What you should know about marijuana credit card processing


Mar 9 2019

Since the push for cannabis legalisation began to bear fruit at the start of this decade, legal cannabis has become one of the fastest-growing industries in the US. Despite recreational being legal in only 10 states—Alaska, Arizona, California, Colorado, Connecticut, Florida, Maine, Maryland, Michigan, Nevada, Oklahoma, Oregon, Vermont and Washington—it is currently worth a massive $10.4 billion and employs 250,000 people, making it bigger than both the 3D printing and self-improvement markets.

Like any nascent industry, it has its teething problems. However, the legal cannabis sector and the small businesses that operate within it face additional challenges because of the inconsistencies surrounding marijuana legislation nationwide.

While other retail businesses face relatively few limitations in expanding beyond their state, legal cannabis dispensaries and shops struggle to attract the same level of support due to federal law.


Legal cannabis and the banking sector

Although marijuana is legal at state level in more and more places, it remains illegal at federal level. Most major banks are federal-backed institutions, which creates complicated risks for the bank itself and the investors that fund it. In most cases, the risks outweigh the benefits and banks can make their profits elsewhere.

For this reason, many medical marijuana dispensaries and recreational marijuana shops find it difficult to accept card payment in-store or online because major banks are reluctant to participate in the sector. This forces legal cannabis businesses to operate as cash-only entreprises, which has two main drawbacks.

It’s a customer deterrent: Not being able to accept card payments can cause businesses in any sector to lose out on potential customers. The legal cannabis industry isn’t just about serving existing clientele, but attracting new customers who may have never used marijuana before. Nowadays, retail customers assume they’ll be able to pay by card and may back out of a purchase rather than go to the nearest ATM to get cash out. Accepting card payments also adds a sense of legitimacy to a business, which is particularly important for a sector whose goods were only recently made legal. The restrictions placed on small businesses in the cannabis sector by banks’ inability to support them limits their ability to retain customers and attract new ones.


It puts them at risk of crime: Because they’re not able to accept any money via card payment, dispensaries and shops are often forced to keep large amounts of cash on the premises, making them attractive targets for robberies. In 2014, 17% of dispensaries in Colorado were victims of a robbery. The disparities between state and federal law and the impact this has on banks compromises the security of legal cannabis businesses and puts them at a disadvantage compared to other retailers.


Credit card processing for marijuana dispensaries

To legally accept payment without going through a major bank, dispensaries and recreational shops are turning to marijuana payment processing solutions. These card systems allow customers to load credit on to a card that is then used to pay for cannabis at a local legal dispensary.

However, the relative lack of regulation governing these merchant accounts and who can create a processing solution means that plenty of providers are little more than opportunists. It can be hard for both dispensaries and their customers to figure out which payment processing solutions they can trust.

Although the systems themselves are often as straightforward as they sound in practice, the legislation and technology behind them requires a level of expertise that many cannabis entrepreneurs don’t have yet. Choosing the wrong provider can do even more harm to your business than being cash-only will. That’s why it’s crucial to opt for a marijuana credit card processing solution built by legitimate financial and legal experts.


About LINX

LINX is the United States’ leading provider of credit card processing and merchant account services for legal cannabis suppliers, such as dispensaries and shops. Our solution has been developed over 15 years, combining the expertise of financial, legal and technical experts to create a fully compliant marijuana payment processing system that supports the growth of a legitimate legal cannabis industry.

All transactions made using LINX are fully compliant with federal law, including the Financial Crimes Enforcement Network (FinCEN) and the Bank Secrecy Act. We are also members of the National Cannabis Industry Association (NCIA), the only US trade association for the legal cannabis industry. By using LINX, responsible cannabis businesses minimise all risks associated with the current market—operating as a cash-only entreprise, dissuading new customers, becoming a target for robbery and theft and non-compliance.

We want to help legitimate businesses become more efficient and spur the growth of a thriving legal cannabis sector, bringing it into an era of financial compliance despite the challenges. If you want to join LINX’s ever-growing network of dispensaries, sign up here.