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 Kehl Frank Kehl has been researching and analyzing merchant services, payment gateways, and international money transfer services since 2015. He has a Bachelor of Science degree from Penn State and a Juris Doctorate from the Ventura College of Law.

  Expert Analyst & Reviewer

• 
  Mar 21, 2022

  UPDATED

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 37 states and recreational use in 18 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. There are, however, viable alternatives to operating on a cash-only basis, which we’ll discuss below.

In addition to highlighting the payment methods available to cannabis dispensaries, we’ll also profile several reputable providers who can accept your marijuana business. Finally, we’ll briefly cover the legal issues that make cannabis businesses such a challenge when it comes to payments and give you some tips to help you find a reputable provider for your business.

Learn More About Our Top Picks

Company	Highlights	Next StepsHighlights
Instabill Read More	Accepts domestic & international cannabis merchants Offers ACH transfers & cryptocurrency payments Offshore merchant accounts not available in US	Accepts domestic & international cannabis merchants Offers ACH transfers & cryptocurrency payments Offshore merchant accounts not available in US Visit Site Read More
Flowhub Read More	Secure point of banking solution Fully integrated POS system No long-term contracts	Secure point of banking solution Fully integrated POS system No long-term contracts Visit Site Read More
Paybotic Read More	Point of banking & ACH payments supported Offers POS software & card readers Customized pricing for all users	Point of banking & ACH payments supported Offers POS software & card readers Customized pricing for all users Visit Site Read More
Bankcard International Group Read More	Offer true PIN debit payment solution Supports ACH, eCheck, and Bitcoin payments Extensive educational resources on website	Offer true PIN debit payment solution Supports ACH, eCheck, and Bitcoin payments Extensive educational resources on website Visit Site Read More

Read more below to learn why we chose these options.

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 simply 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. What this means for you as a dispensary owner is that the credit card processing networks that are used to process credit card payments have to comply with federal law, and 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.

For the same reasons, you generally cannot accept debit cards, either. Customers can, however, use their debit cards to withdraw funds from their bank account using a point-of-banking (or “cashless ATM”) solution to pay for their purchases. Yes, we know it’s very confusing. Note that we have found one provider currently offering a legally-compliant debit card payment option. It’s possible that other providers will follow suit in the near future.

This state of affairs is likely to continue as long as marijuana remains a Schedule I drug. While there have been proposals to de-list it, there doesn’t appear to be any momentum in the federal government to take action any time soon. If this does eventually happen, dispensaries would be free to open traditional merchant accounts and start accepting credit card payments like other businesses.

What Secure Payment Methods For Dispensaries Are There?

With credit and debit cards off the table for now, cannabis merchants have had to get creative in finding ways to securely accept payments from customers. Popular solutions in use today include point-of-banking (also called a “cashless ATM”), ACH transfers, and good, old-fashioned cash payments. Here’s a summary of each of these solutions:

4 Best Secure Cannabis Payment Processors For Dispensaries

A cannabis payment processing account is simply a merchant account that allows you to accept noncash payments for cannabis products. Due to the dramatically higher risk associated with these goods, cannabis accounts will almost always come with higher rates and fees and more restrictive policies than low-risk accounts.

Here are the best companies we’ve found that can provide payment processing services for your cannabis dispensary:

• Instabill
• Flowhub
• Paybotic
• Bankcard International Group

1. Instabill

Instabill	Visit Site Read our Review

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2. Flowhub

Flowhub	Visit Site Read our Review

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3. Paybotic

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4. Bankcard International Group

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Why We Don’t Recommend These Marijuana Payment Processors

While many merchant services providers support high-risk industries, not all of them are willing to take on a cannabis dispensary as a customer. The vendors below — while good companies in their own right — either don’t accept cannabis merchants or don’t have a sufficient track record to warrant a recommendation at this time.

Square

The question inevitably comes up: Why not just use Square? The company is extremely popular with small business owners, offering predictable flat-rate pricing and month-to-month billing. Unfortunately, it doesn’t currently accept cannabis merchants. Although the company now has a trial program for CBD businesses, the additional risks and legal complexities associated with marijuana sales make it a no-go at this time. Using Square to process cannabis sales explicitly violates the company’s Terms of Service, and you will get shut down when (not if) the company figures out what you’re really selling.

PaymentCloud

PaymentCloud is one of our favorite high-risk merchant account providers and a great choice for CBD businesses. However, the company does not accept cannabis merchants at this time, primarily due to the fact that it’s currently illegal to accept credit cards as payment for cannabis products. Should cannabis be delisted as a Schedule I drug in the future, we anticipate that the company will open its services to dispensaries.

Naturepay

Alaska-based Naturepay is a small provider that specializes in serving the cannabis industry. The company claims to allow credit card processing for cannabis businesses, despite the legal challenges discussed in this article. While it’s not clear exactly how Naturepay is able to accomplish this, it most likely involves deliberately miscoding cannabis transactions — an unsustainable tactic that will get you shut down when you eventually get caught. If that risk doesn’t deter you, the flat 5.95% + $0.30 per transaction fee for all credit card transactions might. On the plus side, Naturepay offers month-to-month billing and supports alternative payment methods such as ACH transfers and in-store ATMs. The company’s experience in working with the cannabis industry makes it a good choice for dispensaries, as long as you pass on the credit card processing option.

