Although cannabis is legal in most states and more states fighting to approve its use, both for medicinal and recreational purposes, the industry is still trying to get out of the shadows of the gray market. Rules and regulations differ across state lines and being made on the fly as the cannabis industry evolves regularly.
But the constant in all of it is its uncertainty when it comes to banking. To date, no major conventional payment providers allow any transactions from cannabis-related businesses to cross their network because of the ongoing conflicts between the federal law and the state.
If you want to find out about cannabis in the United States, check out https://en.wikipedia.org/wiki/Cannabis_in_the_United_States for more information.
It includes common banking names like Discover, American Express, MasterCard, and Visa. Because of this, legal cannabis businesses have only been using cash for any transactions in their companies.
The next time you are in a cannabis dispensary, look inside, and you will find out that most of them have an Automated Teller Machine or an ATM to help the inconvenience on their customers that comes with not being able to use electronic payments.
But Automated Teller Machines also pose inconveniences, including high fees with every transaction and safety concerns associated with dispensing and housing large amounts of money. Across the United States’ legalized cities or states, unique attempts to move beyond cash-intensive models have been aplenty. Still, the truth remains: there are few transparent, compliant, and viable electronic payment methods available. Let us take a closer look at payment methods that are currently being used in dispensaries across the cannabis industry.
Note: The list doesn’t generally address the legitimacy of the solution mentioned in this article, but only used in most dispensaries in the country at present.
Cashless Automated Teller Machine/Voucher System is also known as Point of Banking
Cashless Automated Teller Machine – also known as Point of Banking – payment alternative uses countertop credit terminals to mimic Automated Teller Machine transactions. For it to appear as an actual marijuana shop ATM withdrawal, every transaction needs to be conducted in $5 increments, resulting in real cashback to customers with every purchase.
Customers also pay a front-end fee of $3 to $5 (it was increased nationwide by $1.75) plus another possible cast withdrawal/advance fee from the customers’ own bank when the transaction sets. Merchants receive electronic deposits into their bank accounts, approximately three to four days after the purchase.
Hidden merchant accounts
Hidden merchant accounts operate similarly to traditional merchant services accounts. It can include MasterCard, Visa, American Express, and Discover. It varies when it comes to the fact that merchants are unable to operate under their own business names. Instead, they need to use a name not related to their licensed business or use a third-party name to hide the nature of their business.
In this case, third party businesses will receive the funds first and transmits them to the cannabis merchant. It may include merchant accounts outside the country or domestic accounts, and usually involves fees of 5% or more for convenience and merchant fees for the customers. This kind of account has also been known to be very unstable because they can be closed if the processor or bank discovers it.
Prepaid or stored value
With pre-paid or stored value card options, consumers determine how much money they want to spend and pre-load their card or application with the necessary funds. Customers then use the application or card at the dispensary to purchase products.
Some services fund pre-paid accounts using an ACH or Automated Clearing House transfers, while others fund their accounts using credit card payment options. The money will sit in the account that is controlled by the service provider (at banks that may or may not know how the funds are being used) until the consumer, but the product that they want; then the funds will be transferred to the merchant accounts at the same pre-paid provider as payment.
ACH or Automated Clearing House Based
Payment services that are built on Automated Clearing House networks are almost similar to what experienced consumers have while shopping at traditional stores when they use debit cards issued by their bank. These applications or card-based payment services that use the Automated Clearing House network to make a bank-to-bank transfers on behalf of the consumer and cannabis businesses.
The Automated Clearing House network is the same network that most banks use to settle funds for debit card and bill payment purchases – making it a lot more familiar for consumers to use. Every customer needs to do is link their checking account to the application or card to be able to pay the product that they purchase ACH networks has no specific prohibitions on transactions related to the cannabis industry, making it very efficient and reliable.