Banking in the CBD industry

How to Find a Reliable CBD Oil Payment Gateway. The Struggle is Over

Banking in the CBD industry

Anyone who runs an online business understands that one of the focal points of success is using a reliable payment processor. In most cases, setting up an accessible payment processor is pretty simple. Most businesses can establish a PayPal account or use another type of processor.

However, some industries might have difficulty with their banking within the UK – especially if you run a CBD business. The main reason for this is that the CBD business is considered high-risk.

If you are interested in being referred to a payment gateway that does accept CBD product please email businessbankinginsights@gmail.com

Why is CBD a High-Risk Business in the UK?

In most cases, you can expect any business that teeters near the line of legality as high-risk. Because CBD itself is such a controversial product, many banks consider the industry as high-risk, and therefore, may not want to be associated with businesses in that sector. 

Although CBD is legal in the UK and is available in many different forms, there are still some critical limitations involved in the industry, with these three main requirements:

  • CBD products may not contain over 1mg of THC per container.
  • CBD products must be derived from EU-approved strains of industrial hemp with less than .2% of THC. 
  • CBD products must be produced by manufacturers with approved applications for novel foods authorization from the UK Food Standards Agency. 

These guidelines and regulations make it fairly difficult to provide CBD-type products within the UK, so any business selling them online may appear as a risk to banking businesses. 

How to Handle CBD Business Banking in the UK

Learning that your online CBD business is considered high-risk by many UK banks may seem discouraging. After all, how can you run a successful business if your customers can’t make payments for your products? 

Luckily, there are options that can help you establish reliable and secure payment options for your customer base. They are called CBD payment gateways. 

What are CBD Payment Gateways?

A payment gateway is a piece of technology frequently used by online merchants and businesses in order to accept payments from customers. They facilitate both debit and credit card purchases, allowing customers to buy and sellers to sell. 

Payment gateways are also found in physical storefronts and provide card-reading devices, but with the rise of phone-based payments, these devices are slowly becoming less popular in brick-and-mortar and more popular online.

CBD payment gateways, specifically, can help online merchants locate BigCommerce banks that know the ins and outs of high-risk businesses. These payment gateways typically have connections with dozens of payment platforms and can help merchants facilitate business transactions. 

How to Find a Reliable Payment Processing Gateway

These days, there are tons of different payment gateway organizations to choose from. Finding a high-quality, reliable company can be difficult and overwhelming. So what should you look for in a good payment gateway?

High-Risk Availability

Your CBD payment processor must have the ability to process high-risk transactions. This quality is of the utmost importance. Because CBD is a fairly new industry with changing laws and regulations every day, it is at risk for payment fraud and chargebacks. 

Therefore, it is critical that your payment processor knows what they’re doing and can handle these types of risks. If you can, try to analyze a business’s experience with high-risk operations and industries.

You can generally count on a processor who has experience dealing with one of these other high-risk industries: 

  • Online Dating
  • Online Gambling
  • Cryptocurrency Trading
  • Adult Products
  • Travel Services
  • Vape and E-Cigarette Companies

If a payment gateway service has experience with one or more of the above industries, there’s a good chance they can also handle online CBD sales. 

Efficient Integration

A high-quality, trustworthy payment gateway will be able to work with you without changing everything about your established e-commerce website. If a payment processor wants you to switch your entire platform, it’s a sign of a red flag.

Switching your platform isn’t necessarily a bad thing; it can, however, take up a lot of time and wipe away valuable time and money that went into your original site. 

To avoid this discouraging inconvenience, look for a processor who can integrate their system into your platform, rather than the other way around. If a company truly wants your business, they will already have a diverse system in place prepared to work with you. 

Many CBD payment processors operate with API integration, which is very common, reliable, and easily monitored. 

Affordable Fees

One of the necessary evils of using a payment gateway system is paying for it. While you often have to spend money to make money, you shouldn’t be breaking the bank to integrate a reliable payment system. 

Many CBD payment gateways will charge you an installation fee upfront, while also charging a rate or a percentage of your transactions. Companies may also include various other fees, including compliance fees, terminal fees, and statement fees. 

It’s important that you establish what you can and cannot afford upfront and align your expenses with your profit margins. Keep in mind that there are plenty of payment gateways available within the CBD industry, so if one particular company doesn’t suit your margins, move on to a different one. 

