Payment processors have traditionally struggled to offer the same variety of payment options to the cannabis retail sector that they’ve been able to offer retailers in other industries.
Accepting credit cards has thus been a challenge, with many cannabis retailers choosing to go the cash-only route, which can open themselves up to significant risks. But with the legalization of recreational cannabis in Canada, and more and more US states voting to legalize cannabis products, retailers working in the industry are slowly starting to have access to more payment processing options than they previously did.
Now that more options for processing payments are coming online for cannabis retailers, they may be shopping for a processor or merchant account for the first time. Many in the cannabis retail sector may be new to accepting payments altogether, and it can be a very difficult landscape to navigate, even for experienced retailers. Questionable sales tactics, misleading rate structures, and expensive contracts and equipment leases are all common issues that businesses deal with while looking for the right fit for a payment processor, but if you know what to look out for, you can save yourself a lot of trouble and money.
If you’re a cannabis retailer shopping for a payment processor, here are some things to consider:
How Accepting Credit Cards Can Help Your Business
Like in any retail industry, allowing customers to pay for their purchases the way they expect to be able to pay is key to providing a consistent and positive customer experience. As we move closer and closer to a cashless society, with people carrying less cash on them than ever before, it’s important to ensure that you offer payment options for both credit and debit cards in order to maximize potential sales and keep people coming back in the door. Cannabis retailers, just like all retailers, need to keep up with the consumer demand for their preferred payment method.
In both Canada and the US, people are turning to their credit cards to complete their everyday purchases and businesses have had to keep up with the changing technology and liability shifts that come with this change. It comes down to consumers valuing the same things as business owners in terms of being able to complete their transactions simply and quickly. Accepting modern payment methods like chip cards (EMV technology) and “tap” payments (NFC technology) makes for simpler and faster transactions, shorter lineups, and increased security – all factors that are mutually beneficial to both merchant and customer.
How do I Know What Processor is Right for My Business?
Cannabis retailers should have the same considerations that any other business has when selecting a payment processor. Before selecting a provider, it’s important to ask about the applicable contract terms and conditions, what the processing fees and additional charges will be, and what software and integrations are available for their business. Check out the Choosing a Payment Processor section of our blog for more resources on what to look for (and more importantly, what to look out for!) in a payment processor.
What about Cannabis-Branded Processors?
With the recent surge of popularity of the cannabis industry, there has been an increase in the number of merchant account providers who portray themselves as being cannabis-friendly processors or as specializing in the cannabis industry. Just because a processor brands themselves as a cannabis-focused provider with a website full of cannabis photos and terminology, doesn’t mean they are the best option for your business.
These processors are often just high-risk processors who have branded or re-branded themselves as cannabis-friendly after recognizing a lucrative opportunity in a new, booming industry. While they might appear to specialize in the cannabis payment processing, their offerings for the cannabis industry will be very similar to what they will offer other high-risk merchants, which can have their fair share of drawbacks compared to those offered by traditional processors.
Partnering with a high-risk provider often means paying much higher processing fees, which is probably at the top of the list of important factors to consider for any retailer looking for credit card processing. While some processors may try to use a lot of cannabis-related jargon and imagery to make you feel like they’re a perfect fit for your cannabis business, if they don’t mention having great, low rates or a transparent pricing structure like interchange plus pricing, then it might be best to look elsewhere if you want to save money on processing fees. Be sure to shop around and get a good idea of what your rates and fees are compared with a traditional retail processor to make sure you're getting the best deal for yuo business.
With Risk Comes Reserves
Partnering with a high-risk merchant account provider may also subject your account to reserves, which means some of your funds might be withheld in what’s called a ‘reserve’ to protect the processor from the risk of potential chargebacks. While these funds still technically belong to you, as a merchant, the reserves can cause cash flow concerns if you do not have access to all of your funds when you need them. Don’t forget to ask about reserves when exploring your options with these kinds of processors.
Although having access to traditional payment processors and payment methods might be new for those working in the cannabis industry, the needs of individual retailers are not that different from those of any other retailer. Choosing a payment processor with affordable rates, a range of hardware and software options, and friendly customer service will help ensure a positive relationship between a cannabis retailer and their payment processor.
Helcim is a payment processor founded and operated in Canada and we offer transparent and affordable payment processing to a wide range of businesses in North America. If you operate a business in the US or Canada and you’d like to learn more about Helcim’s payment processing services or pricing, reach out to our friendly Helcim Guru’s to get started today.