How to Protect Your CBD Business from Payment Processor Shutdowns?

CBD businesses have been legalized for quite a long time now. However, there are still many restrictions on these businesses. Due to this, many payment processing companies are not willing to work with CBD businesses.

However, these are CBD-compliant payment processing businesses, but they can suspend the account(in case of even minor problems) without any prior notice.

Suspending a payment processing account results in no transactions, decreased customer convenience and satisfaction, and a huge impact on the bottom line.

And, this is something that every business would like to avoid. If you are also the one and are wondering how to protect your CBD business from payment processor shutdowns, then this blog is all you need.

To know more about the basics, the things to keep in mind followed by best tips and practices to prevent shutdowns, then keep reading. Let’s get started.

Also Read: How to Choose the Best CBD Payment Processing Company

Why is Payment Processing Challenging for CBD Businesses? 

One of the biggest challenges facing CBD firms is that a lot of big financial institutions and traditional payment processors, such as Visa and Mastercard, avoid the industry because of the perceived risk. This risk is related to regulatory ambiguity and potential liability if products are discovered to violate THC-level laws or are marketed in violation of FDA recommendations.

Payment processors frequently categorize the CBD sector as high-risk, associating it with sectors such as adult entertainment, weapons, and internet gambling. As a result, finding a reputable payment processing solution for CBD-related products might be difficult. Companies that sell CBD must deal with increased costs, frequent account closures, and fewer methods of payment, which complicates the payment processing overall.

Also Read: Why Do CBD Businesses Struggle With Payment Processing and How to Fix It

Why Preventing Payment Processor Shutdowns are Important? 

Customers of today crave for convenience at every step. And, payments are one of the crucial components that businesses should not overlook. Any inconvenience with the same can impact your bottom line significantly. Payment processor shutdowns can disrupt cash flow, hinder customer transactions, and damage your business reputation. 

These shutdowns often occur due to misunderstandings about CBD regulations, failure to comply with processor policies, or abrupt changes in the processor’s stance on CBD-related businesses.  

Without proper preparation, a shutdown can lead to:

• Loss of Revenue: Interrupted payment channels result in missed sales opportunities.
• Customer Frustration: Customers unable to complete transactions may abandon their purchase, impacting customer loyalty.
• Business Instability: The inability to process payments can halt operations and tarnish your brand’s reputation.

Taking proactive measures ensures that your business remains resilient in the face of such challenges.

Also Read: Secure Payment Processing for CBD E-commerce

How to Protect Your CBD Business from Payment Processor Shutdowns?

To safeguard your CBD business against risks associated with shutdowns, it’s vital to follow the best practices. Let’s keep reading to learn about the best practices to prevent payment shutdowns: 

1. Choose a CBD-Compliant Payment Processor:

Mainstream payment processors often categorize CBD as a high-risk industry due to legal gray areas and inconsistent state and federal laws. Businesses that fail to align with CBD-compliant processors face account closures, leading to halted transactions, operational chaos, and a damaged reputation.

So, it is important to choose a CBD-compliant payment processor that understands CBD businesses to the core and provides the required support when needed with lesser chances of frequent or unexpected shutdowns. 

Here’s how you can do it? 

• Research Specialized Providers: Research the market and look for the best payment processor that is compliant with CBD businesses, ensures seamless transactions, and prevents shutdowns. 
• Verify Compliance Expertise: To prevent compliance problems, ensure your CBD payment processor provider understands industry-specific regulations and requirements.
• Check Reviews and Testimonials: To better find out about the compatibility and choose the best & reliable CBD payment processor, look for customer reviews and testimonials on their website, social media, third-party review platforms, GMB page, etc. It gives you an idea about the experience of CBD businesses and helps you make the right decision. 
• Request a Demo: Do not forget this. Request a free demo from the CBD payment processor and test it on real business environments. Evaluate their features, customer support, and integration capabilities to ensure they meet your business needs.

Also Read: How to Integrate CBD Payment Solutions with E-commerce Platform

2. Maintain Transparency with Your Payment Processor:

Many CBD businesses in order to get quick approval, share false or hide crucial business details related to their business such as product selling, THC content, legal compliance, etc. Concealing information might get you quick approval but might lead to shutdowns and other problems later on. And, it not only disrupts operations but may also damage your credibility with future processors. 

