What’s the Best Way to Buy Weed?

THE WIDESPREAD LEGALIZATION of cannabis has been one of the most revolutionary events of the 21st century. The most recent, related development—President Biden’s pardon of federal convictions for cannabis possession—is a monumental and surprising step in addressing decades of unjust criminalization.

The industry is booming, cannabis-related jobs and educational workshops are surging and new, innovative dispensaries are opening at a lightning pace nationwide. Despite all of this positive activity, however, a significant issue still plagues the cannabis marketplace—the security of cannabis payments.

How can this industry continue to thrive if it can’t solve this most basic of problems essential to the exchange between supplier and consumer?

Historically, when cannabis consumers were treated with hostility and purchase of the substance was criminalized, there was only one method of payment: cash. Fast forward to today, where the holistic benefits of fully legal cannabis are celebrated by esteemed medical authorities and advanced payment technologies are available to us.

How is it that the only payment option available to far too many dispensaries is still the cash transaction?

Cash is a Poor King

To list only a few of these risks, cash payments come with an increased risk of fraud due to counterfeit bills, a greater capacity for human error, increased theft, general inconvenience, reduced expediency for cashiers and customers, and a higher spread of pathogens.

Furthermore, cannabis consumers frequently arrive at dispensaries without cash and are forced to either make a circuitous trip to their bank or pay extraneous fees by using in-store ATMS.

But when cannabis payments are circumscribed by cash transactions, a relatively reasonable relationship to cannabis can become expensive and impractical in a matter of weeks or months for a consumer.

Finally, cash is far more expensive in terms of risk for dispensaries, given the extreme threats they face as public-facing institutions. Most budtenders are already familiar with how often dispensaries are held up for cash and cannabis. The ever-present threat of theft can cause anxiety and even lasting trauma.

Other Options Available

To bypass a few of these issues, dispensaries have turned to charging debit cards using the cashless ATM method. But of late, there have been numerous claimed violations associated with this form of payment. In fact, such workarounds are prohibited in many instances. It is very likely that in the not-too-distant future, major financial institutions will escalate their claims of violations from warnings to legal disciplinary measures.

What other payment options are there? Well, there are credit cards—but most major credit card companies don’t allow credit card processing for purchases of products containing a federally controlled substance like THC.

Cryptocurrency is a favorite of some. But the volatility of crypto and recent scandals like the collapse of FTX are major concerns. Digital currency is dangerously unregulated, rendering its value incredibly unpredictable.

Surveying the cannabis payment services landscape, it’s a simple conclusion that the best form of payment for dispensaries is an Automated Clearing House, or ACH network. An ACH payment system uses electronic fund transfers made between banks and credit unions across an ACH network to facilitate purchases.

ACH utilizes an electronic bank-to-bank fund transfer and bypasses the aforementioned security risks by connecting the merchant directly to the financial source. ACH payments are regulated and strictly processed, further protecting all parties concerned.

Getting It Right

In this highly regulated space, it’s imperative that retailers prioritize a compliant payments partner. A responsible payment platform will have rigorous due diligence processes and obtain the necessary local regulatory approvals and permits before working with clients. It is also equally important to work with providers that have an established relationship with trusted, cannabis-compliant financial institutions, such as Safe Harbor Financial (AeroPay’s banking partner) that follow all reporting guidelines outlined by the Financial Crimes Enforcement Network (FinCEN).