Why Paying with Cards at Marijuana Stores is so Complicated – Shift Credit Card Processing

Why Paying with Cards at Marijuana Stores is so Complicated

It was breaking news when states declared cannabis a legal substance years ago. From the 1990s until recently, it was considered to be a Schedule I drug. But in the past several years, marijuana legalization movements have gained serious support. 

Now, there are recreational and medical marijuana stores, or dispensaries in twenty-nine states where adults can legally buy marijuana. 

However, the process of purchasing the substance can be complicated. Marijuana consumption may be legal in your state, but it’s still a banned substance at the federal level.

Federal marijuana laws trump state laws, leaving the cannabis market unregulated and excluded from financial services. If a credit card company were to lend any amount of money to a cannabis business, they would be liable for prosecution. 

Without the option to use credit or debit cards, cash is the primary method of payment at a cannabis dispensary. However, by limiting a customer to cash, their purchasing power decreases which results in lower sales revenues for marijuana stores. 

An Industry Without Credit

Credit card companies have detached themselves from the marijuana industry to avoid prosecution. In fact, no credit card company has a merchant code that recreational or medical dispensaries can use.

The cannabis industry faced yet another hurdle when the Cole Memorandums were rescinded. These memos gave medical cannabis dispensaries protection from lawsuits. However, in early 2018, then-Attorney General Jeff Sessions replaced the Cole Memos, leaving the cannabis market without any protection from financial lawsuits. 

Current Purchasing Options for Marijuana Stores

The many barriers make card payments at marijuana stores next to impossible. That leaves three general payment options: 


paying with cash

Many dispensaries consider cash more of a burden than a help. But, without banking services, cash is the only payment option for many.

Cash only payments means of payment harms dispensaries in several ways. To start, if marijuana stores only accept cash, the average purchase amount is significantly lower. It’s been proven that when people have the ability to pay with plastic, they spend as much as thirty percent more. 

Banks are afraid of servicing any sort of cannabis store for the same reasons credit unions are. The federal government could shut down their institution if they accept cannabis deposits. These legality concerns mean no bank support, which means no place to deposit cash.

As a result, all of the functions of a marijuana business are done in cash. These activities range from paying workers, buying from vendors, even taxes must be done in cash.

Cash can put customers at risk. In recent months, researchers at Ohio State University found that instances of armed robbery at recreational and medical cannabis dispensaries have increased. The researchers have connected this public safety risk to the large amounts of cash dispensaries have on hand.


withdrawing cash at an ATM machine

Many medical or recreational cannabis stores use different types of onsite ATMs to process payments. Generally, the ATMs found at a cannabis dispensary do one of two things:

1- Allow customers to withdraw cash from their bank accounts

2- Allow customers to exchange cash in their bank accounts for vouchers that act as in-store credit for the marijuana company this is called a cashless ATM

These vouchers are used to create a complicated workaround to federal marijuana laws. 

ATM-operating banks don’t want to do business with recreational or medical marijuana stores. As a result, the workarounds create the potential for bank fraud.

Industry experts caution customers to check their receipts from cannabis ATMs. Fraudulent machines will typically have an incorrect location or claim to be a different kind of business.

Using ATMs to provide or avoid cash transactions is expensive for both the business and the customer. Businesses that have ATMs on site must pay monthly fees to use the machines. These costs are often higher than normal fees because of federal marijuana laws. To offset these costs, businesses often mark up prices or reassign the fee to the customer.

These ATMs are expensive for customers too. When they withdraw cash using a standard ATM, customers must pay a terminal fee. If a medical or recreational dispensary has a cashless ATM system, even more fees are incurred.

In either case, prices are inflated from the workarounds that must happen to avoid breaking federal laws.

Mobile Payments

making a payment by mobile phone

Mobile payment apps were also created to bypass ATM transaction fees. These apps were made to act as the cannabis dispensary version of PayPal.

One of the most used electronic wallet apps is a company called PayQwick. PayQwick is an app that can be loaded with money from the customers bank account. Customers can then use that money to make purchases at contracting marijuana stores.

PayQwick has contracts with a number of popular locations across the nation including: 

  • Los Angles
  • Colorado Springs
  • Winter Park
  • Santa Fe
  • Vail Valley
  • Manitou Springs
  • Moses Lake
  • Summit County
  • Fort Collins and
  • Las Vegas

PayQwick is also among the few cannabis-related money transmitting apps that is approved by state regulators. In fact, the state of Washington has licensed PayQwick as one of the states two marijuana money transmitters.

Mobile apps are certainly an efficient way to process marijuana payments. However, the current scope is far less than ideal. Although PayQwick has contracts with dispensaries across the nation, it has only scratched the surface. Until electronic wallet payments are offered everywhere, they are only helpful to a tiny percent of the market.

A Growing Industry with Growing Needs

As legalized recreational marijuana became more popular, providing flexible payment options became even more important. States who allow recreational dispensaries to operate are shaping the cannabis industry.

They have provided statebystate guides to marijuana legalization and its benefits. Once the industry grew through legalization, industry support grew as well. Now, cannabis is a multi-billion dollar industry.

It has been these expanding profits that have allowed the industry to take shape. In Washington and Colorado, the first states to license a recreational dispensary, marijuana taxes were used to fund marijuana research.

In 2014, Colorado created the Marijuana Tax Cash Fund. Often shortened to MTCF, this fund takes a portion of the sales tax on marijuna products and donates it to cannabis researchers. During fiscal year 2017-2018, the MTCF awarded over twelve million dollars in grants. These research efforts have created several different tips for starting or operating in the cannabis space.

Colorado marijuana legalization created the first adultuse cannabis educational guides. In fact, using the cannabis retail sales to generate money for other programs is very common. Oregon, California, and Washington marijuana taxes all do similar research. 

One notable product of this research has been the creation of a cannabis concentrate guide. This is an educational guide that made strain profiles for the hemp industries many different varieties of products. Guides were also created to codify legal info, gift guides and even a marijuana travel guide.

Research has also set out to help law enforcement. One of the problems with marijuana legalization is the increased risk of drivers operating a vehicle under the influence. This research set out to design a way for law enforcement to conduct roadside drug testing for marijuana.

In addition to the benefits of marijuana’s tax revenue are its therapeutic effects. Recently, a medical study done by the University of Nottingham suggested cannabis help with stroke recovery in adults.

Affiliate and influencer marketing are shaping how the public views cannabis. Now, dispensaries are marketed as social lounges that offer friendly lodging for customers.

The recent growth and maturity of the cannabis industry has been remarkable. Despite this formidable growth of the cannabis space, the issue of achieving credit card processing remains.

Achieving Credit Card Processing in Marijuana Stores

credit card processing in marijuana stores

It’s been established that credit card companies are avoiding the marijuana industry. However, that has not stopped entrepreneurs from creating new ways to accept credit. Just as dispensaries created cashless ATMs to accept debit cards, cannabis credit card payment options have been created.

In order to accept card payments, cannabis companies have had to rely on high risk processors. High risk processing is so far the only way to allow credit card payments at dispensaries.

These systems use encrypted technology to keep transactions private. When people pay with their credit card, the information is stored in what is called a block.  These blocks encrypt one another and form chains as more transactions are completed.

By handling transaction data this way, credit card payments act in complete accordance with federal laws even though it currently remains as a schedule I drug.

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