Startup Offers First Legal Way To Use Debit At Marijuana Dispensaries
Most people have come to understand that under federal law, the selling of cannabis in any form is still illegal. That’s why marijuana is being legalized in a state by state basis. That’s also the reason that some states allow recreational marijuana use while others are still strictly medical.
Since Federal law still outlaws the sale of marijuana the banking and credit card industry is standing back from this highly lucrative retail sector. Visa, Mastercard, Apple and Google all forbid working with marijuana dispensaries. This means that most sales of marijuana (both legal and illegal) still happen with cash only. Go to a dispensary that hasn’t found a creative way to accept plastic payments and you’ll probably find an ATM machine. But like the strip club and the casino, dispensaries are taking a much larger transaction fee for using their ATM.
The high cash nature of the business also makes it risky for some dispensary owners. Safety comes into play when your dispensary is taking in tens of thousands of dollars in cash on a daily basis. What’s more is that most banks don’t do business with marijuana businesses as well.
There are a handful of companies and startups that are catering to this cash problem. Banks like the Partner Colorado Credit Union have divisions that do banking for marijuana businesses and keep it transparent, and in compliance. Their division goes by the name Safe Harbor Private Banking.
Even with some banks and credit unions studying the laws and working under them, that still left a gaping hole for credit card processing. Creative dispensaries have found loop holes in the law or they are processing credit card and debit transactions under another business. When banks discover this, they often times shut the accounts down.
Forbes repots that with CanPay customers pay for their dispensary transaction by accessing the CanPay site on their smartphone. CanPay then generates a single use token or QR Code. The customer presents that token to the dispensary and the rest of the transaction is handled on their side. This is similar to the way PayPal works when paying at brick and mortar retail locations.
The ability to offer CanPay’s service takes a huge burden off dispensaries. First time dispensary customers and visitors usually go for their card first when trying to conduct the transaction. With CanPay they can use their cards. CanPay only works with banks and financial institutions that already have a relationship with the industry. The dispensary must bank with one of those institutions.
“It’s not an exaggeration to say that cannabis businesses face a huge array of challenges that other industries don’t even need to consider,” Tim Cullen, Owner of Colorado Harvest Company in Denver, who has deployed CanPay in three retail locations throughout the state, told Forbes.com “CanPay solves one of these pain points for us as a business.”
CanPay CEO Dustin Eide believes that the major credit card brands and banks will eventually step up to the plate. He thinks that will come in the next few years. Until then CanPay is the only solution for legally accepting debit card transactions at dispensaries. Eide is hopeful that when the banks do allow marijuana retail businesses, his relationships and pricing will still keep his customers with CanPay.