Hypur

Another small provider that specializes in serving the cannabis industry, Hypur offers an app-based ACH payments service that works for retail and eCommerce businesses. The company has an excellent website, with numerous educational resources and clear explanations of the issues confronting the marijuana industry. Unfortunately, we’ve found a disproportionate amount of negative feedback from both merchants and customers alleging technical difficulties with the company’s app. Until Hypur is able to fix the bugs in its payments solution and offer a reliable way to pay for cannabis purchases, we can’t recommend it for your business.

Why Dispensary Payment Processing Is Considered High-Risk

It should come as no surprise that cannabis dispensaries are firmly in the high-risk category when it comes to payment processing. Being labeled as high-risk means that it’s much more difficult to get approved for an account, as relatively few providers are willing to accept these types of businesses. Processing rates, account fees, and contract terms will be more expensive and restrictive than those for a comparable low-risk business. However, you can still get reasonable terms and pricing if you go with a reputable high-risk specialist that works with the cannabis industry.

The following factors combine to make cannabis dispensaries extremely risky for payment processors to do business with:

Illegal Status Under Federal Law

As discussed above, any cannabis-derived product containing more than 0.3% THC is still classified as a Schedule I drug under federal law. While the alternative payment methods we’ve outlined above will give you secure noncash options for your customers, you won’t be able to accept credit or debit cards until the day finally arrived when Congress acts to reclassify cannabis products and take them off the Schedule I list. The bad news is that, while delisting cannabis will make it possible for dispensaries to accept credit cards like any other business, the cannabis industry is likely to remain in the high-risk category due to the other factors described below.

Cannabis deliveries and eCommerce sales are also hamstrung by the fact that it’s illegal to ship cannabis products through the US Postal Service — even within a state that has legalized these products. Major private shippers like FedEx and UPS have also refused to ship cannabis products, leaving dispensaries to rely on small, private shipping firms that are willing to work with them.

Varying Legal Status Under State Law

At the moment, many states have acted on their own to legalize cannabis for medicinal purposes, recreational use, or both. This has created a bewildering menagerie of often-conflicting state laws that cannabis merchants must comply with. While compliance is relatively straightforward for a local dispensary that only sells its products in-person, it can be extremely challenging for an eCommerce business trying to sell in multiple jurisdictions where cannabis is legal.

High Chargeback Rates

Chargebacks are a known risk for just about any type of business, but the chance of experiencing one is much higher with cannabis products. While there are many reasons why a customer might decide to file a chargeback, the perceived lack of medical effectiveness of cannabis products is one of the most probable. For example, a customer might purchase medical marijuana from a dispensary to treat anxiety. If they feel that the product doesn’t work for them but can no longer return it, they might resort to filing a chargeback to get their money back. While chargebacks are most commonly associated with credit card payments, the other payment methods we’ve described above also have mechanisms for customers to dispute a purchase after the sale.

Legal Issues With Cannabis Payment Processing

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:

Cannabis Products Are Illegal 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, there hasn’t been a concerted push to delist cannabis as a Schedule I drug, either.

Credit Card Processors Must Comply With Federal Law

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.)

Offshore Accounts & 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 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.

Cannabis Products Cannot Be Shipped Through The US Postal Service

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 just 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 high-risk specialists — 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. At the moment, 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.

Can You Get Account Approval?

The underwriting process required to get approved for a merchant account can be tedious for any merchant, but it’s particularly difficult if you sell cannabis products. Nonetheless, completing underwriting before you start processing credit card sales can save you from having your account suddenly shut down once you’ve started using it. You should be skeptical of providers offering “instant” approval of your merchant account, as they often defer this critical step until after you’ve already signed a long-term contract.

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 credit card processing for cannabis merchants typically use a flat-rate pricing plan, with the average rate for retail sales being around 5.95% + $0.30 per transaction (or more than twice the going rate for low-risk businesses). As discussed above, however, we recommend that you avoid credit card processing for actual cannabis products due to the high risk of having your account terminated. The good news is that ACH and point-of-banking processing 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 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 will often 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 type of 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 point-of-banking 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 marijuana payment solutions for your cannabis business, 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.

If you’re just getting started in the marijuana industry, you’ll have a lot of concerns beyond finding a good cannabis payments processor. Getting the funds to launch your business can also be a daunting challenge. Check out the following articles for some helpful tips and suggestions:

• What Are High-Risk Business Loans & Where Do I Get One?
• How To Finance A Medical Marijuana Dispensary

In Summary: 4 Best Secure Cannabis Payment Processors For Dispensaries

1. Instabill:
   • Accepts domestic & international cannabis merchants
   • Offers ACH transfers & cryptocurrency payments
   • Offshore merchant accounts not available in US
2. Flowhub:
   • Secure point of banking solution
   • Fully integrated POS system
   • No long-term contracts
3. Paybotic:
   • Point of banking & ACH payments supported
   • Offers POS software & card readers
   • Customized pricing for all users
4. Bankcard International Group:
   • Offer true PIN debit payment solution
   • Supports ACH, eCheck, and Bitcoin payments
   • Extensive educational resources on website

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Frank Kehl

Expert Analyst & Reviewer at Merchant Maverick

Frank Kehl has been researching and analyzing merchant services, payment gateways, and international money transfer services since 2015. He has a Bachelor of Science degree from Penn State and a Juris Doctorate from the Ventura College of Law.

@fjkehl2

View Frank Kehl's professional experience on LinkedIn.

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