal and regulatory requirements are adhered to within the moment. Such tools are invaluable as they monitor transactions and verify them automatically, helping businesses stay ahead of constantly changing regulations. Of course, this considerably reduces the potential for manual mistakes and oversight.
The Future of CBD Payment Processing
As with everything, the future of CBD payment processing is likely to ebb and flow over the coming years as new technology enters the fray. Let’s take a look at some trends and new innovations appearing on the horizon and how they may shape the industry over time.
AI-Driven Compliance and Risk Assessment
AI is certainly changing the landscape in many different industries, and the CBD arena is no different. Artificial Intelligence can be used to streamline and simplify compliance processes while also boosting risk management for CBD payments. This can be done by first automating processes, such as compliance checks, and then optimizing them for the best outcome, ensuring transactions meet regulatory standards without any issues.
Making use of AI can help your business stay on the right side of regulatory rules, create a more efficient picture, and boost competitiveness.
Predictive Chargeback Analysis
As AI becomes more sophisticated, algorithms can be used to not only prevent chargebacks but predict them before they even become an issue. This can drastically reduce risk and help to identify any potentially fraudulent transactions through a flagging system.
Of course, this works to protect incoming revenue but also creates a smooth and reliable experience for not only your business overall but your customers too.
Dynamic KYC Procedures
Know Your Customer (KYC) mechanisms can help to boost regulatory and legal compliance through up-to-date tracking, while also analyzing changes in real-time. The benefits here are clear: not only does your business remain in compliance but this strategy also helps with onboarding of new customers through data collection and risk assessment.
Blockchain Solutions Beyond Cryptocurrencies
We mentioned blockchain in passing earlier on, but it’s worth digging a little deeper into how it can be used in CBD payment processing. Of course, cryptocurrency transactions are one option, but it goes beyond that.
Blockchain is decentralized, which gives a real-time approach to recording-keeping, fraud reduction, and fewer errors. Smart contracts are also within the picture, which can help to automate specific processes, particularly where cross-border payments are concerned.
All of these options create solutions to the difficulties of CBD payment processing, and we have another clear answer to discuss – PayCompass. We offer a simple, tailored payment processing service for high-risk merchant accounts, including CBD businesses. Let’s explore why we believe we stand out above the rest.
The Role of PayCompass in CBD Payment Processing
PayCompass offers a range of features specific to high-risk industries.
It’s clear that CBD payment processing has its challenges, but by this point, you should feel reassured that these issues aren’t insurmountable. PayCompass CBD Merchant Accounts offer a specialized option that simplifies the whole issue and creates peace of mind.
Customized Solutions for CBD Merchants
Throughout this guide, we’ve talked at length about the challenges that CBD merchants face, and you’re certainly more than aware of them from personal experience. The good news is that PayCompass offers a simplified method that is specifically designed for the CBD industry as a whole. We understand the challenges you face, and we have designed our services to help you overcome them.
Chargeback Prevention and Management
One of the key points to mention is our proactive approach to preventing chargebacks. These can be extremely detrimental to profitability, while also wasting time. Our mechanisms prevent this, and help you move with a smoother and more reliable payment option. These include real-time monitoring and alerts, dispute management systems, fraud detection measures, and automated responses.
Comprehensive Compliance Support
We are also committed to remaining up-to-date with regulations, ensuring that you comply with all new rules as they arrive. Our large range of compliance tools and expertise give you peace of mind, vital in such a complex industry.
Virtual Card Issuing
In addition to the features we’ve already talked about, we also offer a virtual card issuing service. This gives you extra flexibility and provides a secure and completely customizable payment option. With this, you can streamline your payments, manage your expenses, and remain in control.
Why Choose PayCompass for CBD Payment Processing?
You have options in front of you, but why should you choose PayCompass?
- We have years of industry experience, with a deep understanding of the CBD-specific challenges you face.
- Our processing options are customized to your needs, creating a tailored solution from the start.
- We offer advanced fraud prevention and data protection tools for your peace of mind.
- Our rates are competitive. Often with high-risk industries, rates are higher, but we’re committed to offering fairness and transparency.
- Finally, our experienced account experts are extremely familiar with CBD regulations, offering you ongoing support from the moment you sign up.
So, if you’re ready to move toward a streamlined and efficient payment processor that’s tailored to your specific industry, reach out to PayCompass by filling out our contact form. Our experts are happy to discuss your needs and find the best route forward for you.
Learnings Recap
Throughout this guide, we’ve talked about the major challenges that CBD businesses face in terms of payment processing. The high-risk label affects many business areas, but due to the complex legal and regulatory issues in this industry, it’s difficult for CBD businesses to find a reliable and low-cost solution.
For instance, major platforms such as PayPal have policies that prohibit processing payments for CBD products. While Square has a high-risk program available, businesses need to go through a rigorous approval process, which is time-consuming to say the least. Cryptocurrencies and smart ATMs give some hope as viable options, yet PayCompass offers one of the most stress-free approaches.
As the market continues to grow over time, technology will certainly alter how payment processing takes place, including the use of AI and CBD credit cards. However, for now, services such as PayCompass CBD payment processing hold the most promise to help businesses jump over hurdles that can often seem too high.
