5 Tips for Choosing a Cannabis Payment Processing Solution (2018 Guide)

Processing made easy
Nicole Richter / Updated on September 15, 2018

Does it seem believable that legal sales of recreational and medical marijuana were around $6.7 billion in 2016 alone, with that number only continuing to rise as more and more states agree to legalize cannabis?

We are here to explain that this statistic is in fact 100% true, yet still those that own and run both recreational shops and medical marijuana dispensaries face many challenges because of a refusal of major banks – as well as the federal government – to cooperate financially. Because cannabis is a controlled substance on a federal level, many financial organisations treat legal businesses selling marijuana products as criminals, denying them financial support and making it extremely difficult to safeguard their profits.

Furthermore, many dispensaries must run cash only businesses, which can lead to a vast increase in dangerous and frustrating circumstances, which will be discussed in further detail later in this article. There are some ways, however, to maneuver around current laws using legal methods that can dramatically benefit the owner/operator of the dispensary or online shop. These alternative solutions are often referred to as cannabis payment processing solutions, but there are a few details you need to observe when choosing the right one for you and your business.

Keep reading to learn 5 brilliant tips about choosing a cannabis payment processing solution, or jump to the bottom of this article and find out who is the BEST marijuana merchant service provider of 2018.

Cannabis Payment Processing Current Laws

Although progress is developing and the numbers are always fluctuating, as of 2017 only around 300 of the 11,000 operational banks in the U.S. will comply with legal marijuana companies or vendors. 300 may seem like a grand and fair number, but these acceptant institutions very often require extra fees or further efforts on the vendor’s side, in order to agree with supporting the company and its decisions.

Federally speaking, cannabis is still part of the Controlled Substances Act, so major banks that typically would provide easily accessible financial support and loans, make themselves off-limits to any businesses related to marijuana, generally stating that if they are a federally regulated institution, they “don’t process payments for businesses participating in federally prohibited activities.” Of course, this includes cannabis and any cannabis-related activities.

And if a bank does open its doors to a business entity in the cannabis industry – even a company that is legal on the state level – these institutions put themselves at risk of being seized by the Federal Deposit Insurance Corporation (FDIC), which is a risk that most well-known financial institutions are not willing to take.

In fact, both JP Morgan & Chase and Bank of America have stated a clear refusal of having any associations with any company or person involved in the marijuana industry, because they can produce enough profit by other means.

Independent banks seem to be more flexible and willing to cooperate with those related to the legal cannabis market, with some small institutions in Colorado specifically seeking to support marijuana vendors within the state. This is a win-win situation for both parties, as it allows the financial institutions to broaden their client base while also providing the opportunity to support the state’s economy.

What most people don’t realize, however, is that the Obama administration issued a directive back in 2014 through the Financial Crimes Enforcement Network (FinCen) that basically gave the “green” light (no pun intended) for financial institutions to partner with legal cannabis organizations, so long as they complied fully with anti money-laundering regulations (as anyone would expect). Regardless, most big-name corporate institutions remained terrified of getting involved, and chose to keep their hands out of the industry completely.

In summary, it is technically legal for a bank to support a legal marijuana business, so long as they take the necessary steps and regulations into account, but many banks simply choose not to because for them, it is not worth the risk of the federal government getting involved.

Why Large Banks Won’t Process Marijuana

As mentioned above, marijuana is still very much illegal on the federal level, even if each state has the right to recognize marijuana in its own way (with many regions voting to completely drop charges related to the medicinal substance).

Because banks are federally-backed institutions, they are inherently bound all regulations and laws set forth by the federal government. Most institutions believe if they support something considered illegal in the eyes of the Feds, they will be subject to greater scrutiny and could even be investigated or legally punished. For banks with high assets and plenty of investments, accepting any marijuana-related business through their doors would not only put the company at risk, but also potentially jeapordize the status of their assets, as well as the money from investors that are involved in funding the bank. If trouble were to arise, for instance, it would spell absolute disaster for the big-name global banks like Bank of America, Wells Fargo, JPMorgan & Chase, etc. In their eyes, the potential benefits simply do not outweigh the risks involved.

This, of course, is the personal choice of each banking institution, but it certainly doesn’t make their actions fair to the many small business owners across the country that are doing everything they can to run a fully compliant, 100% legal marijuana operation.

