MWIP resolves a financial burden for those that need MMJ, while Visa, MC and American Express no longer allow the purchase of the product.
Timing could not be better for MWIP holders.
http://mmjbusinessdaily.com/2012/06/18/exclusive-medical-marijuana-dispensaries-no-longer-able-to-accept-visa-mastercard-as-of-july-1/
June 18, 2012
Exclusive: Medical Marijuana Dispensaries No Longer Able to Accept Visa, MasterCard as of July 1
Tags: ems, mastercard, medical cannabis merchant services, payment processing, visa
The main national company handling payment processing services for the medical marijuana industry will no longer accept Visa and MasterCard transactions from dispensaries, according to information obtained by MMJ Business Daily.
Electronic Merchant Systems (EMS) – which provides merchant accounts for medical marijuana companies via a partnership with Chesapeake Bank in Virginia – informed its MMJ customers of the decision in an email (see full text at the end of this post). The new policy is effective July 1.
The change covers both credit and debit cards, though the email says dispensary clients can still accept MMJ transactions conducted with Discover cards. EMS plans to send out another letter on Wednesday informing medical marijuana merchants to batch and settle all Visa and MasterCard transactions by June 30. EMS and Chesapeake Bank did not immediately return messages left by MMJ Business Daily.
The move is another blow to the medical marijuana business, which is already struggling with a host of challenges tied to banking and payment processing. Most banks refuse to open or service accounts from dispensaries and related businesses, and American Express cut the industry off last year. With Visa and MasterCard out of the picture now, much of the industry will be forced to adopt an all-cash business model.
While some dispensaries have worked out agreements with their local banks or offered vague, possibly misleading descriptions of their businesses to receive credit card processing services, most centers that currently accept cards use EMS.
Companies that facilitate business between EMS and dispensaries are now scrambling to adapt. Several of these companies contacted for comment about the development said they are touting alternative services such as on-site ATMs, which eliminate the need for patients to carry large amounts of cash when they visit dispensaries. Others are still vowing to offer credit card processing services, though dispensaries should perform their due diligence on companies making these claims.
“There are still legitimate non-cash solutions out there for dispensaries with a walk-in location, but proceed with caution,” said Michael L. Rupkalvis of The Transaction Group, which works with MMJ companies to find payment processing services. “If someone claims they can set up a merchant account for your dispensary, make sure they have medical marijuana dispensary listed as the business type on the application and medical marijuana as the product. Some reps will try and get an account approved by not putting the correct business type on the app, or what’s referred to as miscoding an application.”
Aside from making life harder for medical marijuana businesses, the development could exacerbate security issues for the industry, as dispensaries will now have lots of cash on hand.
“This is a disservice to the industry and communities around this industry,” Roger Neustadt, a principal of 420 Card Processing, said when contacted about the effects this will have on the industry. “The claim (by those opposed to MMJ) is that dispensaries increase crime, and this is going to tail right into that and support that notion because it makes them a bigger target.”
Aaron Smith, executive director of the National Cannabis Industry Association, called on the Treasury Department to quickly step in and remedy the banking situation for MMJ companies.
“The Treasury Department in our estimation has the ability to change regulations without an act of Congress,” Smith said. “It doesn’t make any sense regardless of what your position is on medical marijuana to force these businesses into a cash-only situation.”
Here’s the email EMS sent to its agents:
“In light of recent developments, we wanted to reach out and make you all aware of the latest news regarding Medical Marijuana merchants. Effective July 1st, 2012, MMJ merchants will no longer be able to accept Visa or MasterCard credit or debit cards, however, they can continue to accept Discover. All current MMJ merchants will be receiving a message on their May statements that reads:
[IMPORTANT NOTICE Please be advised that as of July 1, 2012 you will no longer be able to accept Visa and MasterCard credit and debit cards for payment. Discover cards will still be honored. We will contact you in the coming weeks to facilitate this transition. If this situation should change with Visa and MasterCard we will inform you immediately. The process for this transition is simple; all merchants need to do is make sure that they batch and settle their transactions at the end of the day on Saturday, June 30th. On July 1st, only Discover transactions will receive approval. Those merchants who fail to batch and settle on June 30th will receive an RB error and will have to call in to Client Services for assistance.]
We will be mailing a letter around June 20th that informs them of the need to batch and settle. Should you have any questions regarding this matter, please call your Agent Relationship Manager. As we informed the affected merchants, if this situation should change with Visa and MasterCard we will inform you immediately!”
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