Common Challenges and Solutions When Choosing a Shopify CBD Payment Processor

Last Updated | December 20, 2024

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Navigating the world of CBD eCommerce presents unique challenges, particularly when selecting a payment processor compatible with Shopify.

As the CBD market expands, merchants often encounter difficulties due to their products’ high-risk classification.

Many traditional payment processors avoid CBD transactions, leaving merchants scrambling to find reliable alternatives that can seamlessly integrate with their Shopify stores.

Understanding payment processing in the CBD sector can help merchants make informed decisions that enhance their customer experience and ensure compliance with industry regulations.

Understanding the CBD Payment Processing

CBD products are closely associated with Cannabis, a major point of contention in the US legal domain, making its sales complex and high-risk.

At the federal level, CBD derived from help with less than 0.3% THC is legal by the 2018 Farm Bill.

At the state level, CBD laws still vary from one state to another, with some states being more rigid than others regarding legal consumption.

Internationally, CBD regulations are on both ends of the spectrum where some countries fully legalize it while others have completely banned its sale and consumption.

CBD High-Risk Business Designation

CBD’s shaky legal status continues to keep payment processors reluctant from expanding their support for the industry.

Additionally, quality control issues and customer disputes run the risk of high chargebacks, further distancing payment processors.

Combining this with instances of fraudulent activity, CBD’s risk profile remains high which keeps payment processors at a distance.

Shopify’s CBD Policy

Shopify’s policy on CBD sales is evolving. While it allows the sale of some CBD products, there are strict guidelines:

Product restrictions allow only CBD products derived from hemp with less than 0.3% THC.
Strong compliance requirements means sellers must comply with all applicable federal, state, and local laws.
Shopify restricts payment options for CBD sellers, especially in high-risk jurisdictions.

In summary, CBD businesses can sell on the Shopify platform (while following the applicable laws) but it does not permit using Shopify Payments to process CBD e-commerce transactions.

Essential Challenges in Picking A Shopify CBD Payment Processor

What issues do businesses face when finding a Shopify-friendly CBD payment platform? Here’s the list:

Legal and Regulatory Hurdles

CBD has always been a major point of contention domestically and internationally, pushing major payment processors away because of the various legal complications.

Moreover, CBD businesses need to ensure compliance at the local, state, and federal level to avoid payment disruptions that results in routine payment processing delays and issues.

Limited Processor Choices

As previously discussed in this article, CBD business are part of a high-risk industry which translates to extensive restrictions and roadblocks from traditional financial institutions.

As a result, CBD business need to rely on high-risk payment processing options that might process payment but arent widely available and charge higher fees that cut into the businesses’ bottom line.

High Transaction Fees and Hidden Costs

Being high-risk, CBD e-commerce transactions come with significantly higher processing fees compared to low-rish businesses.

The CBD business needs to raise product prices in a competitive market, reducing profitability just to keep the store open.

Chargeback fees, gateway fees, and processing fees also sneak into the mix, making total fees a lot higher compared to other e-commerce products and services.

High-Risk Business At Risk of Account Terminations

Since CBD regulations are continuously changing, payment processors may terminate merchant accounts without any prior notice leaving the store high and dry.

Account terminations completely halt store operations that severely damages the business while it tries to deal with security checks and fraud prevention measures.

CBD businesses also fall pray to routine charbacks because the customer deemed the product to be low-quality. Every business hates a chargeback but high-risk ones dread the word and have to find a way to avoid them.

Solving The Challenges of Shopify CBD Payment Processing

The CBD industry continues to grow astonishingly quick driven by riding demand and new, safer production techniques.

More demand means more room in a high-competition market for CBD businesses to enter, grow, and scale their efforts.

This section helps all Shopify CBD stores solve their payment-processor shaped problem that has been a thorn in their side for a long time.

We’re going to address every major issue and find a way for CBD businesses to use Shopify.

Picking The Right Payment Providers

The right CBD-friendly payment providers need to meet certain requirements before Shopify allows them to integrate with the platform.

The CBD-compliant payment provider criteria includes:

Picking a payment processor with a proven track record of working with high-risk industries like CBD e-commerce stores.
The payment processor should have complete and concrete compliance with PCI DSS and every required law to operate within the legal boundaries.
The payment processor should have an impenetrable fraud detection and prevention system that ensures all shady transactions and chargebacks are stopped before they’re allowed through.
It must have transparent pricing plans and offer competitive rates that justify its fees and the impact that it has on the bottom line. If there’s going to be some compromise, it needs to be absolutely worth it.
Check and then double-check the payment processor’s customer service quality before signing up with them. Payments are tricky business and you want to work with customer service teams that are quick to respond and remedy potential issues.

