💵 You gotta pay to play...but how should you pay, today?

When I was a young man, I would often pay for my medical cannabis with a credit card. I didn’t really think much of it; I would head over to my local dispensary, which I found on an early version of Weedmaps, and swipe my Mastercard for two eighths of flower, every two weeks, like clockwork. It was simply more convenient than getting cash out - and plus, I got frequent flier miles. Never thought about it, and I had no idea it wasn’t necessarily kosher.

At the time, in California and under Prop 215, there were precious few clearly-defined rules. You could legally possess cannabis with a doctor’s medical recommendation, yes - but collectives couldn’t legally sell it to you. To get around that pesky little rule, you would make “donations” to the collective, at which point they would dispense your medicine.

Those donations were mostly cash. In order to provide a payment experience similar to a traditional retail store, though, collectives would offer credit card payment options - and they would have fake DBA’s like “Bobby’s Floral Arrangements,” and that’s what would appear on your credit card statement.

Was it legal? Nope.

Does it still happen today? Yep.

And therein lies the crux of this morning’s conversation - what on earth should we, as a more-evolved retail industry, be doing about payments?

What are we dealing with?

🤔 Brian, why are payments even an issue? Can’t we just pay with our credit cards, like some stores still encourage? 

Great question, Person Who May or May Not Be Reading This on the Toilet. Cannabis, a plant that has limitless medicinal potential and has enriched the lives of millions of human beings, is still illegal under federal law. Most banks and credit institutions must comply with federal law, to avoid fines or regulatory shutdowns or other ugly stuff.

The Schedule 1 status of cannabis has eliminated a lot of traditional methods of payment for customers - and spawned a ton of interesting solutions.

Let’s outline the various methods available to a cannabis retailer so we are all on the same page (shout out to Ivy Gress for letting me rip off her research 🕺🏻):

The Safest, but Most Inconvenient: Cash

Cash is still the preferred method of payment at most dispensaries. It’s dirty, it’s paper, and it’s often hard to come by. It also poses a significant threat to retailers, because it’s a physical thing that must be stored and protected from thievery.

But, alas, it is accepted everywhere and is fully legal for a cannabis purchase.

Many dispensaries will offer an ATM on site. Expect to pay a solid fee. Also…

ACH Payments - An Acronym That You Don’t Need to Define

“ACH payments” refer to electronic, bank to bank transfers processed through the Automated Clearing House (ACH) network. They are legal, reliable, efficient, and paperless.

The only friction for ACH payments is that a customer must register an account and connect it to their bank. That takes time and effort, and most consumers don’t trust a platform until they hear some social proof that it’s not a nefarious operation.

There are very good ACH solutions in cannabis. Aeropay, CanPay, Paytender, and Hypur, to name a few. Some have easier onboarding processes, better integrations, etc. They differ in their rates as well.

Point of Banking / Cashless ATMs

This one is a hot button recently, because Visa got a little cranky last week.

Point of Banking solutions (“cashless ATMs,” colloquially) are methods in which a customer dips a debit card and pays; the transaction mimics an ATM withdrawal, but no cash is dispensed. Instead, the payment is forwarded to the dispensary’s bank account. No fuss, no muss.

Creative, to be sure. But it’s ruffling some feathers.

Crypto!

I borrowed words from our friends at Aeropay, because they’re the real cannabis payment experts:

📚 tl: dr

• Cannabis is illegal on the federal level - so you can’t pay for it like you pay for everything else

• Cash is fully legal, but carries more germs than a toilet

• ACH is bank-to-bank transfers, and is compliant and efficient

• Cashless ATMs are transactions that mimic ATM withdrawals, but no money comes out. Visa is mad about it

• Crypto has promise for later

• It is Thursday