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The 4 Best Cannabis Payment Processing Companies For Dispensaries
Cannabis credit card processing is currently illegal in the US, but there are good alternative options for processing marijuana payments, including cash sales, point of banking, and ACH transfer.
Frank has been writing about payment processing and business services since 2015. He is a retired Air Force officer and a former practicing attorney. He has a Bachelor of Science degree in Psychology from The Pennsylvania State University and a Juris Doctorate degree from the Ventura College of Law, and currently resides in Paso Robles, California.
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Frank KehlFrank has been writing about payment processing and business services since 2015. He is a retired Air Force officer and a former practicing attorney. He has a Bachelor of Science degree in Psychology from The Pennsylvania State University and a Juris Doctorate degree from the Ventura College of Law, and currently resides in Paso Robles, California.
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Chris has been writing about small business topics since 2003. He has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida. He currently resides in the Hudson Valley region of New York.
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Chris MotolaChris has been writing about small business topics since 2003. He has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida. He currently resides in the Hudson Valley region of New York.
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Cannabis payment processing can be confusing and challenging, especially for a new dispensary owner. Although it’s still listed as a Schedule I drug by the Food & Drug Administration (FDA) — and therefore illegal under federal law — marijuana is now legal for medicinal purposes in 38 states and recreational use in 24 states.
With new dispensaries opening around the country all the time, the need for a cannabis credit card processing solution has never been greater.
Unfortunately, such a solution does not exist at this time. Because the issuing banks are regulated at the federal level, all of the major credit card associations (Visa, Mastercard, Discover, American Express, etc.) have firm policies against their cards being used for marijuana sales, even in jurisdictions where it’s legal.
Despite this outright prohibition and intense demand from consumers to be able to use their credit cards at a dispensary, there is currently no legal, secure method to accept credit cards for cannabis sales in the United States. There are, however, viable alternatives to operating on a cash-only basis.
Here, we’ll profile the best providers that work with cannabis businesses. We’ll also discuss the payment methods available to cannabis dispensaries. Finally, we’ll cover the legal issues that make cannabis payments so challenging and give tips to help you find a reputable provider for your business.
4 Best Cannabis Payment Processors For Dispensaries
A cannabis payment processing account is simply an account that allows you to accept noncash payments for cannabis products. These accounts almost always come with higher fees and more restrictive policies than traditional low-risk merchant accounts, and do not allow credit card payments in the United States.
Here are the best companies we’ve found that can provide payment processing services for your cannabis dispensary:
No offshore merchant accounts for US-based businesses
Typically requires a six-month rolling reserve
Why Instabill Is The Best Choice For International Cannabis Merchants
Instabill is a veteran high-risk provider that offers some payment processing services to medical marijuana dispensaries. The company is very transparent about accepting cannabis merchants, and its website includes specific information about which payment methods are available and which particular business types are supported.
Instabill clearly discloses who it works with, what payment methods are available, and what limitations you'll have to accept. We're particularly impressed with the disclosures regarding the need for a reserve account -- something most providers won't tell you about.
Getting approved for a cannabis merchant processing account with Instabill will require four to six months of previous processing history, which could be a real challenge in this industry. Account approval requires anywhere from 10 business days to two weeks.
Instabill Pricing
Variable monthly account fees (depends on backend processor)
Variable transaction processing fees (depends on backend processor)
Variable contract terms (depends on backend processor)
Rolling reserve account required (terms negotiable)
Instabill Features
Instabill currently offers the following primary features:
Debit Payments: This solution enables customers to have a debit card connected to their bank accounts for easy loading and reloading.
Cryptocurrency Payments: Customers pay with Bitcoin or some other digital currency.
Offshore Merchant Accounts: In countries where cannabis is legal, Instabill offers merchant accounts that include support for credit card payments. These are currently not available to US-based merchants.
Payment Gateway: Instabill integrates with numerous third-party gateways, depending on your backend processor.
All of these methods come with risks and limitations, but they will elevate your business above operating on a cash-only basis.
Why Flowhub Is The Best Choice For In-Person Payments
As a dedicated cannabis payment processor, Flowhub offers a variety of products and services custom-tailored to the needs of dispensaries. While Flowhub isn't cheap, you can save a lot of money (and handle multiple locations) by bundling services under a custom pricing plan. The company also offers great customer support, with an extensive knowledgebase on its website and email and telephone support. Integrations with a wide variety of third-party services designed exclusively for the cannabis industry make it a great all-in-one choice for your dispensary.
Flowhub offers both PIN debit and ACH payment options to cannabis merchants, although your customers will have to download and install the Aeropay app on their mobile devices to use the latter option.
