2022 Guide to Cannabis Dispensary Payment Processing

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Contents

This guide was last updated August 1, 2022.

This guide is for anyone who is:

  1. Confused by all the cannabis payment options;
  2. Sick of your payments not working or being shut down; or
  3. Ready for real merchant processing.

The goal of this guide is to help you choose the best cannabis merchant processor for your business. We’ll explore how different cannabis payment solutions work, what to look out for, and questions to ask when choosing a marijuana merchant services provider.

Introduction

Cannabis payments have come a long way but choosing a cannabis merchant processing solution is still a daunting task.

A few years ago, the challenge was just finding a cannabis merchant services provider. Now there are plenty of secure dispensary payment options, but choosing the right provider is tricky because many options are fraught with legal and business risks.

Major card networks (Visa, Mastercard, American Express, Discover) prohibit cannabis credit card transactions on their networks, so cannabis merchant services providers have gotten very creative.

Unfortunately, their creativity often results in sub-par products and violations that can have serious consequences for businesses using their service.

Don’t expect traditional merchant card processing to be available until cannabis is federally legal. Safe Banking Act legislation isn’t expected to change the position of the card networks who have stated their position will not change until cannabis is federally legal.

Choosing the right secure payments for your dispensary now will make the eventual transition to credit card traditional card processing seamless and fast. We’ll show you how to be prepared.

Plenty of options but lots of risks

Cannabis businesses have more payment options than ever, but also more risks than ever. The risks are real and include:

Reputational Risk

Frustrated customers due to sporadic uptime, high transaction fees, and no pay ahead option

Financial Risk

Lost sales due to outages, high customer fees, and no order-ahead or delivery payment options

Operational Risk

Inefficiencies due to slow line speeds, multi-step payment processes, cash handling, and reporting/reconciling

Legal Risk

Federal and state laws and card network rules have serious legal and financial consequences

With risk comes opportunity. Offering efficient, reliable, customer-friendly, and compliant payment options, can differentiate you from the competition and turn risk into an advantage.

Payments can a risk or an advantage.
Choose wisely.

Choosing a cannabis merchant processing provider can have a big impact on your business. This guide will help you make the right choices to position your business for success now and in the future.

The evolution of cannabis payments

Cannabis payments have come a long way and current options aren’t far from the ultimate goal – traditional debit and credit card merchant processing.

The largest advancement in the history of cannabis payments – the availability of debit card merchant processing – just happened.

The graphic below illustrates how far cannabis payments have evolved.

graph showing evolution of cannabis payments

High-risk merchant processing

Regardless of federal laws, cannabis merchant processing will always be challenging because cannabis will always be highly regulated making it high-risk.

Factors that can cause a business to be considered high-risk for merchant processing include:

  • How long a merchant has been in business
  • Personal credit rating
  • A merchant’s processing history
  • Card-not-present sales (online, phone, etc.)
  • Recurring billing
  • Big-ticket transactions (over $500)
  • High volume (over $100K/month)
  • Network regulations
  • The industry

Cannabis is a high-risk industry.
Merchant processing will always be challenging.

High-risk merchant accounts

Being classified as a high-risk merchant does not mean you won’t be able to get a merchant processing account, it will just be more challenging and cost a little more.

What it means to be a high-risk merchant account:

  • Fewer processors/banks to choose from
  • Extra due diligence/underwriting
  • Ongoing compliance requirements
  • Potential for transaction limits
  • Possible cash reserve requirements
  • Higher fees
Cannabis businesses shouldn’t be offended by being classified as high-risk. Many seemingly mainstream businesses are considered high-risk for merchant processing. The list below shows industries widely considered high-risk, regardless of other factors.
High-Risk Merchant Processing Industries
Advertising services
Cryptocurrencies
Health
Pet sales & supplies
Affiliate marketing
Dating services
High-ticket coaching
Phone unlocking services
Airline, lodging, travel
Debt collection / debt mgt
Insurance
Prepaid phone cards
Alcohol
Domain registration
ISPs & web hosting
Self storage
Antiques
Drugs & prescriptions
Jewelry
Software & apps
Auto sales
Events
Male enhancement
Subscription services
Auto warranties
E-Wallets
Marketing
Supplements / nutraceuticals
Background checks
Fantasy sports
Merchant aggregators
Tech support
Beauty, skin & hair
File sharing
Money transfers
Ticket brokers
Business opportunities
Firearm sales
Moving services
Timeshares / Holiday clubs
Charities
Foreign exchange
Network marketing
Tobacco
Coins & collectibles
Furniture sales
Online auctions
Vape / E-Cig
Computer sales
Gambling
Pawnshops
VPN services
Credit repair/monitoring
Government grants
Payday loans
Web design, SEO services

