September 11, 2016 | by Staff
Even though several states have legalized the use of cannabis and more are expected to do so in the near future, the plant remains illegal according to federal law. This technicality has constantly been a challenge to cannabis businesses where it concerns the options that they have for payment processing. Things are definitely better than they were for the cannabis business pioneers, but there is much room for improvement as only a small fraction of financial institutions such as banks and credit unions actually allow for payments to be received by cannabis businesses.
Many of those who manage to secure a bank account, which is a task in itself, still find it challenging to acquire payment processing services from most providers. As a result, most cannabis businesses are forced to operate on the cash-only model. This model is an inconvenience for many customers, the business will potentially lose sales and they will also have to deal with the concerns of having large amounts of cash on hand in their retail stores.
The number one concern when operating a cash-only business is crime. If the word gets out that a retail store regularly has large amounts of cash on hand, it can be tempting to robbers, as several cash only dispensaries have already experienced first hand. Unfortunately for cannabis businesses these kinds of threats are very much a reality; and all because they do not have the same access to all the business banking facilities and services that non-cannabis related businesses do.
Having a lot of cash hanging around on your cannabis retail store location can also be very tempting for weak willed employees. When you operate a cash only business, especially one that is successful, you will always run the risk that a staff member will seek and find an opportunity to make off with some cash. The more successful the business is, the more cash will be on hand and the more tempting it will be for everyone who works there. Internal theft is a real concern for cash businesses in general and not just for those in the cannabis industry.
The records in a cash only business are just not likely to be as correct as those that also take credit. Credit has to be processed and approved at the point of purchase and this automatically leaves a nice, detailed paper trail. This paperwork will show the actual amounts for every transaction and so there is little or no room for error when calculating the accounts of the business with these records when compared to the likelihood of error if the accounting is to be done manually.
Solving this payment processing problem within marijuana-related businesses will mean that customers will have more payment options and get better service from their favorite cannabis retail locations and or service providers. This type of convenient service will undoubtedly attract more customers, which will most likely mean more sales for the business. In the end that this is what it's really all about and so now we will look at some solutions to this payment processing issue that has been plaguing the industry since its inception.
Several companies like PayQwick have presented themselves as solution to the payment processing problem. Typically the customer will load money into their account and then they will be able to make purchases online. The concept is very similar to PayPal. Once they have money loaded in their account, they are able to make payments using an online App or a physical card from the service provider.
One of the most popular alternatives to having legal payment processing facilities in a cannabis business, especially in retail shops, is to have an ATM at the location where persons can get the cash that they need to pay for their purchases. This method works for many but some cannabis retailers fail to inform the ATM companies about the true nature of their business, putting them at risk for federal charges if a problem arises.
The typical scenario with a cannabis dispensary hosting an ATM onsite to facilitate cash transactions will involve the customer simply using their card to get cash from the ATM machine and then making their purchases. Some cannabis retailers however, use a ‘cashless’ ATM system where the customer will swipe his/her card at the point of sale terminal, enter their PIN code and send funds directly into a cash account for the business.
There are already signs that things are improving. Increasingly more financial institutions are seeing how lucrative the cannabis business is and they are taking steps to make their services available to these businesses. As more states relax their cannabis-related laws, more financial institutions will be encouraged to get in on the action.
In the event that the federal marijuana laws are somehow changed and it becomes legal on a federal level, these payment issues will virtually disappear. With initiatives the Marijuana Business Access to Banking Act, we are slowly getting to the point where the federal status of marijuana will be faced with reform. The act has been pending in congress since 2015 and if does get approved it will totally transform the way that payments are processed in cannabis businesses.
Categories: Cannabis Payments
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