The currently murky legal status of medical and recreational marijuana dispensaries has led Visa, MasterCard, Discover, and American Express to classify dispensaries as illegal businesses, leaving merchants without access to credit card processing for medical marijuana. Until this matter is resolved at the federal level, it appears that the major credit card processors will not provide merchant services for marijuana dispensaries.
This policy has forced most marijuana vendors to exclusively accept cash transactions, limiting payment options for dispensaries and turning their customers and their cash-only locations into targets for robbery.
Point of Banking Systems
Some marijuana merchant account providers have found workarounds that do not rely on major credit card processors. Marijuana credit card processing is typically made possible by a service called a point of banking system. This system, also known as a “cashless ATM,” 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.
When a customer swipes a credit, debit, or ATM card through a point of banking terminal, the terminal essentially acts as an ATM that the customer might find at his or her bank. The only difference is that no physical cash is ever withdrawn from the customer’s account. Instead, the customer must enter a PIN, choose a type of transaction (in this case a withdrawal), and specify the dollar amount being withdrawn.
Just as with ATMs, these dollar amounts are in increments of five dollars ($10, $15, $25, etc.). The terminal then prints a receipt for the customer to sign, and the merchant places a copy of that receipt in the register before providing the customer with 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. This greatly reduces the amount of cash on site, and the swiped payment is deposited in the merchant’s bank account usually within three days.
Generally speaking, marijuana merchant services providers encourage merchants to charge a convenience fee on each transaction to cover the cost of the terminal/processing service. This fee comes at the customer’s expense, so merchants should weigh a customer’s potential irritation with a surcharge against the convenience of offering card payments.