Although cannabis retailers and their shoppers have become accustomed to the all-cash nature of the business, most customers still yearn for the convenience of being able to pay for their purchases with credit cards and debit cards, just like they would at any other business.
And retailers have the most to gain by allowing credit cards, as research shows the average ticket size increases substantially when they do. Over the past decade, numerous companies have developed solutions to skirt the banking regulations and other complications that have generally prohibited dispensaries from accepting credit cards, but as of today, only a handful have proven to be viable and compliant.
One of those companies is TruHarbor Merchant Solutions, a payment processing firm established specifically to serve the cannabis industry. The Illinois-based company works with adult-use and medical marijuana retailers across the country, as well as both brick-and-mortar and e-commerce CBD businesses.
TruHarbor was founded in 2016, but CEO Bill Schroeder says the company remained patient while developing its products and services, watching and learning from the mistakes of other credit card processing services as they “crashed and burned.”
One workaround that got other payment processing companies in trouble was labeling cannabis stores as something other than a cannabis store — a “health center,” for instance — thereby concealing the true nature of the business and constituting bank fraud.
For TruHarbor, it was imperative that everything was above-board, compliant and affordable for retailers.
“We needed to find a solution that was 100% transparent,” says Schroeder, who, along with co-founders Michele Urso and Rich Urso, has about 30 years of experience in credit card processing.
TruHarbor acquired a “text-to-pay” platform that allows cannabis retailers to accept credit card and debit card payments, while providing customers the convenience of paying with a card and bypassing the hassle of downloading a smartphone app. Retailers can also use the system to pay cannabis growers and manufacturers and other vendors.
For consumers, the process is relatively simple. When the customer is ready to pay, the budtender takes their phone number and sends the customer three questions via text message: name, phone number and email address. With that information, they’re automatically approved for a virtual checking account. The customer uses their credit card to fund the virtual checking account, then those funds are transferred to the dispensary.
According to Schroeder, the solution has more than 450 merchants actively on the program and none have had their accounts shut down.
Not only is the process safer because it reduces the amount of cash retailers must have on hand, but it also helps generate more revenue.
“Our data shows that within the first 90-day cycle the average ticket will increase 26%,” Schroeder says. “And that’s conservative. It’s usually considerably more than that. To use round numbers, if your average ticket was $100, it’s going to go up to $126.”
In competitive areas, it can also pull customers away from other shops once they realize they can pay with a credit card. Overall dispensary volume, including cash, typically goes up 10-15% once a shop starts accepting credit cards, Schroeder says.
“What we find is that once we get a handful of dispensaries in a certain area, others will soon follow because they lose business, because their customers will go somewhere else,” he adds.
The system works, in part, because it “doesn’t ride on the credit card rails,” Schroeder says. Payments work like an ACH transfer, similar to writing a personal check.
Plus, customers only need to sign up one time, and they’re entered into the system for any shop that uses TruHarbor.
Schroeder says consumers are easily trained on the TruHarbor system — especially younger customers who can avoid stopping at their banks or paying out-of-network ATM fees.
“I recently read an article that 60% of millennials would rather go to the dentist than go to their own bank,” he says.
Schroeder says the biggest hurdle for companies like TruHarbor is gaining the familiarity and trust with cannabis retailers. So many retailers were turned off by early credit card processors and systems that either didn’t work or were based on sketchy, if not outright illegal, workarounds.
“My industry has a little bit of a black eye because of their initial failures,” Schroeder says, which is precisely why TruHarbor played the waiting game for years, only launching on the market when the company had a compliant system that was fully ready to roll out.
That focus on providing cannabis and CBD retailers with a valuable service is even codified in the company’s mission statement: “Our position is that we refuse to sell a product that does not deliver exactly what we say it will do, and won’t partner with anyone that does not take on this position.”