Payment processors are an important but complicated part of business for CBD companies and their customers. Photo credit: Envato.
Payment Processing companies, like PayPal, are a necessary component of both in-person and online shopping. If a customer wants to buy anything with a credit card, debit card, or any form of online payment, then the business they are buying from must have a payment processor.
For most companies, this is just a regular part of doing business. But for CBD and cannabis-related shops, it can be a nightmare.
For small business owners, payment processing is a necessary, but needlessly complicated, aspect of business. Take Stephanie Boucher, a business coach and founder of CannaBotanicals, an herbal remedy and elixir retailer, for example. She used PayPal without issue for a few years, mainly for the coaching side of her business. But after the 2018 Farm Bill passed — which federally legalized hemp — she says, her account was frozen.
“I got an email from PayPal not too long after [the Farm Bill] that they were freezing my account; that I was no longer ever going to be allowed to use PayPal as a payment processor, and they were basically holding my money […],” she tells Emerald. “I didn’t have access to it for six months.”
Boucher eventually got her money back. But without access to one of the largest online payment processors in the world, it makes receiving payment for some things, such as work with affiliate businesses, difficult.
Although hemp and CBD are federally legal, many payment processors will not work with them. According to Paypal’s vague acceptable use policy, for example, these businesses may be considered to “present a risk to consumer safety.”
After PayPal shut Boucher down, she applied for an account through Stripe, another online payment processor.
Unfortunately, she was denied by them until she split her business up into two separate entities: a coaching business and a retail business.
Stripe approved her coaching business — Bud to Bloom Coaching. However, as far as the CBD side of business goes, she says that CannaBotanicals has found success with Square.
“You Went Against Terms and Conditions”
Jill Cohen, CEO of TheCannaBossLady, a CBD beauty and wellness boutique, shares a similar experience. Cohen, who is also managing director of EmeraldLive, started her business on Shopify.
When starting her business, she immediately ran into an issue with Shopify. While Shopify itself is cannabis friendly, according to Cohen, its payment service is not.
As a result, she had to find a third-party processor. Since many consider Square to be the most CBD and cannabis-friendly processor, due to their early entrance program for CBD companies, she chose to work with them. However, this posed a new challenge. Square could not integrate with Shopify. So, Cohen had to use a separate service in order to integrate the two.
After a complicated setup, disaster struck.
“All of a sudden, my credit card processor went down, and I just got this big generic email where it just [said:] “You went against terms and conditions, you’re no longer allowed to use Square, we had to take your account down, please reach out to customer service,”” says Choen. “I was just baffled.”
After what she describes as a “total nightmare,” she finally got a hold of someone at Square — thanks to help from one of her business partners.
The root of the problem was, in fact, a root. One of Cohen’s products contained kava root — a violation of Square’s terms of service. Consequently, she removed the product from her site. After she pulled the product and changed wording on her site, she was back up and running. She says that Square has not given her any issues since.
However, Cohen says she was not notified, or given a reason or an opportunity to resolve the issue before action was taken.
“My Sales Took a Nosedive […]”
Kristen Haas, founder of The Botanica Boutique, a carefully-curated selection of high-quality CBD and wellness products, like many other CBD business owners, has had issues finding a payment processor. After settling on Square, she says, “everything ran well for a while. Then one day I got an email that my website, the payment processing, was shut down,” explains Haas.
“Eventually, in some of my digging I found out that they do have a CBD program that I was unaware of,” she explains. “I applied for the CBD program, and I waited and waited and waited, and my sales took a nosedive for a number of months […]. To this day, I have never heard back from Square’s CBD processing [service].”
After no response from Square, she decided to move on to work with brokers. The first she worked with put her in contact with a bank. But a mountain of paperwork stood in her way.
“I had to put together a packet of information, and I’m telling you it was more information, more paperwork, than I had to do to get my mortgage,” Haas says.
When Haas finally completed the required paperwork, the bank said that she would have to remove 70% of the products on her site in order for the bank to approve her.
She decided to look for a new bank, and she eventually found one. Haas says there are still stringent guidelines, but that she is able to run her business successfully.
Causing More Drought in Cannabis Deserts
A common experience by all of the business owners interviewed was being abruptly shut down by payment processors, with little to no warning. For them, it’s a disaster, since they can’t sell their products and their livelihood is in jeopardy.
But businesses are not the only ones who suffer when this happens.
A sudden loss of access to online retailers can have a huge impact on consumers, especially for those in areas without any brick and mortar stores with CBD products. For medical patients, people who live in rural areas, or those who are unable to drive — this is particularly devastating.
Even in states where adult-use cannabis is legal, there may not be physical stores to visit for many. And without the ability to purchase online, it can leave those living in these “cannabis deserts” without the products they want or need.
Changes in the Treatment of CBD Businesses
The path forward for CBD businesses, and their customers, is still uncertain. We asked Jill Cohen, Kristen Haas, and Stephanie Boucher what changes they would like to see with payment processors’ treatment of CBD companies.
They all shared a similar sentiment; small CBD businesses should be treated the same as any other small business. The hoops that these business owners and their customers have to jump through, and the extra scrutiny by their payment processors is simply ridiculous. It serves as a major barrier for entry into the field.
For prospective entrants into the world of CBD business, it’s not all doom and gloom. As Boucher puts it, “[don’t] get discouraged. Things are shifting and changing. More is going to become available, and even though it seems hard right now, it’s not impossible. There are ways to make it all work. We have an opportunity right now to be a part of that change.”