Most people who aren’t a part of the cannabis industry may assume that cannabis credit card processing is similar to any other industry. After all, even the gambling and other high-risk industries can process credit cards. In reality, cannabis payment processing is much more complex than that, but fortunately, things are changing, as we’ll discuss later in this article.
A Cannabis Business Can’t Accept Credit Card Payments
While there are some businesses in the cannabis industry accepting credit cards, many are often doing so by gaming the system. Quite frankly, it isn’t worth the risk for a legitimate business. However, sellers get desperate because of a lack of cannabis banking solutions. All major credit card providers have stated that paying for cannabis using their cards is against their policies.
Americans have become accustomed to making purchases using their credit cards. However, most people reading this may be surprised to learn that most cannabis dispensaries can’t accept credit card or even debit card payments. So, some even accept money to their bank account.
One reason cited by experts is that cannabis is still a federally illegal substance, classified as a Schedule 1 controlled substance. That’s why major credit card brands, like AMEX, VISA and MasterCard, don’t allow these purchases.
However, the majority of cannabis sellers are trying to offer their buyers a quick, easy, and streamlined buying experience, something, like a cash-only approach does not cut it. It is second nature for a buyer to reach for their phone to charge a credit card, even when buying groceries at a local store. They earn loyalty points, and it is convenient.
Even though it may sound tempting to accept credit cards, unless you have a proven payment processing method specifically for the cannabis industry, as we provide at FLEX Payment Solutions, we advise that you avoid it.
The surge in the number of states passing legislation legalizing cannabis in one form or another has been a revolutionary step. This is a step unheard of since prohibition in 1933. Every year it seems that legalization, demand and normalization associated with cannabis have grown, which is an optimistic outlook on the industry’s future. However, little can be done if the current classification isn’t changed.
As a cannabis business right now or someone who wants to start one, what are your payment processing options? can you get a merchant account? That is what we’ll explore below.
Accepting Cash Payments – Marijuana Payment Processing
It isn’t uncommon for cannabis dispensaries to accept cash payments despite all the risks involved because they can’t get approved for cannabis merchant accounts. Even though cash payments are common in retail stores, they have their fair share of legal complications.
When transacting in cash, especially when selling in high volumes, it can be complex and can end up leading to unforeseen costs, which may be associated with managing the cash.
Cashless ATMs, AKA The ATM Loophole
How do you make cannabis-related purchases using your debit card? Well, for one, not how you would buy anything else. As the industry continues to grow, those selling cannabis are looking for better ways to sell their products, including using cashless automated teller machines or ATMs. However, in 2021 Visa issued a press release stating that Cashless ATM use or misuse, as they labeled it, was prohibited. This was aimed at those selling and buying cannabis.
The impact of this on the cannabis industry has been somewhat alarming since many businesses in the industry have become accustomed to using Cashless ATMs as an alternative cannabis payment solution compared to regular retail transactions.
What Does The Future Hold For Cannabis Payment Processing?
The future of cannabis payment processing promises to be brighter. In fact, FLEX Payment Solutions has already developed a proven, reliable service designed to effectively manage payment processing for businesses throughout the cannabis industry.
As legislation around cannabis continues to pick up steam in the US, and the federal government also seems more open to talking about cannabis and banking solutions, we could see a tipping point within the foreseeable future.
Federal authorities are already seeing the scales tip as legislation will continue to ease around financial guidelines regarding the cannabis industry. However, there is no guarantee that payment processing and banking may suddenly pivot in favor of the cannabis industry. So, banking may continue to be a challenge and credit card processors may not feel comfortable with the industry anytime soon.
Upcoming legislation to keep an eye on:
SAFE Banking Act
Primarily this act will allow financial institutions like banks to become involved in the sales of legal cannabis without worrying about legal action from the government. As of June 2022, the Safe Banking Act has passed seven times in the House of Representatives, 321 to 101. But it still has a battle to win in the Senate. However, Biden’s promise to reschedule cannabis will also probably make a difference in the next few months.
Schedule I Status Reclassification
This has been a legal problem since 1972. According to the UN World Health Organization, the world has already started removing and rescheduling cannabinoids and cannabis, which puts pressure on the US to do the same. President Biden’s announcement on cannabis reform included a statement about rescheduling cannabis.
280E and Cannabis Credit Card Processing Fee
The tax code 280E prevents cannabis sellers or producers from claiming expenses to help reduce their income tax. Over the years, many cases have been tried around 280E, and the best way to navigate the current law is to have a great tax accountant with experience working in the cannabis industry.
Final Word About Cannabis Industry
Cannabis payment processing, while a hassle right now, will change. Sure, the chance is slow, but it will happen, and with that change selling and buying cannabis will hopefully be like any other product. However, nobody can say how long this will take, which is why understanding cannabis payment processing right now is the only way to do business by navigating all the hurdles.
If you need assistance with securing a safe, reliable method to process payments for your cannabis-related business, contact FLEX Payment Solutions for a complimentary consultation today at (844) 353-9768 or [email protected].
