Cannabis is a disruptive industry. Within a few short years, it transformed from an underground culture to becoming regulated “essential businesses” during the COVID-19 pandemic. The pace of change is simply astounding with projected 2020 U.S. cannabis revenue ranging from $15 to $19 billion dollars. Clearly, long-held attitudes are changing and this helps normalize the entire cannabis community. A 2019 Gallup poll revealed that 66 percent of Americans favored legal cannabis, but when it comes to cannabis sales, federal banking laws have not adapted to consumers’ new attitudes. Cash remains king as if banks and cannabis credit and debit card processing companies did not exist. This limits dispensary and delivery purchases because customers may have limited cash on hand, or choose not to use a dispensary’s ATM machine. Thankfully, options exist for dispensary card processing in 2020 and we’re honored to help guide your journey to newfound opportunities.
The BLAZEPAY Solution for Dispensary Card Processing
Credit and debit card processing technology known as Point of Banking (POB) is a steadfast ally of the cannabis community. It enables dispensaries and mobile delivery services to accept electronic payments. POB systems, otherwise known as a “cashless ATM,” allow customers to use their debit or credit cards by making pin-based withdrawals from their accounts. However, cash is not part of the process. Instead, a receipt or voucher is placed in the register drawer. A customer “withdraws” funds in $5.00 or $10.00 increments, so if a sale comes to $72.00 and the customer withdraws $75.00, they receive $3.00 in cash from the budtender. From the customer’s perspective, the payment process feels like a routine shopping transaction. They swipe or insert their card into the small BLAZEPAY processing terminal provided by our partner, industry-leader Dejavoo. The process benefits the dispensary because the transaction seamlessly integrates with the BLAZE Retail cash drawer to track money as it leaves the drawer. This reduces the number of human errors and ensures the numbers are correct at the end of each shift. BLAZEPAY also provides tipping for budtenders, so Point of Banking transactions don’t negatively affect their income. Everybody wins.
BLAZEPAY provides a real-world solution by accepting all major cards provided you have your pin number, with no barriers for customers. If you have a cannabis merchant account we can quickly have BLAZEPAY up and running, typically within a few business days. To avoid system delays, BLAZEPAY utilizes multiple processors to ensure consistent payment processing. On the recordkeeping side of things, all payments have a corresponding transaction ID linking each deposit to specific transactions ensuring compliance with the “Know Your Customer” and “Anti-Money Laundering” banking regulations.
Federal Regulations and Suspicious Activity Reports
Dispensary owners know that cannabis merchant processing options are extremely limited. This is primarily due to one overarching fact; major banks and credit unions are regulated by the federal government and cannabis remains illegal under federal law. This creates a high level of risk for any commercial bank and for now, most decline cannabis merchant accounts. Bank officials fear the dreaded SAR, which stands for Suspicious Activity Report. A SAR obligates financial institutions to report any “suspicious” criminal activity. This includes filing a SAR for cash transactions exceeding $10,000 on a daily basis or any other transaction that might signal criminal activity. This includes money laundering, and large cash deposits raise red flashing warning signs which of course is a problem for cash-based businesses like cannabis dispensaries. It does not matter whether the business is in complete compliance with state and local cannabis regulations or the “Cole Memo” issued by the Department of Justice in 2013 during the Obama administration. The Cole Memo essentially precludes U.S. Attorneys from going after legal cannabis businesses (and individuals) that are in compliance with state laws and regulations.
Under the federal Controlled Substances Act, companies may not assist in the commission of any cannabis “crimes” including providing financial services. However, in February 2014, the U.S. Treasury Department offered banks compliance guidelines for a “Marijuana-Related Business” (MRB) under the Bank Secrecy Act. In theory, the Department’s FinCEN guide provides compliance advice, but it still considers MRB activity to be illegal and retains enforcement options. While the Motley Fool reported that Bank of America, Wells Fargo, and JPMorgan Chase quietly offered account services to select cannabis businesses, the bottom line is that for most financial institutions the heightened compliance and SARs reporting requirements deem it simply not worth the risk. But banking is only the first layer, banks must comply with the credit card companies’ compliance standards in order to issue credit cards through the bank. In reality, a federal law enforcement action against a bank may jeopardize the bank’s standing with the major credit card companies such as Visa®, MasterCard®, American Express®, etc. For most financial institutions, it’s not worth potentially violating the card providers’ terms of use and losing access to credit card services for their traditional clients as well.
