Marijuana Merchants Take Debit Cards with GreenStar Workaround
GreenStar Payment Solutions, a venture of SinglePoint, Advanced Content Services and GreenHouse Payment Solutions, is offering debit card acceptance to legal marijuana dispensaries through the use of cashless ATMs.
Customers run transactions at the ATM in the dispensary, which prints out a receipt for the approved transaction. The customer then takes the receipt to the cashier to make a purchase and receive change as cash.
The company is not running the debit transactions over the Visa or MasterCard rails, says Greg Lambrecht, CEO of SinglePoint. The transaction at the ATM is passed from the customer's bank account to the merchant's bank account via automated clearing house transfers.
Some states have passed laws legalizing marijuana but because the federal government hasn't ruled on its legality, banks and payment processors are hesitant to take the reputational and legal risk of servicing cannabis merchants. Because of their trouble finding banking relationships, such merchants rely heavily on cash, which can be dangerous and hard to manage.
This year, the Financial Crimes Enforcement Network issued guidance meant to assure banks that doing business with legal marijuana shops was OK, in an effort to bring dispensaries out of the shadows.
"We saw the movement of Colorado and Washington opening up cannabis for recreational use and thought this could open up all 50 states very radically," Lambrecht says.
While GreenStar currently enables only debit card acceptance, the company would like to build more advanced point of sale terminals, ATMs and loyalty programs, says Lambrecht. If the federal government makes cannabis legal, the company will start accepting credit cards, he says.
The venture's terminals are currently used by more than 100 marijuana dispensaries, Lambrecht says. "We're doing anywhere from $500 to $1,000 a month in transactions at each dispensary," he says.
GreenStar charges consumers a $2 fee per transaction when they use the cashless ATM.
The joint venture serves recreational marijuana dispensaries in Colorado and Washington. It also works with providers in the 20 states where marijuana can be purchased for medical use.
Medical marijuana sales generated more than $2 billion in revenue in 2013, according to IBISWorld, a market research provider. The anticipated growth in 2014 is 23.1%, according to the research.
"A lot of people in this industry are calling this the land grab, like the gold rush," Lambrecht says. "The amount of investment that has come into the cannabis business is just amazing. There's a huge opportunity for business people to legally get into the vertical."
SinglePoint launched in 2006 as a text message-based mobile payment service (a year before the iPhone launched, catalyzing the consumer smartphone market). The company sent consumers a text-message link to a mobile landing page, where the user would enter credit card information.
SinglePoint plans on using a similar model to employ a loyalty program with the dispensaries. The consumer will use a dispensary's numerical code to join the mobile club and receive special offers, says Lambrecht.
Other companies providing services for the marijuana industry include GrowLife, which offers retail point of sale software and Cal-Bay International, which is developing a prepaid card for licensed dispensaries to buy from growers.
Citadel EFT, a credit card processor, is planning to build an alternative payment network for marijuana businesses. The network will not require the use of automated clearing house transfer or credit or debit cards.
The struggle to find banking and payment services isn't exclusive to marijuana merchants; gun and ammo sellers, adult entertainment companies, mug-shot galleries and Bitcoin-based startups also have trouble because of the moral reputational risk or the regulatory environment.