Marijuana Payment Processing Options Ranked Worst to Best -

Marijuana Payment Processing Options Ranked Worst to Best

Marijuana payment processing options.

Marijuana payment processing options are less than ideal. Federal laws still do not consider marijuana legal anywhere in the country. Despite this, the majority of states have legalized marijuana in some form or another.

As a result, marijuana merchants are operating in a financial grey area. Without legal cannabis at the federal level, banks won’t service the cannabis industry. Banks and credit card processors could face charges for servicing a marijuana business.

Medical and recreational marijuana companies are left without a payment processor. This has left the expanding marijuana market to create new ways to accept payments.

The cannabis industry has found several payment processing solutions. Each of these payment systems have their own benefits and drawbacks. Here are four of these methods ranked from worst to best:

Processing Methods For Marijuana Payments

4. Marijuana Payment Processing With Cash

Accepting cash payment for marijuana purchase.

Normally, cash is good for businesses, but for cannabis merchants, it can be a nightmare.

The illegality of federal marijuana made cash the standard option for states who legalized marijuana. This worked at first to get the first few medical marijuana dispensaries off the ground.

Since then, legalization has become much more widespread. Now, more than thirty states have legal marijuana in some form. This growth of marijuana vendors has outpaced the processing capabilities of cash. The amount of cash businesses owners must process has created some significant problems. In fact, cash as a cannabis payment method creates daily challenges for dispensaries.

The most notable challenge is how expensive it is to accept cash. A cannabis dispensary must take several costly steps to keep their money safe. Safety measures often mean dispensaries must hire armed guards to protect their money.

In addition to the initial expenses to guards, extra steps are often necessitated too. These often include hiring armored trucks to transport the cash to depository sites.

On top of the dangers and expenses of protecting the cash, having it at all creates another security risk. When a cannabis company has such a large amount of cash on hand, likelihood of robbery increases.

Cash makes everyday expenses for a cannabis business less efficient. Common business expenses like payroll, rent, or taxes become more difficult in cash.

On its own, cash is no longer an effective processing solution.

3. Marijuana Payment Processing With Cryptocurrencies

Accepting cryptocurrency payments for marijuana.

One processing solution unique to cannabis banking is cryptocurrencies. This method arose when dispensaries began looking for ways to accept mobile payments.  What came from these efforts were the first industry specific cryptocurrencies.

Cryptocurrencies work to decrease the number of cash transactions by allowing digital payments. Anyone with an internet connection can anonymously invest in cryptocurrencies. This anonymity works around the federal governments ban on recreational and medical cannabis.

These payments are generally safe, but do have drawbacks- most notably accessibility. The currency itself exists only online, but no mobile app is available to the public. If you’re a merchant interested in accepting cryptocurrencies, here’s 9 reasons why it’s a good idea, from our friends over at Coindiligent.

Another key aspect to the accessibility challenge is merchant acceptance. As of now, only twelve brick and mortar businesses accept cryptocurrencies. Twelve shops is progress, but far from creating an industry-wide cannabis banking solution. As a cannabis payment processing solution, cryptocurrencies are far from implementable.

2. Marijuana Payment Processing With Debit Card Workarounds

Using debit card workarounds for marijuana purchase.

Some dispensaries use workarounds to accept debit card transactions in their shops. These methods must work around the federal laws surrounding the cannabis industry. Workarounds have created several interesting ways dispensaries can accept debit cards.

One method that allows dispensaries the option of accepting debit is a cashless ATM. Cashless ATMs act very similar to normal ATMs, but do not use cash.

Instead, this system has the customer use their debit card to buy a voucher for the store. These vouchers come in five dollar increments and only have value in their store of origin.

Buying vouchers instead of paying cash is beneficial for a number of reasons. Firstly, they are a non-cash transaction. Debit card payments like these deposit money in the merchant’s bank account immediately. This segues all the negatives that come when dispensaries operate only in cash.

The other notable benefit to cashless ATMs is their security. Accepting debit at dispensaries lowers the likelihood of charge backs or fraudulent transactions. This gives the extended benefit of peace of mind for both the merchant and customers.

Unfortunately, cashless ATMs are not without flaw. Without a doubt, the worst aspect of cashless ATMs are the fees. Setup fees make cashless ATMs expensive for dispensaries implement.

On top of these setup fees, customers incur transnational fees any time they use this system. These unavoidable expenses make workarounds a difficult cannabis payment processing solution.

1. Marijuana Payment Processing With Credit Cards

Accepting credit card payment for marijuana purchase.

The ability to accept credit cards is the easiest solution for dispensaries. Making marijuana credit card processing an option, however, has been anything but easy.

The biggest obstacle to cannabis credit card processing has been the federal government. As expressed above, the government still considers marijuana completely illegal. This initially blocked all financial institutions from providing marijuana merchant accounts.

Since then, the medical and recreational marijuana industries have looked to alternative payments. As shown by the three alternatives that have been addressed, there is no perfect fix. Despite this, new credit card processing solutions are arising.

Recently, a cannabis credit card processing solution was even introduced into Congress. The bill, called the SAFE Banking Act, would allow the industry to accept credit cards.

The SAFE Banking Act would end  bank penalties for servicing the industry. This would allow processing companies to provide dispensaries with high risk merchant accounts.

The SAFE Banking Act is, however, still just a bill. Although it has passed out of committee, it still has not been to the floor of the House of Representatives. This means that while it is a promising solution, it is yet to provide credit card processing.

Even though there is no national law, credit card payment solutions still exist. Some processors, like this one, allow dispensaries to accept credit and debit cards.

These methods use blockchain technology to encrypt customer credit card information. This protects customer information from theft and certifies that all transactions are FDIC-insured.

Additionally, accepting credit avoids the hidden fees many other cannabis payment solutions have. The only fees with these systems are cannabis merchant account premiums.

Another benefit to accepting credit and debit cards at dispensaries is added profits. Studies have shown that when customers can pay in credit, they spend an additional 20%.

As a whole, systems that allow dispensaries to accept a credit card transaction are the best. Not only can they accept credit cards, but debit and cash as well. This makes it the hands down winner of cannabis payment processing solutions.  

The marijuana industry is a growing one that has adapted to the challenges it’s been posed. These are only some of the current payment processing options for cannabis vendors. Whether the SAFE Banking Act passes or not, the industry has several payment options. In the future, cannabis banking will need to keep adapting as the industry continues to grow.

In the coming years, the cannabis industry is expected to grow even more. This growth will spur more dispensaries, growers, and distributors who need financial services. The question of the best current solution has been answered. What remains to be seen is what new options arise from here.

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