CBD GUMMIES

Businesses Are Forced to Work Cash Only (Implications)

For the majority of marijuana business owners, running a cash business is really their best (and sometimes only) option. But even if this solution might not sound so awful, there are always potential dangers involved when your revenue and profits are collected with digitally untraceable papers. Many credit and debit card operating systems won’t even allow a cannabis vendor to set up a marijuana payment processing system under their bank, so as profits rank in higher, the cash register becomes fuller and fuller. Having plenty of income and tangible cash on hand is usually a great thing, but not if you are netting hundreds of thousands of dollars with nowhere safe to store it.

It is a fact that cash only businesses are not only at a higher risk of internal (employee-based) theft, but also at a much higher risk of robberies. For this reason, most medical marijuana and recreational cannabis dispensaries hire full-time armed guards in an effort to specifically combat issues they might have with shady criminals entering the business, who are willing to hurt those working just to get in on some of the cash profits.

A guard might not seem like such an immense compromise, but it does not guarantee the safety of the company 100%. For example, in circumstances where the guard might become outnumbered, a single unarmed security officer is not going to fare well against several armed robbers. Moreover, it costs the company a pretty penny to pay for full-time security during all hours of operation – and sometimes even after the doors have been closed.

Crimes are so prominent, in fact, that in 2014 17% of marijuana dispensaries in Colorado experienced some sort of a robbery. In the eyes of thieves, hitting up a gas station might send you home with $50, but if they were to rob a cannabis dispensary, the potential for nabbing $100,000 in cash is a very real possibility on any given day. This is precisely why these criminals see cannabis institutions as a better target, and they are well-aware that many hold vast amounts of paper money due to their inability to work with banks and credit card systems.

All in all, if the federal government were to allow banks and financial institutions to cooperate with cannabis vendors and companies, it would deter huge amounts of crime from areas where the dispensaries are located. Less cash on hand equals decreased risk for theft and robbery, and ultimately a decreased risk of violence when you factor in the percentage of robberies that end with bystander casualties.

Legalization of marijuana has already done wonders for pushing weed out of the black market’s hands, which has helped to lower crime in that aspect. So why not support legality on the financial side of things and continue to lessen the incentive for criminals to have easy access for committing armed burglary?

Marijuana Payment Solutions Are On the Rise

Marijuana payment solutions are on the rise, because cannabis companies are looking for legal methods to get around the strict banking laws so they don’t have to store their profits in cash (the dangers of which are thoroughly explained above).

Marijuana payment solutions are not only legal and safe, but also can prove to be quite inexpensive, and in the end profitable. There are numerous solutions available on the internet, most of which can be found using a simple Google search. But as with any area where money is involved, not every company offering “fair services” should be trusted — especially online.

In order to make your experience with a cannabis payment processing provider friendly and simple, we have generated 5 valuable and knowledgeable tips to make both the choice and the transaction a breeze.

5 Tips When Looking for a Marijuana Payment Solution

Cannabis Payment Processing Solution

1. Ensure your Payment Processing Company Understands the Complicated Legal Jargon

Nothing in this world is easy, and that goes for payment marijuana processing solutions as well. In this article, we explained that marijuana processing is not an easy task and the last thing you want to do is put your business in the hands of a bucket-shop merchant that does not know how to deal with the legalities involved within the industry.

To process marijuana requires experience and a deep familiarity with FinCEN, BSA, DOJ, CSA and the Cole Amendment, as they apply to different financial institutions. It’s important that your payment processing company understands the legal structure of the cannabis industry, and more importantly, knows how to deal with unpleasant situations where legal authorities suspect suspicious activity on your account and may try to freeze your money.

Summary: Look for a provider that understands all legal aspects and will always give you quick access to your money. It’s important to use a proprietary gateway that ensures credit card processing is stable, secure, and uninterrupted. Furthermore, make sure that the processor accepts Visa, MasterCard, Amex and Discover.

2. Look for a Company that Offers Variety

Different companies offer different payment processing services, and as with most things in life, having a wide variety to choose from is key to accessible flexibility. In general, there are two major groups of payment gateway providers: eCommerce business models (which tend to be classed as medium risk businesses), and high-risk processors (which have been recognized as more chargeback prompt due to the specific products or services they provide).

Some of these businesses even include gambling, dating, traveling etc. Payment processors that work with these type of industries have a wide range of tools, such as card storing, token systems, 3D secure and other fraud protection tools that allow them to monitor transactions and prevent fraudulent activity. These payment solutions offer an additional layer of protection to prevent their partners from encountering problems and unwanted chargeback fees.