The list contains many mainstream, well-established industries that seem low-risk but in the merchants services world, they’re high-risk.

Cannabis will always require a license to sell, sales will be age-restricted, and closely related to illicit activity so it will always be considered a high-risk industry.

Understanding merchant processing fees

Merchant processing fees are notoriously confusing and can make you feel like you are being “nickel-and-dimed”.

Fees are shared between the card-issuing bank, merchant sponsor bank, processor, and sales agent (reseller/ISO). The bank that issued a customer’s card (the issuing bank) receives the largest share of fees. Issuing bank and network fees are non-negotiable.

Types of merchant account fees include:

  • Discount rate (% of the transaction)
  • Interchange fees
  • Per transaction fees
  • Setup fees
  • Monthly fees
  • Returned item fees
  • Reporting fees
  • Compliance fees
  • Equipment fees
  • Network dues and assessments

The discount rate makes up the largest component of the total cost of merchant processing.

High-risk processing fees

Businesses considered high-risk can expect to pay higher merchant processing fees due to the increased transaction risks and costs of underwriting and ongoing compliance monitoring. The increase in fees typically goes to the sales agent and processer.

Compared to processing fees for other high-risk merchants, cannabis processing fees are a relative bargain. When traditional merchant processing is available to cannabis businesses, expect processing fees to increase.

Discount rates for traditional merchant processing can vary widely based on a business’ risk. The table below shows the range of discount rates and who they apply.

Merchant Discount Rate Spectrum

Low-Risk

1.80% - 2.95%

Lowest risk industries with excellent merchant services history, low chargeback rates, and average ticket size

Mid-Risk

3.00% - 5.00%

New businesses that have poor credit, limited merchant service history, or potentially higher chargebacks

High-Risk

5.00% - 8.00%

Businesses in the highest risk industries, poor merchant service history, high sales tickets, or high chargebacks

Insist on reviewing a fee schedule and understanding each type of fee. Depending on your volume, average transaction size, and type of transactions, some fees may be prohibitive.

No-fee Processing

Some businesses want to pass merchant processing fees on to customers. This seems more common in cannabis than in other industries and seems to be a by-product of cashless ATMs which have an ATM fee paid by the customer, not merchant processing fees paid by the business.

If you want customers to pay your processing fees it must be done in a compliant manner. A common strategy is referred to as a ‘cash discount’ program in which a business’ listed prices are for cash sales and customers paying with a card are charged a higher price for not taking advantage of the ‘cash discount’ pricing.

Rules and laws regarding customers paying fees are tricky. Laws and disclosure requirements vary by state, and we recommend seeking legal advice before proceeding.

If you want customers to pay your merchant processing costs, make sure your provider offers it, and you know your local laws.

Not paying processing fees may seem appealing.
But the rules are tricky, and it can reduce sales.

Another factor to consider is the effect on your business. Requiring customers to pay transaction fees will result in some customers paying with cash (which costs more than processing fees and results in smaller purchases) or shopping somewhere they don’t have to pay fees. Lost sales and the cost of cash can easily exceed processing fees.

We offer no fee “cash discount” processing but encourage our customers to consider the impact before implementing a cash discount program.

PRO TIP – use our free calculator to analyze the impact charging customer transaction fees can have on your business.

Tipping

Budtender tipping is common, but as cannabis businesses transition to electronic payments, tipping becomes an issue since not every payment option offers tipping or only offers it in a limited capacity.

