Payment Solutions for Marijuana Dispensaries
- Common challenges in finding payment solutions for marijuana dispensaries.
- A list of credit card processing services for marijuana dispensaries.
- How to choose the right payment processing system for your dispensary.
The cannabis industry is a freak of politics and economics. How often do we see a political issue about which state governments are willing to say, “yeah, so it’s federally illegal, so what, we’re going to do it anyway.”
Just think about that for a moment. It’s truly an absurdity. And the fact that more than two-thirds of U.S. states have snubbed the feds and legalized marijuana just shows how absurd federal prohibition is.
(NOTE: If you’re already familiar with all of the challenges faced by state-legal marijuana dispensaries (and even CBD shops), and why they exist, then you can skip the rant and get right to our list of credit card processing and merchant services for marijuana dispensaries below.)
The federal prohibition of marijuana combined with state-legal marijuana is not only a political and law enforcement quandary, it’s also an economic issue. Very few banks and credit card processing services are willing to risk federal prosecution by offering payment processing systems for marijuana dispensaries. And as a result, dispensaries are often forced to deal in cash. Many dispensaries have massive piles of cold, hard dough sitting in a safe somewhere that they can’t bank. (Imagine paying your corporate income taxes with a van full of cash?)
There is a high likelihood that the federal government will, at some point, cave and legalize marijuana. However, what form legislation will take is anyone’s guess at this point. But in the meantime, Congress has been trying to do something about it for a few years now. In fact, the House has passed a cannabis banking bill four times. The first few attempts withered on the infertile ground of a conservative republican-ruled senate. But that has changed. Democrats now maintain a tentative majority in the Senate (and that’s only because VP Kamala Hariss gets to make the deciding vote in a tie).
The House once again recently passed the SAFE Banking Bill, and it’s likely that the Senate will follow suit. The bill will make it completely legal for banks to offer services to the cannabiz. And although President Biden is against legalizing marijuana at the federal level, he’s likely to sign off on a banking bill. But as we all have seen, when it comes to the federal government almost anything can happen.
In the meantime…
420-friendly payment systems for dispensaries
The good news is that there are some courageous banks that are willing to do business with cannabis companies. And there are some credit card processing companies that are willing to handle their transactions. The bad news is that marijuana is considered a high-risk business. And this causes a number of problems.
First, transaction processing fees can be astronomical. Second, because of the fear of chargebacks, service providers will hold onto the money for up to six months. That’s a long time to get your hands on your hard-earned money. When you follow the money you always eventually end up on the front steps of a big bank.
Nonetheless, many dispensaries are willing to pay the high fees and wait months for the payoff to offer their customers more payment options and thus sell more products. (The costs, of course, end up either getting passed on to the consumer or taking away from profits and thereby taking away from state and federal tax revenue and reducing the amount of money that can be reinvested into the economy.)
This quandary applies to not just marijuana but also, in some cases, to hemp — the non-intoxicating, federally legal crop. The sale of CBD oil and CBD-infused remedies is also considered a high risk. Although more and more banks are now willing to do business with hemp companies, the costs of transaction processing can still be excessive.
In spite of the difficulties, more and more payment processing companies are tapping into the lucrative dispensary business.
Let’s have a look at some of the 420-friendly payment processing systems for marijuana dispensaries.
NOTE: These are not in any particular order. We are not recommending you do business with these companies. You need to do your own due diligence.
CyoGate
CyoGate offers a proprietary payment gateway that allows merchants to process card transactions using a mobile device (similar to Square). The company also provides business loans, chargeback protection, e-check processing, and shopping cart software for marijuana dispensaries.
e Merchant Broker
eMerchant Broker, or EMB, are specialists in high-risk merchant accounts as well as check processing, chargeback protection, reloadable debit cards, and ecommerce payment gateways, cannabis ATMs. The company also offers loans for marijuana dispensaries.
KronicPay by Canna Group LLC
Canna Group has been offering credit card processing services to high-risk industries since 1992. The company offers credit card processing for CBD retailers and marijuana dispensaries under its Get High Risk division under the brand name KronicPay. (On a side note, Canna Group also offers a first-of-its-kind medical marijuana insurance plan.)
MMJPay:
MMJPay is focused on providing merchant services for medical marijuana dispensaries, in particular. They also offer POS hardware, ATM machines, and mobile payment processing.
PayKings
PayKings superpower is that it protects high-risk merchants from things like chargebacks or having funds frozen. PayKings does not offer credit card services to marijuana dispensaries, only to CBD sellers.
Platinum Payments
Platinum Payments offers payment processing for cannabis merchants with no long-term contracts. The company also offers products such as POP terminals, mobile apps, gift cards, and loyalty programs.