Summary: Your Cannabis processing solution should have a well-designed system that aims to address issues within the cannabis industry, and is also compliant with federal and local regulations and laws. Make sure the company can provide a merchant account for any cannabis-related business, including eCommerce, CBD products, and cannabis paraphernalia.

3. Monthly fees, Set-Up Fees and Gateway Fees

Honest companies will likely not charge monthly fees, and they will make that very clear to you ahead of time. When choosing a marijuana payment provider, it’s important to understand the whole picture before you sign any marijuana processing contract. Most providers will charge a fee on every transaction and therefore, set-up costs and admin costs should be free of charge. Also be careful about blended fees, as these fees will tend to surprise you later.

In addition, the marijuana industry is still classed as a “high-risk” industry and therefore transaction fees will be higher than many other industries. Look for a cannabis payment processing solution that charges an adequate fee, but doesn’t charge additional costs. For example don’t pay more than a 6% flat fee + 0.30 cents per transaction. Trust us, the processing company will be making enough money from your transactions anyway.

Summary: Make sure you find a cannabis processing company that has no hidden fees, no termination fee, and no monthly fees. Also, try not to pay more than a 6% flat fee.

4. Transparency is the Key Issue

It’s important to remember that marijuana is still classed as a Schedule 1 drug, and therefore there are federal and local regulations and laws that a reputable processing company must comply by. When seeking a marijuana payment processing company, it is important to ask them how they deal with large volume passing through their system. Many processors will more than happily transact your money, but when your business starts to grow, they will leave you hanging.

The more transactions that are processed through their gateway, the more they have to account and be responsible for those transactions. Always look for a long term partner that can provide a complete solution, and that will be entirely transparent about all fees and logistics from the beginning.

Summary: When choosing a payment solution, ask them how they deal with monthly volume above $10,000. Also, seek a processor who is anxious to build a long-term relationship and not just close a short-derm deal.

5. Start Small – You’ll get better support

We’re all in this fight together. Marijuana payment processing companies directly rely on and work with cannabis vendors and businesses, so it is ultimately in their best interest to support the “small fries” as much as possible. They will also be there to make an income, of course, but a good payment processor will show appreciation for your business. Also, when working with a processor that cares, you won’t get random emails from “Mr. Robot” that contains general templates, or have to call them 10 times just to get a response.

If you are just starting out and looking for a marijuana processing solution, don’t be afraid to start small and work with a company that fits your budget and needs. Switching gateways isn’t as much of a pain as switching an eCommerce platform. At first, you will want a company that can give you an immediate solution – one that includes 24/7 support, technical support to implement the payment solution on your website, and around the clock assistance to overcome any processing barriers. We often see business owners develop an amazing online store on Shopify, only to find out that their payment processing company isn’t compatible and will not assist with the setup.

Summary: Choose a company that provides 24/7 support and doesn’t tie you to a contract. It is advised to only commit to a month-to-month contract.

Medical Cannabis Payment Solutions: Why is it So Difficult?

As a customer or business owner, you may be thinking to yourself, ‘there are a lot of marijuana businesses out there that use medical cannabis payment solutions, why is it so hard to find a good one?’

Well, the simple reality is that most of the cannabis-related entities that are able to accept cards and other forms of digital payment have found a loophole of some sort wherein the cannabis credit card processing organization doesn’t know that they are actually providing service to a marijuana-based organization.

Of course, though, a large part of the issue surrounding cannabis credit card processing is the fact that, unless a marijuana-related business has a legitimate bank account (which many do not as per the reasons discussed above), the money that is received through the processing service will have nowhere to go.

Anytime a customer buys something from a vendor using a debit or credit card, that money is “sent” through the digital processor before eventually making its way into the vendor’s bank account. If there is no bank account, there is no practical use for a payment processor in the first place.

You would think in this day and age that cannabis banking solutions would not be a problem. And indeed, some companies (such as Colorado-based Advanced Cannabis Solutions, Inc) are doing everything they can to try and pioneer the industry and show first-hand that cannabis/banking relationships should promoted and enocouraged, rather than shunned.

Sadly, Advanced Cannabis Solutions seems to be one of the only large-scale companies that is willing to take a risk when it comes to their financial comings and goings. Until actual laws and regulations begin to change at the federal level, we will likely not see many viable solutions to the current cannabis banking conundrum.

How Can Some Dispensaries Use Medical Marijuana Credit Card Processing?

