The Current State Of Cannabis Payments In The U.S.

Oct 22, 2021

It was a banner year for the Cannabis industry in 2020. Legal sales nationwide hit an astounding $17.5 billion, which was a 46% jump from 2019. According to BDSA, a cannabis sales data platform, the majority of the sales growth hailed from established “adult-use” markets in Colorado and in Oregon. Colorado increased sales by 26% to reach $2.2 billion. Oregon sales topped $1.1 billion, which was a 29% increase over 2019. 

In spite of the Cannabis industry and consumer demand bursting at the seams, the government is still not too keen on legalizing it at the federal level, prohibiting both its possession and use

As a result, most banks and credit card networks (Mastercard, American Express, and Visa), refuse to provide essential processing services to the industry for fears of violating the law. 

Current Status On “Marijuana Banking”

Marijuana-related businesses or (MRBs) have very limited access to any type of banking service. Banks are fearful of violating federal anti-money laundering and other laws for dealing with illegal marijuana operations. 

Although marijuana is becoming legal across many states, currently 36 states and the District of Columbia for medical use, no major bank in the United States will accept an MRB as a customer. 

The solution would have to come from the federal government in the form of “federal legislative action.”

Current Solutions For MRBs

Despite the cannabis boom and increasing calls for legalization, merchants have very few choices for taking and processing cannabis payments. Here are a few options that dispensaries can consider for the time being:

  • ACH or Bank Transfers

This is a perfect middle-ground solution to exclusively taking cash. ACH, or Automatic Clearing House, uses the process of transferring money between banks without having to handle checks, cards, or wire transfers. 

Since these transfers are all electronic, businesses can confirm if the funds exist. Then the customer’s funds can move from the customer’s account to the merchant’s bank account. 

  • Cashless ATM

It works almost identically as a traditional ATM where a customer inserts a debit card and then enters in their personal identification number or (PIN). The biggest difference is that the ATM does not dispense cash, because it is completely electronic.

Instead, it provides proof that funds have been debited from the customer’s account. It is then deposited into the merchant’s business account. Payments can only be in increments of $5. 

  • Cryptocurrencies

Although this digital currency has gained increased notoriety as the future of currency, many cannabis merchants are still not up to speed with the tech necessary to accept this form of payment. Then there’s the trust issue and lack of support should a payment falter along the way. 

  • Real-Time Peer-to-Peer Payments

These are instant transfers of funds from payer to payee. How it works is that the merchant will ask the customer to send a “real-time bank-to-bank or account-to-account payment”. Once the funds are received and confirmed, the merchant will either ship the product (if an online store) or allow the customer to pick up their order at the store. 

Unfortunately, there is a snag with this option. Current P2P payment systems such as Venmo, PayPal, Square Cash App, Zelle, and others, do not permit their networks to be used for the sale of cannabis. The only workaround that is available is for the retailer to conceal the true nature of their business. It is also believed that even P2P providers have disregarded their own rules. 

Moving Forward

There is no doubt that payment options for the cannabis industry are scarce. On the bright side, the legalization of medicinal as well as recreational cannabis use is gaining more acceptance nationwide. 

With this increase of acceptance will come an increase of opportunities to create more cannabis payment systems in the near future. 

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