Fiserv gets on board with pot shops

Fiserv opened an avenue for payment card acceptance at cannabis dispensaries: the Accel debit card network. Cannabis is an industry bursting with cash, largely due to federal law that classifies it as a dangerous drug and card brand rules that prohibit the processing of cannabis purchases on their networks.

The existence to these roadblocks has led to a series of one-off solutions to cash acceptance, like prepaid cards, digital wallets and cashless ATMs, all of which have been frowned upon by financial institutions and the card brands.

Now Fiserv has decided it's time to get into the action with a solution that avoids Visa and Mastercard prohibitions. And for good reasons: there's a lot of money to be processed. Last year consumers spent an estimated $15.2 billion at state-authorized retail pot shops. The estimated spend could reach $171 billion by 2028, according to MJBiz, a media and events company that serves the cannabis industry.

A way to bypass roadblocks

Fiserv is allowing cardholders within the Accel network to make card-present, PIN-based mag-stripe purchases at POS terminals in states where cannabis sales are legal, stated Carol Specogna, senior vice president, network business at Fiserv. This way Fiserv bypasses the roadblocks put up by the Visa and Mastercard networks for processing these transactions.

Accel is an ATM/POS network that Fiserv acquired as part of its purchase of Elan Financial Services from U.S. Bancorp in 2018. About 3,100 financial institutions participate in the network, which serves an estimated 3 million merchant locations.

"Customers can continue to use their primary debit cards to make purchases at dispensaries in states where [cannabis] is legal, without having to switch their preferred payment method or remember to bring cash," Specogna said in an email. "This ensures smoother transactions for the customer and dispensary, as well as additional card loyalty for the [card-issuing] financial institution."

Business debit cards for non-cannabis purchases

The federal government classification of cannabis as an illegal substance not only inconveniences consumers; it also, and perhaps more importantly, precludes cannabis dispensaries from maintaining checking accounts at financial institutions. One result is that dispensaries must use cash when paying for goods and services. But now Fiserv has a solution for that problem, too.

According to Daneen Cady, Fiserv's vice president, network product strategy, the Milwaukee-based firm is partnering with financial institutions through the Accel network to issue business debit cards to licensed pot shops.

The solution enables these businesses to transact securely over the Accel debit rails and helps financial institutions diversify their portfolios by expanding into this emerging market. The only caveat: cards issued to dispensaries cannot be used to purchase cannabis.

"Licensed cannabis businesses can use their debit cards for standard business purchases like office supplies, display stands and POS devices, both online and in store, leading to better purchasing power," Cady said.

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