By Max Miller
Paybotic
It's hard to dispute the benefits of fee-free payment processing. That's why so many ISOs and merchant level salespeople (MLSs) now offer businesses cash discounting and surcharging options, and are earning great residuals in the process.
For marijuana dispensaries and other businesses selling cannabis products, point-of-banking systems, also known as cashless ATMs, present a similar benefit scenario for PIN-authorized credit and debit card acceptance.
It's a well-known fact that marijuana businesses operate at a disadvantage to other businesses, like restaurants and auto repair shops. This places even more importance on the ability to offer money-saving services to this largely unbanked vertical.
It's a well-documented fact that most banks and credit unions have shut their doors to cannabis businesses, as have the domestic arms of the major credit card brands. That means traditional card acceptance is off limits. So are bank loans and government assistance. In fact, despite being classified as "essential" businesses in most states during the COVID-19 pandemic, marijuana businesses were locked out of the financial assistance available to other small and midsize businesses under the CARES Act and subsequent relief programs.
Legal sales of cannabis across the United States are soaring, exceeding $17.5 billion in 2020, according to cannabis research firm BDSA. And because of the reluctance of financial institutions and the credit card networks to open up to cannabis businesses, a big chunk of that total was transacted in cash.
All that cash flowing into dispensaries and other cannabis businesses is a recipe for disaster. In the Portland, Ore., metropolitan area, for example, cannabis dispensaries were robbed, burglarized or looted more than 100 times between March 2020 and March 2021. As more states legalize marijuana for medicinal and adult recreational uses—37, plus the District of Columbia and several territories have done so to date—the costs and risks associated with handling massive amounts of cash will surely mount.
Businesses legally selling marijuana and other cannabis products generate significant tax revenues for state and local governments. In Washington state, taxes collected on retail cannabis sales last year outpaced taxes collected on alcohol sales, according to an analysis by the Marijuana Policy Project. Since 2014, when the first two states (Colorado and Washington) legalized adult recreational sales of marijuana, states have collected nearly $8 billion in taxes on these sales, the MPP reported.
Legal cannabis businesses also find themselves in the unenviable position of having to pay more in federal income taxes than other legal businesses. That's because Section 280-E of the Internal Revenue Code prohibits these businesses from claiming traditional business expenses—cost of security, marketing, rent and utilities, payment processing fees—because cannabis remains illegal under federal drug laws.
Cannabis shops can only deduct the wholesale prices they pay for cannabis products. This applies to all state-sanctioned cannabis businesses, whether they cater to medicinal or adult recreational customers.
With the income tax deck stacked against them and most traditional sources of business finance closed off, cannabis businesses must find other ways to reduce overhead. Fee-free payment processing saves them money on card processing and reduces the cost of handling and securing the mountains of cash they collect on daily.
Card payments initiated through point-of-banking terminals process through regional ATM networks, which unlike the credit card networks, don't prohibit transactions tied to legal marijuana sales. The payments are PIN authorized, and post as debits to customer checking accounts (in the case of debit cards) or as credit card cash advances.
Consumers are accustomed to paying convenience fees when accessing cash from ATMs. Many pay convenience fees to withdraw cash from ATMs located at or near dispensaries when the only in-store payment option is cash. Convenience fees are a time- and money-saving proposition for dispensaries and their customers/patients. Plus, it makes the dispensary POS experience more like that of every other business.
In time the laws and regulations that prevent cannabis shops from using the credit card networks will change. But why wait? ISOs and MLSs can sell these businesses a fee-free way to accept card payments today, with point-of-banking solutions. 
Max Miller is founder and CEO of Paybotic, a payment processing company specializing in high-risk businesses, including cannabis businesses. Contact him at max@paybotic.com.
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