Compliant, transparent debit solution for cannabis merchants

Littleton, Colo.-based CanPay, established in 2016, has created a debit payment solution for the state-regulated cannabis industry. Designed to deliver a frictionless payments experience, the solution is fully compliant with U.S. Department of Justice and FinCEN guidelines, company representatives stated.

“CanPay started with one goal: to bring traditional and legitimate electronic payment solutions to highly regulated industries,” said Dustin Eide, CEO at CanPay. “Our experienced team of payments professionals spent years researching the unique challenges facing consumers and retailers in the high-risk cannabis industry and designed a stable, reliable payment solution.”

CanPay partners with select financial institutions to provide cannabis retailers and customers with a compliant debit payment solution within a closed-loop banking network. The program lowers traditional debit card fees and cash transaction costs, Eide noted. CanPay has launched in 17 states, with additional rollouts planned in accordance with evolving regulatory conditions.

Frictionless, low-cost payments

Eide acknowledged that cannabis dispensaries and business owners in other emerging industries may have difficulty establishing relationships with risk-averse banks and payment processors. They may find their merchant applications rejected or have their merchant accounts shut down shortly after opening. In addition to facing risks and inefficiencies related to cash-only businesses, cannabis merchants are frequently targeted by predatory ISOs that misrepresent the nature of their companies and transactions to processing networks, he stated.

“Before CanPay, there was no way for cannabis merchants to comfortably, legitimately and transparently process payments,” Eide said. “Nontraditional or off-shore payment solutions were expensive, inconvenient and slow to fund. Some acquirers tried gift card and cryptocurrency workarounds; we didn’t want to go that route.” CanPay was determined to work within state guidelines to make the payments experience for regulated cannabis businesses look and feel the same as payments everywhere, Eide stated. The company built a proprietary network and mobile debit app to facilitate fast, frictionless payments. Designed to lower costs, the solution eliminates consumer debit convenience fees and traditional merchant debit network fees.

Decoupled debit

The CanPay Closed-Banking Feedback Loop enables participating financial institutions to offer a fully compliant solution to high-risk banking customers while ensuring that only compliant transactions flow through the CanPay network. Consumers who sign up and download the CanPay mobile app authorize CanPay to initiate debits against their checking accounts through the automated clearing house network. They receive a single-use QR code each time they visit a dispensary, which is subsequently scanned by the merchant's system at checkout.

Eide pointed out that accepting CanPay can help merchants increase customer retention and loyalty by providing a consistent consumer experience. In addition to helping merchants increase revenue and reduce cash-handling costs, CanPay provides the following benefits:

• Stability: Merchants can maintain a consistent identity with payments industry service providers.
• Transparency: Merchants can transact and do business with full disclosure, using their DBA names.
• Reduced costs: CanPay offers sustainable, competitive pricing.
• Consistent customer experience: CanPay mobile app users will enjoy a traditional checkout experience.
• Safe environment: Reduced presence of on-premise cash makes retail environments safer for merchants and consumers.
• Higher average tickets: Customers have been proven to spend more when they pay electronically.
• Add-on selling opportunities: Merchants and sales associates can upsell at the point of purchase because customers haven’t predetermined what they are going to spend.
• Attract new and returning customers: CanPay users will see stores that accept CanPay.
• U.S.- based transactions: Merchants will not have to rely on expensive offshore solutions; all CanPay funds flow through financial networks based in the United States.

“CanPay retailers must be affiliated with a CanPay approved financial institution to participate in the network,” Eide said. “The financial institutions and technology partners in our proprietary network have a deep understanding of cannabis merchants and safely and efficiently process their electronic debit payments.”

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