CBD Merchant Accounts

What do you need to know while starting a merchant account for your CBD business?

Running a CBD business is not easy but can be very profitable. The use of CBD products is no longer a new concept and attempting to sell them online in the United States has always been a cat and mouse game with the acquiring banks.

The most significant issues with running an online cannabis business are the restrictions that payment gateways have on the industry. Inexplicably, CBD oil has been rated as high-risk and merchants are routinely shut down by most payment processors for no other reason than it is a hemp derivative.

There are payment options that merchants have but the fees can be suffocatingly high and the application process is more involved there are potentially longer wait times for approval. It takes a reputable agent to help traverse the application process and submit the paperwork on behalf of the client.

One such card service isSquare, who has thousands of applications and have shepherded the great majority through the process to approval. According to Roderick Simmons, the process is not without some friction and it is important to retain an experienced and trustworthy representative to make sure that the end-to-end process results in a successful outcome.

“We provide end-to-end service to our customers by shepherding them through the entire process and then helping them implement it in their businesses and on their website.” Justin Jilg, CEO of Brainstorm Hosting, says that “Working with Square provides a soup to nuts solution which removes all the complexity for the client. Service coupled with technology allows for an outcome that is excellent for the customer.”

CBD oil merchant account solutions

One example of a successful CBD producer is WAAYB Organics. In the formative months of their eCommerce business, they were experiencing exploding growth which inevitably hit the radar of their payment processor, Stripe. After a cursory review of WAAYB’s site, they were shut down unceremoniously. This necessitated sending an email to their customers letting them know that they were shut down due to not being compliant with their terms of service.

According to WAAYB’s Chief Operating Officer, Victor Trasoff “When we asked them why, they said, ‘Hemp is too risky & banks no longer want to underwrite high-risk transactions.” We didn’t know how to tell our loyal customers that our products are considered ‘high-risk,’ and are somehow lumped into the same category as firearms, escorts, and adult entertainment.

”WAAYB’s experience isn’t unusual. It’s one of a growing list of companies selling products with CBD that have been cut off from payment services.

These companies find themselves in a murky situation that is difficult for them to traverse. CBD is derived from hemp. Hemp has low levels of THC, the physiologically active element of marijuana that produces the euphoric effects of getting “high” which is often misunderstood as a legitimate product for many health-related maladies.

After trying Square, we attempted to use PayPal  although she underscores PayPal is far from a sure thing for CBD companies. According to Victor, “We’ve talked to a lot of brands where even PayPal randomly freezes their account and freezes all funds or shuts down their account, and hundreds of thousands of dollars are locked in PayPal.

Looking for an alternative, WAAYB went to PayPal as an online payment solution for CBD brands spurned by credit card processors. Given PayPal’s history with providing services for individuals almost without any verification and also providing services for millions of merchants on eBay, and even more surprisingly though it is legal in all 50 states, they don’t want to deal with the complexity of a company that deals in a product such as cannabis and hemp.

WAAYB tried to work with Amazon payments which provides controversial services from companies that make products in China and other third-world countries with less than stellar reputations for using children to product their products; they were not even get on Amazon because of the CBD in the product.”

Why Are Banks Reluctant to Take on CBD Businesses?

All of this begs the question why banks are still a long way from supporting  businesses specializing in CBD.  The problem is many banks still worry about getting in trouble with the law for providing financial services to the CBD industry.

They don’t want to incur the risk and overhead with taking part in and industry with murky legal issues. Although it is possible for progressive banks to take part in states that have legalized cannabis, they still make the determination that the industry is too risky?

One of the obvious outcomes of continuing to provide products in the CBD Industry is using cash to pay for products. Even with using cash, the bank industry is still reluctant to accept deposits which transitively makes them join the marijuana commerce industry. This has left many CBD businesses to pay their bills and make sales using cash.

This isn’t an easy process when you have to pay employees and suppliers and requires them to keep significant amounts of cash on hand. Having to store cash in a business is always a security risk since it could easily become lost or stolen. When cash flow is this important to a CBD-based business, losing it is devastating and can sink a business.

This ultimately necessitates business to find creative ways to store money, sometimes meaning burying it to keep it safe. Just a couple of years ago, 60% of all cannabis businesses didn’t have a bank account to do business. The ramifications of financial institutions’ actions are profound for companies looking to sell CBD products online. CBD beauty brands  have confronted myriad banking woes.

They’ve been unceremoniously kicked off a several of payment processors and have had their bank accounts frozen with zero warning. Leaving the bank with a stockpile of their customer’s money.

