One of the greatest difficulties for the marijuana industry – since its beginning – was a lack of access to banking. Federal statutes defining marijuana as a Schedule I narcotic have meant that banks agreeing to handle a marijuana company’s finances would risk criminal charges for money laundering.
As it still stands, Visa and Mastercard have made it explicitly clear they will not work with marijuana retail companies until the federal government changes the law and legalizes the drug. But that could mean opportunity for some other financial firms willing to take the risk.
Now, an app called CanPay has announced the creation of the very first debit payment solution available to buyers of cannabis in Colorado, Washington and Oregon.
This is an important adaptation for a few reasons. The first is that most people take for granted that they can use their credit or debit cards anywhere. That’s not true at marijuana dispensaries. At some locations, dispensaries will provide an on-site ATM so that customers can easily access immediate cash. However, those machines often charge $5 per use.
On top of that, because dispensaries and pot shops can’t maintain bank accounts, they have to deal in all-cash. That means there is a significant security risk, which requires a greater investment in staff and personnel.
Some dispensaries say they already accept debit and credit cards, but as the CanPay CEO pointed out, some are using MasterCard and Visa solutions not approved or endorsed by those firms. Marijuana businesses and dispensaries that have set up bank accounts often do so by misleading the bank as to the nature of the operation. This can be risky for all parties involved and if/ when the bank does discover it, they close down the account, which can cause business to come to a grinding halt.
Visa and MasterCard aren’t the only companies to reject marijuana merchants and customers. Google and Apple do as well. That means neither allowed CanPay to install its payment app in their mobile stores. For this reason, the company had to build a separate website to set up the app. The company says for this reason, the site is more secure than payments made by debit or credit card.
According to Forbes, the way it works is the customer pays for the transaction by accessing the site on their smart phone. The CanPay app then offers a single code or token. This is then offered to the retailer, who pays the transaction fee.
Our cannabis lawyers know all those who work in and near marijuana businesses face substantial challenges that most other industries don’t need to give a second thought. The issue of payment is a pain point for many cannabis operations, and if CanPay can solve it, that makes for a more effective business model.
The company reportedly only partners with financial institutions and depositories that already work in the marijuana industry. That ensures all parties know exactly who they are working with and that they are in compliance with all state regulations for each transaction.
CanPay executives say eventually, larger corporations will begin to enter the fray once the federal marijuana law changes (and there is confidence that it will). However, the hope is the business relationships established now will continue even when that time comes.
The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.
CanPay Debuts First Legitimate Debit Payment System For Cannabis Purchases, Nov. 17, 2016, By Debra Bochardt, Forbes.com
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