Over the years, Cannabis has been legalized in some states for medical and recreational purposes. However, federally, it still remains a Schedule I drug under the Controlled Substances Act and is treated as an illegal substance.
Due to the murky legal status of the medical and recreational marijuana industry; Visa, MasterCard, Discover, and American Express have refused Cannabis payment processing on their networks. Thus, leaving merchants without access to credit card processing for medical marijuana. Major credit card processors will not provide merchant services to marijuana dispensaries till the issue is resolved federally.
No access to payment solutions has forced marijuana dealers to exclusively accept cash transactions, thus, limiting payment options available with dispensaries. Also, cash transactions have turned their customers and their ‘cash-only locations into targets of theft and robbery.
However, certain high-risk credit card processing specialists have started to offer solutions- that enable merchants to accept credit cards. These companies rely on loopholes or procedural gray areas in order to process cannabis payments. These Cannabis merchant service providers offer point of banking for MMJ dispensaries as an alternative method of card acceptance.
Point of Banking Systems
Marijuana merchant account providers have found a workaround that does not rely on major credit card processors like Visa, MasterCard, for processing payment. Marijuana credit card processing is made possible through a service called “a point of the banking system”. This system functions in the store as a PIN-based swiped transaction, but the actual processing of the payment is completely different from traditional credit card processing.
Point of Banking – The Process
To make payment,
- Swipe the card: the customer has to swipe their credit card/ debit card or ATM card, through a point of banking terminal. The terminal acts as an ATM. The only difference is, unlike ATM, no physical cash is ever withdrawn from the customer’s account.
- Enter the PIN and details: customer must then- enter the PIN, choose a type of transaction (in this case a withdrawal), and specify the dollar amount being withdrawn. Like ATMs, these dollar amounts are also in increments of five dollars ($10, $15, $25, etc.).
- The receipt generated to be signed by the customer: The terminal then prints a receipt for the customer to sign, and the merchant places a copy of that receipt in the register.
- Providing change: customer provided with the change to make up the difference. For example, a cashier in a dispensary would hand back $3.20 in cash for a $16.80 purchase made by a customer who selected a $20 withdrawal.
- Convenience fee: Cannabis merchant services providers encourage merchants to charge a ‘convenience fee’ (usually about $3.50) on each transaction, to cover the cost of the terminal/processing service. This fee comes from the pockets of customers. So, merchants should weigh a customer’s potential discomfort, against the convenience of offering him/her card payments.
Point of Banking for MMJ Dispensaries greatly reduces the amount of cash on site. The swiped payment receipts are deposited in the merchant’s bank account usually within three business days.
Contact Paybotic today to learn more about our cannabis payment processing system.