The Future of Virtual Terminals in the Cannabis Industry

Boxes of a cannabis product.

As medical and recreational cannabis has been legalized in many states, numerous products have come on the market. These include a wide range of profitable CBD products. A merchant account allows your business to accept credit card payments from customers who buy these, while a virtual terminal allows you to accept credit card information without having physical access to cards.

This means you can sell your products online. However, many payment processors still consider CBD products to be a high risk. Here’s a look into CBD credit card processing and how a virtual terminal can help your business, and customers.

What Is CBD?

Cannabidiol (CBD) is a substance derived from cannabis, or hemp, plants. These are the same plants that marijuana comes from. The main difference is that there is little or no tetrahydrocannabinol (THC) in CBD products, meaning they don’t have the same psychoactive effect. A hemp plant used to produce CBD has 0.3% or less THC. While it hasn’t been approved for treatment of any health condition, CBD has been used to treat health issues such as childhood epilepsy, anxiety, insomnia, and chronic pain.

Is CBD legal?

CBD, as well as the hemp plants they come from, can be legally sold where regulations permit them to be. However, restrictions vary from state to state. The federal government had CBD and marijuana in the same class, but products made from hemp were legalized with the Agricultural Improvement Act of 2018 (Farm Bill). As long as your state has legalized medical and/or recreational marijuana, your business can sell CBD products.

What Is Cannabis Payment Processing?

Cannabis payment processing is a service that allows dispensaries and other businesses to accept payment by credit or debit card. Tools such as virtual terminals are included. These allow credit card information to be entered manually, by an agent over the phone, or via the internet. The benefits include:

  • More options for customers to make purchases
  • Reduced payment processing time, so purchases can be completed faster
  • Equipment isn’t purchased/installed by the company, so payment processing is more cost-effective
  • Increased sales for the dispensary
  • The potential for accelerated industry growth

CBD Requires High-Risk Processors

Risk is one of the greatest challenges with CBD credit card processing. Many merchant account providers won’t support the sale of CBD or hemp products. That is why you need a high-risk account. Even if your business already offers a high-risk product, such as vaping products or online gaming, check with your merchant account provider, as not all will process CBD-related transactions.

Why Is CBD Payment Processing Considered High-Risk?

Despite a more favorable legal status, payment processing for CBD products is still considered to be high-risk for a number of reasons, such as:

  • The market segment is relatively new.
  • Deregulation to move such products to the mainstream market takes time.
  • There are still many questionable producers.
  • Product efficacy is often backed by unsubstantiated claims.
  • Chargeback rates in the industry are high.
  • There are legal issues with product distribution.
  • Some banks underwriting merchant accounts aren’t yet open to dealing with such businesses.

Legal Issues in the CBD Oil Industry

All CBD-based products were considered Schedule I drugs by the Drug Enforcement Agency (DEA) up until late 2018. Their sale, transportation, or use was prohibited under federal law. Following the passing of the Farm Bill, states have continued to lift restrictions against CBD products.

Although CBD- and other hemp-based products with less than 0.3% THC are no longer on the Schedule I list of controlled substances, there are other factors to consider. To sell CBD products, your company must be licensed. It must also comply with a variety of federal and state laws to legally produce and sell such products. It’s important to research these laws before starting sales.

Ensuring the amount of CBD in your products is within the legal limit is one challenge. Consumers may unknowingly receive a product with too much THC or no CBD. While the Food and Drug Administration (FDA) has approved Epidiolex for some types of epilepsy, it has not approved use of CBD-based products for other uses. This is one reason merchant account providers are often reluctant to work with merchants that sell them.

What to Look For in a CBD Payment Processing Gateway

When you do find a merchant account service provider willing to take on the risk, here is what to look for. First, check their reputation. A reputable CBD credit card processing company will offer honest service and fair prices; this is important, as you’ll encounter higher processing rates in a high-risk segment.

In addition, some processors require extremely high monthly sales volumes, among many other restrictions. These are some other factors to consider before signing on with a merchant account provider:

  • Underwriting/Account Approval Process: Being approved for a merchant account as a CBD products company can be difficult and tedious. Avoid any provider that offers “instant” approval, but make sure you are approved. If you start processing credit card sales too soon, your account could be shut down later.
  • Cost: Monthly and annual fees for a high-risk merchant account are higher. However, processing rates are where such an account differs. You may be required to sign on to a tiered pricing model—the most expensive credit card processing option. Processors often use a rolling reserve with high-risk merchants, where cash funds are withheld until a reserve is met, which can be problematic for small or new businesses.

A customer making a purchase at a POS terminal

  • Customer/eCommerce Support: High-risk merchants often face customer support issues. Research the provider’s reputation in this area and choose one with eCommerce support. With a payment gateway, you can process transactions online; the best system will filter out addresses where there are restrictions on CBD products. This way, you can expand your company’s reach and do so safely.

Choose Adept Payments for CBD Credit Card Processing

Our credit card processing service makes it simpler for you to sell your CBD products online. It seamlessly integrates with your existing infrastructure. We also offer the lowest rates, guaranteed, as well as the latest technologies. The virtual terminals and other payment options we offer allow your business to accept all forms of electronic transactions. To learn more, call 888-732-3838 today.

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