Currently, 33 states, 3 U.S. territories, and Washington. D.C. have medical cannabis programs in some form, and 11 states permit adult-use sales. In September 2019, the House of Representatives passed the Secure and Fair Enforcement Banking Act of 2019, known as The Safe Banking Act. The Act openly permits banks to work with cannabis businesses without fear of federal banking enforcement actions. The Act’s purpose is “to increase public safety by ensuring access to financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses.” While the legislation died in the Senate, the House later included parts of the Act within a COVID-19 stimulus bill. Despite several states deeming medical cannabis as an essential service during the pandemic, the Republican-dominated Senate stripped the ACT from the initial stimulus bill. As an interim alternative to federal legalization (or removal from the Controlled Substances Act), the Safe Banking Act creates the framework for banks and credit card companies to provide dispensary card processing services. If Democrats retake the Senate majority and retain the House in 2021, the chances of passing the Act substantially improve.
With cannabis businesses moving solidly into the mainstream of the American business community, sometimes literally on Main street itself, low-cost banking services must be made available to these businesses. Even without full federal legalization, regulated cannabis merchants need the federal government to move forward in some way. The Safe Banking Act is an excellent alternative and we support its eventual passage.
Cannabis Merchant Accounts
Accepting credit or debit cards without a POB system is often the result of “grey market” methods for dispensary card processing, but these “workaround” methods carry inherent risks. A dispensary owner may open a bank account without informing the bank of its true nature, or perhaps list the parent company of the dispensary. Merchant codes are then used for wellness products, supplements, flowers, or other product codes that would be expected with the purported business. If the bank grows suspicious and learns the true nature of the dispensary, the bank could terminate the merchant account along with credit card processing for cannabis sales. This presents banking challenges because major banks and credit card companies must follow federal laws and regulations. In fact, credit card companies do not provide a merchant code for cannabis transactions as their policies do not permit cannabis purchases. According to a report at Creditcard.com, a Visa® representative stated in an email that “Transactions in the U.S. involving the purchase or trade of marijuana are not permitted on the Visa network, until such time as federal law allows.” In addition, a bank may revoke a cannabis merchant account at any time and without notice. This in turn can wreak havoc on dispensary operations until an alternate account is in place.
Fortunately, some banks and credit unions are willing to comply with the Treasury Department’s FinCEN guide and provide merchant accounts for MRBs. The tradeoff is that the fees tend to run much higher than a non-cannabis business account due to the additional compliance requirements. If a dispensary or other cannabis business can open an account, credit and debit cards then become a viable option for cannabis payment processing. With a cannabis merchant account in place, BLAZEPAY provides Point of Banking (POB) debit card processing that is fully integrated with BLAZE Dispensary Point of Sale (POS) Software.
The COVID-19 pandemic forced many dispensaries to adopt new ways to serve their customers. To help with in-store customer flow, curbside service, and delivery payments alike, BLAZEPAY easily facilitates mobile cannabis payment processing. However, without federal banking reforms or cannabis legalization, credit card use at dispensaries remains challenging. Debit card processing is much more common, and BLAZEPAY provides options for both credit card and debit card payments using the customer’s PIN. But the fact remains that without implementing routine credit card acceptance, the entire cannabis industry is placed at a disadvantage as customers are far less likely to make a spontaneous point of purchase decisions. A good example is a customer going to a CVS or Walgreens with a pre-planned shopping list and trying to calculate how much cash to bring, including the tax. For a basket full of goods, this would probably include a stop at an ATM to withdraw enough money. In a dispensary, a cash-only system not only results in fewer potential cannabis sales, but it also creates security risks due to the volume of daily cash transactions.
