Let’s face it, it has been a tough year for cannabis payments. Overall, that is nothing new for the industry, however, this is extra painful because 2022 through 2023 (two full calendar years) were pretty painless. More and more banks felt comfortable with facilitating transactions and the solutions felt more seamless.
As is always the case in this industry, two steps forwarded, ultimately resulted in twelve steps back. Dispensary owners have it tough: 280E, regulations, employee theft, armed robbery, stiff competition, software failures… The last thing they need is payment processors lying, holding their money, or getting shut down. At least banking is drastically more affordable and prevalent now than a few years ago! 🙂
Let’s get to the two big elephants in the room: SAFE Banking and Legalization/Rescheduling. SAFE Banking will have NO impact on payment processing unless it’s passage sends waves through the card brands and network owner/operators leading to the conclusion that cannabis is no longer high risk. This is a pipe dream.
Cannabis transactions are higher risk now than two years ago. Chargebacks are through the roof as the economy has worsened and customers have gotten better at friendly fraud. Legalization would have an impact on payment processing, as it would no longer require processors, networks, issuers, and acquirers touching a Schedule 1 Narcotic.
However, the payment card world would likely still look at cannabis as high risk, as, based on the data, it has more in common with kratom sales than ordering a bowl of soup at a diner. With that said, this would make for a massive improvement. Rescheduling could have a similar effect, but it would be less pronounced.
The core issue with cannabis payment processing is that this remains a schedule 1 narcotic and in order to have a fundamentally sound and compliant payment solution, you MUST have specific types of chartered banks involved, and these banks have historically had little to no interest in facilitating these transactions. It is difficult and amazingly expensive.
Not only does interest lack, there are an incredibly small number of this specific type of bank. A processor cannot simply run transactions through a cannabis friendly bank, the bank must have very specific charters and ties with regulatory authorities.
There are many less compliant options now than a year ago. Most of the banks that were comfortable working in the industry have exited. Classic workarounds that used to work for months or years now get identified by card brands (AI, web crawlers, etc.) and shut down in days, if not weeks, after launch.
Some dispensaries have chosen to go the route of having multiple backups in place in their stores. We have literally seen some stores with over a dozen terminals on the counter just in case their current solutions go down.
Unlike the “branded pay” options that are offered by some of the larger POS companies, our solutions don’t crash, get your money frozen or need to have a backup solution.
A compliant solution must, at minimum, file SAR reports, KYC, OFAC, and OCC. This is in addition to the absolute requirement that the back-end bank KNOWS they are running cannabis. There is more to it, but we will not give it away publicly.
If you want more info about this, feel free to contact us today.
When it comes to cannabis payment processing, Payment Funnels and Get Cannabis Payments stand out as premier solutions tailored to the unique challenges faced by the industry. Given the limitations imposed by federal regulations, which often prevent traditional financial institutions from processing cannabis-related transactions, our platforms provide specialized alternatives that are not only compliant but also efficient.
Payment Funnels streamline the customer experience by integrating sophisticated point-of-banking systems into dispensaries, enhancing transaction security and ensuring smoother interactions at the point of sale.
Moreover, their solutions, such as ACH transfers and cashless ATM mechanisms, offer businesses ways to circumvent the cash reliance that can lead to security risks and operational inefficiencies. On the other hand, Get Cannabis Payments focuses on delivering a robust payment gateway that supports various transaction methods tailored for the cannabis sector.
This service minimizes the margin of error through their integrated software solutions, efficiently automating accounting processes and improving overall financial management for dispensaries. With the ability to process multiple payment types—combined with a user-friendly interface that encourages higher transaction volumes—Get Cannabis Payments significantly boosts revenue potential.
Our approach addresses the regulatory landscape’s complexities while providing cannabis businesses with the tools needed to thrive in a predominantly cash-driven market. This dual approach not only enhances the customer experience but also aligns with the industry’s move towards greater compliance and operational transparency.
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