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Payment Processing for the Cannabis, hemp, and CBD industries - Here is what you need to know!

December 18, 2018

By Michelle Mattice

What is a merchant processor?

They’re the pesky people that you pay to process your customer’s cards, checks, etcetera’s money into your bank accounts. If you want electronic payment and not have a ton of cash on hand, you need a merchant processor. Cash is great, but thieves and crooks like it too.

There are different ways to receive electronic payments, ACH, PIN Debit, Credit Card, Bit Coin, Apps, etc. But for the cannabis, hemp, and CBD industries, what is safe and legal? 

Regulations, What You Need to Know..

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Currently, the only electronic payment option open to cannabis businesses is ACH or PIN Debit processing.

Federally speaking, it’s still illegal. The credit card companies won’t touch it with a hundred-foot pole. For CBD and hemp businesses, they can accept credit card payments, ACH, and PIN Debit. They just need a high-risk processor that knows what they’re doing and works with the underwriting banks that will accept those types of business.

Those other types of payments skirt the line of what is considered legal, especially when you are working with cannabis. It’s skirting the line of cleaning (money laundering) the money into an acceptable payment.

Since the Federal Government still sees cannabis as illegal, accepting payments for it is as well. Adding anything remotely close to cleaning the money? Ouch!  Direct account to account through ACH and PIN Debit is acceptable though.

Want to get scary? Try having transactions with an international bank. Now you’re looking at international drug money. There are plenty of options out there for 100% USA banked and based businesses. Go with one of those first.  You aren’t bringing any foreign money in and chances are a USA merchant processor and bank is much more familiar with the laws that govern your industry and won’t break any. 

Why is it so hard to find dependable solutions?

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There are a LOT of sleazy unethical processors out there. In the past, they have miscategorized businesses in this industry. For example, taking a CBD online business and categorizing them as a “flower shop”. When the underwriting bank checks on the site, they realize that not only is it NOT a flower shop, it’s something that skirts what their company will even work with.  Next step.  You get shut down and money gets seized.

The federal and state laws are all playing catch-up with the industry. Due to a few (a LOT) bad pennies, it has caused red flags in the banking industry and it has severely limited the number of banks willing to underwrite payment processing.

If a bank is even willing to work with the industry they will often take a bank account for the industry  OR underwrite it. Not both.  They consider it too high a liability to do both.

Tips to choose the right payment processor

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  • Always work with a bank that knows what you’re selling. Always work with a merchant processing company that knows what you’re doing as well. That way you won’t get your money seized and you won’t get shut down. I currently have a stack of files from client’s I’m working on that have been shut down by Shopify, PayPal, Square, and the major banks.  Your processor should know some banks they can refer you or help give suggestions on where to look. 

  • Always research a processor. There are some, especially lately, that just got into the business because they see the writing on the wall about how big this industry is going to be.  When you have a problem with your application, or need help though, will they be able to help you? Will they be there a year from now? If you dig deep enough, is it their main business? I recently received a blanket marketing message from a company that offered high-risk merchant services, when you go to their site and click on the link for processing, nothing comes up.  Not a good sign. I had another one, where if you go to the web-site that is the extension of his e-mail, for $100 you too can develop a screen play in Hollywood.  Again, not a good sign.

  • Ask these questions;

    • How many customers does your company process?
    • How long have you been in the industry? Payment processing AND yours
    • How long is the contract? What are the cancellation rates?
    • What are the monthly minimums?
    • As the industry changes and rates go lower, will my rates reflect those changes?
    • How responsive are you when I need a question? (Call the person back in an hour and see how long it takes them to respond. E-mail too. If you ask questions and they don’t have the answer, see how long it takes for you to get an answer).

  • Most reputable processors have multiple solutions as well. They don’t just work with one bank, they work with multiple underwriting banks. They should be asking you questions to see what services you need. Figure out what program would be best for you and offer you that solution.

  • Research whatever company you’re looking into working with. There should be a professional looking website.  There should be a contact phone number, e-mail, etc, that links with the company name.  Check with your industry associations to see if they’ve ever heard of the company and are reputable.   You’re putting your livelihood and money into their hands.  You need to be able to trust the company and the people that you will be working with.

  • Don’t feel pressured. Yes, you want electronic payment solutions. Especially today, there are more companies to choose from than ever. If you don’t like the person that you are working with than choose someone else. Some merchant processors will put a ton of pressure on you to sign up with them. I personally want to sign up as many accounts as possible.  However, my clients choose to work with me. Don’t ever feel pressured.  This is your business. You can choose who you work with. Don’t forget that in the rush to get a solution. I’ve worked with some people that have told me they were locked into a contract with a company that they are miserable with and paying exorbitant fees with simply because they felt pressured to do so by the account officer. You are in charge of who you work with.

Suggested payment processors

Three I can think of off the top of my head are:

Good luck!  If you ever have a question, feel free to contact me directly.

About the Author

Michelle Mattice is a Senior Account Officer with Joint Venture Pay and their parent company, PayIt Forward Processing. Her favorite part of her job is helping clients and knowing that by doing so she is also helping give back through her company’s “Every Swipe Benefits Charity” program where a portion of company proceeds go to help vetted charities of the client’s choice. To contact directly call her direct line at 518-847-8577 or e-mail her at: michelle@jointventurepay.com.



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