So, keep in mind that transparency is a cornerstone of building trust with your payment processor. And, make sure to be completely honest about your business, products, and operational details when signing agreements.

Here’s what you need to do. 

• Disclose all the Product Details: Share specifics about product composition, including lab test reports that confirm legal THC levels.
• Provide Licensing Information: Ensure your licenses and certifications are up-to-date and readily available.
• Provide all the required details: Make sure to get and provide all the details that your payment processor asks you to. 
• Maintain Ongoing Communication: Update your payment processor if you introduce new products to expand your services.

Also Read: How to Get a CBD License

3. Diversify Payment Options: 

No matter how hard you try or follow the best practices and maintain compliance, there will always be a risk of payment processor shutdown. The end result? Don’t depend on just one CBD payment processor. 

Over-reliance on a single payment processor can leave your business vulnerable to shutdowns. If that processor suspends or terminates services, you could face immediate cash flow problems and lose sales opportunities.

So, it is important to consider multiple payment methods to safeguard against disruptions. When you face a shutdown with one, you can always switch to another one. It ensures seamless payments.  

Here’s how you can do it. 

• Partner with Multiple Processors: Spread the risk by collaborating with several compliant payment processors.
• Integrate Alternatives: Offer ACH transfers, e-wallets, or cryptocurrency payment options for additional resilience.
• Test Systems Regularly: Ensure all payment methods are functioning properly and ready to use in emergencies.

Also Read: How to Open a CBD Business Bank Account

4. Stay Updated on CBD Regulations:

The CBD industry is highly regulated. It is subject to frequent regulatory changes at both state and federal levels. And, if you can’t keep up with the changing rules and regulations, there will be consequences. Falling behind on compliance can result in penalties, legal action, or payment processor terminations. 

So, make sure to keep yourself updated about the latest laws and guidelines that impact CBD businesses and make adjustments accordingly. 

Here’s what you should and need to do: 

• Subscribe to Regulatory News: Follow updates from the FDA, USDA, and local government agencies. 
• Consult Legal Experts: You can consult and work with legal experts. They are updated about this stuff and can guide you accordingly to stay updated and maintain compliance. 
• Train Your Team: Regularly educate employees about new regulations and their role in maintaining compliance.
• Consult with your payment processor: As the regulations around CBD change, make sure your payment processor also follows all the regulations and stays compliant. It ensures seamless payment processes. 

Also Read: Guide to Start a CBD Business

5. Implement Fraud Prevention Measures:

High chargeback rates and fraudulent activities can classify your business as high-risk, leading to higher fees or account termination by processors. So, it is important for CBD businesses to have a proactive approach to fraud prevention that helps you safeguard your business’s reputation, reduce financial risks, and prevent shutdowns. 

It is recommended to get your hands on robust fraud detection tools and protocols to protect against suspicious transactions.

Here’s what you need to do to ensure end-to-end fraud prevention and shutdowns: 

• Leverage Fraud Detection Software: There are so many fraud prevention tools available for CBD businesses that you can use to flag suspicious activities and inform businesses about the same. It helps reduce frauds, and chargebacks and even prevents shutdowns. 
• Enforce Identity Verification: Age verification is quite important for CBD businesses and if you can’t keep up with it, it can lead to challenges. So, make sure to authenticate their identities during transactions.
• Maintain Detailed Records: Make sure to keep all the records of product purchases and sales as well to dispute any fraudulent chargebacks and even payment processor shutdowns. 

Also Read: How to Avoid Fraud and Chargebacks in CBD Payment Processing

6. Negotiate Favorable Terms with Your Processor:

Before choosing any payment processor for your CBD business, it is important to discuss all the terms. Because unfair terms, such as excessive fees or high reserve requirements, can strain your business financially. 

The right and reliable CBD payment processor with a well-negotiated agreement provides better cost management and clearer expectations, reducing the risk of misunderstandings or abrupt shutdowns. 

So, it is important to connect, discuss, and secure a contract on transparent and reasonable terms with your CBD payment processor. 

Here’s how you can do it: 

• Review the Contract Carefully: Pay attention to clauses about fees, reserves, and account termination conditions. 
• Negotiate it thoroughly: You need to research, look after, and negotiate all the terms thoroughly to ensure it is favorable for the business. You can use your transaction history and compliance record to negotiate better terms. 
• Seek Legal Advice: Before finalizing anything, it is best to hire a lawyer who can review the agreement to ensure it aligns with your business interests.

