We’re thrilled at how far the cannabis industry has come and there seems to be a world of good things ahead for the industry. But we’ve got some grave concerns about the fact that, at least in the U.S., there is no cannabis credit card processing.
This is a big concern, on several levels.
Transactions for cannabis can only be conducted in cash and, in some dispensaries, debit. Accepting cash for product is tedious and leads to bigger problems:
- Dispensaries are attractive targets for robbery
- Security and armored trucks add significant expenses
- Cash often ‘warehoused’ or stored in-house due to transport and deposit limits
Conversely, those dispensaries that can accept debit transactions are adding needed simplicity to the consumer checkout experience.
Allow us to play devil’s advocate for a moment: If I was a hacker, I’d be very interested in targeting dispensaries to ply my (devious) craft. Why is that? Because debit transactions lead to bigger, better things, like consumer bank accounts.
Why consumers love debit transactions
We’re fascinated at the many ways consumers pay worldwide. By and large, Americans prefer credit cards (a good thing…we’ll explain) with debit transactions are a close second. Many European consumers also prefer the use of debit cards, which are attractive for several reasons:
- Debit card transactions are immediate, seamless and impact a consumer’s bank account in real time.
- Debit consumers, for budgetary reasons, characteristically prefer to know an accurate, up-to-the-minute bank account balance.
- Typically, those consumers who use a debit card do not overspend and are very conscious about living within their means.
Each is a legitimate reason for using debit to pay for goods and services. Debit consumers, however, should also be aware of the perils.
The credit card transactions are favorable for consumers
We’re big fans of Frank Abagnale, the real-life subject of the Steven Spielberg film Catch Me if You Can, who is an expert and renowned speaker on cybercrime and information protection. In a 2017 lecture he gave at the headquarters of Google (well worth viewing on YouTube), Mr. Abagnale discussed what he does to keep his finances and personal information secure.
His answer was short and direct: He uses a credit card. For everything. Never does he use debit. He calls a debit card the ‘worst financial tool ever given to the American consumer,’ which maybe an exaggeration.
His rationale is this: If his credit card information is hacked or stolen, it is the credit card issuer’s problem to fix, not his. The credit card issuer simply sends the hacked consumer a new card and handles the problem separately. While the use of a debit card has benefits such as real-time transactions to a consumer’s bank account, it can also be extremely problematic: the purchase is direct to the consumer’s bank account. Thus, when hackers penetrate a consumer’s debit card, and debit transactions have been made, the hacker has direct access to the consumer’s bank account.
It can take weeks, Mr. Abagnale said, for banks to replenish stolen funds from consumer bank accounts. When a consumer uses either a credit card, or their bank card as a credit card, however, it is the credit card issuer that assumes liability.
Since all U.S. dispensaries can accept cash and debit transactions only, it is actually more secure to pay cash for product.
Our point: Will we start reading about dispensary data breaches and hacks?
We fully believe that all businesses – especially e-commerce businesses – should prepare as if they’re the next data breach victim. However, dispensaries make attractive targets for hackers because of the fact that there is no cannabis credit card processing – only debit card processing and cash.
Along with many in the payments and cannabis space, we believe credit card processing for cannabis storefronts is desperately needed, despite the fact that cannabis remains against federal law.
No cannabis credit card processing, but solutions nonetheless
Instabill can offer licensed cannabis storefronts a solution similar to a debit card or mobile wallet: a card that is easily reloadable with the necessary amount of cash for cannabis purchases. The card scheme enables merchants’ payouts within 24 hours.
To find out more about Instabill’s cannabis credit card processing options, our merchant account experts are available for a conversation at 1-800-530-2444, Monday through Friday from 8 a.m. until 6 p.m., U.S. eastern time.