The banking system continues to pose challenges in the rapidly evolving legal cannabis market, in which states are steadily legalizing marijuana for both medical and recreational purposes. Financial institutions are still hesitant to cooperate with cannabis companies due to federal regulations, despite important legislative advances such as California’s 1996 legalization of medical cannabis and Colorado’s 2012 legalization of recreational use. In light of these legislative hurdles, this article delves into the complexities of cannabis payment processing solutions, offering insights into the evolving industry and the necessity for specialist financial services.
Why Is It Hard for Cannabis Businesses to Accept Credit Cards?
The leading cause of the difficulty of credit card payment processing for cannabis merchant accounts is the inconsistency between state and federal legislation.
The use, distribution, and possession of marijuana products are all illegal under federal law. On the other hand, state laws about the sale and use of cannabis vary greatly. Furthermore, cannabis products with a tetrahydrocannabinol content of 0.3% or above are still classified as Schedule 1 medicines by the FDA. This category’s drugs are prohibited, except those utilized for research. Although these regulations don’t restrict merchant processing firms, some have policies that forbid processing payments for cannabis. Some businesses avoid this difficulty by sending payments to offshore processing accounts, only to face chargebacks afterwards. Some sellers falsify their products by claiming to be involved in selling other merchant goods.
Best Payment Method for Cannabis Industry
With the advent of real cannabis debit card processing, secure payments for dispensaries have advanced significantly in recent times. Marijuana dispensaries for medical and recreational use now have access to services that are quite similar to regular merchant services.
Here are some of the best cannabis seed payment processing options around
Debit Cards Payments
Traditional merchant processing is available with cannabis debit card processing, but options in cannabis credit card processor have not yet been offered till now. Yes, cannabis companies can now avail themselves of nearly comprehensive merchant services. Debit cards facilitate a smooth checkout process and enable consumers to tip bartenders at the time of purchase when integrated with point-of-sale (POS) systems. Although it has a few restrictions, cannabis debit card processing is comparable to standard merchant processing. Due to each card’s debit networks, not all cards will be accepted in the present dispensary debit card processing system. Although acceptance rates differ by location, they typically offer a 95% acceptance rate.
Currently, cannabis shops may only process card-present purchases, which is another barrier. Debit cards can, therefore, be used for both in-store and delivery cannabis purchases, provided payment is made at the time of delivery rather than when the product is requested.
ACH Payment
- Account-to-account (from consumer bank account to dispensary bank account). Electronic Funds Transfers (EFT) are widely used for ACH payments.
- ACH payments for online cannabis payment processing offer significant advantages to cannabis retailers.
- Customers can now place cannabis orders for pickup or delivery and pay online.
Customers who pick up online orders do not have to wait in line, therefore paying in advance saves dispensaries a significant amount of money.
Furthermore, they can gain greatly from pre-paid delivery orders, which eliminates the need for delivery drivers to handle cash. They can avoid making extra excursions because clients don’t have enough cash, their cards don’t work, or their card is denied. There are more possibilities than ever before for cannabis ACH payments nowadays!
Note: Combating fraud and NSF transactions is complex, and inexperienced ACH payment providers may lose a lot of money due to fraud and NSF transactions.
Merchant losses may be significant if an ACH programme lacks the necessary controls to the world of the scam spreads quickly whenever someone discovers a weakness in an ACH payment system’s fraud defence procedures. Therefore, ACH payment providers will constantly be playing catch-up if they’re not attentive.
- Stop and combat fraudulent transactions
- Stop NSF transactions and collect anything that happens.
Cashless ATMs
Cashless ATMs used to be the most widely used alternative for cannabis payment options. Here is a general overview of cashless ATMs in case you are unfamiliar. Rather than resembling an ATM, the devices resemble a standard card terminal placed on the checkout counter. Customers swipe or insert their card to pay for purchases and then enter their PIN to make an ATM withdrawal. This is where the “cashless” aspect comes into play; rather than getting cash, the consumer gets the item they bought plus a change to cover the difference between the amount they took out of their ATM and the cost.
CASH RETURN: Cashless ATMs round transactions to the next five- or ten-dollar increment to make the transactions appear like cash withdrawals rather than purchases. Budtenders are required to return change to customers for this reason.
COMPLIANCE: Cashless ATMs need you to provide the business name and address to be compliant. This is one of the main ways legitimate cannabis banking solutions may be distinguished from dubious cashless ATM products that pose as being somewhere else.
