Marijuana businesses need to be very careful when it comes to selecting the right dispensary payment solutions. With the potential risks of being shut down by a processor or even facing criminal charges for fraud, it’s essential that marijuana dispensaries choose a legitimate payment solution that can handle their needs and keep them safe from any legal issues. We will explore some of the no-good dispensary payment solutions out there, as well as what to look for when selecting a legitimate solution.

Dispensary Payment Solutions to Avoid Like the Plague

Marijuana dispensaries must be careful to avoid no-good, shady dispensary payment solutions as the risks associated with these solutions include the potential for hefty fines, lost business, frozen accounts, and potentially even criminal charges for fraud. In addition, some of these payment solutions may not offer sufficient protection from thieves who may try to rob a dispensary or hackers and other cyber threats that can leave a dispensary vulnerable to data theft.

These include cash-only payments, Cashless ATMs, and merchant account providers that fraudulently miscategorize an account as something that it is not. Such practices can put a dispensary at risk of being shut down by a processor or even facing potential criminal charges for fraud. To stay safe from legal issues, dispensaries should look out for certain features when selecting a legitimate solution.

Cash-Only Payments

While a cash-only payment solution is a 100% legal payment solution, it’s far from being a secure and convenient payment solution. Cash-only payments can create problems for dispensaries by requiring them to keep large amounts of money on hand and making it more difficult to track sales. Additionally, cash-only payments put dispensaries at risk of robberies if criminals target the dispensary for its cash holdings.

While you might think that cash-only payments are a great way to avoid fees charged by merchant service providers, you must keep in mind that 41% of Americans say that none of their purchases in a typical week are paid for with cash¹. When you require your customers to pay in cash, they are limited in what they will spend by how much cash they have on them. Only 16% of Americans always have cash on them², knowing this, it’s obvious that cash only is not a good payment solution for dispensaries.

Imagine if a customer intends on buying $60 worth of product, but they learn about a new offering from your dispensary when they come in to make their intended purchase. Do you think they will leave to make another withdrawal at an ATM and return to buy the extra item? Of course not! Consumers want convenience and it’s not convenient at all for them to leave and return to get something they didn’t initially plan on purchasing in the first place. Furthermore, the average transaction amount for cash payments is only $22 while debit and credit card purchases average $112 per transaction³. It’s foolish not to accept debit cards at your dispensary when statistics clearly show that your average transaction would increase significantly while also providing a better customer experience.

Cashless ATMs

Cashless ATMs have been a fairly popular choice for dispensaries to use as a payment solution but they are risky and illegal. Why? Because cashless ATM vendors set up the account in a fraudulent manner. They do not disclose that the cashless ATM will be used by a marijuana dispensary to accept payments from their customers. This has led to many dispensaries that were using cashless ATMs to have their payment solution abruptly shut down by ATM transaction processors.

Cashless ATMs work by charging a customer an incremental amount for every transaction. These increments can range from $10 to $20, and the customer is given change for the difference between their “withdrawal” and their total purchase price. This means that if a customer purchases something for $12.50, they’ll be charged $20 and only receive $7.50 in change. This is not a good customer experience! And don’t forget the ATM fee that is charged to the customer, which can be anywhere from $2.75 to $3.50! But here’s the real kicker – cashless ATMs report the transaction as a cash withdrawal rather than a purchase.

Peter Su, a senior vice president at Green Check Verified, said this of cashless ATMs, “Everyone knows it’s an obvious workaround. It’s a loophole, and it’s going to get closed down.”⁴  For dispensaries currently using a cashless ATM, the time to change is now. Otherwise, you will be shut down just as hundreds of other dispensaries that were using cashless ATMs have been shut down over the past several years.

Shady Merchant Service Representatives & Providers

Some merchant services sales representatives and brokers may try to trick a merchant services provider by saying an account is something it isn’t. This can be dangerous because if the merchant services provider finds out, the provider could shut down the account or even punish the account holder (you) for being dishonest. This too is considered to be a form of fraud.

Potential issues that can arise if a customer or account representative sets up a merchant processing account by lying on the application include having their transaction processor shut down their payment account, being charged steep fines and fees, and in some cases even facing criminal charges. Rather than being honest about the type of business they are running, if they deceive their processor the consequences can be devastating.

