Guide to Cannabis Payment Processing Solutions (2024)

Cannabis payment processing with credit card

The cannabis industry plays a significant role in today’s global economy, yet despite the growing popularity (and growth potential for you as a cannabis business owner), the trade remains stigmatized and heavily regulated.

This means that even though opening a cannabis business is easier than ever, it’s still a challenge to build a successful one due to various legal and financial restrictions. Namely, it’s still tough to access payment processing solutions in the cannabis and CBD industries (for reasons we’ll explain below).

This all begs the question…is it possible to navigate these challenges to guarantee successful operations as a cannabis merchant in 2024? We think so, but you’ll need to work with the right payment service providers.


What Makes Running a Cannabis Business So Difficult?

The cannabis industry remains highly regulated because of the varying restrictions around product types and legal statuses in different regions

The sale of Delta 8 was recently regulated (i.e., restricted) in several EU countries, for example, paving the way for HHC to become more widely available and popular.

The specific product types have differing standards across different countries, too, adding to the complexity of opening and managing a business in this high-risk industry.

The allowed list of ingredients and consistency, along with the required lab tests, varies, and the narrow list of processors willing to work with marijuana dispensaries consequently makes it harder to stay compliant.

One of the biggest challenges we see cannabis entrepreneurs encounter is that they get a lot more scrutinized than other industries. While there isn't much that unique or different about the payment processing solutions compared to other high-risk industries, the bigger issue is that you never know what laws or regulations are going to change or when, and they're so regional and country-specific.


Along with the unique (and strict) regulations, here are a few reasons why it’s usually difficult to legally operate a cannabis business online, especially when it comes time to accept payments.


Your Website Should Show Lab Results

When it comes to cannabis, the devil’s in the details, meaning that the actual ingredients of the products you’re selling play a huge role in whether they’re considered legal or illegal, and that’ll have a big impact on how you’re able to sell products to your customers.

The products being traded on today’s CBD market, for example, often contain varying levels of THC, THC-P, HHC, and Delta 8. While that might sound simple enough, the regulations for each of these components vary greatly worldwide.

HHC, for example, is banned in most European countries, but you can buy it online from providers with a base in countries like the Czech Republic or Germany.

Because of the delicate nature of these products and how the tiniest bit of THC can impact the legality of a vape or edible, regulatory organizations require you to have and show thorough lab tests to:

  • Ensure the safety of your products

  • Measure compliance with regulatory terms

  • Help build customer trust

Basically, what’s most important to know is that the reputation, trustworthiness, and proficiency of cannabis carriers often depend on the requisite lab results


Import & Export Rules Make Shipping Difficult

The import and export laws for cannabis or cannabis-derived product carriers also differ greatly across regions around the world.

That’s because a certain product, with a specific level of HHC, for instance, could be completely legalized in a country like The Netherlands while exporting it to another country like Estonia is prohibited despite both of them being member states of the European Union.

These discrepancies, which might seem ‘minor’ or trivial to a business owner, often lead to very big challenges with processing transactions.

When it comes to CBD specifically, we recommend you know your local laws, especially if you're selling to different countries and not just the country you're based in. We've worked with a lot of companies who encounter issues when they start to export internationally, so it's important to be attentive to all of those laws and regulations


Different Products Contain Different Amounts of Cannabis

As mentioned, the various legal nuances for different cannabis products are perhaps one of the biggest obstacles for most cannabis business owners.

This is especially true for those who sell different types of cannabis-derived products, such as HHC alongside THC-P or Delta 8.

The sheer variety of cannabis products on the market is what makes this all so difficult.

Nowadays, there are so many different by-products with different ingredients, purposes, and forms, which makes a) understanding which products to choose and sell hard and b) it difficult to understand the rules and regulations for each specific product.

This is also what makes finding a reliable cannabis payment processing solution so difficult, as the solution provider has to be quick on their feet and very knowledgeable of the industry’s daily challenges and changes.


The (Traditionally) Most Common Cannabis Industry Payment Options

The location of your business and the products you sell within the CBD or cannabis industry affect which payment options you can choose from.

A cannabis dispensary in Canada, for example, is likely to have more freedom and choice of payment options due to the legality of most cannabis products in the country.

A smaller business operating in a smaller country in the EU, on the other hand, often has a smaller range of payment methods available and a limited reach. 

Despite regional differences, it’s important to understand your options. Choosing the right payment option will enhance customer experience, which is important for your growth and legal and tax compliance.

A credit card a store and a wallet with some coins imitating a transaction

Cash Payments

Cash has always been the backbone of any business, but it’s traditionally been especially popular for cannabis-related transactions due to banking restrictions that have made it difficult to accept digital payments.

However, relying solely on cash in today’s economy simply isn’t feasible, especially if you care about the customer experience (which you should!).

Relying too much (or only) on cash transactions can be a barrier to your business’s success and reach since most customers nowadays prefer immediate transactions without having to worry about the hassle of cash.

That’s why cash payments are becoming the least common of them all (at least now, as the cannabis industry has advanced beyond using them out of necessity) and the one that could raise red flags with tax authorities, putting your business at an even higher risk than it already is.


POS Systems

POS (Point Of Sales systems) serve as the perfect tool for managing cannabis sales, inventory tracking, and ensuring compliance. These devices can help a business maintain smooth operations by streamlining payment processing.

The benefits of these systems don’t stop at just simple payment processing, though.

