As the CBD market starts to heat up, questions still loom around CBD credit card processing, leaving many eCommerce business owners scratching their heads. Additionally, many new entrepreneurs with bold ideas don’t even realize the dilemma caused by the gray area of hemp and cannabis banking.
For this webcast, Harrison Mallen, with LimeLight, talks about the muddy waters surrounding the CBD industry in terms of banking and merchant accounts.
Mallen, the Head of Business Development at LimeLight, has worked in the high-risk merchant processing space for more than five years. During this time, he has spoken with hundreds of CBD business owners, attended dozens of CBD conferences around the world, and has formed nearly all of LimeLight's business relationships with CBD brands and fulfillment companies.
What’s the Problem with CBD Payment Processing?
Due to the gray legal status of CBD, selling products in this arena can present specific challenges. Mallen commented that obtaining a merchant account isn’t as simple as signing up for Stripe account or setting up a Shopify store. He stated, “There are only a couple of banks now that are underwriting for the CBD transactions.”
Mallen reminded those who already have existing merchant accounts, or are in the process of getting one, there is always the possibility the merchant could “pull the plug,” on CBD processing at any time. He recounted the moment Elavon shook up the CBD industry earlier this year.
Additionally, sellers need a payment gateway which encrypts credit card transactions and routes it to the appropriate processor. “This is the middle layer that integrates into your website, such as Shopify and Woocommerce,” Mallen explained.
“Although hemp is legal, it’s still considered a high-risk product,” he continued. Mallen then compared the current state of banking in the hemp industry to “a game of ‘whack-a-mole,” talking about how financial institutions dodge in and out of acceptance for the CBD industry.
Redundancy and Back-Ups are Key
Just as redundancy is critical in the world of information technology and data, redundancy in payment processing is also essential for business. As many companies learned from the exodus of Elavon, losing a payment processor can substantially impact your day-to-day business and cause significant losses.
Mallen advises, “Don’t put all your eggs in one basket,” referring to having multiple channels for payment processing. “Then, if one merchant shuts down, you have backups available,” he continued.
“If your website is shut down, you lose business as well as exposure, which is detrimental,” he said. “Having multiple solutions in place helps in the long run.”
Existing Tech Solutions
Mallen suggested that one of the best domestic solutions to date is Square. However Square doesn’t integrate directly with Shopify, a common e-commerce platform. That’s where LimeLight can help with integrations.
Additionally, Mallen explained the differences between US domestic payment processing solutions as well as off-shore solutions such as T1 payments. He warned, however, approval rates can be low with many off-shore accounts, but they make good back up options.
Marketing, Affiliates, and Subscriptions
Marketing presents another major challenge for many CBD products. Mallen distinguishes that normal advertising channels, such as Facebook or Instagram, don’t allow ingestible CBD products. Meanwhile, topicals, such as creams and salves, appear to be getting the green light. To work around these limitations, Mallen suggests marketing a complementary product, one which is Facebook compliant, to gain leads for direct CBD marketing campaigns.
Affiliate programs are a common way to get product visibility, as this allows other marketers, influencers, and bloggers to actively promote your product. Likewise, you only pay a fee when a sale is made, so affiliate marketing is a productive method of online advertising.
Finally, Mallen also suggested that subscription services are a growing segment in the CBD market. He emphasized that redundancy is especially critical in these instances. Losing your credit card processor when running a subscription service could be devastating your monthly profit margins.
LimeLight’s Solutions
With more than ten years of experience in the high-risk space, LimeLight works with several payment processors, which can help CBD retailers connect with the financial institutions that allow CBD transactions. Technically defined as a billing engine, Mallen describes LimeLight as a “back office order management billing solution for optimizing CBD merchant processing.”
Mallen explained their service, through a process called cascading, can reroute transactions through multiple processors to ensure the sale always goes through. Additionally, through payment routing, they can route specific card types or card brands to a particular merchant account to improve approval rates.
“We have a plugin with Shopify, which allows you to leverage Square for processing while using Shopify for your storefront,” Mallen explained. Since Square currently has the best rates for CBD merchant processing, LimeLight can work with business owners take full advantage of this new technology.
Listen to the Q&A at the end of the webcast to hear Mallen’s answers to the following questions:
- What type of rates should you look for processing transactions?
- What/who are examples of 3rd party marketers/ad placement organizations?
- Can we use LimeLight to support Hemp flower purchases?
- When the market changes from Hemp to Marijuana (CBD to THC), can LimeLight support this market? Will there be limitations with this?
- Can he please explain the functions of businesses like Limelight, payment processor and the bank; Also, why is CBD problematic?
- What about using BIllPay, Zodaka or Zelle, GooglePay, ApplePay, AndroidPay, and others?
- We are still having a difficult time opening a bank account. Would we still be able to use Limelight?
- Are merchant processors and marketing platforms more lenient if the wording of the product and the website is “HEMP” instead of “CBD”?