Cashless ATMs make it easy to tip using the cash given back to the customer, however, the tip amount is limited by the change provided. Other payment options have no tipping functionality at all.

If tipping is important, be sure to ask what tipping functionality a payment program offers.

Cannabis payment options

Cannabis payment solutions generally fall into one of a few general categories. Each payment type has advantages, disadvantages, and risks.

We think it’s important to understand how various cannabis payment solutions work and how to identify what category a payment option falls into.

Cashless ATMs

Cashless ATMs are currently the most popular cannabis payment option. Their popularity isn’t surprising since they were the first debit card-based solution for marijuana dispensaries.

Their popularity appears to be short-lived, but a thorough discussion of cashless ATMs is warranted due to their popularity and the misunderstandings about them.

Many cannabis payment solutions have come and gone but cashless ATMs appear to be the most widely used solution that will fail or be shut down.

On December 2, 2021, Visa issued a memo to banks, processors, and agents titled “Cashless ATM” and Misuse of ATM Transactions Prohibited. The memo calls cashless ATMs a “scheme,” describes how they are used for cannabis transactions, and warns of penalties and further compliance enforcement against banks and their third-party agents (ISOs or resellers).

ATM networks (Visa & Mastercard) prohibit all purchase transactions.
Not just cannabis transactions.

In July 2022, Mastercard sent letters to financial institutions they suspect are processing cannabis transactions disguised as ATM transactions. The letter requested the financial institutions to review their portfolios and if any illegal activity is detected it should be ceased immediately. The letter also any such activity will be treated as a violation of Mastercard standards and actions could include assessments.

Cashless ATMs use standard payment card terminals in which customers insert or swipe their card and enter their PIN like a standard payment transaction. This is where the similarities end.

Disguising the transactions

Cashless ATM transactions are submitted to networks reserved exclusively for ATM cash disbursements, so providers take steps to mask the true nature of transactions.

Transactions are coded as ATM cash disbursements and are often rounded up to the nearest $5 or $10 increment to create the appearance of a cash disbursement.

The major card brands (Visa, Mastercard, American Express, Discover) prohibit purchase transactions of any kind, not just cannabis transactions, to be submitted to their ATM networks. Submitting purchase transactions to ATM networks violates network rules.

From a customer standpoint, cashless ATM transactions are closer to an ATM transaction than a debit card transaction. Customers are charged an ATM fee by the processor and may be charged an out-of-network ATM fee by their bank.

Chargeback epidemic

Another recent trend that could contribute to the demise of cashless ATMs is chargebacks. Customers have learned that they can easily request their financial institution to reverse cashless ATM withdrawals.

The very nature of cashless ATMs is what makes chargebacks so easy, and hard for processors to dispute. Merchants are out cash when a chargeback is successful.

All a customer must do is call their bank and tell them they did not receive cash for the ATM transaction, which is true because they received product instead of cash.

Word of the ease of chargebacks is spreading among cannabis customers and cannabis businesses. This could spread like an epidemic.

Reconciliation nightmare

One of the biggest complaints we hear from businesses using cashless ATMs is that reconciling POS reports to cashless ATM reports and their cash drawer is next to impossible. Not surprising since ATMs are designed for retail transactions.

Cashless ATM reports show rounded-up amounts that include the ATM fee, whereas POS reports use the actual sale amount (plus taxes). This makes reconciling the two quite challenging. As for reconciling your cash drawer….good luck.

Are cashless ATMs illegal?

Is it illegal for merchants to use cashless ATMs?

While the December 2, 2021, Visa memo was directed at banks, processors, and sales agents, businesses could face fines and enforcement action as well. Violating card network rules can result in potential fines of $2,500 to $200,000 per day which can be retroactively applied to, and from, the first day of noncompliance.

In a January 20, 2021, post, Kasim Carbide, an attorney who concentrates his practice on corporate law, bank secrecy act/anti-money laundering compliance, thinks businesses using cashless ATMs are not only violating card network rules but are also violating federal law.

Fines for violating card network rules are up to $200,000 per day.
And cashless ATMs violate network rules.

