Marijuana company Columbia Care is rolling out a credit card for customers to use at its dispensaries, creating a new payment option for a clientele that has largely had to deal in cash.
Like banks, credit card companies hesitate to get involved in the cannabis industry because the drug remains illegal at the federal level. That has meant most dispensaries around the country are only able to accept cash even though customers often spend more than $100 at a time. Many dispensaries have onsite ATMs, and some have systems that accept debit or ATM cards.
Columbia Care, which has a dispensary in the Jefferson Park neighborhood, has been testing its credit card in New York and plans to roll it out this month in Illinois, said CEO Nicholas Vita. Patients spend an average of $144 per visit at the Chicago dispensary.
“We have an industry where people have to use their debit cards or ATMs or cash to make purchases. It’s like 1974,” he said. “We’ve seen what happened when we introduced access to this capital, and it has a huge impact in giving patients access to the products they need and want.”
Patrons will fill out a form on a tablet in the dispensaries to get qualified, Vita said. The process is fast, and typically customers will be able to use their credit card to make a purchase on the same visit, he said.
Columbia Care is working with financial institutions and other intermediaries in each of the 12 states it operates in, plus Puerto Rico and Washington, D.C., on the credit cards. Vita declined to disclose the company’s local partner. The cards do not have fees, but the annual percentage rate for Illinois users will be 15.99 percent, Vita said. The national average annual percentage rate is 17.73 percent, according to Creditcards.com.
At the New York dispensaries that tested the credit card, customers bought 18 percent more per dispensary visit when paying with credit. That means people can buy larger quantities and come in less frequently, a perk for patients for whom traveling is difficult and for customers traveling long distances to the dispensary, Vita said.
“If you go to an ATM, you can only take out so much money,” he said. “If you go in and have the cash in your wallet, you can’t do much more than that.”
Vita also said that if customers are able to use a credit card to buy marijuana just like they would any other product, they’ll get used to buying the drug.
Customers who purchase cannabis for medicinal purposes typically spend between $120 and $195 per dispensary visit, said Chris Stone, CEO of Ascend Illinois. The total amount spent varies each week and throughout the state. Once Illinois dispensaries start selling recreational marijuana on Jan. 1, the price per visit will likely increase, Stone said.
Ascend’s dispensaries in Springfield and Collinsville accept cash and debit cards, Stone said. The company has been searching for the right mechanism to accept credit cards, but hasn’t found it.
Other solutions for processing marijuana sales do exist, but they are not widespread and have been controversial at times. Earlier this month, a cannabis delivery company sued one of its competitors in California, alleging the way it processes payments commits wire and bank fraud.
In other cases, payments have been processed offshore or in ways that bypass traditional credit card processing. For example, a dispensary may let the customer buy a gift card with their credit card then use that gift card to purchase marijuana. Or the dispensary purchase may show up on the customer’s statement as a flower shop purchase.
Some companies are rolling out ways to make electronic payments. Hawaii dispensaries started asking customers to download Colorado-based payment app CanPay in 2017. Customers used their checking accounts to pay through the app, which then transferred the money to the accounts dispensaries set up at a Colorado credit union. A California-based company called Zodaka also is working to roll out its bank-to-bank payment platform to dispensaries.
“This has always been an issue that has plagued the cannabis industry,” said Morgan Fox, spokesman for the National Cannabis Industry Association. “Since people have been looking for viable alternatives, people have been trying to fill that gap in lieu of better federal policy.”
Both state and federal lawmakers have pushed legislation that would protect financial institutions working with cannabis companies that comply with their local laws. Banks and credit card companies have said they would need federal protections to feel comfortable enough to wade into the industry.
For MasterCard, there is an issue with the inconsistency between federal and state laws, spokesman Seth Eisen said in an email.
“Our rules require our customers to conduct lawful activity where they are licensed to use our brands. The federal government considers marijuana sales illegal, but is currently not challenging state laws that legalize marijuana sales,” he said. “Given this complexity, we continue to monitor the situation.”
Currently, the only consumers purchasing marijuana at Illinois dispensaries are patients who use cannabis for medical purposes, but state legislators earlier this month approved a measure legalizing the recreational use of marijuana starting on Jan. 1, and Gov. J.B. Pritzker is expected to sign the bill. Illinois’ cannabis market is forecast to reach nearly $1.3 billion by 2023, according to a recent report from Chicago-based cannabis research firm Brightfield Group. The market could ultimately rival Colorado’s marijuana market.