Most state governments are fully aware of these conditions but they cannot change federal banking regulations regarding cannabis sales. This, in turn, puts the dispensary and the cannabis community at a disadvantage for missed sales and maintaining accounting records. BLAZEPAY provides a robust marketplace solution without any shades of grey by accepting all major credit and debit cards. On the recordkeeping side of things, all payments have a corresponding transaction ID linking each deposit to specific transactions ensuring compliance with the “Know Your Customer” and “Anti-Money Laundering” regulations connected to SARs.
Choosing a Cannabis Dispensary Payment Processing Partner
When you’re exploring cannabis payment processing options for your dispensary or delivery service, it’s crucial to make the right platform decision. Whether its medical marijuana credit card processing or adult-use marijuana payment solutions, it is vitally important to research software and hardware compatibility, customer records integration, and state regulatory compliance. Many owners and managers may not know what questions to ask about dispensary card processing options.
Selecting the right cannabis credit card processor can be challenging. Many offer similar services, but what sets a good company apart from one that may be less diligent? First, because marijuana remains illegal at the federal level, credit card companies do not permit traditional credit card processing. Fortunately, BLAZEPAY offers a seamless, far less risky, and integrated solution for credit card processing in dispensaries. Some key points include:
1. Transparency and Reputation
Is the processing company upfront and candid about their fees? Are they immersed in the marijuana community and understand our unique needs? Have they abruptly terminated marijuana merchant accounts, and if so, can they provide good reasons for doing so? Are they a U.S. company, or are they a foreign, off-shore entity? Do they answer your questions in a friendly, straight forward way and actively partner with you to quickly solve any issues? These are just a few critical elements to consider when selecting a qualified cannabis credit card processing company.
2. POS Integration
Does the payment processing software work with a Point of Sale platform? BLAZEPAY integrates with the current BLAZE Retail cash drawer to account for money as it leaves the drawer. This process reduces human error and helps ensure accurate numbers at the end of the shift. Tracking is simplified as every payment generates a corresponding transaction ID, and automatic nightly batching is sent directly to the merchant’s bank account.
3. Reliability
What is their history of service outages, and will they openly share that information with you? To avoid unwanted downtime, BLAZEPAY utilizes multiple processors to ensure high availability for payment processing. To reduce the risk of instore hardware issues, BLAZEPAY uses industry-leading terminals made by Dejavoo.
4. Scalability
In addition to reliability, is the payment platform scalable? This certainly comes into play when an owner has multiple locations. The last thing he or she needs is different payment processing systems at each dispensary. Reconciling different payment platforms is frustrating, but it also wastes valuable time better spent on growing the business.
We bake scalability and reliable integration into the BLAZE family of services, including BLAZEPAY. In any business, working with a trusted partner is indelibly important. This is especially true in the cannabis industry, as regulations and compliance processes continuously change. For both dispensary and mobile orders, BLAZEPAY provides a robust and secure platform for better managing your cash flow, increasing cashless sales, and, most importantly, improving profit margins. When customers can rely on using their credit cards for in-store or delivery purchases, the data indicates they spend more per transaction. We encourage you to consider implementing a Point of Banking system to better serve your customers and increase efficiencies. We take pride in our open and collaborative customer relationships, especially when it comes to dispensary card processing with BLAZEPAY. There are many payment processing companies out there, and BLAZE clients know we’re dedicated to transparency and collaboration because they’re the core of our business philosophy.
Selecting a qualified and reputable cannabis payment processing company is a strategic and operational decision. “BLAZEPAY is an incredibly important customer payment solution for dispensaries,” said BLAZE CEO, Chris Violas. “Dispensary customers want to use credit or debit cards just like they would at any other legitimate business. We can help dispensaries and delivery services improve their per-customer sales by accepting card-based payments. Until cannabis laws change at the federal level, a POB platform is an essential, legitimate, and reliable way to improve the customer experience. Ask us how, and we’ll show you the way.”
Choosing the right dispensary processing partner provides positive, stable, and long-lasting Point of Banking operations that will improve your profit margins. We’re happy to answer any questions, so do not hesitate to contact our sales team. Guiding your new path towards reliable and transparent cannabis credit and debit card processing is a fundamental part or our mission, and we can’t wait to get started for your cannabis company.