Carbide points to network rules from both Mastercard and Visa which could cause trouble for merchants:

MasterCard Section 5.11.7 “Illegal or Brand-Damaging Transactions” states: (1) a merchant or customer must not submit “any Transaction that is illegal, or in the sole discretion of the Corporation, may damage the goodwill of the Corporation or reflect negatively on the Marks.”

Visa Rules 1.5.1.4 “Submission of Illegal Transactions” state “[a]n Acquirer must not knowingly accept from a Merchant for submission into the Visa payment system any Transaction that is illegal or that the Acquirer or Merchant should have known as illegal.”

The fines and prison time consultants for the cannabis company, Eaze, received are a clear indication that courts take bank fraud related to cannabis payment schemes very seriously. The widespread use of cashless ATMs in cannabis and blatant attempts to disguise the transactions could spell trouble for ATM operators.

Identifying a cashless ATM scheme

Providers of cashless ATMs aren’t always transparent that their “debit” transactions are processed as ATM disbursements and violate network rules.

Given the card networks’ recent enforcement efforts and the rash of press warning businesses about the use of cashless ATMs, we expect providers will further obscure the structure of their products and even rebrand from cashless ATMs to Point of Banking, Virtual Banking, or another name.

To you help identify and avoid cashless ATM schemes, look for characteristics such as:

  • Rounding the transaction amount up and providing change back to the customer.
  • No discount rate is charged to the merchant – ATM transactions use a flat fee charged to the cardholder.
  • Fee kickbacks – cashless ATM providers often offer to share the ATM fees with the merchant – this is common when placing a physical ATM at a business location.
  • Use of a short “ATM placement” contract – true merchant processing uses a multi-page merchant processing agreement.
  • Little to no underwriting – true merchant processing, especially high-risk merchant processing, involves thorough underwriting.

Cashless ATM schemes can be sneaky.
But they're easy to spot.

Credits cards and cashless ATMs

Some cashless ATM providers state that their payment card terminals work with credit cards. Customers need a PIN number for their credit card and transactions are processed as a cash advance.

This doesn’t have any impact on the business, but it has nasty implications for the customer, including incurring interest charges of 25%, or higher, starting from the date of the advance, additional fees of 3-5% of the amount advanced, out-of-network ATM fees, and possibly impacting their credit score.

Debit card processing

The most recent, and exciting, advancement in cannabis payments is standard debit card processing. A few providers now offer true debit card transactions (not cashless ATMs) that offer the same customer experience as paying at a grocery store.

Dispensary debit card processing solutions utilize regional debit networks which tend to be more accepting of cannabis transactions if proper risk management and compliance measures are in place.

The caveat with cannabis debit card processing is that it only works for card-present transactions (in-store, delivery, curbside), and not all debit cards will work.

Card acceptance can be excellent but varies based on geographic location. These solutions aren’t perfect but they’re as close to traditional merchant processing as cannabis businesses are going to get until the major card networks permit cannabis transactions.

Debit card processing is as good as it's going to get
for cannabis businesses for awile.

As with all cannabis payments, there are some shady marijuana debit card processing providers so choose wisely. If a provider has changed processors recently, they’re probably hiding something, and their offering may not be sustainable.

Some providers promote cannabis debit card processing using Visa and Mastercard networks. Beware of these – they violate network rules, are likely short-lived, and you risk being blacklisted from traditional merchant processing.

If you want customers to be able to add a tip to a debit card transaction, ask what tipping functionality a provider offers. We discourage passing processing fees on to customers (it lowers your processing costs and your profits), but if this is something you want, ask what options a provider offers.

ACH payments

ACH-based payment systems are the longest-running, most reliable payment solutions for marijuana dispensaries. These systems work by transferring money from a customer’s bank account to the business’ account.

Some cannabis ACH payment solutions can be used for in-store, online, order-ahead, and delivery sales, which is something current debit solutions can’t offer. Additionally, many ACH systems integrate into your website or mobile app for a seamless customer experience.

