CanPay pushes cannabis debit card into California and other states
A debit-card payment company launched by a Colorado-based entrepreneur is aimed at cannabis retailers as an alternative to cash, the mainstay of the industry that received a huge boost in California with the January launch of recreational pot.
“Conducting business in a highly regulated industry can be expensive and frustrating,” said CanPay in its note to retailers. The company launched in 2016. “When it comes to accepting payments from your customers, you can still only accept cash. You know your customers want to pay with plastic and you’ve tried to open a merchant account to accept credit cards, but were either rejected outright or had your account shut down a short time later.”
North Bay banks have consistently expressed resistance to banking any business in the cannabis trade because the products remain illegal under the federal Controlled Substances Act.
“CanPay is the legitimate and stable electronic payment solution you’ve been searching for,” the company said. “By utilizing a proprietary network of financial institutions and technology partners that know exactly what kind of business you are conducting, we are able to process electronic debit payments at your stores.”
The free CanPay app is designed for smartphones. The company charges merchants about 2 percent of each purchase. CanPay, based in Littleton, Colorado, was founded by Dustin Eide. Colorado legalized recreational cannabis in 2012.
The service allows for cashless delivery of cannabis or purchase in a dispensary, Eide said, for face-to-face payment in person. “We are operational in over 50 dispensaries around the country.”
“It’s not using a debit card from Visa or Mastercard,” Eide said. “Those card networks prohibit transactions” for cannabis. “This is its own debit network. The customer downloads the CanPay app. We’re not allowed in the iTunes store or Google Play store,” he said. “Then they link their CanPay account directly to their checking account” the way debit cards are linked to a checking account.
“When they go in to make a payment or have a delivery with CanPay,” Eide said, “the money begins to transfer from their checking account directly to the cannabis business’s checking account.”
CanPay is not a payment intermediary. “We don’t receive the funds at all,” Eide said. The money “stays within the financial institutions. We are using the ACH network (National Automated Clearing House). CanPay never receives the money — a critical difference,” he said. “We are not storing everyone’s funds. It goes from the customer to the financial-services network to the dispensary.”
The money is processed by Safe Harbor, a credit union based in Denver that is “fully aware that these transactions are related to the cannabis industry,” Eide said. He seeks to insure that clients using CanPay operate in compliance with state laws governing cannabis business.
The CEO of Partner Colorado Credit Union, which operates Safe Harbor Private Banking, is Sundie Seefried. The credit union reported nearly $1 billion in 2017 transactions relating to cannabis.
On Jan. 4, 2018, Jeff Sessions, the federal attorney general, rescinded a 2013 memo from Deputy Attorney General James Cole that had suggested deferring to state law on cannabis prosecution except for large-scale criminal enterprises.
Partner Colorado Credit Union is regulated by Colorado’s Department of Regulatory Agencies. The credit union has assets of about $350 million, according to Mark Valente, deputy commissioner in the Division of Financial Services that handles credit unions. There are 37 credit unions in Colorado and roughly 100 banks.