Finding a way to accept payments for your online CBD store isn’t completely straightforward. And the two top issues to resolve are finding the right payment gateway, and the right bank to open a merchant account.
What is the difference between a payment gateway, a payment processor and a merchant account?
We’ve spoken about payment gateway providers for CBD businesses in the UK at length, offering potential solutions for businesses in the niche. But we often get the question, is a payment gateway, a payment processor and a merchant account the same thing?
No, they’re completely different, stand-alone functions.
Let’s break it down:
To accept payments online, you need all three: a merchant account, a payment gateway and a way of processing each payment.
The Function of the Merchant Account
When a customer makes a purchase on your site, this is considered an ecommerce transaction, and their payment will be deposited in an internet merchant account. It is an online banking facility that allows you to accept payments by debit or credit card.
The Role of the Payment Gateway
For the money to move from the customer’s bank account to your merchant account, the online customer will make a payment with their credit or debit card through a payment gateway. The gateway is a secure facility that communicated the card details between the necessary parties of the online payment.
How Payment Processing Works
The payment processor shares the card transaction details with the financial parties involved, which is turned into a payment that is deposited into the merchant’s account.
How does this look in practise?
If you’re an online CBD company, when a customer initiates a transaction on your website, there are four parties involved – the customer, the issuing bank (the customer’s bank), the merchant (you) and the acquiring bank (your bank).
- Step 1: Customer makes a purchase on your website
- Step 2: The payment gateway processes and approves the purchase
- Step 3: The payment processor communicates the details of the transaction to the relevant financial parties
- Step 4: The money moves from the issuing bank (customer’s bank) to the acquiring bank (your bank)
- Step 5: The money reflects into your merchant account
- Step 6: You can transfer the money from your merchant account to your business bank account.
Which payment gateways are available for CBD companies?
There are a number of payment gateways that are available for CBD businesses, which we’ve covered in previous blog posts. You can read more about them by clicking here
Which banks accept CBD companies?
CBD is seen as a high-risk niche and there are many examples of banks that don’t accept CBD companies. The financial institutions that work with CBD companies continue to change. A possible solution is Starling Bank, where we, as the owners of Cude, have spoken directly with them and each case is reviewed on an individual basis. Viva Wallet used to use Starling until Starling removed its support for Viva Wallet CBD customers. This does not seem to be specifically related to CBD products because they do provide bank accounts to CBD businesses on a case by case basis.
We have no direct relationships with banks, but a number of payment merchants do. To find out more information, you can download our payment gateway comparison table below.
Should you tell your bank about the products you are selling?
CBD is considered a food supplement and it is completely legal to sell CBD products in the UK. So is there any reason to tell your bank exactly what you’re selling? As long as your products fall within the law, and you’re selling a legitimate CBD product, you don’t technically have to go into any details about the product with your bank. But there is a small risk that they could give you notice and shut down your bank account. This worst-case scenario has serious implications for your business – with no bank account, you won’t be able to take payments through your website.
- A merchant account makes it possible to process credit card and debit card payments online
- A payment gateway authenticates the customer’s card information and transmits it securely
- A payment processor communicates the details of the transaction to the relevant financial institutions, which results in the money being deposited in your merchant account.