More and more cannabis technology companies now offer their own “____ Pay”. Most of these are ACH solutions. Some have built their own system and others utilize a 3rd party provider.

Cannabis payments are tricky and there are sure to be issues with a new program, especially if a non-payments company built it.

Some ACH payment solutions have limited functionality (no online transactions, limited integrations), a poor customer experience (long approval process, transaction limits), and erratic performance (poor uptime, failed transactions).

As with all cannabis payments, there are some shady marijuana debit card processing providers so choose wisely. If a provider has changed processors recently, they’re probably hiding something, and their offering may not be sustainable.

Some providers promote cannabis debit card processing using Visa and Mastercard networks. Beware of these – they violate network rules, are likely short-lived, and you risk being blacklisted from traditional merchant processing.

If you want customers to be able to add a tip to a debit card transaction, ask what tipping functionality a provider offers. We discourage passing processing fees on to customers (it lowers your processing costs and your profits), but if this is something you want, ask what options a provider offers.

ACH payments can be used for online sales.
Some providers offer seamless integration for web and mobile aps.

ACH payments are like accepting a check. If a customer doesn’t have enough money in their bank account, the transaction will be an NSF and you will have to collect from the customer. Ask providers how they mitigate NSF risk and collections.

Questions to ask an ACH payment provider

  1. How long have they been processing cannabis transactions?
  2. How do they handle NSF transactions?
  3. How successful are they in recovering your money in NSF transactions? (Hypur recovers 99.9% Hypur Pay chargebacks)
  4. Do they have much fraud?
  5. How long does it take a customer to get approved for an account? (It should only take a few minutes.)
  6. Are customer account balances verified before each transaction?
  7. Are there customer or store transaction limits?
  8. What POS integrations are offered?
  9. Are online, in-app, and delivery purchases supported?
  10. What type of online and in-app integrations are offered? (Look for APIs and customers being able to pay without leaving your website or app.)
  11. What 3rd party delivery and order-ahead service integrations are offered?
  12. What reporting do they provide? (Especially important for multiple locations.)
  13. Are they PCI compliant or certified? If not, do they utilize bank-level security?

Pre-paid programs

These “stored value” systems utilize a re-loadable account where customers must “load” funds onto their account before buying something. PayPal and Venmo are examples of pre-paid programs (PayPal and Venmo do not allow marijuana dispensary transactions).

Funds added to a pre-paid program are held in a commingled bank account in the name of the program provider – businesses and customers do not have separate bank accounts in their name. When a transaction occurs, the provider makes a journal entry to move funds from the customer to the business within the commingled account.

Some pre-paid programs offer only limited banking functions and moving funds to your bank account can take several days. Early MMJ merchant processing solutions were most prepaid programs.

Most pre-paid programs require Federal registration and state licensing – a time-consuming and expensive process many providers skip.

Pre-paid programs operating without proper registration or licensing can be shut down and funds held in the program confiscated. This is a risk in any pre-paid program but is of special concern for cannabis pre-paid programs.

Closed loop payments

Closed loop payments are pre-paid programs with limited functionality. They can only be used at one business or with one service (delivery, order-ahead, etc.).

You will get lower adoption with closed loop payments because fewer customers will sign up for a service that can only be used at businesses using that service or only for certain types of sales (e.g., order-ahead but not in-store.)

Cash

Cash is still the primary payment method for marijuana dispensaries. Besides the security risks and stigma of being a cash-only dispensary, cash is the costliest payment method.

The cost of cash (slower line speeds, labor, back office, shrinkage, transportation costs, deposit fees, etc.) is less obvious than merchant services fees but estimates range from 4.7% to over 15%.

The cost of cash, coupled with customers spending more when paying electronically, highlights the importance of reducing your cash sales.

The average cost of cash is 9.1%.
Reducing cash sales means higher profits.

Cryptocurrencies or “Credit/Point” based systems

These offerings have extremely low adoption rates by customers, require time-consuming employee training, and are confusing to explain to customers.

We expect these creative solutions to continue but gain little traction.

