May 8, 2017 | Categories: Payment Processing Back to list

How The Payments Industry Came To Accept Legal Marijuana

How The Payments Industry Came To Accept Legal Marijuana

The use of cannabis is starting to experience a wider acceptance, especially in the United States. It has been legalized in several states, medical marijuana is more readily available through legitimate resources, and the sale of it contributes a significant amount to the U.S. economy.

However, selling cannabis remains banned in several states and merchants specializing in this area or cannabis related products still face restrictions in collecting payments due to federal law.

This makes it difficult to find a payment processor willing to offer payment processing to this industry. Merchants are often limited to specialist or high risk merchant service providers to collect payments, but then getting a bank account isn’t easy as so few of them are willing to take on such clients. Nevertheless, with the growing acceptance of cannabis, there are calls for these restrictions to be lifted so marijuana businesses can compete on a more even field.

The Use of Medical Marijuana

One of the biggest changes has been in the use of medical marijuana.

In 2016, it became legal under some circumstances to grow cannabis in Canada for personal use to treat medical conditions. In Australia, the growing and manufacturing of medical marijuana is a burgeoning industry, with the market estimated to be worth $100 million a year, according to the University of Sydney Business School.

However, it’s the United States that has frequently been in the headlines for its relaxing of the laws as more states deem it legal; marijuana has now been ‘broadly legalized’ in more than twenty states in the U.S. and its legal for leisurely use in eight states. By 2021, the North American market is set to be worth over $20 billion, and with this predicted expansion comes a greater need for payment processing and banking facilities.

Payment Processing Difficulties the Marijuana Industry Faces

As detailed in the Orange County Times, under federal law cannabis is a schedule one narcotic, Because of the potential legal issues many banks and payment processors tend not to do business with the industry in case they are accused of money laundering.

In addition, merchants in the marijuana ancillary’s industry were faced with further difficulties in collecting payments when well-known payment processors like PayPal and Stipe stopped processing payments and closed several accounts. Moreover, with a Trump government now in power, there are concerns there will be a deeper crackdown on marijuana, leading to more banks and payment processors blocking out merchants.

Getting a legitimate business bank account also remains a major obstacle. Out of the 11,000 U.S. banks, just 300 of them allow cannabis business owners to set up accounts, according to figures from the Credit Union Times. And even if a business owner can get a bank account, they’ll still face difficulties when trying to find a payment processor that will take them on.

When they do find a payment processor, many merchants selling cannabis/cannabis related products say they don’t always know which companies they can really trust. Also, the merchant will often be forced to pay much higher fees due to the high-risk nature of their business and their limited options – some payment processors in this sector charge up to eight percent.

What Options Are Available to Cannabis Owners?

The lack of facilities for merchants has left many of them with no other choice except to impose cash-only restrictions; this further limits their business potential as most consumers prefer card transactions.

Moreover, the cash-only approach leaves merchants vulnerable to security problems, and there have been some high-profile robberies. However, merchants have found other solutions to accepting payments.

Some use cashless ATMs, but this doesn’t always work out. In 2014, hundreds of merchants lost their accounts after a crackdown by payment processing companies, and left them without a means to collect their money unless they took cash.

Other payment processors use a closed loop system, and some will allow accounts for the cannabis industry – they just don’t advertise the fact. Bitcoins have also become popular among merchants.

However, there has been a slight shift with credit unions accepting accounts; Credit unions are likely to accept more cannabis merchants in the future, according to the Credit Union Journal by permitting the use of cashless ATMs.

The industry could be further helped if proposed changes to the banking laws are passed.

Are Banking Laws Changing?

As detailed in the Cannabist recently, Congressman Ed Perlmutter has announced plans for the Secure and Fair Enforcement Banking Act, which would permit banks to cater for marijuana businesses.

The industry has also received some support from Senator Elizabeth Warren. Along with nine other senators, Senator Warren signed a letter addressed to the Financial Crimes Enforcement Network urging it to issue guidance that would allow banks to work more easily with merchants in the cannabis sector; among the reasons Senator Warren has spoken out on the need for better access to banking is the security dilemma cannabis business owners can face.

The Future of Payment Processing for Marijuana Businesses

The Marijuana Business Access to Banking Act offered hope back in 2015 when the Obama government was still in power.  The bill offered “A safe harbor for depository institutions providing financial services to a marijuana-related legitimate business,” but the bill doesn’t resolve some of the major issues involving payment processing/banking for the cannabis industry.

One of the biggest problems remains the contrast between state and federal laws, but there are signs that this might be resolved over time. California – where the use of cannabis is legalized – has established a working group to smooth over these conflicts and perhaps provide more options for merchants in the future.


At a time when the cannabis industry in the U.S. is undergoing significant changes in the terms of acceptability, the sector is still hindered by a lack of access to payment processing and banking facilities. Further, the election of a Trump government has also left a question mark over whether the industry will face a further crackdown and yet more uncertainty.

However, there are also signs of positive changes with Senator Warren and Congressman Ed Perlmutter pushing for legislative changes in the sector that will allow the cannabis industry easier access to banking.


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