Flowhub Pricing
No monthly fees
Variable transaction processing fees
No long-term contracts (60-day notice required to close account)
Hardware and account setup fees not disclosed
Flowhub Features
Flowhub offers the following products and services to handle every aspect of running your dispensary:
Includes PIN debit payment solution
Offers ACH payments through Aeropay
Flowhub Maui point-of-sale (POS) software for Mac and iPhones/iPads
Greet mobile app for customer check-in and identity verification
Stash app for inventory management
View mobile data analytics app (available for iOS and Android)
Why Paybotic Is The Best Choice For Multiple Payment Methods
Florida-based Paybotic specializes in serving the CBD and cannabis industries. It's been in business for over 10 years -- a long time in these industries -- and has the experience to help you run a legally-compliant dispensary. Paybotic is one of the most experienced cannabis processors in the industry, and offers a full range of services for retail, eCommerce, delivery, and curbside pickup business models.
While the company doesn't offer any specific pricing information, you pay only a single monthly fee for your account. Transaction processing costs are passed onto your customers in the form of a convenience fee, which helps to keep your costs low and predictable. Online feedback from merchants is mostly positive, which is more than we can say about most of the major traditional credit card processors.
Paybotic Pricing
Variable monthly fees
Variable transaction processing fees
No reserve required for ACH or eCheck processing
Paybotic Features
Paybotic offers a wide variety of services for cannabis dispensaries. Note that the company also accepts CBD merchants, so some services (such as credit card processing) that are available to those businesses will not be offered to cannabis merchants. Here are the major features:
Why Bankcard International Group Is The Best Choice For PIN Debit Payments
Not to be confused with North American Bancard, Bankcard International Group (BIG) is a fairly new high-risk payment processor that offers specialized support for cannabis businesses. Founded by a group of payments industry veterans, BIG offers payment processing accounts for CBD, cannabis, and other high-risk industries.
Bankcard International Group provides the most extensive educational resources on the intricacies of legitimate cannabis payments processing that we've found to date. It's also one of the few cannabis providers we've found that's accredited by the BBB, and has had zero complaints since accreditation. The company's most appealing feature is that it offers a fully transparent, legally-compliant PIN debit processing solution -- something that can help you avoid operating on a cash-only basis and significantly increase your overall sales volume.
Why You Can’t Accept Credit Cards At Your Marijuana Dispensary
While many dispensaries are able to operate successfully on a cash-only basis, this strategy can put you at a competitive disadvantage compared to businesses that offer a variety of payment methods. Customers have become accustomed to using their credit cards for the majority of their purchases, and most of them expect to be able to use their cards everywhere, whether it’s at a restaurant or a cannabis dispensary.
Unfortunately, it’s currently not possible to legally use a credit card to purchase marijuana products in the United States, even in states that have fully legalized them.
Cannabis is still a Schedule I controlled substance under federal law, and the banks that issue credit cards are regulated at the federal level. Since the credit card processing networks that are used to process credit card payments have to comply with federal law, they cannot permit any cannabis sales to be processed over their networks.
Visa, Mastercard, Discover, and American Express have each stated publicly that they will not permit their cards to be used for cannabis sales, even if it’s legal under local state law. If you get caught trying to do it anyway, you’ll quickly have your merchant account shut down, and you’re very likely to be placed on the Terminated Merchant File (TMF) or MATCH list.
The proposed Secure And Fair Enforcement Banking Act (SAFE Banking Act) would change all of that, allowing banks and credit card processors to accept credit card payments for cannabis products in states where they have been legalized. Unfortunately, the bill is currently stalled in the Senate, with no indication that it will be passed anytime soon.
Likewise, proposals to de-list marijuana as a Schedule I drug haven’t made any progress, and such action appears unlikely in the near term. If this does eventually happen, dispensaries would be free to open traditional merchant accounts and start accepting credit card payments like any other business.
Secure Payment Methods For Cannabis Dispensaries
With credit cards off the table for now, cannabis merchants have had to get creative in finding ways to securely accept payments from customers. Here’s a summary of the most popular solutions currently in use:
Cash Payments
Pros
No transaction fees
Immediate payout
Offers customer anonymity
Cons
Extensive security requirements
Customers tend to spend less
ATM fees may be required
The old adage “Cash is king” isn’t as true as it used to be. However, many cannabis dispensaries have been able to successfully operate on a cash-only basis. Installing an ATM machine on the premises provides a convenient way for your customers to withdraw the funds they need to pay in cash, as most people no longer carry large sums of currency with them at all times. Cash-only transactions eliminate processing fees, account fees, and the risk that your account will suddenly be shut down. You also won’t have to wait several days for funds to reach your account, which can be very handy if a steady cash flow is critical to the success of your business.