Credit card processing

Any credit card processing account offered to a marijuana dispensary will require you to knowingly or unknowingly misrepresent information to a financial institution which is a felony.

Many processors claim to have marijuana credit card processing. THEY DON’T. They all use some form of deception.

Cannabis credit card processing accounts typically utilize offshore banks and processors and are short-lived. When they’re shut down, you risk losing multiple days of transactions that haven’t settled. Businesses also risk losing their bank account.

Cannabis businesses should avoid credit card processing until branded card networks openly permit marijuana dispensary transactions.

Types of sales (in-store vs. online)

When choosing a payment provider, you should consider what types of sales (in-store, order-ahead, online, and delivery) you want to accept payment for. All payment options work for in-store purchases but most can’t be used for online or in-app payments.

Most card-based payment providers offer battery-powered payment terminals with cellular capabilities so they can be used for delivery or curbside payments. You will be responsible for monthly cellular fees for each terminal.

Additionally, not every payment provider is integrated with order-ahead and delivery services so consider which services you use when comparing payment options.

Online sales

Consumers increasingly want to order online (or in an app) but having to wait in line to pay when they pick up their order undermines the convenience of ordering ahead.

If you want customers to be able to pay when they place an order be sure your payment provider offers online cannabis payments (or in-app payments). Also, ask if payments can be made without leaving your website or app. ACH payments are your best bet for online transactions.

Want higher sales, and happier customers?
Offer order-ahead payments.

Delivery sales

Offering electronic, truly cashless payments, is more important for delivery sales than any other type.

Since customers aren’t leaving their homes, they can’t stop at an ATM and can only spend up to the amount of cash they have on hand. Additionally, drivers needing to carry cash, even if it’s just to provide cash-back for cashless ATM sales, is a major hassle and unsafe.

The table below shows the types of transactions different payment types can be used for.

Type of Transaction

In-store

Delivery

Pay-ahead

ACH
Debit card processing
Cashless ATM
Cash
Pre-paid/Closed loop

Reporting

Reporting is an often-overlooked consideration in merchant processing. Weak reporting can make reconciliations impossible or require staff to spend unnecessary hours to complete. The workaround nature of many marijuana payment processing solutions means they weren’t designed for retail sales and the reporting is severely lacking.

At a minimum, you should receive monthly reports. Ideally, you can access reports electronically in Excel or .csv format so you can manipulate data if needed. Reports should show gross (not net) sales, fees, returns, and chargebacks.

Ask to see an example of the reporting you will be provided and have your accountant review it to be sure it provides the data they need.

Omni-channel payments

Omni-channel payments are becoming increasingly important to marijuana dispensaries.

If you want debit card processing for in-store transactions and ACH processing for online orders, you are going to have to offer multiple types of payments.

That means reconciling settlement statements for both services and working with two account managers. Or you can work with a payment provider that offers debit cards and ACH processing.

With all POS, delivery, order aggregators, and loyalty providers now offering ACH payments the market is fragmented.  Depending on how nicely these tech companies play with each other, you could end up working with multiple ACH payment providers (and reconciling even more settlement statements).

Or you can work with an ACH payment provider who will work with any POS, delivery, order aggregator, and loyalty provider. Like Hypur Pay.

Data security / PCI certification

The PCI (Payment Card Industry) Security Standards Council was formed by major branded card networks (Visa, Mastercard, American Express, Discover, JCB) and establishes standards to protect cardholder data.

Any party involved in the payment process that stores PII (personally identifiable information) is required to be PCI compliant. This applies to payment providers but also includes software providers like POS, order-ahead, and delivery providers as well as hardware providers.

Even if you use non-card payment systems, ask your providers if they store PII and if they are PCI compliant. If they take data security seriously (they should), they will be PCI certified, the highest level offered by the Payment Card Industry.

Preparing for credit card processing

We don’t expect marijuana credit card processing to be available for dispensaries until cannabis is federally legal. This is likely years away but choosing the right payment providers now will make the transition to credit cards much faster and easier.

Major branded card networks maintain a shared “blacklist” of businesses caught violating card network rules who are banned from merchant processing.

