Mastercard Ban Rocks Cannabis Industry
Mastercard has made a hardline demand asking cannabis retailers in the U.S. to stop accepting debit cards payments. The reaction comes after the financial service company found out some shops accepted debit payments for cannabis purchases despite the federal ban.
Mastercard said in a statement Wednesday, July 26, that financial payment companies must stop allowing US customers to make legal marijuana purchases in shops with its debit cards. The reason is because marijuana remains federally illegal in the US. Customers across the 38 states where marijuana is allowed for medicinal and/or recreational purposes are typically forced to make cash payments.
Mastercard Unhappy for Cannabis Transactions
Mastercard’s latest demand means that banks and payment processors should immediately halt all marijuana transactions that are made with its debit card. This would certainly affect those businesses who have such an arrangement in place.
“As we were made aware of this matter, we quickly investigated it. In accordance with our policies, we instructed the financial institutions that offer payment services to cannabis merchants and connects them to Mastercard to terminate the activity,” Mastercard said in its statement.
“The federal government consider cannabis sales illegal, so these purchases are not allowed on our systems,” the statement continued.
As a result of the Mastercard order, retailers and suppliers will have to deal with increased amounts of cash, which brings its own set of challenges and risks, such as break-ins and robberies. Left with fewer options to pay, the move also affects cannabis consumers, who will likely see more ATMs at stores in the coming months.
Cannabis retailers usually arrange payments in cash. It’s less common for weed shops to offer their customers the credit card option. And paying with cash is a hurdle in the age of digital wallets, when you can make any kind of transaction with credit cards, but not when purchasing marijuana medicines.
The Mastercard ban on cannabis transactions is another reminder of the bleak reality surrounding legal marijuana business. Without federal cannabis reform, and especially banking reform, these types of setbacks will continue. And when they happen they always create new or additional financial and security risks for doing business.
Lack of Political Consensus for Banking Reform
Industry insiders and marijuana advocates have been quick to call yet once again for new legislation that will ease retail of cannabis where legal.
“This move is another blow to the state-legal cannabis industry and patients/consumers who want to access this budding category,” said Sunburn Cannabis CEO Braddy Cobb, criticizing Mastercard’s decision.
“We are taking a situation and making it harder for cannabis businesses to facilitate legal operators,” said Dawne Morris, co-founder of Proteus 420, a Californian company that makes point-of-sale (POS) and inventory software for cannabis operators.
“What this means is moving into [a] heavier cash process again, which increases theft, and potential for more (illicit) market operators to move back a space prior to legalization,” Morris said.
The U.S. House of Representatives has been attempting to pass a bill to either legalize marijuana federally or to provide safe harbor protections to financial institutions so that they can work with cannabis operators as they would work with businesses from any other sector. The most prominent bill is the SAFE Banking Act, which has passed the House seven times since its introduction in 2019, however, it has repeatedly failed to pass the Senate.
Also read on Soft Secrets:
- The Support for Banking Reform in the U.S. is Overwhelming
S
Stephen Andrews