At the same time, handling large sums of cash creates its own set of headaches. Having all that money lying around will make you a prime target for thieves, so you’ll have to invest heavily in security measures such as safes and lockboxes to protect your money. You might also need to hire armored cars to transport your funds to the bank. The biggest disadvantage of running a cash-only dispensary, however, is that you’ll earn less money in sales than you would if you offered additional payment methods. Study after study has shown that your number of sales and average ticket size will both go up significantly if you offer your customers an alternative way to pay you than just the spare change in their wallets.
ACH Transfers
Pros
Very secure
Low transaction processing costs
No processing hardware required
Cons
Customer must install a third-party app for in-person use
Extensive underwriting process required
ACH transfers have become more popular in recent years, with many businesses using them as a lower-cost alternative to expensive credit card processing fees. Funds are transferred directly to you from your customer’s bank accounts, offering a cashless and contactless payment solution. Transaction fees are typically much less than those for credit cards. Accepting ACH payments is particularly well-suited to eCommerce businesses, giving customers a convenient alternative to entering their debit card information.
Unfortunately, this convenience doesn’t translate quite as well in a retail setting. Because there’s no physical payment card involved in making an ACH transfer, your customers will have to download and install a third-party mobile app (Aeropay is currently a popular choice) on their phones and enter their banking information before they’ll be able to make a purchase. While inconvenient for a one-time purchase, it works quite well for repeat customers. Another consideration is that approval for ACH processing requires a lengthy underwriting process before you can start. This process is separate from the one required to be approved for a merchant account using credit and debit cards.
PIN Debit Payments
Pros
Secure, low-risk payment method
Low transaction processing costs
Convenient for in-store use
Cons
Requires full regulatory compliance on the part of the provider
Not available for online payments
PIN debit payments have emerged as one of the safest, most convenient payment methods legally available to cannabis merchants. With this method, your customers can use their regular debit cards in your store, authenticating their identity with a PIN. However, setting up a PIN debit payment system that’s fully legally compliant requires a lot of additional work on the part of your provider. For this reason, relatively few providers currently offer PIN debit processing for cannabis businesses. Transaction fees will also be higher than those for low-risk transactions, reflecting both the higher risk involved with cannabis products and the additional costs of setting up a compliant payment network.
While PIN debit is a very convenient payment method for in-person use, you won’t be able to use it for eCommerce sales. Customers cannot enter their PINs online, and running the card as a credit card is not allowed at the present time. We recommend setting up a BOPIS (Buy Online, Pay In-Store) payment system if you plan to accept online orders at your dispensary.
Other alternative payment methods, including cryptocurrency payments and Point of Banking (or “cashless ATMs”) are either no longer available or not recommended. While still offered by some cannabis payments providers, cryptocurrency payments are simply too volatile to be a safe solution for your business. Likewise, Point of Banking solutions came with a number of problems that caused the major credit card associations to withdraw support for them in 2022. Therefore, cashless ATMs are no longer a viable payment method for your dispensary.
Legal Issues With Cannabis Payment Processing In The United States
The cannabis industry is unique in that its primary product is both legal and illegal simultaneously, thanks to conflicts between the laws of the United States government and those of many US states. This situation creates a number of difficulties for dispensaries struggling to operate a legitimate business in cannabis-friendly states. Here’s a brief rundown of the major issues to be aware of:
Illegality Under Federal Law
The first and most important thing to know about the current state of marijuana law in the United States is that cannabis products (defined as having 0.3% or more of tetrahydrocannabinol, or THC) are still listed as Schedule I drugs by the FDA. Under federal law, it’s illegal to possess, use, or distribute these products — period. Also, the Supremacy Clause of the US Constitution (Article VI, Paragraph 2) explicitly states that federal law will take precedence over conflicting state law. While that should settle the argument, the fact is that the federal government has generally declined to enforce the law in states that have chosen to legalize marijuana or to challenge conflicting state laws in the courts. At the same time, efforts to delist cannabis as a Schedule I drug have made little progress to date.
While you can still register a marijuana dispensary and obtain a business license to operate in a state that has legalized cannabis products, your bank and credit card processor have to comply with federal law. Credit card associations must operate under the same constraints, which is why Visa and Mastercard have policies stating that they won’t allow their cards to be used for cannabis purchases. As we’ve discussed above, this restriction prevents dispensaries from legally accepting credit card payments for cannabis products. (Note that ancillary products, such as water pipes, etc., don’t have this restriction.)
Anti-Money Laundering Laws
One possible workaround that you may be considering is to obtain an offshore merchant account that will allow you to accept credit card transactions without routing the transactions through a US bank for processing. Our advice here is simple: Don’t do it! Even with a merchant account in a country that has legalized cannabis, the act of transferring funds from the sale of cannabis products in the US to a foreign account and then back into your local business bank account violates federal anti-money laundering statutes. You would be subject to criminal liability, meaning that if prosecuted and convicted, you could face the possibility of prison time in addition to having your business shut down.
