As one of the most accessible money-sending and receiving platforms, PayPal has established itself as the go-to for people hoping to make a quick payment online. What once started as a way for private individuals to send payments to loved ones has become a massive interface and payment solution for businesses.
You can pay for almost anything with PayPal, from online streaming subscriptions on Netflix to bespoke trim bric-a-brac from Etsy. But how far do the payment possibilities reach? And will PayPal let you accept and send payments for CBD products? Find out here.
The short answer is no — you can’t. PayPal is a traditional payment processing service, like Stripe or Square. So while their solutions might be super convenient and tech-forward, they also impose some severe rules regarding the kinds of transactions they’re willing to conduct.
PayPal works best for low-risk merchants that deal with industries like furniture, apparel, homeware, and similar markets. Of course, since they’re one of the best-known online payment platforms, they also accommodate select high-risk merchants that involve subscriptions, digital goods and services, and similar businesses.
Many small businesses involved in the sale of CBD have shared their experiences using PayPal for payment collection. Unfortunately, it rarely goes according to plan. One vendor suspended his PayPal for 180 days without warning, pushing his venture to the verge of closure.
Interestingly, however, PayPal has been found to work with select CBD merchants throughout the country, particularly in the UK. The most noteworthy is Holland & Barrett, considered one of the most prominent CBD manufacturers and retailers in the UK.
This proves to the rest of the players in the CBD market that the product itself might not be the main issue. As it seems, PayPal prefers to work with CBD merchants with a better-established reputation and high volumes of successful transactions to offset any disputes and refunds they might receive.
It’s pretty simple — CBD is a high-risk industry. The 2018 Farm Bill has opened the doors for more unrestrained movement and the use of hemp-derived CBD products throughout the US market. That means you can buy and sell the stuff without worrying about running in with authorities.
But even then, most traditional payment processors try to distance themselves from CBD businesses because of the associated risk. The rules and laws surrounding the CBD industry are constantly changing, so chargebacks are expected. But that’s not the only problem.
The thing about CBD — and most other nutraceuticals, for that matter — is that it’s never guaranteed to work. That means the benefits one buyer gets might not be the same benefits everyone experiences. So when buyers don’t get the effects they were hoping for, they have the right to demand a refund, and businesses have no choice but to agree.
Businesses allow buyers to resolve disputes through other means to protect their accounts from chargebacks. For instance, some might offer to give the buyers store credit, while others send replacement products at no added cost. But while this might work for some buyers, not everyone wants to get the same products again — especially if they don’t work.
A chargeback happens when a buyer disputes a transaction on their account, whether or not they authorized it. In some cases, it could be because the transaction was fraudulent. In other cases, it could be because the buyer didn’t like the products or services they received in exchange for that payment.
Payment processors like PayPal negatively regard chargebacks for good reasons, the most prominent being that a chargeback also costs their business a penalty. To prevent chargebacks, services like PayPal impose steep fines on every refund that a merchant executes. Sometimes, they may temporarily suspend your account if you experience too many chargebacks.
Some micro-enterprises still manage to use PayPal to collect payments, but minus all of the merchant features it provides. That means they perform transactions simply via the send money feature that PayPal offers for private individuals. So, for instance, their buyer is charged a total of $100 for products and shipping fees. The business sends its PayPal registered email address and requests the buyer to send their money to that account.
Again, it’s a very limited option that restricts many of the features that PayPal has to secure B2C transactions. It also entails that the buyer should have their own funded PayPal account, which isn’t always something they have. Finally, there’s the issue of transaction fees. PayPal charges some pretty exorbitant fees that take away from your total revenue. If a buyer sends their payment through PayPal the traditional way, you might have to factor in the added charges.
PayPal uses several security features that help them detect when its services are being used for prohibited transactions. So even if you try to keep your CBD transactions on the down low, they’re likely to find out one way or another.
Unfortunately, this can spell out danger for small businesses, with most of their cash flow passing through the PayPal platform. The payment processing facility can shut down your account without warning if they find that you violate their terms and conditions. This can leave any funds in your account inaccessible for up to 180 days, depending on what PayPal deems fit.
Another issue is that depending on the extent of your business transactions, PayPal can even suspend your account altogether. Whatever money you have in your PayPal account can be revoked permanently, leaving you at a loss. However, that’s not too common of a penalty since businesses that get their first warning are unlikely to repeat the violation.
What PayPal can do, however, is fine you for the violation. In some cases, the payment processor can require that you pay up a certain amount before you can use your account, given that you guarantee that you will stay away from violations in the future.
Like any other high-risk merchant, the best solution would still be establishing a high-risk account with a trusted merchant service provider. These providers dedicate their services to high-risk merchants via their enormous risk appetite, allowing them to take on more challenging businesses.
Today, there are tons of merchant service providers and payment processors that offer to work with businesses in the arena of CBD. Some of the most noteworthy include:
While PayPal’s features might seem to make it the perfect platform for micro, small, and medium-sized enterprises hoping to grow their CBD empire, the payment processing facility’s terms and conditions make it impossible to use their solutions within the industry. Well, unless you’re as big as names like Holland & Barrett, that’s a different story.
Nonetheless, many other payment processors and merchant service providers would gladly take on your business without the steep fees and the potential for account closure. So before you decide which merchant service and the payment processor to try, check your options to ensure you find the best one for your brand.
