Cannabis Payment Processing Options for Dispensaries
Dispensaries in the cannabis industry have a variety of payment processing options available. The days of being dependent on cash are over. You can process cashless payments compliantly at your dispensary now!
This post explains the available cannabis payment processing solutions for dispensaries, covering the pros and cons of each to help dispensary owners make an informed decision without blindly choosing a high-risk solution.
Types of cannabis payment processing solutions
Different payment processing companies offer different services. Depending on your dispensary’s workflows, access to financial institutions, and regulatory landscape, you may opt to include some or all of these.
Credit cards
Cannabis consumers are increasingly requesting credit card payments. This preference is easily understandable for customers, given that credit card processing is utilized in 28% of all transactions across various industries.
Pros of cannabis credit card processing:
- Convenience
- Customer preference
- Increased sales
- Improved cash flow
Cons of credit cards:
- Processing fees (some processors charge higher fees than others)
- Non-compliance if you work with the wrong partner
ACH (Automated Clearing House)
ACH payment processors enable transfers via ACH (Automated Clearing House), which is the process of digital payment between the customer bank and cannabis merchant account without the need for checks, wire transfers, or cards.
As these transfers occur digitally, cannabis businesses can promptly confirm the existence of funds, with the money flowing directly from the customer's account to the recipient's bank account. ACH mobile payments offer a straightforward, secure, legally compliant, and reliable way to sell cannabis products.
Pros of ACH:
- Typically low processing fees
- Secure
- Effective for online transactions and ecommerce
Cons of ACH:
- Difficult to drive customer adoption
- ACH transactions are subject to reversals or chargebacks
- Still charge transaction fees (often to the cannabis company)
- Verifying customer information for ACH transactions can be challenging
Point of Banking
Point of banking, although more prevalent in the cannabis industry, is not commonly utilized in other sectors. It is often referred to as a "cashless ATM," although "point of banking" is the preferred legal terminology.
The point of banking workaround serves as a cannabis payment method enabling customers to access their bank accounts directly at the point of sale in-store.
In cannabis dispensaries, point of banking operates similarly to traditional ATMs. Customers insert a debit card and enter their personal identification number (PIN) for authentication.
Transactions through point of banking at dispensaries typically require payment in increments of $5, with some solutions allowing rounding to the nearest dollar. If a transaction doesn't result in a round number, the budtender must return the change, a practice that often boosts tips.
Customers are also subject to a convenience fee in addition to the rounded total. The marijuana payment processing fee varies among merchant services. Certain point of banking vendors offer cannabis retailers a portion of this fee as a rebate, providing a potential financial incentive.
Ideally, your POB solution should be integrated with your POS system. This integration eliminates the need for manual data entry.
Pros of point of banking:
- Relatively convenient
- Allows customers to use their debit cards
- Compliant
- Secure
- Potential to increase budtender tips
- Some processors offer rebates to dispensaries using POB
Cons of point of banking:
- Often round pricing charges to the nearest $1 or $5 increment
- Usually charges a convenience fee to the customer
PIN Debit
PIN debit is a payment method that involves customers using their debit cards to complete transactions securely at the point of sale. This method requires customers to enter their PIN to authenticate and authorize the transaction.
PIN debit transactions function similarly to traditional debit card transactions. Customers insert their debit cards into a card reader at the point of sale, and instead of signing a receipt, they enter their PIN for verification.
Pros of PIN debit:
- Fast checkout process
- Secure payments
- Enables debit card usage
- Allows payment to the exact cent
Cons of PIN debit:
- Charges a customer or retail-facing fee
- Only allows debit card payments
Cryptocurrency
Considering crypto as a payment solution for your dispensary may seem advantageous — it's entirely digital, offers anonymity, and appears secure.
Some enthusiasts have gone so far as to suggest that cryptocurrency could rescue the cannabis industry. While the alignment of these two concepts is evident in theory, the practicality is questionable. Cryptocurrencies possess the potential to address cannabis banking and payment challenges in the cannabis sector. However, the inherent volatility and risk associated with crypto render it an impractical choice for cannabis retailers.
Although there is hope for a future where a reliable, user-friendly cryptocurrency becomes widely adopted in the cannabis industry, we are currently a long way from realizing that vision. Only a few stores have successfully implemented this technology, and none are conducting routine transactions through crypto.
In essence, relying on cryptocurrency as the primary payment solution for cannabis is premature at this stage.
Get simple, secure cannabis payments with Paylabs
Cannabis customers spend an average of 30% more using Paylabs payment options like debit and credit processing. Our solutions are safe, effective, and compliant for the cannabis industry.