US Postal Service Shipping Restrictions
Another serious legal issue — particularly for eCommerce dispensaries — is that it’s still a felony under federal law to ship Schedule I drugs (including marijuana) through the US Postal Service. This is true even if you’re shipping within the borders of a state where marijuana use is legal. Likewise, most major private carriers (such as FedEx and UPS) won’t risk violating the law by shipping your cannabis products. If you want to accept online orders from states that have legalized cannabis products, you’ll have to hire a private courier service that specializes in working with the cannabis industry. Otherwise, you’ll effectively be limited to accepting online orders for in-person pick-up at your dispensary.
What You Should Look For In Marijuana Payment Processing
With a few notable exceptions, finding a good marijuana payment processing provider for your cannabis business involves the same criteria as finding a good low-risk provider. It’s just much harder to find a provider that offers the right combination of reasonable prices, fair contract terms, and high-quality customer service. Here are the most important considerations:
Does The Processor Accept Cannabis Dispensaries?
You’ll need to confine your search to providers that are actually willing to provide payment processing services for cannabis merchants. Unfortunately, the majority of providers — including many top-rated high-risk specialists such as PaymentCloud — don’t accept cannabis businesses at all due to the legal issues we’ve discussed above. Some well-known high-risk providers accept CBD merchants, but not actual cannabis businesses. This includes Square, which does not accept cannabis merchants at all, but has a special program for CBD businesses. Most of the providers that will accept a cannabis dispensary are small firms that have only been in business for a few years and specialize in serving the cannabis industry.
What Is The Pricing System?
As with any high-risk industry, transaction processing costs are going to be significantly higher than they typically would be for a comparable low-risk business. Providers offering PIN debit credit card processing for cannabis merchants typically use a flat-rate pricing plan, with the average rate for retail sales being about double the going rate for low-risk businesses. The good news is that ACH solutions typically involve significantly lower processing rates, as you won’t have to pay interchange fees to the card-issuing banks. In comparing different providers, be sure to also factor in the impact of recurring and incidental fees on your overall costs.
Will You Have To Deal With Reserve Accounts?
Another additional “expense” that most high-risk merchants have to contend with is a rolling reserve. That’s where your processor withholds a certain percentage of your funds every month until the reserve is met. While you’ll eventually receive all your money, rolling reserves can create serious cash flow problems for a small or newly established business.
Can You Accept A Long-Term Contract?
We prefer month-to-month billing arrangements that don’t lock you into a long-term contract or force you to pay an early termination fee (ETF) if you close your account early. However, cannabis merchants may have to accept both a long-term contract (typically for three years) and an ETF. Be aware that almost all long-term contracts include an automatic renewal clause that extends your contract, typically for one-year periods at a time.
What Kind Of Processing Hardware Do You Need?
Since you’ll be selling cannabis products out of a retail location, you’ll need some processing hardware to process and track transactions. Unfortunately, your needs will be very different from other businesses, which can get away with a simple countertop terminal or a mobile POS system. You’ll need a system that can handle cash and PIN debit transactions, as well as provide the analytical data you need to run your business efficiently. We recommend that you invest in a specialized cannabis POS system that will keep you compliant with the laws of your jurisdiction. These systems aren’t cheap, but they’re currently the best option for cannabis dispensaries.
What Kind Of Customer Support Can You Expect?
In researching dozens of merchant account providers, we’ve found that high-quality customer service is the real secret ingredient that separates the merely average providers from the truly outstanding ones. Customer support issues occur more frequently with cannabis and other high-risk merchants, so you’ll want to pay particular attention to a provider’s reputation in this area.
Which Cannabis Payment Processor Is Right For My Dispensary?
Although we’ve given you four recommendations to start you on your search for cannabis payment processing solutions for your dispensary, there isn’t any single company that’s the “best” — or even the most affordable. You’ll want to find a provider that offers the best fit with how you want to run your business. Moves to legalize marijuana use for medicinal and recreational use in many states have created a tremendous business opportunity for cannabis entrepreneurs, but they’ve also created a hopelessly fragmented and complex legal landscape where compliance with the law is both challenging and essential to the survival of your business.
With that in mind, be aware that nothing in this article should be construed as legal advice. We strongly encourage you to seek out the services of a business attorney in your local area who can assist you in staying within the bounds of the law as it currently exists. We also recommend that you steer clear of any payment processor that promises to allow you to accept credit cards for cannabis products for the reasons discussed above. For selling cannabis-related products, where you can accept credit cards, one of our recommendations for the best high-risk merchant account providers should be able to help you.
Frank has been writing about payment processing and business services since 2015. He is a retired Air Force officer and a former practicing attorney. He has a Bachelor of Science degree in Psychology from The Pennsylvania State University and a Juris Doctorate degree from the Ventura College of Law, and currently resides in Paso Robles, California.
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