Quality Payment Systems
Quality Payment Systems offers “ZeroCost” payment processing software for marijuana dispensaries. Rather than taking a hefty percentage of a transaction, ZeroCost charges a small service fee to customers who use the system.
SQ Merchant Services
SQ Merchant Services a variety of merchant services to marijuana dispensaries including a cannabis-centric POS system. They also provide ATMs and offer cash advances on payments (which is great for companies that need their cash sooner than later).
Sky High Moly
In addition to traditional credit card processing services from Visa, MasterCard, Discover, and Amex, Sky High Moly also offers ACH Processing (bank transfers), point-of-sale systems, and cashless ATMs.
Choosing a merchant services company
There are other options out there in addition to those listed above. With more and more options coming online, how does a dispensary owner choose a company with which to do business? The research can be time-consuming. But here are few tips and things to watch out for.
- Talk to other dispensary managers and see which systems they’ve had luck with — good or bad.
- Avoid companies that aren’t familiar with the cannabis industry.
- Ask for references from other dispensaries using their services.
- Avoid companies that spawn horror stories such as suddenly canceling accounts or that have frequent service outages.
- Don’t rush into choosing a payment system. Be damned sure that it integrates easily into your POS systems.
- Always triple-check with your rep and their references to make absolutely sure there are no hidden fees, especially if you’re signing a long-term contract.
- If you’re planning on expanding into multiple locations and other markets make sure that you choose a system that will grow with your company.
The best way to find the right merchant services for your dispensary is to talk to other successful dispensaries and see which credit card payment solutions. Some have frightening horror stories — but take them with a grain of salt because they might not apply to you. And some will sing the praises of their service provider — but it might not be a good fit for your business model. Nonetheless, talking to other dispensary owners can provide you with a wealth of knowledge that you won’t get by talking to salespeople at merchant services companies.
Other options for dispensary payments
Working with credit card processing companies can be tedious. For larger companies, it makes sense because they can hire an expert to manage these kinds of needs. However, if you’re just getting started as an entrepreneur there are some much less complicated options such as using Square, Stripe, PayPal, Google Checkout, etc.
The benefit of these kinds of services — which are essentially online banks that process credit card payments on your behalf — is that they don’t involve things like commissioned salesmen, credit checks, long-term contracts, delayed settlements, and so forth. The downside is that you might pay a higher fee, or the process might not be as simple for the staff and/or the customer who might have to whip out a mobile app to make the transaction.
These digital payment services can oftentimes be integrated into a website shopping cart system. And if your website is built on a service such as Shopify you may have access to their payment gateway. You’ll also have to pay them a monthly fee which is reasonable considering all of the tools they offer for building an ecommerce website.
Don’t think that using these services is like starting on training wheels. Services such as Shopify and PayPal aren’t just for the little guys and new kids on the block. Some big operations take advantage of these platforms. Companies such as Hasbro, Crabtree & Evelyn, Penguin Books, and Red Bull run their ecommerce through Shopify and eBay runs entirely on PayPal.
Below is a list of some of the many digital payment solutions for dispensaries. Keep in mind that some of these companies might not be options if they know you’re selling marijuana.
Cryptocurrency payment options for dispensaries
One last thing to mention is the possibility of offering your customers the option of paying with cryptocurrencies such as BitCoin (BTC) and scores of so-called altcoins. There are even some marijuana cryptocurrencies such as PotCoin (POT), CannabisCoin (CANN), DopeCoin (DOPE), HempCoin (THC), and CannaCoin (CCN).
One of the great things about cryptocurrencies is that they are not banks. Most are decentralized networks just like the Worldwide Web. So they don’t have to worry (as much) about getting raided by the federal government for processing payments for marijuana dispensaries.
There are several companies and blockchains that offer cryptocurrency payment solutions. Moreover, digital payment services such as PayPal and Square are starting to offer cryptocurrency payments to their clients. In these cases, clients need to purchase crypto through their app. But when they pay for a purchase the seller is paid in U.S. Dollars. However, not all crypto holders want to do business with PayPal.
The world of cryptocurrency is a deep rabbit hole right now. There’s a lot to learn. But over time the crypto world will get easier to navigate. For now, crypto is so new on the scene that the vast majority of your customers probably don’t use it. Although there’s no need to rush into figuring it all out it’s worth looking into at this early stage.
Do your own due diligence and choose wisely
The choice of merchant services, credit card processing solutions, and/pr digital payment platforms can make or break a dispensary. Take your time. Do some due diligence and research all your options. The best advice we can give you is to talk to other dispensaries in your class and see what works for them.
If you rush into it and choose the wrong provider and you could be in for recurring headaches. Choose wisely and you’ll enjoy some smooth sailing.