With all the shady cannabis payment solutions out there, being added to the blacklist is a real risk for marijuana dispensaries. If your payment provider uses Visa or Mastercard networks (for debit or credit), you are violating network rules and risk being banned for life.

How to prepare for credit card processing

  1. Establish a relationship with a debit processing provider (transitioning from debit to credit is easier than from ACH or pre-paid/closed loop to credit).
  2. Don’t use a provider that processes over Visa or Mastercard networks.

Things to consider when choosing a payment processor

  1. Do you want to accept online payments for order-ahead purchases?
  2. Do you want to accept payments for delivery orders?
  3. Do you want to work with multiple providers or one provider for in-store, online, and delivery payments?
  4. Do you want payments to be integrated with your website or app?
  5. Does the process flow for a transaction – for the customer and your staff – interfere with your purchase process or slow line speeds?

Questions to ask a cannabis payment processor

  1. Do they offer payments for in-store and online/in-app sales?
  2. What fees will you pay?
  3. What fees will your customers pay?
  4. Is there a cash reserve requirement?
  5. Is there a transaction limit (# or $ amount)?
  6. What kind of reporting do they provide?
  7. Are they PCI Compliant/Certified?
  8. What are their customer support hours and contact methods?
  9. How quickly will your transactions be settled?
  10. Can you use your current bank account?
  11. Can you view their uptime history?
  12. Do they utilize a major card network (Visa, Mastercard)?
  13. How long have they been providing cannabis payments?

Increase profits with payments

Between the high cost of cash (estimated at an average of 9.1% for retail transactions) and larger average transaction sizes for electronic transactions, shifting more payments to electronic methods can significantly increase profits.

Profit analysis

The analysis below shows the increase in profit of 100% of your sales being cash vs. 70% cash/30% electronic and vs. 50% cash/50% electronic.

analysis comparing profit for cash sales vs electronic sales

A 10% increase in profit from just 30% electronic sales is impressive and getting 30-40% electronic sales is easy.

The analysis above uses the following assumptions:

  • Customers paying electronically spend 25% more than cash customers
  • The cost of cash is 9%
  • Merchant processing fees are 3%

We created a free calculator so you can run the analysis above using your own assumptions. Use our free calculator.

PRO TIP – When running your own analysis, remember that not all electronic payment methods will yield the same results. ACH has under 10% in-store adoption rates and charging a customer convenience fee might reduce profits.

Getting 50+% electronic sales might take a little effort but the results are worth it and we’ve got some ideas below that have worked for our customers.

To encourage electronic payment adoption, consider:

  1. Offering online and in-app payments for order-ahead purchases.
  2. Offering reliable payments (customers can only use it if it works, every time).
  3. Not charging customers a fee to pay electronically (the lost revenue from customers paying cash or shopping elsewhere to avoid fees is more than you save on processing costs).
  4. Promoting electronic payments in-store, on your website, and directory listings.

Summary

As mentioned at the beginning of this guide. Payments can give you a strategic advantage or they can be a risk. So, choose wisely.

If your payment methods encourage customers to use them, they spend more than cash customers, your service is reliable, reconciling is easy, it increases line speeds vs. cash, and chargebacks/NSFs are reasonable, payments are an advantage for your business.

If some customers pay cash or shop elsewhere to avoid fees, there are service outages or shutdowns, reconciling is a nightmare, the process slows down line speeds, chargebacks/NSFs are a problem, or cash drawer shortages are an issue, payments are a risk to your business.

Your payment method and payment processor are too important to your business so choose wisely.

Use common sense and do your due diligence. If a solution seems “too good to be true”, or is obviously a workaround, it’s best to stay away. 

How Hypur can help

Hypur is an omnichannel payment provider – meaning we provide cannabis payment solutions for all your needs. We offer debit card processing for in-store, delivery, curbside sales, and ACH payments for in-store, delivery, curbside, online, and in-app purchases.

Our solutions are fully transparent and built to protect you and your customers. We’re PCI certified, integrated with many popular delivery and order-ahead services, and with over 600,000 cannabis transactions, we’re just getting started.

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