Mastercard Will No Longer Allow People to Buy Weed Using Debit Cards
The banking industry's lame decision highlights the necessity of federal cannabis banking reform.
Published on July 27, 2023

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Mastercard is forcing payment processors and banks to stop authorizing cannabis transactions made using the company’s debit cards. 

Last week, the credit card corporation sent cease-and-desist letters to dozens of companies that have been quietly providing payment processing solutions to cannabis businesses. The company's decision will deal another serious blow to the legal weed industry, which has been struggling to provide convenient and safe payment options to medical and adult-use cannabis consumers.

"As we were made aware of this matter, we quickly investigated it,” a Mastercard spokesperson said, according to Reuters. “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. The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems.”

Federal law prohibits banks from providing services to any business that deals with illegal drugs, including cannabis. This restriction prevents dispensaries from opening bank accounts or accepting credit cards, essentially forcing them to operate on a cash-only basis. And not only is that an inconvenience to customers, it also poses a serious public safety risk. Cannabis shops tend to have huge amounts of cash on hand, which makes them prime targets for robberies.

Payment processing companies eventually figured out a way to help ease the weed industry's financial woes. Smaller financial institutions set up middleman services, like cashless ATMs and PIN-debit systems, that allow dispensary customers to conveniently pay with their debit card. Most of these processors charge hefty fees for this service, which has generated millions of dollars in revenue for them.

“More people have migrated to PIN debit in the last year and a half as the cashless ATMs have had issues,” said Tyler Beuerlein, chief strategic business development officer of Safe Harbor Financial Services, to Bloomberg. “If the PIN debit solutions go away, it leaves people back with ACH or cash.” 

ACH (automated clearinghouse) payments are safer for cannabis businesses, as they authorize a direct transfer from a customer's bank account. This method is less convenient for customers, though, because they must provide their bank routing number and account number for every transaction. And returning to cash-only sales further increases the risk of burglaries.

Lawmakers have attempted to help resolve these issues by creating a banking exception for state-legal weed businesses. The House of Representatives has passed the SAFE Banking Act, a bill that would do just that, on at least six separate occasions. The Senate rejected the bill every single time, though. Senate Majority Leader Chuck Schumer is finally working to advance similar legislation this year, but the bill may now end up getting rejected by the Republican-dominated House.

Chris Moore
Chris Moore is a New York-based writer who has written for Mass Appeal while also mixing records and producing electronic music.
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