Also Read: Which Bank Supports CBD Businesses

7. Build a Strong Online Reputation:

Building a strong online presence is equally important to prevent payment processor shutdowns. You might be wondering, how a strong online reputation would prevent shutdowns?

Well, a professional and credible online presence reassures both customers and payment processors. On the flip side, negative reviews or a poorly maintained website can create the impression that your business is unreliable, increasing the likelihood of account scrutiny.

So, make sure to create a reliable, secure, and best-in-class website for your CBD business that helps you to create a trustworthy online image for your CBD brand.

Here’s what you should do to create a strong & reliable presence: 

• Develop a Professional Website: Make sure to include a professional website with detailed product descriptions, add all the compliance certificates, secure practices (mainly for payments) and even easy navigation.
• Encourage Positive Reviews: Ask satisfied customers to share their experiences on trusted platforms.
• Engage with Feedback: Address negative reviews constructively to demonstrate your commitment to quality.

Also Read: How to Market CBD Business On Social Media

8. Maintain Open Communication with Your Payment Processor:

Another best practice that helps you prevent payment processor shutdowns is maintaining open communication with your payment processor. Lack of communication can lead to misunderstandings and shutdowns during compliance reviews. 

But, open communication helps you ensure smoother operations and in case of any potential issues, they will provide you with the required support for quicker resolution of potential issues. 

Here’s what you should do? 

• Proactively update your payment processor on business changes, such as new products or expanded operations.
• Promptly address any concerns or disputes raised by the processor.
• Provide updated documentation whenever requested.
• Assign a dedicated team member to handle processor communications.
• Respond to processor inquiries immediately and provide clear, detailed answers. 

9. Develop a Robust Contingency Plan:

You will follow all the best practices to prevent payment processor shutdowns, but even with all the precautions, shutdowns can happen unexpectedly. So, it is important to have a well-prepared contingency plan in place that helps you minimize downtime and ensures continuity in transactions and customer service.

Here’s everything you need to develop a robust contingency plan: 

• Establish relationships with backup processors to handle emergencies.
• Train staff on contingency protocols for payment disruptions. In your contingency plan, make sure to outline roles and responsibilities during disruptions. 
• Use email or SMS campaigns to inform customers about alternative payment options during outages.

A quick tip: Dedicate a small portion of your income to a contingency account. 

10. Implement Strong Data Security Practices:

Apart from getting the best-in-class fraud & compliance tools, you also need to implement best-in-class data and payment security practices. Data breaches or poor security practices can lead to fraud and chargebacks, raising your risk profile with payment processors. 

Well, strong data security practices ensure end-to-end secure transactions, lower frauds, and chargebacks, and improve trust and credibility for your business. 

Here are some of the best transaction practices that you should follow: 

• Payment compliance: Ensure your payment systems are PCI DSS (Payment Card Industry Data Security Standard) compliant. It validates the payments and reduces the associated risk. 
• Keep security at the core: Security is among the crucial aspects of all CBD transactions. So you can use SSL certificates to encrypt sensitive data on your websites, regularly back up your data, update cybersecurity measures, invest in tools like firewalls, antivirus software, and encryption protocols, and other measures. 
• Hire experts: It is always recommended to get expert work on all the security aspects of your business and payments are one of them. So, make sure to take their help when it comes to auditing and improving your cybersecurity infrastructure. 
• Keep your team updated: Another best practice is educating and updating your team about security and protection when it comes to recognizing phishing attempts, fraudulent transactions, and other cyber threats.

To Wrap Up! 

Payment is at the core for every business, so security is no brainer. But, especially for CBD businesses – this becomes even more important as they are more vulnerable to frauds, chargebacks and other problems that can lead to shutdowns. 

In the blog, we have covered the best tips that CBD businesses should follow to prevent problems and unnecessary shutdowns. But, the best one being – choosing the right payment processor who follows the best security practices and offers the required support and assistance when needed. 

If you are looking for the best one, you can check out CBD Merchant Solutions. We are a trusted, secure, reliable and CBD compliant payment processor. To know more about it, whether it fits your business, how we support your business – you can check out reviews on our website or third-party platform and even book a free demo.

So, what are you waiting for? Let’s get started now.