Risks of Choosing a No-Good Payment Solution

If a dispensary chooses a no-good, shady payment solution that isn’t up to industry and legal standards, they risk facing some very serious consequences. Let’s take a moment to look at the consequences your dispensary might face if you are using a shady payment processing solution.

Getting Shut Down by a Processor

One second you’re able to accept card payments and the next second your dispensary comes to a grinding halt because it can only accept cash. Not only that but your merchant account is typically frozen and you can also be charged hefty fines & penalties depending on the details of the situation. Your payment processing solution can be shut down If a dispensary tries to deceive its processor by lying about what kind of business they are running. This can arise from using a cashless ATM solution or by applying for a merchant services account using false information.

All merchant services accounts must select a Merchant Category Code (MCC) when applying. As the applicant, you are responsible to ensure that your application is truthful. Whether you or your sales representative lies on an application by misstating the nature of your business, you will be the one held accountable and your dispensary will suffer because of your actions. It’s always best to be honest and find a solution that is 100% legal for your type of business.

Facing Potential Criminal Charges for Fraud

This is probably the worst consequence of all. If a dispensary is found to be using an illegitimate payment solution, it could face potential criminal charges that could even include jail time. Dispensary owners should be aware of the risks of fraud and not take any chances with a payment solution that isn’t 100% legal. If you are not truthful on a merchant services application, that can be deemed as fraud. If you use a workaround solution, such as a cashless ATM, that too can be considered fraud. It’s never worth lying or cheating to get around the system, eventually, it will come back to bite you in the…you know what.

Legitimate Payment Solutions for Weed Dispensaries

When selecting a payment solution, dispensaries should always make sure it is in compliance with all applicable laws. Pin debit is one of the safest and most secure payment solutions for dispensaries, as it offers a high level of security and protection from fraud. Furthermore, pin debit transactions are encrypted, making them nearly impossible to hack into or duplicate. Additionally, this payment option allows for convenient purchasing without needing to worry about cash. Most importantly, pin debit is 100% legal and fully compliant with industry requirements.

While the options for a dispensary payment solution are very limited, it’s important to select a payment processor that specializes in providing payment solutions to dispensaries in a 100% legal and fully compliant manner. One such option is provided by Unity Payments. They specialize in providing marijuana-related businesses with secure, reliable payment solutions. For dispensaries, Unity Payments offers a true pin debit payment solution that is supported by Star, Accel, NYCE, and all other major debit networks. Your customers will appreciate the ability to purchase their cannabis products the same way they would buy groceries with a debit card.

In Conclusion

When selecting a payment solution, dispensaries should avoid cash-only payments and Cashless ATMs due to the risks they pose. Cash-only payments are difficult to track and audit, increasing the chances of theft and fraud. Plus, holding large amounts of cash makes dispensaries a frequent target of robbers which results in not only stolen cash, but also traumatized employees. Cashless ATMs come with high fees to both you and your customers, can lack proper security measures, and most importantly are illegal due to their fraudulent nature. Lastly, shady merchant account representatives may miscategorize an account to bypass regulations and laws, leading to serious consequences for a dispensary. Remember, it is your responsibility to ensure your merchant services account application is truthful. It’s never worthwhile to lie in an attempt to circumnavigate laws and other policies.

When selecting a legitimate payment solution, it is important to look for providers, like Unity Payments, with strong security measures and fraud protection, reliable customer service, and a clear understanding of the industry’s regulations. PIN debit is the best solution currently available for dispensaries looking to accept payments quickly and safely. PIN debit offers a simple authorization process, quick transaction times, and secure payment processing that is compliant with all laws. Additionally, PIN debit allows customers to pay with a PIN, rather than cash, making it far less likely for customers to fall victim to fraud or theft.

SOURCES:
¹ Share of Americans who go ‘cashless’ in typical week continues to grow | Pew Research Center
² Cashless Future | Financial Wellness Blog | Travis Credit Union (traviscu.org)
³ Cash vs. Credit Cards: Which Do Americans Use Most? – Experian
⁴ Marijuana ATM: Legal Cannabis Dispensaries Embrace Debit Card Workaround – Bloomberg