Understanding Cannabis Payment Processing Fees for Dispensaries and Retailers

Treez Team

The cannabis industry has predominantly run on cash payments due to the restrictions set by financial institutions on the purchase of cannabis products. But as the rules and regulations change, cashless payments have seen a steady increase amongst cannabis dispensary and retail businesses. And that’s where businesses can be seen partnering with cannabis payment processing platforms to ensure they continue to  remain compliant as transactions move to digital. 

But these cannabis payment platforms come with their own processing fees, which can impact the bottom line revenue the business generates. 

In this blog, we’re sharing everything you need to know about cannabis payment processing fees. 

What are cannabis payment processing fees? 

A processing fee is the amount of money a merchant has to pay as a fee to a payment processor each time they accept a debit or credit card payment. Payment processors and cannabis POS systems may have different types of pricing models - this includes charging a flat fee per transaction made using their solution, a percentage of each transaction, or both. 

Recommended read: Frequently asked questions about cannabis POS systems

What are the different types of transaction fees for cannabis payments solutions? 

Due to the payment regulatory requirements associated with the industry, the cashless payments processing fees are usually higher than what businesses in the traditional industries are charged. 

Here are the most common pricing models of the transaction fees charged by cannabis payment solutions: 

  • Flat rate pricing model - This cannabis payment processing fees structure offers a fixed percentage for all transactions, irrespective of the card type being used by a customer at the point of sale. 
  • Percentage of each transaction model - Another common cannabis payment processing fees model is wherein the solution charges a set percentage of the transaction made through them. 
  • Interchange plus pricing model - In this pricing model, the interchange fee is passed on to the merchant and an additional fee is negotiated on by the payment processing company. The interchange fees can range from anywhere between 1-3% depending on the card a customer uses at the point of sale. This is most commonly used for higher annual revenue merchants. 

It is also important to note that some payment processing companies may also charge a monthly setup fee - this includes hardware and installation charges. 

Recommended read:
How to choose the best cannabis POS for your dispensary

How to choose the right cannabis payment solution pricing model? 

When choosing a cannabis payments solution for your dispensary or retail outlet, don’t just look at the overall cost of the hardware and software, or the processing rate in isolation. Integrated payments through your POS provider gives you better and cleaner data. 

So evaluate the value of the cannabis POS system in relation to your business revenue by looking into: 

  • Transaction volume - Assess the volume of transactions your dispensary handles every day for cashless payments. Identify if you fall into the high-volume or low-volume category. 
  • Average order value - Look into purchase behavior of your customers and calculate your average order value. These purchases should be made via cashless payment methods only. 
  • Budget and affordability - Understand the different pricing models for cannabis payment processing (described above) and evaluate your financial capabilities. This includes looking into the revenue left after processing fees has been paid. 
  • Payment mode preferences - Offer multiple payment methods and identify the most commonly used ones for cashless purchases. 
  • Hidden fees - One of the most common forms of hidden costs is PCI certification and associated fees. It is important to ask the cannabis payments processor about their PCI compliance and if they include charges in their monthly billing. Another common aspect to look into is PIN debit transactions that some payment solutions charge a higher transaction fee on.  
  • PCI compliance - PCI DSS compliance is essential to safeguard customer data and offer a secure payment processing environment. By adhering to PCI standards, dispensaries can ensure customer privacy and reduce risk of data breaches, and at the same time avoid higher transaction fees on cashless payments. 

Recommended read: Complete guide to cannabis payment processing solutions

Do you need a cannabis payment processing solution? 

The number of reports on cash thefts and frauds occuring at cannabis dispensaries and retail outlets has been on a steady increase. This is why businesses have started to move away from traditional cash payments to choosing cashless payment methods. 

But to be able to take cashless payments from different credit and debit cards, cannabis businesses need more than just a point of sale solution. They need a cannabis payments process solution that also helps them record these orders and report them as per the compliances around the industry set by the state laws. 

That’s why it makes it important for businesses to invest in cannabis payment processing solutions despite the additional processing fees they need to pay. 

Want to learn more about cannabis payment processing fees for dispensaries and how cashless payments work? 

Book a demo of TreezPay today

Frequently asked questions about cannabis payment processing fees 

What are payment processing charges? 

Processing fees are the fees that a cannabis dispensary or retailer pays each time they accept a debit or credit card payment through a payment processor. Payment processors have different pricing models - they may charge a flat fee per transaction, a percentage of each transaction, or both.

Are payment processing fees legal? 

Yes, payment processing fees are legal across countries. When getting started with a payment processor or setting up a cannabis POS system at your dispensary, ensure you have asked for details about the payment processing fees, structure, and the refunds if applicable. 

How much does it cost to have a cannabis POS? 

The average cost of a cannabis POS software varies across the industry but typically can range between $500 to $1500 per month. This does not include the hardware and installation fee. You should expect to pay anywhere from $10,000-$20,000 per year to use the POS system depending upon your dispensary size, the number of sales you make, and the required feature enhancements. You should always relate the cost of POS with better processing rates; companies like Treez can bundle the costs together and offer custom rates that benefit the customer. 

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