A Dispensary’s Guide to ACH Payments in Cannabis

ACH payments enable cannabis shoppers to digitally send funds from their bank to their dispensary.

This post offers a complete explanation of ACH payments in the cannabis industry.

You’ll learn what ACH means, how it works, why it’s great for dispensaries, comparisons with other payment methods, and why ACH is the ONLY compliant alternative to cash payments. Keep reading or jump to a section using the navigation on the right.

What is a cannabis ACH payment?

ACH stands for Automated Clearing House, a network that enables electronic payments and money transfers between banks in the United States. For cannabis transactions, ACH payments allow customers to transfer funds directly from their bank accounts to dispensaries, providing a seamless and cashless experience. This is crucial in an industry where traditional payment services are often limited.

‍Note: ACH payments are the only compliant alternative to cash for cannabis businesses. Learn more about cannabis payments here.

How ACH works

Here’s what an ACH transaction looks like from start to finish. The entire process typically takes under a minute:

1. Customer initiates payment

Online: The customer places an order on the cannabis dispensary’s ecommerce platform and selects the ACH payment option, often facilitated by a third-party provider like Aeropay.
In-store: At the checkout counter, the customer chooses ACH as their payment method, either through a QR code or payment link.

2. Payment is authorized

Customer authorization: Customer provides their bank account details and authorizes the transaction. This may involve logging into their bank account through a secure payment portal or linking their bank account to the payment provider’s system.
Verification: For first-time users, a one-time setup will verify and link the bank account, ensuring the legitimacy of the account details provided.

3. Transaction is submitted

Payment request sent: Once authorized, the payment request is sent from the cannabis dispensary’s system to the ACH network via the payment processor (e.g., Aeropay).
Data encryption: Customer’s bank details and transaction information are encrypted to ensure security and compliance with regulatory standards.

4. Clearing and settlement

Clearing house processing: The ACH network processes the transaction by debiting the customer’s bank account and crediting the dispensary’s bank account. This process involves several intermediary banks and can take 1-3 business days.
Batch processing: ACH transactions are processed in batches at scheduled intervals throughout the day, unlike real-time transactions with credit cards.

5. Notification of payment

Confirmation to customer: The customer receives a notification (email or SMS) confirming the successful initiation of the ACH payment.
Confirmation to dispensary: The dispensary’s payment system updates the order status to reflect that payment has been initiated or completed, depending on the stage of the transaction.

6. Settlement

Funds transfer: The funds are transferred from the customer’s bank account to the dispensary’s bank account. This is usually completed as quickly as a couple hours or may take up to two business days.
Bank reconciliation: Both the customer’s and dispensary’s bank statements will reflect the ACH transaction, aiding in reconciliation and record-keeping.

‍📖 Read next! How to pay with Aeropay.

Benefits of ACH for cannabis payment processing

100% compliance

ACH payments are fully compliant with state and federal cannabis requirements, unlike traditional debit and credit card payments. This makes ACH a safe, legal, and compliant form of payment for cannabis transactions.

POS integration

Integrate your ACH solution with your POS for real-time data syncing. This makes the checkout process seamless for customers as well as automated for budtenders—there’s no manual data entry and funds are directly transferred at checkout.

Online and in-store workflows

ACH payments are flexible, meaning customers can choose to pay online via pre-payment, or complete their payment in-store using payment links or QR codes. This flexibility drives customer ACH adoption and higher retention rates.

Free for customers

Your customers will be delighted to find there are no fees when they pay via ACH! Lower fees are a competitive advantage for your business, and they help you increase your average order amount.

Low merchant cost

Handling cash costs businesses between between 4.7 and 15.3 percent on average. In cannabis, those costs are even higher due to increased security requirements and additional bank fees for large cash deposits.

In comparison, ACH is considerably more affordable. There is typically a 1-3% fee per transaction, which is easily offset by a 25% increase in average customer spend when paying via ACH.

Faster processing speeds

ACH transactions process faster than traditional cannabis banking methods, improving cash flow and operational efficiency—so your money is in your account and usable much sooner.

Great customer experiences

ACH payments are the most convenient way for cannabis customers to pay. They can be done in seconds and the transfer of funds is very fast. This holds weight for shoppers who will be delighted to pay digitally.