Best Cannabis Payment Solution Companies
“To find the best fit for your company’s needs, compare the top cannabis payment solution providers based on processor description, benefits, drawbacks, and price range”, You’ve got to efficiently look into and select the top supplier for safe and legal payment processing in the cannabis industry.
| PROCESSOR | DEFINITION | PROS | CONS | FEE RANGE |
| PaymentCloud | Versatile processor for various high-risk industries. | Good for high transaction volume, and international support. | Monthly fees and chargeback fees can be high. | 2.75% + $0.30 per transaction (variable) |
| Host Merchant Services | Handles large, high-risk businesses. | Experienced with complex industries, and dedicated account managers. | High minimum processing volume, opaque fee structure. | Negotiable, typically higher than standard rates |
| Durango Merchant Services | Caters to very high-risk businesses. | Accepts many restricted industries, and robust fraud prevention. | Expensive fees require significant reserves and strict underwriting. | 4-8% + $0.30 per transaction (variable) |
| SMB Global | Specializes in international high-risk merchants. | Multi-currency processing, global support, industry expertise. | A complex fee structure requires significant reserves. | Negotiable, vary by industry and location |
| Pay-line | Offers cash discount and ACH options. | Transparent fees are good for specific high-risk niches. | Limited payment methods are not ideal for high transaction volume. | Cash Discount: Merchant discount rate + processing fee |
| Square | Popular mobile POS system for small businesses. | Easy setup, user-friendly app, affordable for low volumes. | Limited features for complex businesses, and higher fees for high-risk industries. | 2.6% + $0.10 per transaction (variable) |
| Clover | POS system with integrated features like inventory management. | Robust features, good for mid-sized businesses, support EMV payments. | Monthly fees, and higher transaction fees for high-risk merchants. | 3.5% + $0.15 per transaction (variable) |
What Are the Challenges in Marijuana Payment Processing?
If you are going through search queries like “payment processing cannabis”, “cannabis delivery payment processing”, or “cannabis related business payment processing”, then congratulations, you’ve landed perfectly on an exact section of this article, where you’ll get clarity on all of your doubts about cannabis payment processing.
COMPLIANCE WITH REGULATIONS
Cannabis payment processors must work through a maze of federal and state laws. Although cannabis has been made legal in several states for either medical or recreational purposes, it is still banned on a federal level. Due to this, payment processors face uncertainty and difficulties complying with banking rules, money laundering restrictions, and other financial obligations.
LIMITED BANKING OPTIONS
Cannabis payment processors are forced to rely on smaller banks or credit unions who are willing to work with the industry, perhaps resulting in higher prices and fewer services, & that limits their financial alternatives. Because of federal regulations and the likelihood of legal implications, traditional banks generally decline to provide services to cannabis businesses.
HIGH-RISK NATURE
Due to its link with legal and regulatory uncertainties, potential reputational hazards, and other factors, the cannabis industry is seen by financial institutions as high-risk. Payment processors in this industry could have trouble getting and keeping merchant accounts, finding sufficient insurance, and getting funding.
CASH-INTENSIVE
Payment processors catering to the cannabis sector must provide customized solutions, such as electronic payment terminals or mobile apps, to enable cashless transactions. This is because banking services are scarce in the cannabis industry, and many businesses rely heavily on cash, posing operational and security challenges.
RESTRICTED ACCESS TO FINANCIAL SERVICES
Cannabis companies frequently face difficulties obtaining various financial services, such as credit lines, loans, merchant services, and cannabis seed payment processing. Payment processors in this market may find it challenging to provide complete financial solutions that satisfy the wide range of needs of cannabis companies, which could impede the expansion and scalability of these enterprises. To establish a more sustainable and supportive financial ecosystem for the cannabis business, addressing these issues will require creative solutions, continued regulatory compliance efforts, and cooperation between industry players, financial institutions, and regulators.
Checklist: Best Cannabis Payment Processor
1. LEGITIMACY
The issue with marijuana business owners is that they don’t mind breaking the law. Although it may appear reasonable, marijuana businesses and credit card firms may suffer legal repercussions if these rules are broken.
- Whether or not you were aware that the credit card processing provider was operating unlawfully, you can still face closure of your business and account freezing.
- For this reason, confirming that the business has the licenses to offer credit card processing services is crucial.
