Cannabis payments glossary

Cannabis payments has its own vocabulary, and a fair amount of it is used loosely by vendors in ways that obscure what is actually being sold. These are the working definitions.

Payment rails

The underlying network money moves across. Card transactions travel the card networks (Visa, Mastercard, Discover). ACH transactions travel the Automated Clearing House network between banks. Which rail a payment uses determines which rulebook governs it, and in cannabis that distinction decides whether an account survives.

ACH (Automated Clearing House)

The United States network that moves money directly between bank accounts. It already carries payroll, rent, mortgage payments, and most recurring billing in the country. An ACH payment debits the customer's bank account and credits the merchant's, on federally regulated banking rails, with no card network involved.

Bank-to-bank payment

A payment settled directly between the payer's bank account and the payee's bank account rather than through a card network. Because no card is presented, card-brand rules and merchant category codes do not apply to the transaction.

Merchant category code (MCC)

A four-digit code assigned to a merchant when an acquiring bank boards the account, identifying what the business sells. It sets interchange pricing, risk treatment, which acquirers may board the account, what monitoring the transactions receive, and in some cases whether a card issuer will approve the transaction at all. There is no MCC for state-licensed cannabis retail, cultivation, or distribution.

Miscoding

Boarding a merchant under a category code that does not describe its actual business. For cannabis this is not usually deception by the operator; it is the unavoidable result of no accurate code existing. Network monitoring is built to detect the mismatch.

Acquiring bank (acquirer)

The bank that holds a merchant's card-processing account, boards the merchant, assigns the merchant category code, and carries the financial risk of the account. When a cannabis merchant is shut down, this is the party that makes the decision.

Issuing bank (issuer)

The bank that issued the customer's card and approves or declines each transaction. Issuers can decline by merchant category, which is one more layer at which a miscoded cannabis transaction can fail.

Interchange

The fee the acquiring bank pays the issuing bank on each card transaction, set by the card networks and priced by merchant category code. Interchange does not exist in an ACH transaction, which is one reason ACH pricing is structured differently.

Cashless ATM

A card transaction structured as an ATM withdrawal made at the point of sale. The amount is rounded up to a fixed increment, the purchase is deducted, and the remainder is handed back as change. It runs on the card networks and is coded as an ATM at a location that is not one, which is why these accounts are routinely terminated.

PIN debit routing

Debit transactions routed through networks that will accept them, again under a category code that does not describe cannabis retail. Frequently marketed as the compliant option; it carries the same structural exposure as any other card workaround.

Plant-touching business

A cannabis business that physically handles the product: cultivators, processors, distributors, and dispensaries. Plant-touching businesses face the strictest banking and payment restrictions.

Ancillary business

A cannabis-sector business that does not handle the product itself, such as software, packaging, security, consulting, or payment services. Ancillary businesses face fewer restrictions but are still frequently subject to extra review.

Underwriting

The review a bank or processor performs before boarding a merchant, covering licensing, ownership, financials, expected volume, and average ticket. A previously terminated account is visible to the next underwriter.

Merchant account

The account that lets a business accept payments and receive settled funds. In cannabis, the fragility of this account is the entire problem: it can be opened, operate normally for months, and then be closed without notice.

Account termination

Closure of a merchant account by the acquiring bank or processor. In cannabis it usually arrives without advance notice, mid-operation, and with funds already in the settlement pipeline retained during closeout.

Funds hold

Retention of settled and unsettled balances by the processor or acquiring bank while a terminated account is reviewed and closed. Holds of around 90 days are commonly reported. For a store doing real volume this is a working-capital problem before it is anything else.

Rolling reserve

A percentage of each transaction withheld by the processor for a defined period as protection against chargebacks and losses. Common in high-risk categories and a meaningful drag on cash flow.

MATCH list (TMF)

Mastercard's Member Alert to Control High-Risk Merchants, historically called the Terminated Merchant File. A database of merchants terminated by an acquirer. Being listed makes obtaining a new card-processing account substantially harder for several years.

Chargeback

A card transaction reversed at the cardholder's request through the card networks' dispute process. Chargebacks are a card-network mechanism; ACH uses a different and narrower process.

ACH return

An ACH transaction sent back unpaid, most often for insufficient funds, a closed account, or an unauthorized-debit claim. Returns operate under NACHA rules with defined timeframes, which is a materially different exposure profile from card chargebacks.

NACHA

The organization that writes and administers the operating rules for the ACH network in the United States. NACHA rules govern authorization, return timeframes, and data security for ACH payments.

Settlement

The transfer of funds into the merchant's bank account after a transaction is authorized. Settlement timing is a working-capital question, not a technicality: next-day settlement and a 90-day hold describe very different businesses.

Next-day settlement

Funds arriving in the merchant's bank account the business day after the transaction. This is the settlement timeline Greencard Payments provides on bank-to-bank ACH.

Average ticket

The average value of a single sale. Payment method changes it directly: cash caps the sale at what is in the customer's wallet, cashless ATM caps it at a rounded increment, and bank-to-bank ACH charges the exact basket total.

Point of sale (POS)

The system that rings up sales, tracks inventory, and in cannabis usually reports to the state traceability system. Bank-to-bank ACH acceptance runs alongside an existing POS rather than replacing it.

SMS pay link

A payment link texted to a customer so an order is paid before it is fulfilled. In delivery this means the order settles before the driver leaves, so the vehicle carries no cash.

B2B invoicing

Invoicing between businesses, in cannabis typically a cultivator or distributor billing a dispensary on terms. Running wholesale invoicing on the same platform as retail gives an operator one ledger instead of two reconciliations.

Independent Sales Organization (ISO)

A company that originates and qualifies merchants on behalf of a payment processor or acquiring bank. An ISO sells and refers; it does not hold merchant funds. Seay Payments, LLC is an ISO.

Section 280E

A provision of the United States Internal Revenue Code that bars businesses trafficking in federally controlled substances from deducting ordinary business expenses. State-licensed cannabis operators remain subject to it, so rent, payroll, marketing, and most operating costs are not deductible, while cost of goods sold generally is. The practical consequence is a record-keeping burden heavier than an ordinary retailer’s: COGS has to be substantiated in detail, which is difficult to do from cash drawer totals and becomes harder when a processor terminates and the digital transaction record stops mid-year. Section 280E is a tax rule, not a payments rule, but it is the reason payment records and clean ledgers matter more in cannabis than in most industries.

SAFE Banking Act

Proposed United States federal legislation intended to protect financial institutions serving state-licensed cannabis businesses. It has been introduced repeatedly and has not become law, so it does not currently change how card networks classify cannabis merchants.

Federally regulated banking rails

The bank payment infrastructure supervised under federal banking regulation, including the ACH network. Describing a payment method as running on federally regulated banking rails is a statement about the infrastructure carrying the money. It is not a claim that a cannabis business is federally compliant.