Tuesday, October 18, 2011

Bad Industry For Credit Card Processing

A Bad Industry For Credit Card Processing

credit card processingYou would not think there were industries out there which were bad for credit card processing but anything questionable to the United States Government is a good place to start.  Things like online gaming or overseas pharmacies might come to mind but as laws change regarding the use and sale of medical marijuana, the subject of credit card processing becomes a point of contention.
Let us first start by mentioning that to date there are sixteen states and Washington D.C. that all the use of Medical Marijuana.  This may be news to some people but America seems to be changing and regardless of how we may feel about it, if it is for sale, how is it paid for.  A medical marijuana dispensary is much like a regular pharmacy except they only sell one thing.  True there are different varieties and interesting products but these businesses distribute medical cannabis to patients with their State’s written permission to purchase it.  The problem is that for the dispensaries to accept credit cards for payment using traditional credit card processing is becoming more and more difficult.
The reason stems from the fact that the federal government is not making it so easy on the States which have passed legalization legislation to have total control over its sale and distribution.  It’s a slippery slope which leaves businesses owners as the unwilling pawn in this political game.  The Feds say that any business that accepts credit cards in this industry is supporting activity which is against Federal Law.  But in truth, credit card processing for these businesses operating in State’s where the sales are legal, have not violated any State Law.
So there we have it.  It is really nothing more than the Federal Government looking for ways to circumvent State’s rights and pushing back against the Country’s desire to at least open the debate for Federal decriminalization of marijuana.  The result has not been a ban on credit card processing for these marijuana collectives, but more of an unwritten rule. Banks providing merchant services for dispensaries so they can accept credit cards from their patients now feel like a target for federal regulators.  Even if nothing officially happens to these banks, many feel that it is not worth hanging around the wrong neighborhoods and inviting trouble.
This seems to be an effective ploy for Government so far but it will not last for long. Truth be told, marijuana collectives would rather not accept credit cards from customers because they have to pay transaction fees which dip into the profits when compared to cash.  Business owners in general accept credit cards as a convenience for customers and in competitive industries it is just the cost of providing good customer service.  But this new industry has little competition right now that makes large scale credit card processing worth the trouble for management.
The funny thing is that the real loser here is the Merchant Services Providers who are, of course, the banks.  When banks see profits being lost it won’t be long before they set their lobby loose on Washington and the pressure to relax Federal regulations will be in the form of holding back campaign contributions for elected officials.  This is when we will see changes in credit card processing for medical marijuana.