Good Contracts

Some payment processors will require you to sign a binding contract in order to do business with them, while others will not. Every company is different, so it’s always a good idea to review them carefully and pick the one that aligns best with your standards. 

A good general rule of thumb is to avoid companies that require long-term contracts only. If a company feels the need to trap you into a substantial partnership, there’s a good chance their services aren’t that great. Reliable companies typically feel confident enough to let their services speak for themselves. 

Another red flag to look out for is a contract with an early termination fee, meaning that if you want to cut out of your contract before the time period is up, you’ll have to pay. 

In short, look for a reasonable contract with little to no fees, if possible. 

Why Is It Tough to Get Financing in the CBD Oil Industry?

To understand why CBD oil products face so many restrictions, it helps to discuss the industry’s background and challenges. It’s easier to obtain financing when you can address potential roadblocks.

CBD-finance

What Is CBD Oil?

Cannabidiol (CBD) is a chemical compound extracted from the Cannabis sativa plant. CBD has calming properties that can help people relax without a psychoactive component.

Products made with CBD oil can aid in pain management and help curb some anxiety symptoms. However, you’re not likely to find a CBD oil product in London that is licensed as a medicine.

It’s Tough to Market a Non-Medicinal Treatment

Did you figure out the first issue facing the CBD industry? It acts as a medicine but technically doesn’t qualify as one. Marketing CBD is a challenge when your product intends to treat conditions like pain and anxiety but can’t be called medicine.

At this point, companies marketing CBD oil products can’t make any claims about the medical effectiveness of their products. All marketing materials must avoid all references to health benefits. That’s tough when it’s the purpose of your product!

CBD vs. THC

Six letters form two compounds that come from one plant. The Cannabis sativa plant creates Cannabidiol (CBD) and Tetrahydrocannabinol (THC), but the two compounds have very different effects on the human body. CBD is perfectly legal in most places, but THC fares differently.

Tetrahydrocannabinol, or THC, is the chemical responsible for the psychological effects of marijuana. It has the calming, relaxing properties of CBD, but with a psychoactive component. Consequently, THC is illegal in many parts of the world and heavily regulated.

Many countries, including the UK, restrict the amount of THC that can be present in a CBD product. Since the amount of THC permitted is minuscule, it can be difficult to abide by the standards. Some investors refuse to take the risk and refuse to work with any CBD oil businesses.

cannabis-business-banking

The Struggle of a Faulty Infrastructure

CBD oil banking is problematic because of the UK’s faulty system. Though it’s not as tricky to navigate as other countries, like the US, the UK system relies heavily on perceived risks versus rewards.

Given the above challenges facing the CBD industry, CBD startups look like massive risks for many banks. Even though many CBD products are legal in the UK, many High Street banks stick to their conservative ways and refuse to approve accounts for companies dealing in cannabidiol.

To further complicate the situation, few payment processors and point of sale systems agree to work with companies selling CBD products with reviews for all of the above reasons. Even modern banking companies struggle under the weight of restrictions and questionable legal issues under the UK’s financial system.

CBD-finance-UK

Financing Options for CBD Businesses

CBD oil banking options may be limited because of the restrictions around the product, but that doesn’t mean it’s impossible. If you believe in your product and understand how to navigate the industry, there’s no reason you can’t secure the funding you need.

  • Secure private investors to bypass the traditional banking system.
  • Start small and scale slowly to work within your means.
  • Save up before starting up. It may take a while but funding your business without a bank helps your long-term goals.

How to Accept Payments from Customers and Get Paid

Even if you have plenty of capital for your company, you won’t do much business if your customers can’t purchase your product. Thankfully, some payment gateways willingly work with companies selling hemp products.

If you are interested in being referred to a payment gateway that does accept CBD product please email businessbankinginsights@gmail.com

hemp-business-banking

The Future of CBD Oil Banking Looks Bright

Though it’s difficult to navigate now, the trends for CBD oil banking should change. As government regulations shift to allow more sales of CBD products, the banking industry is sure to follow suit. Like most industries, it pays to get in at the front end of a new product, though you may have to be patient for financing to catch up.

Leave a Comment