Offshore and High Risk Merchant Services | Our Blog

The Ins and Outs of Opening a CBD Business Bank in the UK

CBD Merchant

CBD (cannabidiol) is one of those industries that’s booming all around: retail shops on every corner, e-commerce stores, ads on all sorts of websites, and even cartridges for e-cigarettes. There’s no end in sight for the CBD market! But how are these sellers making such big strides when it seems impossible to get a CBD bank account in the UK?

The good news is getting your CBD business rolling is completely possible, you just need to talk to the right people. We’ll show you how it’s done.

Why is it so hard to get a bank account as a CBD merchant?

That’s the million-dollar question, isn’t it? There’s so much good (re: money) that can be made for people, businesses, and the government as a whole if they just made it a little bit easier.

CBD is a high-risk industry.

Pretty much wherever you go, you’ll run into some issue selling CBD. In the US today, they’ve made it extra confusing by having blanket federal laws combated by state laws. In Europe, the sale of CBD is becoming more restricted in the countries that can sell it, but of course there are several countries that ban it.

And in the UK, only manufacturers with novel foods authorisation by the FSA can produce CBD products like CBD oils, vapes, gummies, etc. These are the official rules about selling CBD in the UK:

  • The products cannot contain more than 1mg THC.
  • They must be derived from EU-approved hemp with no more than 0.2% THC.
  • Food Standards Agency (FSA) authorisation is required for CBD product manufacturers.

You need to ensure the CBD you sell is derived from hemp, not cannabis. Cannabis produces too much THC, the psychoactive substance that gives people a high more than a calm. This is a hard line drawn between CBD products (and a bane on the cannabis industry).

With so many regulations, there’s no doubt banks want to avoid doing business with this kind of high-risk company.

How is CBD a novel food?

That does sound pretty strange as very few people think of CBD as a food. But it is an ingestible substance. And since it hasn’t been widely consumed (by people) before 1997, it gets labelled as a novel food by the EU and the UK. May 15, 1997 is the date in which the novel foods regulation came to be, it otherwise has no significance to CBD.

By placing CBD under novel foods, the perception is to make it safer for consumers and regulate manufacturers so only approved CBD is found in each product. The problem right now is that the regulation is new, so there are a lot of products on shelves that don’t comply with the new standard. Manufacturers now have to rush to become certified and either rush-sell all their current products or throw it all away. And that doesn’t sound very good for business—either wasting product or selling it at a loss.

Those same reasons are also not very attractive for banks.

High street banks have given the “no go” for CBD sellers.

That’s exactly what that sounds like. When starting out, you probably head straight to the bank with which you have your current business or even personal account and confidently ask, “can I open an account for my CBD company?” only to receive laughter, denial, frustration, and embarrassment.

You already know CBD is a high-risk industry, but what does that really mean? The group that put the “high-risk” label on it is none other than the banking system. And in doing so, they’re saying that your business risks their financial standing; there’s too much risk towards losing money. Banks are all about gaining money, loaning money to people and business owners who will pay them back with interest, and offering banking solutions to those who will no-doubt be a problem-free successful.

Marketing is just as important.

CBD is a non-medical supplement, which means the way you advertise your product is equally important towards the legality and approval of your financing solution. It’s a strange crossroads to be stuck on: CBD is not a medicine, but people consume it for medicinal purposes.

So how do you market it? First, you cannot use absolutes. CBD does not rid the body of inflammation, it does not make someone sleep better, it does not calm them. It can do all of those things, but it’s not guaranteed.

The CBD market, itself, is super-saturated in the UK.

Since CBD sellers in the UK operate locally—because taking business into the rest of Europe is a separate, even more difficult challenge, there’s a lot of competition in a small area. The CBD industry really is booming, but to some banks that can look like the window of opportunity is narrowing for new CBD businesses.

How can you compete in a saturated market and expect to be profitable? That’s an important question you should find the answer to ASAP; it might just be your saving grace when applying for a bank account.

What can you do about opening a bank account and setting up payment processing?

Now that you know the issues behind banks denying service for CBD merchants, you can approach it from a new direction. The key is alleviating those concerns from the get-go.

Start out with Currenxie or similar.

Currenxie is a global, borderless business account service that’s free to sign up for. It’s super simple to set up and basically gets you going instantly. You’ll have to have an online payment gateway set up already, of course, like PayPal, Stripe, or something else. Currenxie is a business bank account service provider, not a processing gateway. And we’re not really here to promote the service, but it is one of the easiest to sign up and get started with right away.

The caveat is, again, they aren’t a bank. So they aren’t providing you with a business bank account, instead they are linking you to other financial institutions behind-the-scenes. Think of it like TransferWise (now just Wise) online banking but for businesses only.

The other issue is they are a low-risk institution which means they aren’t really interested in doing business with high-risk businesses. You’ll have to fly under the radar here for a bit by limiting your monthly sales and keeping an eagle eye’s watch on your chargebacks.

Use this service as a temporary starter. After about six months of sales, you can apply for a real business bank account.

Next, apply for a CBD business bank account.

Now that you have some transaction history and your business is set up for proper operations, you can formulate an attractive application to banking institutions in the UK. It’s still better to avoid the bigger, popular banks because they’ve all stated their disdain for supporting the high-risk CBD industry. Instead, go for smaller banks and ones dedicated to CBD sellers. Believe it or not, they do exist.

You may be subject to higher rates and other not so smile-worthy criteria, but having a dedicated bank account is far better. And later down the road, you can renegotiate some of these terms. But for now, having the CBD bank account approved and ready for business is what’s most important. You can finally remove the limits on CBD sales and reach your business’ full potential.

CBD merchant account providers will help you even more.

It’s tough doing it all on your own with few credentials. Having someone who has wide-reaching connections across the financial industry speak and negotiate on your behalf is far more attractive. High-risk merchant bank account providers help you close that gap by using their industry connections and negotiating power to get you approved for a CBD account, CBD payment gateway, and CBD payment processor without all the hassle. You’ll be ready to process card payments from debit cards, credit cards, and maybe even ACH all with your own IBAN.

Customers will have more payment options, you can use virtually any site hosting platform, like Shopify or WordPress, and the application process will be simpler. Merchant account providers are the perfect solution for startups and established CBD businesses, alike.

With the help of a merchant services team, your store can have CBD banking and card processing in just a few days.

Why take the risk when you can get guaranteed service in a fraction of the time? Hopefully this guide helps you get your business affairs sorted properly and gives you the motivation to get CBD online business going in the right direction.

Our merchant services support team is here to help whenever you need it. Get in touch and let’s get your products on the market.