Unlocking The Payment Matrix Of The Cannabis Industry [Forbes]
The cannabis industry’s current operating standards mirror that of an illegal black market, especially when it comes to handling money, transactions, and banking. Transactional requirements are generally vague and there is a lack of understanding as to what is legal and what is not.
My friend and colleague, Will Yakowicz, recently detailed these challenges. A great example of this ambiguity occured recently when Visa issued a statement in December 2021 that the use of any Visa branded product or network in any way (including digital gift card, Debit card, and cashless ATM) was not allowed for cannabis transactions.
This news sent shock waves and chills up the spines of many business owners who were guided by their merchant service providers, point-of-sale systems, and payment processing companies, to unknowingly commit federal banking fraud by utilizing one of these “work around” payment methods. Cannabis operators were genuinely surprised to find out these practices are deemed illegal.
What remains unaddressed, however, is the use of non-brand payment methods, like ACH, as being presently legal. While there has been considerable movement within the government concerning cannabis legalization, there is still a long road to be traveled for modern payment practices to be unlocked.
Spending any amount of time in the cannabis industry, especially since the onset of the COVID-19 pandemic, will reveal that payment processing and banking are major pain points. Point-of-sale companies pop up overnight offering the next cannabis payment solution to the industry only to fizzle out in a matter of months, leaving dispensary owners and consumers even more frustrated.
For some time now, dispensary owners have been able to lessen the payment headaches by utilizing “cashless ATMs and Debit Card Pathways.” These “alternative pathways” have always been shaky at best.
What many business owners fail to understand is that all transactions in the cannabis space are deemed “high risk” according to payment industry standards. The “high risk” category is accompanied by much higher transaction costs and a slew of other restrictions. These “alternative pathways”, like cashless ATMs, seemingly allow cannabis companies to use payment rails without being subject to “high risk” costs or restrictions.
However, these “pathways”, popular as they may be, fly well under the radar. The Payment Card Industry’s stance is black and white. They state that their payment resources are off limits until federal laws change.
It seems as if the entire cannabis industry is operating under the notion of “it is better to ask for forgiveness than ask for permission” when it comes to payments. Until there is federal cannabis legalization, the payment landscape in this industry will continue to be riddled with complications.