Why Do Banks Consider CBD A High Risk Industry?

Even with all of the advancements in the understanding of CBD and Hemp Extract Oil, most traditional acquiring banks continue to be worried about CBD payment processing because of its link to marijuana. The hemp plant is comprised of cannabidiol (CBD) and THC. While THC is the psychoactive, painkilling chemical in marijuana, CBD is a natural analgesic with hardly traceable amounts of THC. Even though there is a clear delineation between THC and CBD, the fact that it is a derivative of marijuana is enough to scare off certain acquiring banks. According to Roderick Simmons from Apex Card Solutions , there are acquiring banks that welcome CBD merchants with the right criteria, such as:

  • Proof the merchant can generate a minimum of $1,500 per week in sales.
  • Four to six months of payment processing history with banking statements showing company name, total sales, chargebacks and refunds.
  • A website that meets several customer requirements

CBD eCommerce Hosting

In order for acquiring banks to approve CBD business to transact commerce online, companies must have a website that satisfies a set of criteria such as notifications about the levels of THC in their product,  want to accept credit card payments online, where the products is legal, and a clear cut terms of service and privacy policy as well as several other elements such as a payment gateway API and eCommerce platform such as WooCommerce.

According to Justin Jilg, CEO of Brainstorm Hosting, the application process for acquiring banks that are willing to approve CBD products is much less painful when a website has all the items needed before the application is submitted. There is no rework needed and it reduces the delays in the process.

Endure a 10 percent rolling reserve

Prior to her troubles with Stripe, WAAYB was also booted from SquareSpace’s payment gateway, Stripe. The processor WorldPay later shut her out upon building a new website with the e-commerce platform WooCommerce. Cannabliss Organic founder Melissa Christensen tells similar stories.

“When we first applied for a merchant account about two years ago, we got approved, and we integrated with Authorize.net,” she recalls. “All of the sudden I noticed charges not going through, so they cancelled us, no notice, no explanation.

Obviously, it was because of the CBD. From there, we were scrambling. We applied for a few other what they call ‘high-risk’ gateways. They do cigarettes and porn, and they said that they could accept CBD, but we went through the application process and, after two or three months, it never happened.

Then, we tried a European bank, and that didn’t work.” Some card processors try to prevent banks from recognizing purchases of CBD-based products through the nefarious practice of recoding the transactions. Many suspicious agents say “There are payment processing companies who specialize in the CBD” says WAAYB.

“They are lying. It’s not on the up and up with the government. You use those at your own risk.” Victor, who sells a cream and face oil on her site containing hemp flower, was forced to implement. The firm says it could be months before an opinion is released. With legal and financial hurdles still omnipresent, companies often change the verbiage on their sites to steer clear of government scrutiny. Goggin recommends they move away from the use of the term CBD.

He advises they call CBD products “full spectrum hemp products.” Yarnell is noticing brands are increasingly tweaking wording in this way. “People are changing the verbiage to activated hemp extract because it does need to be clear that what is being used in these products contains less than .3% THC, which classifies it as industrial hemp,” she says.

“It’s not coming from the cannabis plant. It isn’t illegal.” Some CBD product vendors are turning to overseas processing companies that are not under the U.S. government’s jurisdiction to accept credit card payments online. “I’m looking into the overseas because I don’t have another option,” says Schriever. Overseas services can be costly, though. “They will charge anywhere from 5% to 10%. That’s just the fee per transaction,” reveals Schriever. “Many of them also want you to put money in an escrow account. It costs you way more.”

In comparison, Shopify swipe rates are as low as 2.4%. To avoid steep fees, CBD brand-focused Verde Distribution only accepts checks. “For bigger companies, it’s hard with credit card processing, but even harder for distribution companies and smaller companies because we are working with a small margin,” says Hattie Yarnell, director of marketing and sales at Verde.

“On our website, we started out with Square and PayPal, but when I found out that they don’t want to process hemp and CBD products, I quickly deleted that. So, the majority of payment that we take is checks. It takes up a lot of time having to track down payments.”


As a result of legal gray area created by conflicting cannabis legislation, e-commerce payment gateways have decided to drop retailers they discover to be selling CBD products of any kind out of fear the products could be considered illegal. The ramifications of financial institutions’ actions are profound for brands trying to sell CBD products online.

They’ve experienced being kicked off several payment gateways and have had their bank accounts frozen and/or closed. PayPal has emerged as an online payment solution for CBD brands.

Until a clear consensus on the legality of cannabidiol products is reached, many companies are changing the verbiage on their sites to stay away from the word CBD in an effort to avoid government scrutiny.

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