Credit Cards and CBD/Hemp

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Credit Cards and CBD/Hemp

There is a vast range of companies that offer services for CBD merchants. However, because the category itself is considered high-risk, merchants have to contend with very varied pricing, high rates and hidden fees. To that point, Square (as the latest entrant to the category) is touting transparency and ease of use. However, other companies are more established and offer more nuanced services- like eMerchantBroker, which is known for taking on merchants that other providers may decline; Digipay, which has already subdivided the CBD market into different types of merchants with offers for each; and Authorize.net, which has aggressive fraud protection and the longest history of all four.


Square CBD Payment Program

  • On October 3, 2019, Square announced they would open up their payment-processing capabilities to all CBD product sellers after a successful beta program. Their program was born out their own compliance team. As they created their own process for reviewing sellers, they realized the credit card companies they worked with often had the same questions and felt the program could be expanded. While Square has promised enhanced due diligence, however, it's still up to the individual seller to ensure compliance with the industry's regulations.
  • Utilizing Square to handle payments gives merchants access to all of Square's resources. Advantages include seamless integration with in-person and app-based purchases, comprehensive customer service, and a strong corporate reputation with the best security. There are also related benefits like POS systems, website builders, and partner integration to help sales.
  • For online and in-app purchases, Square charges 4.2% + $0.30 for each transaction. However, the company is open to custom pricing for large businesses.
  • Square is for almost any CBD seller, which is in line with their stated vision to help sellers of all sizes start, run, and grow their business. Given their experience in the payment processing space, Square is able to offer end-to-end support for any size business. Small business owners can be lured by their personal customer service, low single rate for any card, no hidden fees, and help setting up their websites. Bigger businesses are likely to be attracted by their financial security, custom rates, and the ability to consolidate all their data and processes in one place regardless of how the sale is made.
  • Square has a big competitive advantage given their low rates and established name outside the CBD industry. As mentioned in the early findings, high-risk payment processors can expect about 6-8% of each transaction while Square might only charge half of that.

eMerchant Broker (EMB)

  • eMerchant Broker is a high-risk merchant account provider. It allows for online applications that can be done within minutes, and the support system will process the application in as little as 24 hours. Once set up, EMB offers help to ensure the merchant stays as profitable as possible and doesn't put their approved account in jeopardy. Their chargeback management system helps merchants reverse 1 in 4 chargebacks. They also have support staff available 24/7.
  • They are well-regarded within the industry. Top Credit Card Processors has named them the top high risk merchant account provider and processor five times (although they lost that by 2016), and they have an A+ rating as a BBB Accredited Business. However, reviews laud them for their reputable sales team and strong customer support.
  • Their pricing is not standard- a client would first need to apply before being told their custom rate. That would depend on the industry, but also on the merchant's "past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes." They also work with a range of processors, so rates differ there as well. Merchants are advised to work with a sales rep they trust as there are a lot of costs that can be negotiated.
  • Some reports put the cost per transaction for swiped and keyed-in transactions respectively at 3.00% + $0.15 and 4.00% + $0.25. Note however that this does not cover online transactions which may be higher. Also, eMerchant Broker charges early termination fees that can range from $295 to $595 and up, depending on the length of the contract. There may also be additional monthly fees, as well as fees for the use of the payment gateway, PCI compliance, and chargeback fees. They may also have a minimum transaction amount per month that a merchant has to hit.
  • EMB targets CBD sellers that are looking to set up online stores with Shopify. They also target merchants that may have trouble getting approved with other companies, since they work with merchants with no/poor credit scores, those that have lost accounts due to high chargebacks or have no credit card processing history.
  • EMB's advantage rests on two things. One is their partnership with Shopify, given the latter's scale and established ecosystem as a shopping destination. The second is their willingness to accept merchants that other companies might turn down, as noted above.

Digipay

  • Digipay is a digital payments and financial services platform that offers a range of services depending on the business. When it comes to CBD, they specifically target businesses like B2B wholesale hemp CBD, stores and wellness centers, topicals for body and hair, ingestibles, vape oil, and supplements. For these, they have fast-track approvals, underwriting, and a full credit card suite.
  • Digipay's pricing is not available as that will depend on the individual business; interested parties have to reach out for a personalized quote. According to one user, they were quoted a rate of 4.4%+ $0.30 per transaction, with an additional fee of $20 a month.
  • They target CBD e-commerce or retail businesses.
  • According to them, their competitive advantages are: they have great pricing and payment solutions, since they have the biggest network of partner banks; they have tools to preemptively stop fraud and chargebacks; they have risk managers; they have a value-added service with their payment gateway wherein they don't just process the payment but double-check identities against global repositories; they offer customer analytics; and they have varied payment options like "ACH check processing, cash discount, currency conversion, digital wallets, gift cards & loyalty programs". They also partner with Shopify.

Authorize.net

  • This provider is one of the oldest gateway providers in ecommerce and is currently owned by VISA. It provides a payment interface and several other services connected to it, like fraud protection and a streamlined checkout experience. Some other services include support for billing recurring transactions automatically, access to customer service, QuickBooks support, and eCheck processing.
  • Authorize.net charges a minimum $25 monthly fee, although that is currently waived until August 1, 2020. There is also the per-transaction fee of 2.9% plus $0.30. There may be additional fees tacked on as well given any add-on services and a high-risk category like CBD. On the other hand, if all that is needed is a payment gateway, then the fee is just $0.10 per transaction with a daily batch fee of $0.10.
  • Given the $25 monthly fee when several other companies have phased this out, Authorize.net is recommended for clients that need their advanced fraud protection backed by the VISA name.
  • Authorize.net finds its strength from its long history and is recognized as "one of the best gateway providers in the merchant service industry". Part of that is due to Authorize.net's sprawling infrastructure that allow it to take in funds from a range of sources- from credit card, to check, to fund deposits, and even mail, phone order, or mobile (via the company's virtual terminal), as well as their track record of having partnered with hundreds of resellers that use it as a payment gateway.
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