Cannabis dispensaries are spreading like wildfire.
Far from the days of illegality, the cannabis industry is increasingly amongst the most lucrative markets in the US. The US Cannabis market is predicted to grow to $30 billion by 2025. Already there are more than 400,000 legal cannabis jobs in the nation.
It's a phenomenal turnaround. But one problem remains complicated: dispensary credit card processing.
Dispensary Credit Card Processing Solutions
In this article, we'll explain why dispensary credit card processing is so complex and provide our top 5 potential solutions.
Why is dispensary credit card processing so difficult?
Despite being legal at the state level, cannabis's lingering illegality, according to Federal authorities, means many banks refuse even to open accounts to cannabis-related businesses, let alone run their dispensary credit card processing.
The result is a cutting-edge industry forced to accept the habits of yesteryear. Many dispensaries only accept cash and must transport these large volumes of physical money to the bank – sometimes by armored truck. It's led to an uptick in robberies and fraud.
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But it's not just a logistical and security headache for dispensaries. It's also a backwards step for its consumers. After all, this is the age of next-day delivery – ultimate convenience – customers expect to pay with the credit card and go.
In fact, 83% of Americans between 30 and 49 years old own a credit card. Moreover, 70% of consumers prefer any type of card payment over cash, with around 10% making all their purchases using cash.
It's time for dispensaries to get with the times – but how?
Why can't dispensaries use credit card companies?
You may be asking, why can't I use a well-known credit card company? Think Visa, MasterCard, or Amex. These global titans are the gold standard in credit and debit card services. Why can't you use them?
The answer is they simply won't accept any marijuana payments due to the Federal government's stance on the drug. To control their services, Visa and MasterCard use merchant category codes (MCCs) to identify and classify your business type numerically. It also helps determine which interchange rates to charge.
Some dispensaries have circumvented the credit card companies' ban by either intentionally or unknowingly miscoding their business. Common alternative MCCs include 5999 (Miscellaneous Retail) and 5193 (Florist Supplies, Nursery Stock, and Flowers).
But it's a risky prospect. If merchants are using an incorrect MCC, their merchant account can be frozen or closed. They're also opening themselves up to significantly more rigorous federal scrutiny.
Top 5 dispensary credit card processing solutions
To accept credit card processing, your dispensary needs a marijuana merchant account. Using this account, you can accept credit card payments and are approved to sell cannabis products.
The process works using point-to-point (P2P) technology. It functions similarly to PayPal or Venmo by keeping the transaction away from a strict credit card system. It is 100% legal in the US.
The downside is that in many cases, the fees are extremely high. It's not unusual for processing to average 5.95% plus $0.30 per transaction. That's not the case for all organizations, however.
1. Shift Processing
Shift Processing provides a P2P payment processing solution for both low- and high-risk industries, including dispensaries. It allows customs to pay with traditional credit cards and does not use offshore bank accounts to do so. Shift also strongly promotes their minimal fees as a major incentive for use.
However, it does not allow for eCommerce sales. So, all P2P transactions must be conducted in-store or on pick-up orders only.
2. eMerchantBroker
eMerchantBroker is amongst the most well-respected high-risk processing providers in the country. Indeed, with years of experience as high-risk merchant account specialists, they're well-informed to handle dispensaries' processing. You can access their full range of products and services and even use both domestic and offshore accounts.
Nevertheless, such freedom and expertise come at a cost. Expect higher-than-average rates and fees – particularly involving their tier pricing structure.
3. PaymentCloud
PaymentCloud, like most high-risk specialists, relies on a quote-based pricing system. They don't reveal any standardized processing rates or account fees. Still, they're a reputable company, accepting high-risk merchant accounts since 2010. Perhaps, best of all, is their success rate in getting merchants approved for an account – and they don't charge for application or account setup.
The biggest downside is that you may need an offshore account to use the service.
4. Instabill
Instabill is a long-time high-risk processing provider. However, it's very reserved about who it will and will not accept (it won't accept startups, for instance). In part due to its open and transparent position on accepting cannabis merchants. Instabill offers two potential payment options: (1) via cryptocurrency or (2) create a card issued to customers, which links to their bank accounts, allowing ACH (automated clearing house) payments. You will not be able to accept traditional credit cards (Visa or MasterCard).
5. SMB Global
SMB Global was formed in 2016, specializing in high-risk and offshore merchant accounts. It offers excellent customer service, reasonable pricing and contract limits, and accepts cannabis dispensaries (via an offshore merchant account).
However, processing rates, account fees, and contract terms can vary significantly because SMB Global uses many different banks and processors to get you approved for an account. Moreover, the company requires a minimum processing volume of $50,000 per month. If you do not have an adequate turnover, this account is not for you.
Alternative dispensary credit card processing options
For dispensaries, providing credit card processing is critical. But it's not the only option available. Cryptocurrencies are perhaps the only other viable solution. (The other solution relies on creating shell companies to hide your account name. It is a seriously dangerous and dodgy activity. It's also a clear breach of credit card company rules!)
You can accept a digital payment using cryptocurrencies and then convert the digital currency back into cash based on the currency exchange rate, depositing it into your account. Startups often prefer such methods. But it does require a customer base who actively uses common cryptocurrencies.
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