Square's reversal moves cannabis payments closer to the mainstream
Square is changing an earlier ban on cannabis payments and is conducting a pilot, raising the possibility that cannabis merchants may get greater access to banking and payment processing.
Legal cannabis merchants have long had to rely on alternative payment methods while more traditional financial services companies stay on the sidelines as the legality of cannabis plays out in states and the federal government.
In an email, a Square spokesperson said the fintech is currently conducting “an invite-only beta for some CBD products.”
Square told Forbes it closely watches evolving public policies and strives to create new opportunities for clients. Until recently, Square has refused to process all cannabis related purchases as they fall under the category of “any illegal activity or goods” in its Terms of Service.
The opportunity to process payments in legal cannabis industry is massive as it brought in more than $7 billion in revenues in 2017 and is expected to eclipse $24 billion in 2025.
But there are headwinds for payments processors, such as Alt Thirty Six, which have to manage federal and state laws. Additionally, the federal ban on cannabis has created an opportunity for businesses trying to meet the needs of cannabis dispensaries that don't want to rely on cash-only payments. That's attracted closed-loop debit networks such as CanPay, cashless ATMs, digital currencies, and blockchain solutions such as the Tokes Platform.
In Canada, where cannabis was federally legalized for recreational use in 2018, Visa, Mastercard and American Express have agreed to process cannabis purchases made with their cards.
Hemp was legalized when President Trump signed the 2018 Farm Bill, clearing potential path for CBD products derived from Hemp. Cannabis plants must contain less than 0.3% THC in order to be classified as hemp.