As we mentioned above, it’s obvious that some marijuana businesses have no problem accepting credit and debit card payments. However, these businesses are typically only located in states like Colorado, Washington, or Oregon, where marijuana banking solutions are actually encouraged rather than avoided.

Even if a dispensary or other cannabis-based organization is able to open a banking account that allows for marijuana payment processing, however, many still have to “smudge” the facts a little bit in terms of what kind of a business they’re actually running.

The ability to use popular digital payment processing services like Square, PayPal or Venmo (which, by the way, is owned by PayPal) would certainly solve many problems regarding cannabis purchases and marijuana credit card processing. Unfortunately, these services strictly prohibit any financial activity that is cannabis related.

PayPal, for example, lumps marijuana in on its “restricted items list,” which includes any alcohol, tobacco, or pornography-related transactions. Even many CBD products, which contain no THC and are 100% legal under the U.S. Farm Bill, are prohibited from being purchased using major digital processing systems. If a customer is “caught” buying marijuana or marijuana-related products using services like Venmo or Square, their account will be terminated and be put under risk of investigation.

While medical cannabis payment solutions are no doubt a headache for any marijuana-related business owner, we can only hope that practical, viable processing options will present themselves in the coming years. America is a country built on opportunity, and the cannabis industry represents far too great an opportunity for these problems not to get sorted out in the near future.

Final Thoughts About Cannabis Payment Processing Solution

With over 300 banks to choose from, it is often hard difficult to know where to start. Here at MarijuanaBreak, we have taken it upon ourselves to thoroughly research, communicate, and test dozens of cannabis payment processing providers. Our team of experts has reviewed companies based on transparency, fees, efficiency, legality and customer support.

Want to find out who ranked #1 on our list and will provide a 100% complete solution for top brands in the cannabis industry? Leave your details below and we’ll send you the info by email!

5 Tips for Choosing a Cannabis Payment Processing Solution (2018 Guide)
September 15, 2018
4.8 83
83 comments
  1. Anthony
    bank fees crushed me

    thank you so much for these solutions. perfect

    1. Cody
      Agree

      Just got hooked up. Thanks

  2. Dave

    Great post guys, this really helped me a lot!

  3. Cody T
    Excellent article and solution

    Thank’s marijuanabreak. Wish this industry was easier

  4. Artem
    great, thanks

    Very useful info, thanks!

  5. Devorah M

    Perfect solution

  6. Nick T

    Using T1, but their approval rate isn’t that high 🙁 Any other options?

  7. James (SpeedBuds4You)

    Processing fees in this industry are so high. Can’t believe that i am now getting below 6%

  8. Chris R (GGroads)

    Good info and read!

  9. April Harper

    I can’t believe it’s possible to get processing fees as low as 3%

  10. Denise C

    Just signed with them and hope to have my store up in the air by the end of this month. Rob is fantastic. Thanks for the great info

  11. Dorris B

    Amazing solution. Thank you to all the team at MB

  12. MMJgold (Shawn)

    Thank you so much MJ. The information was excellent. Hope to have processing up within the next month

    1. Adam

      Glad we could assist

      1. Jordan T

        Why do other merchants charge such a high rate. I am on a 7% flat fee

  13. Barbara Stovall

    Very well explained.

  14. Mary G

    Wonderful website.

  15. Michelle S

    Big shout out from GGG! Thanks for all the assistance

    1. Adam

      Thanks!

  16. Rick G

    Excellent!

  17. Seth R

    Just got banned from stripe. What is the solution

  18. Josh from Rollitup & Friends

    Great info!

  19. Rick J

    Can’t believe that stripe and paypal have blocked me again. Thanks for this solution!

  20. Jodie F

    Thank you for all the help. Great read

  21. Will M

    Thanks for all the info. Love your site (GreenGrassDaily)

  22. Sammy K

    Great service and informative article.

  23. Maryalice Jones

    These payment processing laws are very helpful.

  24. GreenLeaf Corp Collective

    Sandy here from GLC. Thanks for the help and info, especially in a tough industry like this one.

  25. Craig Simons

    Amazing info and help. Especially to Jonathan

  26. Rick P (Green Grass)

    Awesome solution. Thank you Jonathan and the rest of the team

    1. Adam Tidwell

      Second that. Thank you Jonathan

  27. Saul B

    Great solution! Thx

  28. Jay R

    Been using PP for a while. They keep on blocking my business. Any other solutions.

