Most professional cannabis retailers know the struggles of collecting and making payments within the marijuana industry. For years, even in states where medical weed has long been legal, dispensaries and other marijuana-related businesses could hardly hope to have a bank account, let alone accept credit and debit payment cards. Visa and Mastercard refused to allow weed-related charges on their accounts, PayPal, eBay, and Square declined support for marijuana businesses, and even MetaBank, the largest ATM sponsor in the U.S., removed machines from perfectly legitimate cannabis retail stores. As a result, most shops operated on a cash-only business model, which was not only inconvenient for keepers and customers but exceedingly expensive and dangerous to business health.
Fortunately, because Colorado, Washington, California, and other states have welcomed recreational marijuana usage, the federal crimes division of the Department of the Treasury has revised how cannabis-related businesses can accept payments. Though you should verify your state and local regulations before making changes to your business, you might benefit by adopting any of the following payment solutions in your dispensary.
Online Merchant Services
When Colorado and Washington became the first states to allow recreational use, Visa and Mastercard released vague statements about preventing unlawful purchases but trusting local merchant acquirers to determine legality; specifically, Mastercard promised to “work with” merchants when marijuana purchases are made — though what “work with” means is nearly anyone’s guess.
Ultimately, these statements mean that credit card companies are willing to allow marijuana purchases in some states and circumstances. Thus, merchant services providers have sprung up to address the need of the burgeoning (legal) marijuana industry in states with appropriate regulation. With more online payment gateways expected in the future, companies such as Humboldt Merchant Services provide payment solutions to various high-risk businesses, including cannabis retailers.The benefits of using an online merchant services provider include convenience and speed — as well as flexibility and room to grow, should regulations on legal marijuana expand.
Bank Merchant Services
In the past, FinCEN, the criminal division of the Department of Treasury, did not prohibit banks from doing business with dispensaries — but it did make the process exceedingly difficult. Though FinCEN did not pursue banks providing merchant services for felonies, as assisting a marijuana business is a federal crime, the agency did require banks to file suspicious activity reports for the services they provide to cannabis retailers. Thus, banks were required to perform extensive background investigation of the businesses they hoped to support.
Fortunately, President Barack Obama instituted a non-enforcement approach – one that President Donald Trump has not rescinded – to these rules, so banks providing services to legal marijuana-based businesses would not be targeted by law enforcement agencies. While many banks are still hesitant to enter an industry with such murky legality, other banks are eager to capitalize on marijuana businesses’ abundant need and provide the services that will increase profits. However, no banks advertise their willingness to cater to cannabis retailers, so entrepreneurs are forced to approach local banks and credit unions in turn.
Before regulations on marijuana businesses’ finances were relaxed, many dispensaries turned to alternative payment systems that reduced their dependency on cash. PayQwick was a popular option marketed specifically to the marijuana industry. The service provides cannabis customers with cards or mobile payment accounts they can fill with cash to purchase marijuana and related paraphernalia. In effect, the service isn’t much different from Apple Pay, Google Wallet, and other mobile payment apps — except that it is reserved for marijuana purchases.
Additionally, you might consider installing a cashless ATM in your dispensary. While most ATM sponsors pulled machines from marijuana-related organizations in 2014, cashless ATM terminals allow customers to swipe debit cards to make purchases without cash. To make the transaction legal, payment processors hold onto the cash for a length of time before transferring it into your account. It’s easy enough to install terminals in your dispensary — but the service doesn’t come cheap.
Finally, you can consider using emerging cryptocurrencies to sell your product. Bitcoin, Monero, Litecoin, Peercoin, and others circulate outside traditional financial systems but can be easily converted into dollars, making them useful financial tools for blurrily legal businesses like dispensaries. Already, cryptocurrency startups are creating ATMs and POS systems to accept Bitcoin and others, and a few dispensaries in California and Arizona are accepting purchases made with the digital money. If your dispensary is digitally minded, this might be an option for you.
Cherilyn Zorilla is a content coordinator for Humboldt Merchant Services, assisting in providing informative, up to date information and insight into the cannabis industry. Her primary focus is payment processes and financial options for startups and business owners alike.