Square accelerates its support for cannabis payments

Square has expanded its invite-only pilot for CBD products in the U.S. to all of its existing merchant accounts, but is charging a premium.

The pilot program Square launched in May 2019 was called an “invite only beta test” for some CBD products at select merchants. One of Square's challenges is to determine how to keep other marijuana products that are still considered illegal under federal law from being processed on its terminals.

On it Townsquare blogpost the Square states that for CBD to be processed that it must be hemp-derived and contain less than 0.3% THC. However, processing transactions is not going to be cheap despite any merchant testimonials that state otherwise.

Jin Lee/Bloomberg

CBD laws have been loosening quickly. CBD and hemp, which are both cannabis products, were legalized federally when President Trump signed the U.S. Farm Bill in December 2018 as long as they contain less than 0.3% THC, the psychoactive chemical in cannabis that creates a high.

There has been a boom in CBD sales with celebrities and sports athletes, such as former New England Patriots star Rob Gronkowski, promoting their use. In May the NFL announced it will conduct research on joint pain management using treatments that will include cannabis, cannabinoids and CBD.

Square highlighted one merchant testimonial in its blog post from Bluebird Botanicals’ chief operating officer, Kevin Liebrock, as stating: “With Square, we don’t just get better rates—we’re also treated with respect and trust. And now, instead of waiting for checks in the mail, we get paid the next business day.”

Square is taking advantage of merchants who have largely been deprived of traditional banking and payments processing due to the federal ban on cannabis where alternative processors such as Nature Pay charge 5.95% + $0.30 per transaction.

Square’s prices are lower than alternative processor yet higher than other products such as e-cigarettes and alcohol. However, Square does prohibit internet/mail order/telephone order of age-restricted products (e.g., tobacco) according to its terms of service.

Square’s pricing is for CBD is 3.90% + $0.10 for in-person transactions, 4.20% for online and in-app purchases and 4.80% + $0.15 for keyed, card on file and virtual transactions. In comparison Square charges 2.60% + $01.0 for other products sold in person, 2.90% +$0.30 for e-commerce transactions and 3.50% + $0.15 for keyed, card on file and virtual transactions on non-CBD products.