The federal prohibition of cannabis makes payment processing more complicated than in traditional retail industries.
This is because financial service providers are reluctant to work with marijuana businesses, even in states where cannabis is legal, for fear of federal reprisals.
The consequences of this for cannabis retailers are significant. Consumers generally prefer to pay by card as it’s safer and more hygienic than carrying cash. Research also shows that customers tend to spend more money when paying by card rather than cash.
Processing payments will remain an issue for dispensaries until marijuana is federally legalized or a new law is passed to protect payment processors and financial institutions that offer their services to cannabis businesses from federal interference.
In the meantime though, there are other options available to marijuana companies to help process point of sale payments and move away from using cash. Some of these options arose in response to the COVID-19 pandemic and social distancing guidelines that discouraged cash payments. Others have been around for some years and could provide your business with a reliable means of processing payments.
Here, we’ll go through some of the available options and payment methods.
As with more typical products, customers use their debit card and enter their PIN to buy cannabis. However, instead of the payment being taken directly from your bank, it’s routed through a third-party payment processor.
In terms of providing a seamless customer experience, this is a solid option but it has its drawbacks.
First, it can be expensive, for both the merchant and the customer. The payment terminal itself can cost up to $500 and it typically comes with a $10/month service fee. Payments also generally have to be in denominations of $5.
Many companies also add a ‘convenience’ charge to each transaction, which can be around 3-4 percent of the total price plus a flat fee of $0.25.
On top of this, many banks will charge their customers for using an “out-of-network” ATM, with each purchase (or “withdrawal”) subject to a fee of anywhere between $2 to $7.
Some cannabis payment processing providers don’t impose these fees and charges though, so it’s well worth shopping around.
Paybotic, Bankcard International Group and FinCann all offer PIN debit payment processing for cannabis retailers and they don’t come with “out-of-network” fees, nor convenience charges.
Cashless ATM, or “point of banking,” services operate in a similar way to PIN debit options for cannabis retailers, but for credit cards.
After installing a credit card terminal that’s programmed to behave like an ATM, customers can authorize payments directly from their account to that of the merchant.
Like with PIN debit options, these can come with convenience fees for the customer and maintenance fees for the merchant.
Some companies like POSaBIT have taken the idea of cashless ATMs further and integrated more features to facilitate payments by, for instance, making the payment terminal mobile to process curbside payments and to receive online orders and payments.
Another option for marijuana retailers is using apps to process payments.
GreenBeanPay and CanPay are two of the more well-known debit payment apps for cannabis businesses. They are similar to cashless ATM and PIN debit options insofar as it involves direct bank to bank transfers through a third party without the use of checks, wire transfers or cards.
There are fewer upfront costs to the merchant though since there’s no need to install and maintain a card terminal.
It does, however, require the customer to download the app in order to pay which some may be reluctant to do. To pay, the customer opens the app, checks in to the dispensary and confirms their payment for products through a four digit verification code sent to their phone.
Banks that service marijuana businesses
The last option is for a cannabis merchant to bank with an institution that is happy to service marijuana industry clients. These are few and far between but they do exist.
Herring Bank and Dama Financial are two such banks that work with cannabis businesses alongside other high-risk clients. With these banks, you’ll be able to accept payments from Visa, MasterCard, Discover and American Express using credit and debit cards.
If you choose to manage your cannabis finances with a marijuana-friendly bank there can be many other benefits to your business other than easy, secure and familiar payment processing for your customers.
These banks can be more amenable to providing your business with a loan, insurance and even a smart safe to store cash on-site.