  29. Sam Cook

    Great info. Thanks for all the help marijuanabreak

  30. Sam B

    Thanks for all the help and info. Great site from the team over at Cannagreenvapes

  31. Joy Nelson

    Thanks for all the information and support. Great site!

  32. Teresa Dupree

    Thanks for the solution

  33. Pamela M

    Thanks for all the info. Superb article

  34. Ashley Ramon

    Thank you guys!

  35. Cody T

    Been a cash industry for years and probably will be unless sessions gets his head out his ass.

  36. James

    Been trying to integrate my shopify store with a new PSP. Seems as if the minute I say the word cannabis everyone goes haywire. So frustrating.

  37. Laura W

    I’ve also had money stuck. It’s annoying. Looking for a good PSP. Can anyone help?

  38. James T

    Looking for a domestic solution. Please help

    1. PBrazell

      Where are you located, I have a payment solution that could help.

  39. Ella B

    We are currently using PP and it isn’t easy. Funds get stuck all the time

  40. Miguel

    So what are the most recommended ones to use in regards to selling accessories and paraphernalia online? I have been running into issues with my retail store.

  41. Robert R

    If anyone is following crypto, it doesn’t look as if it will solve this industry.

  42. Joe B

    Someone needs to fire sessions!

  43. Donald M

    If they would just legalize it already it would solve so many problems

  44. Linda H

    I know that a few businesses have integrated Pot coin, but it is far from the norm. Still traditional processing is needed. Good article

  45. Jonny Luke

    I have heard that Pot coin and Cannabis Coin could work for this industry

  46. Barb Fletcher

    2018 is going to be the year where the allow processing. Fingers crossed.

  47. Brad

    This year will be the year of PotCoin

  48. Bonnie

    You guys run an awesome website. Thanks for the info

  49. Janet Holmes

    Thanks for all the info and your guidance. This industry is tough enough as it is. Great to have people like you helping out

  50. Jerry H

    I have still got money stuck with PP. It’s been 180 days. It’s so annoying

  51. GreenRushAlive

    Great info and tips. Thanks

  52. T Moore

    This industry sucks. Processing is so hard!

  53. James E

    Been using stripe for a while. Just got blocked. Damn processing!

  54. Staci H

    I too have had so many problems with processing. Thanks for the info

  55. Joe

    I had money stuck with T1 for a month. It was a nightmare

  56. Karen S (420Greens)

    Great solutions. I have been reaching a dead end for over a year in regards to solutions. I tried stripe but they shut me down after 2 weeks. Then I moved on to T1. Also there I had problems due to payment delays. Your solution is great. Thanks for all the info

  57. Charles R

    Cash only boys and girls

  58. Amanda Boyd

    Let’s just legalize the plant and then there won’t be any problems

  59. Walter P

    This industry is a tough one. Thanks for all the info

  60. Kody W

    Thanks for the great info and valuable information. Finally got my online site up and running.

  61. Andy Mcgee

    Perfect solution

  62. Howard S

    Excellent article

  63. Josh T

    Excellent solutions!

  64. Tracey Hix

    Excellent info!

  65. Kristen Holt

    Finally got my store online. Thanks for all the help!

  66. Judy (Green4u)

    Marijuanabreak we just wanted to thank you. So far we are very happy with with your recommendation, they are very professional, and provide excellent customer service. Also the payment gateway to our website works very well and the back end system with the reporting functions is excellent…

  67. James S

    Great info and excellent site!

  68. Paul M

    I used to pay transaction fees of 8%. Thanks for all the info

  69. Susie Ashmore

    Was working with PP and it is was horrendous. I used to lose so many online sales. Thanks for the info and help!

  70. Mark Austin

    Finally got my online shop up and running. Thanks for all the help!

  71. Katherine (Green4UCollective)

    Must say that the information on your site is excellent. Thanks for all the help. Banking is a real bitch but the solutions you have are quite creative

  72. Leslie L

    They need to legalize it nationwide. That will solve the problem

  73. GreenKushSuns

    Marijuanabreak, thanks for all the help. Hope to be online within 3 weeks.

  74. 5StarLeaf Collective

    Jim and the team are amazing. Excellent fees and supreme service, thanks for the recommendation

  75. Alan J

    Thanks for all the assistance, your input really helped me with the online process of Kushgramsandfriends. Keep up the good work, you have an amazing site

  76. B & H Deliveries

    The fees from my other processing company were killing me. Thanks for the info

  77. Trish B

    Why is this industry so tough?!?! Papal fees are killing me. Thanks for the alternative

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