In addition to aiding seamless transactions, new-age POS solutions can integrate with payment processors to accept a wider range of payment methods, which, in turn, helps you widen your reach, diversify your target market, and improve security and efficiency.


ACH Transfers

The use cases of ACH (Automated Clearing House) transfers have been increasing over the past few years, which makes sense in some ways, as they’re designed to make transfers more secure and user-friendly with direct deposits

Before you start researching how to offer ACH transfers, though, it’s important to consider their various disadvantages as well.

Due to the CBD industry’s complex nature, many financial institutions are simply not willing to facilitate ACH transfers for such high-risk businesses.

Additionally, ACH transfers tend to take a while to process, which makes them less convenient compared to other payment methods. 


Credit Cards

CBD credit card processing is only just now gaining popularity and increasing in efficiency as the industry grows and regulations are modified and modernized. 

So, although the acceptance of credit card transactions within the cannabis industry is limited, it is evolving little by little.

The restricted acceptance of this payment method comes from the regulatory environment of the trade, banking restrictions, and complex shifts.

However, if you understand those risks and work with the right high-risk payment processing provider, you can get a cannabis payment gateway and merchant account to effectively accept credit card payments.

small signs of all the high-risk indsutries we cater to and a payfasto logo pointing to them in a scale: crypto, adult, travel, escort, gambling, cbd, cannabis, e-cig & vape

More About the Risk of Credit Cards in the Cannabis Industry

Accepting credit card transactions as a marijuana carrier comes with several risks (and benefits, but let’s explore the riskier side of things first to set you up for success).

The main risks associated with credit cards in the cannabis industry include:

  • Legal uncertainties
  • Card network penalties
  • Compliance difficulties
  • Higher costs 

These are due to, as mentioned, the industry’s wildly varying legal requirements and restrictions.

While this makes sense (acquirers have to protect themselves, too), it makes it difficult for entrepreneurs, as there’s no one specific guideline to follow to alleviate those risks—it’s incredibly product and niche-specific.

In addition, card networks tend to charge higher fees for breaches of terms and conditions. That, in theory, sounds fair, but taking all the unforeseen changes into account, it’s pretty easy to violate terms and conditions without knowing it.

There are a few strategies to employ as a marijuana merchant to mitigate these risks.

One is working closely with acquiring banks. This can reduce penalty risks, ensure smoother operations, and aid with troubleshooting.

Another great way to reduce risks is to obtain an expert opinion on your business’s risk assessment and invest in compliance proficiency.

That way, you’ll be consciously avoiding excessive losses and staying ahead of regulatory changes.


What Does the Future of Cannabis Payment Processing Look Like?

While they might not seem connected, upcoming trends, modern technologies, and the growing acceptability of cannabis products all have a remarkable influence on transaction processing.

Mainly, we believe that digital currencies and blockchain technologies will continue to improve the payment processing landscape for high-risk businesses across the board.

Digital currencies, along with distributed ledger technologies, are helping businesses in this sector navigate restrictions with more ease and contributing to the security of transaction processing.

More progressive attitudes towards cannabis (globally, not just in the United States) will also likely open up opportunities for CBD and cannabis merchants to access better payment processing solutions.

money is being sent back to the owner of the card from the merchant. Customer is happy, merchant is sad

How to Choose a Cannabis Payment Solutions Provider

Now that we’ve run through your payment processing options, how do you decide which is best for your business?

You might think it starts with figuring out what kind of payments you want to accept (cash, ACH transfers, etc.). However, we believe it starts by choosing the right provider and then assessing payment options through them.

And choosing the payment solution provider for your cannabis business comes down to individual aspects of what products you’re selling, your transaction volumes, and other factors specific to your business.

As there isn’t a universal guide to this, consider the following factors when selecting a payment service provider.

  • Experience: An experienced service provider can ensure compliance and help reduce losses related to unexpected regulatory changes. They can also (usually) help predict shifts in trends and tailor the service to your needs based on their experience in the industries they’ve worked in.

  • Security features: Given the fragile nature of the data being processed, the security features a payment processor can equip you with play a crucial role in which one you choose, too. Why does this matter? With the help of modern fraud prevention and transaction monitoring tools, you can ensure security and avoid costly financial mistakes.

  • Transaction fees: Cost efficiency is extremely important in high-risk transaction processing, as the processing costs are typically higher, and the service has to be in accordance with the quality and pricing.

  • Customer support: A good team of industry experts can give you a head-start in high-risk industries. Challenges are easy to come by in the cannabis and other high-risk sectors, and everything often feels very unpredictable, so a specialized support crew that’s quick on its feet can be a huge help.

If the provider you’re opting for can tick off these four boxes, then you’re on the right path.

However, there are some red flags to look out for as well, which include:

  • Lack of transparency

  • Lack of experience

  • Exaggerated claims

  • Extraordinarily low fees

  • Unresponsiveness


Ready to Get Cannabis Payment Processing Solutions?

Ultimately, if you own a cannabis business and are looking for merchant processing solutions, your specific needs, safety, security, compliance, and reliability, should be at the top of your priority list.

Whether you’re an established cannabis business or are just starting to build your business plan, it’s important to work with the right merchant services provider who understands the industry’s rules, regulations, and restrictions.

At PayFasto, we can help ensure compliance and success. Get a free, no-obligation quote to start the process.

Our services include:

  • An assessment of your site and business needs
  • A cannabis industry-specific merchant account
  • Fraud prevention tools
  • Transaction monitoring
  • 24/7 support
  • Everything else a cannabis merchant could need to ensure security and boost operational success!

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