Shopify-Compatible CBD Payment Processors

The most commonly used CBD-compliant payment processors include:

NMI, known for its advanced payment processing solutions.
Payline, known to offer flexibility payment solutions for various high-risk industries including CBD
PaymentCloud, known for being a high-risk business favorite.

Ensuring Complete Legal Compliance and Documentation

Legal compliance has been repeatedly mentioned in this article since it continue to be the first and most obvious hurdle with more payment processors agreeing to work with CBD e-commerce stores.

The risk associated with CBD businesses has major payment processors refusing to work with an industry that has varying legal requirements.

However, CBD businesses can strengthen legal compliance in the following ways:

Ensure their licenses, certifications, and permits are updated so they have approval from all the essential areas.
Proactively conducting regular compliance audit to find and address potential compliance issues that could potentially grow.
Creating and implementing robust risk management practices that regularly review payment processing procedures and business operations to ensure there is no avoidable damage.
Keeping a detailed, accurate record of all CBD transactions including product sales, purchase volume, and all payment processing.

The business must have its duck in a row because if someone comes asking, the CBD business needs to have everything prepared.

Negotiating Transparent Contracts and Competitive Rates

The high-risk nature of CBD payment processing means the business is already paying more to use the processor compared to other businesses.

This makes it essential to negotiate with payment processors before the store begins using it.

The CBD business should compare rate and fees from different processors to find the best value for money and negotiate if needed.

CBD businesses with high transaction volumes and strong business histories can leverage these factors to get a better deal.

Using Powerful and Advanced Fraud Prevention Tools

The CBD industry also operate with severe fraud risks and needs a system that monitors and immediately subdues any attempts.

Advanced fraud detection tools continuously monitor the store and its transactions 24/7 without needing bathroom breaks, off days, and repeat instructions. You set the parameters in the beginning and the system continously monitors for fraud.

Develop effective chargeback management strategies to dispute fraudulent chargebacks and build systems.

Consider using Shopify apps that can enhance payment security, such as fraud prevention apps and payment gateways with robust security features.

Having A Backup Payment Option

As a business, never put all your trust and dependency into one tool or service because if things go wrong, you need a contingency plan to kick into action immediately.

Using multiple payment options reduces these risk while ensuring business continuity in case of our an outtage or unexpected issues.

Regularly monitoring payment processor performance helps the business keep an essential component in check to find an issue before it grows in order to completely mitigate the risk of an outtage.

The Best Practices For Sustainable Business Growth

Picking a CBD supporting payment processor is essential for the business and because it decides whether there is a store to sell CBD products.

Beyond payment processing, there are several areas where CBD businesses can improve themselves to perform better in an extremely competitive market.

Here are three essential best practices for sustainable business growth:

Conducting Regular Compliance and System Audits

Stay updated by regularly monitoring changes in regulations, industry standards, and technological advancements.
Run internal audits to check compliance with regulatory requirements, security protocols, and internal policies.
Run external auditors to provide an objective assessment of your business practices.
Use audit findings to identify and address potential security risks and compliance gaps.
Document and update procedures with detailed documentation of all policies, procedures, and compliance efforts.

Building Long-Term Partnerships with Payment Service Providers

Choose reliable partners with a strong reputation for reliability, security, and customer support.
Maintain open and transparent communication with your payment provider to discuss any issues or concerns.
Negotiate favorable terms, i.e., competitive rates, flexible payment terms, and favorable contract conditions.
Leverage the value-added services offered by your payment provider, such as fraud prevention tools, chargeback management, and customer support.
Regular review and optimize your payment processing strategy, ensuring it aligns with your business goals and evolving industry trends.

Educating Customers on Accepted Payment Methods and Policies

Have clear communication with your accepted payment methods on your website and in your marketing materials.
Offer an informative checkout process that provide clear instructions and guidance during the checkout process.
Remind customers about the security of their payment information by displaying trust badges and security certifications to reinforce your commitment.
Offer excellent customer support to address any questions or concerns related to payments.
Stay updated on payment trends and emerging payment technologies and trends to offer your customers the latest options.

Conclusion

Selecting the right payment processor for your Shopify CBD store is essential for your business’s success.

Understanding the specific challenges—like regulatory compliance and high-risk categorization—can help you navigate this complex landscape.

By focusing on processors that specialize in CBD transactions and ensuring they meet your business requirements, you can streamline operations and build customer trust.

Finding effective solutions not only reduces risks but also positions your business for growth in a competitive market.

Keep an eye on industry trends and regularly assess your payment processing options to stay ahead of changing regulations and consumer demands.

With a proactive approach, you can create a smooth shopping experience that boosts sales and fosters lasting customer loyalty.

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