2. ACKNOWLEDGE DISPENSARIES OF CANNABIS
One of the numerous high-risk enterprises that require credit card processing is the marijuana industry. However, since not all businesses provide these services to marijuana retailers and operators, it’s crucial to confirm this information from the onset.
3. REASONABLE COSTS
Since the marijuana industry carries a high level of risk, it is likely to command high prices. Most providers charge between 6% and 0.30 on average for each transaction. These fees reduce a company’s earnings, particularly if the cannabis payment method imposes a rolling reserve.
- If you allow customers to pay with their bank cards, on the flip side, you may see an increase in sales. Moreover, using a card to pay is less “painful.”
- You must request an immediate comprehensive breakdown of the credit card processing costs. As an alternative, search for suppliers who provide month-to-month contracts instead of a single, long-term one.
4. CUSTOMER SUPPORT
The supplier ought to be reachable at all times. Since the marijuana industry is such a delicate one, legal issues could arise at any time. As a result, it’s advisable to stay away from businesses with a negative reputation in this industry.
- For many marijuana producers, the cannabis credit card processing industry is still unclear due to the withdrawal of companies like Elavon. These six businesses demonstrate that cannabis owners are still able to take payments using credit and debit cards.
What Does the Future of Cannabis Payment Processing Look Like?
With any luck, cannabis retailers won’t be limited to accepting cash or debit cards, However, there may be some unusual workarounds.
- Just because they want to buy from you, your customers shouldn’t have to feel like they must go through a difficult process of finding sophisticated workarounds.
- When you choose to partner with a business that provides cannabis credit card processing, you can now give your clients a convenient and safe way to make credit card payments. Your company and the customer benefit when you streamline the process at the point of sale.
Customers looking to buy cannabis and related items are increasingly looking for nearby shops that take credit cards. You’ll also have an advantage over the competition if you provide your customers with a virtual terminal that allows them to place socially awkward orders for curbside pickup or delivery. You are not limited to using gift cards, cash, or cryptocurrencies. Your clients may easily swipe their credit card using Shift Processing’s P2P technology, just like at any other store.
Wrapping-Up: Cannabis Payment Processing Solutions
Payment processing alternatives are rapidly evolving as the cannabis industry responds to changing legislation and expectations. Despite ongoing challenges, cutting-edge technologies such as cannabis debit card processing and ACH payments offer greater security and convenience of usage. Future improvements in the cannabis industry should result in a more inviting and integrated financial environment that makes transactions easier for both consumers and businesses. To stay ahead of the competition in this fast-paced business, Keep looking into the latest cannabis payment processing options, & advancements with eMerchant Authority.
Frequently Asked Questions…
Can companies who sell cannabis accept payments using debit and credit cards?
Ans. Yes, using specialized cannabis payment processors, certain cannabis businesses can accept payments using debit and credit cards. By providing solutions that abide by federal and state laws, these processors enable companies to take electronic payments while lowering the risks of using traditional banking services.
Why aren’t banks or other conventional payment processors an option for cannabis businesses?
Ans. Due to the federal illegality of cannabis and the ensuing regulatory concerns, banks and traditional payment processors frequently hesitate to offer services to cannabis firms. As a result, cannabis companies have trouble obtaining standard financial services like credit lines, loans, and merchant accounts.
How do cannabis payment processors make sure guidelines are followed?
Ans. Cannabis payment processors use robust compliance measures to guarantee compliance with state and federal authorities that oversee the cannabis sector. This includes implementing strict Know Your Customer (KYC) and anti-money laundering (AML) policies, doing extensive due diligence on merchants, and continuing monitoring to identify and stop illicit activity.
Are payment processing fees for cannabis more expensive than for other industries?
Ans. Yes, because the cannabis industry carries more operational and legal risks than other sectors, processing fees for payments related to cannabis can be more than those for other industries. Elevated processing fees result from various factors, including the industry’s high level of risk, compliance requirements, and the absence of typical banking services.
Which kinds of payment options are provided by cannabis payment processors?
Ans. Cannabis payment processors provide a selection of payment options designed to meet the particular requirements of the sector. To enable safe and legal transactions, these could include point-of-sale (POS) systems, smartphone payment apps, online payment gateways, electronic payment terminals, and cash management services.
Can payment processors for cannabis operate between states?
Ans. Even while certain cannabis payment processors might be able to operate in several states, they still need to make sure that they adhere to the rules unique to each of those states. Payment processors must modify their services and procedures to reflect the considerable variations in state laws about cannabis to be efficient and compliant.