Why Is Cannabis Credit Card Processing So Complicated?

cannabis credit card processing

When most Americans make their first trip to buy cannabis, a substance that’s legal in many states, and stores need a license to sell, they assume that swiping their credit card should be enough. 

While people may conduct research online before they buy cannabis, they often don’t check how to pay for it because the assumption is that it should be like any other product they buy at any other regular dispensary. However, people soon see the Cash Only sign at the register. So, the next question is: don’t you guys accept credit card payments? Unfortunately, most, if not all, perfectly legal marijuana dispensaries can’t accept credit or debit cards. It is not that they don’t want to. It’s just that the companies, aka credit card companies, don’t allow them to. The alternative is perhaps using the in-store ATM machine, but most people may not want to incur additional fees for it and thus will leave empty-handed.

Cannabis Payment Processing is A Big Problem with An Easy Fix

Unfortunately, what we described earlier isn’t an uncommon occurrence. Every day, some patients and customers enter a cannabis store to buy legal cannabis, assuming that the dispensary will accept credit cards. However, many soon realize that cash is king in the business. So, most people that venture out to buy cannabis carry cash with them. But why?

While states are legalizing cannabis, the substance is still classified as illegal at the federal level. Banks and other financial institutions need to comply with federal regulations and laws. Sure, there are a couple of workarounds, but only if banks are willing to take a few risks, but most don’t, which has put debit and credit card services out of reach.

While there is hope on the horizon, most marijuana dispensaries don’t have very good relationships with their payment processors and banks making cannabis payments more complex. They understand that credit unions and banks will often close their merchant account without so much as a moment’s notice, and then they are left with nothing.

Now, if a dispensary can open a bank account, it has a better chance of providing buyers with the ability to buy with their debit or credit cards in-store. Usually, this will mimic an ATM withdrawal, which the cashier will then apply to the customer’s purchase via an electronic voucher. This voucher system is called a “cashless ATM” or is technically referred to as a Point of Banking Transaction.

However, suppose a buyer does find a dispensary that somehow secured a cannabis merchant account and is accepting credit cards. In that case, it is often because the merchant account used by the cannabis dispensary is in the name of its parent company which has nothing to do with cannabis. The problem is that this is a risk because VISA and Master, for instance, don’t have a merchant code to record cannabis transactions. Then there is also the fact that a VISA representative issued a statement saying that transactions in the US involving cannabis or marijuana are not allowed on its network until a change is made to the prevailing federal laws.

That means any marijuana dispensary processing credit cards could foreseeably be taken down. This could endanger not only the cannabis dispensary but also all other companies associated with the parent company. It could even cause significant problems for the credit card processing service.

The easy fix is changing federal law, but that’s proving to be more complicated than most initially thought. But even if the law changes marijuana payment solutions will not instantly spring up.  This is why it is critical to partner with a cannabis payment processing company such as, FLEX Payment Solutions, that offers deep experience in high-risk industries and a proven solution for marijuana-related payments.

Congress Involvement In The Cannabis Payment Industry 

Starting in September 2019, the Secure and Fair Enforcement Banking Act of 2019 was passed by the then-elected members of the US House of Representatives. This was later called The Safe Banking Act. The Act allows banks to work with businesses selling cannabis without worrying about banking regulators taking action. The reason for the act was to make it easier for people in the industry to access the financial services they needed to sell and buy legitimate cannabis. This would reduce the burden of cash on the industry.

The Safe Banking Act was supported by Attorney Generals of 38 states that urged congress to pass it, but this was killed in the Senate. Later the House included a few parts from the bill into the COVID-19 stimulus bill, which was stripped from the bill by Senate Republicans. During the pandemic, many states deemed cannabis as being an “essential” business, but the senate’s refusal to take action and help these small businesses was a significant lost opportunity.

As of June 2022, the amended bill is awaiting the senate’s approval. So, cannabis businesses are left with finding and using alternative payment options. 

Final Word About Marijuana Payment Processing

Today, congress has the power to change this unfair status quo, giving legal cannabis dispensaries the ability to do business freely like any other. However, the political challenges caused by hurdles put in place by states where cannabis isn’t legal are major stumbling blocks for the bill in the Senate. But as many experts believe, it is only a matter of time before the bill passes and cannabis dispensaries can do business like any other. Though credit card processors may also take time to start offering services to cannabis dispensaries. 

In the meantime, if you need assistance with securing a safe, reliable method to process payments for your cannabis-related business, contact the FLEX Payment Solutions team for a complimentary consultation today at (844) 353-9768 or [email protected].

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