In the same way digital payments improve customer experience, they increase retention. That’s because you’re able to avoid negative payment experiences, like when a customer:

Forgets their wallet (digital payments allow shoppers to pay with their phone)
Doesn’t want to pay a card-related fee (providers like Aeropay don’t charge customer-facing fees)
Runs into any sort of friction related to traditional payment methods (cash, cards, and clunky cannabis payment processes)

How successful dispensaries are using ACH

Thousands of dispensaries trust Aeropay to enable and process ACH transactions. Here are some of the most popular use cases for our cannabis clients:

Pre-payments

Offering pre-payment in a dispensary setting comes with a long list of benefits, including increased revenue and greater store efficiency. Learn more about cannabis pre-payments here.

ACH is the only compliant option for online pre-payments in the cannabis industry—meaning cashless ATMs, credit cards, and other cannabis payment solutions won’t work.

Aeropay’s online pre-payment feature allows customers to submit pre-payments online and capture them once they receive their order. Dispensaries enable authorized payments in advance to allow for easy order adjustments or cancellations.

In-store

Aeropay offers three unique payment options for in-store dispensary ACH transactions:

Static QR codes: Utilize a QR code customized with your branding at your checkout counter. Customers simply scan the code, enter the amount of the transaction, and confirm the payment. Your employee will confirm the receipt and complete the order.
Dynamic QR codes: Turn on Aeropay with one of our integration partners and allow enable dynamic payment QR codes at your point of sale. Allow customers to scan a QR code that automatically pulls through the order amount. The customer will confirm the payment and the POS will close the order. Learn more about QR code payments.
Payment links: Generate a unique payment link and share directly to your customers via email or text message. Learn more about ACH payment links.

Delivery

Enable online payments for cannabis delivery orders with Aeropay. It’s the same familiar sign up and payment flow—with capabilities for POS/driver routing integration, driver tipping, and more.

‍See how Aeropay helped Priscotty enhance their delivery services.

Deep dive: Understanding ACH in cannabis

Card networks in cannabis

Major card companies like Visa and Mastercard do not allow cannabis transactions on their network because marijuana is still a federally illicit substance.

ACH transactions enable a direct connection between customer and business bank accounts, so there are no card networks involved. This is why ACH is compliant for the cannabis industry.

PIN debit vs. ACH

PIN debit is a popular workaround used by payment processors in the cannabis industry. It looks and feels just like a debit transaction, but it is not actually compliant.

The reason stems from cannabis’ federal illegality and classification as a Schedule III substance.

Major card processors like Visa and Mastercard have strict policies against cannabis payments because of this classification.

To bypass these policies, PIN debit payment processors are coding cannabis transactions. Here’s how:

MCCs, or merchant category codes, are used to identify which industry the payment receiver is a part of. For example, a taxicab or limousine business would use the code 4121 to signal their industry type.

Cannabis PIN debit providers are using MCC code 5912, a classification for traditional drug stores and pharmacies, to hide cannabis transactions.

Merchants say this workaround is perfectly legal because it’s acceptable in Canada (where cannabis is federally legal), but that’s not the case in the United States.

Cashless ATM vs. ACH

Another popular cannabis-industry workaround for card payments is the “cashless ATM” transaction.

Cashless ATMs allow cannabis customers to pay with their debit card, enter their PIN, pay for their order to the nearest $10 and receive cash back in change. On the back end, the transaction is being disguised as an ATM withdrawal so card networks don’t realize the payment is made for cannabis.

Visa has issued stern reminders to financial institutions and dispensaries that cashless ATM cannabis transactions are a violation of Visa’s payment policies.

ACH processing times

Cannabis company ACH transactions are processed very quickly, often within a single business day, although same-day processing is climbing in popularity and more regularly offered.

ACH costs

While there are costs associated with ACH payments, they are lower than those of credit card processing fees—and significantly lower than cash handling costs. Plus, a small fee is easily offset by a 25% increase in average customer spend when paying via ACH.

The ACH impact for dispensaries

Digital ACH payments are helping cannabis retailers streamline the payment process and accept seamless, compliant digital payments. The impact has been overwhelmingly positive, leading to:

25% higher customer spend
30% increase in completed online orders
37% increase in online customers returning

Takeaway: ACH is the only compliant cash alternative for dispensaries

Add the cannabis industry’s #1 ACH solution today

Aeropay is the most trusted and largest ACH provider in the cannabis industry for a reason; we’re compliant, effective, and integrated with all your dispensary technology.

Contact our cannabis sales team to see our full payments solution and add ACH bank transfers at your dispensary today.

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