Why Is It So Hard To Find Payment Processing for Cannabis Companies?

If you’re starting up in the emerging cannabis industry, you might have noticed that your banking options are limited. While there are places where it is easier to find a cannabis merchant account for credit card processing and other electronic payment types in Canada and a few other select countries with a legalized trade, legal medical and recreational dispensaries in the United States have had more difficulty. Even with wider availability in other jurisdictions, overall, processing options remain limited in this industry when compared to other similar niches in adult recreation and medicine.

Federal vs. State Jurisdiction

Cannabis payment processing remains difficult in the United States because of the conflict between state and federal laws. While most of the separation between levels of government in the U.S. is clear, court precedents in the latter part of the 20th century led to an interpretation of federal interstate commerce that placed all illegal drug enforcement at their doorstep. In most cases, the states still handled simple possession and small-scale distribution charges, but the potential for federal charges became a real threat in every case related to Schedule I and II drugs. That interpretation still stands despite many states moving to legalize cannabis, resulting in a standoff where citizens of a state following the law can still be guilty of a federal felony. The potential for jail time is mostly theoretical due to a series of restraining measures taken in Congress, like the resolution blocking the DEA from spending money on cannabis enforcement measures in states that have legalized it. Still, these measures are temporary and must be renewed from time to time, and that uncertainty has had a chilling effect on payment processing for cannabis businesses.

Federal Finance and Banking Laws

In addition to the issue of jurisdictional conflict, there are also federal laws aimed at organized crime and narcotics trafficking that could potentially be weaponized against many traditional financial institutions, despite the presence of clear federal guidelines for payment processing in those jurisdictions with legalized cannabis. So much has been done through temporary and informal measures that there is not a lot of assurance for key financial players at the major processors and credit card providers. The result has been a situation where a path to payment processing exists, but the process of getting a cannabis merchant account is still practically impossible for many businesses.

Changing Financial Options

Luckily, with international jurisdictions like Canada legalizing the cannabis trade entirely and entrepreneurial operators looking to fill a space neglected by the traditional industry, the options for cannabis payments and merchant accounts are changing. The pioneers in this industry take on a little extra risk relative to their counterparts serving other businesses, and there might be some reflection of that in the fee structure from some providers. This makes shopping around important. It’s also important to remember some key tips from other industries when it comes to shopping for credit processors and merchant accounts.

  • Costs vary a lot, but so do levels of service, and you get what you pay for
  • Make sure to check out the supported payment options before committing
  • Ask about deals for hardware and leasing rates if you don’t want to buy equipment
  • Review available financing options, included those offered by equipment providers

A lot of processors guarantee low rates by limiting you to support for just one or two major card providers. Additionally support for cryptocurrency is popular in the cannabis industry, and has been a mainstay of online retailers in legal jurisdictions for years. Reviewing the options and looking for ways to continue support for this industry-popular payment method is probably a wise investment. Finally, remember that you will need equipment, and check out whether your best deal comes from signing a contract with a processor who can also provide you with options for buying and leasing or finding a separate source for your terminals and pay stations.

Get Ahead of the Curve

In today’s cannabis marketplace, consumers expect to have to pay cash when they work with a dispensary. That’s changing, though, especially as legal seed dispensaries begin springing up with an ecommerce presence. If you want to capture a new segment of the market as it gains access to your product, you need to find a payment processor who is as forward-thinking as you are. That way, you’ll have the tools to establish your brand early, making yourself a trusted authority by the time the larger financial institutions are finally warming to participation in the industry. Establishing that early foothold is often the key to long-term success in emerging markets, so make sure your company is ready to compete.

Wholesalers and manufacturers in the industry need to consider the benefits of payment processing options as well, because by taking electronic payment they enable their own business partners to pay with more options. If you want to work in cryptocurrency, you need a reliable way to receive the money, and even growers can benefit from that access.

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