In the rapidly evolving landscape of Canadian cannabis retail, business owners constantly struggle to maintain a competitive edge and protect their slender profit margins. However, there's an added burden that is levied unfairly and applied without cause – the annual US $500 special merchant fees imposed by Mastercard on cannabis merchants in Canada. Cova Software, a leading advocate for cannabis retailers, is partnering with the industry to challenge these prohibitory fees administered without fairness and equity.
A letter signed by Cova Software, Greenline, Tech POS, Buddi, Retail Cannabis Council of Ontario, and multiple cannabis retailers, including Canvas Cannabis, Cannabis Xpress, Sessions Cannabis, HunnyPot Cannabis, Plantlife Cannabis, and SativaBliss Cannabis, has already been sent to Mastercard. Read the complete letter here.
Why Mastercard's Fees are Prohibitory and Unjustified
Since the legalization of cannabis in Canada in 2018, Mastercard has enforced an annual $500 USD (~$690 CAD) fee per merchant account under their Business Risk Assessment and Mitigation and Specialty Merchant Registration Program (SMRP). This charge is outlined in Sections 9.1 and 9.2.1 of their SPME Manual and was created for “high-risk” businesses. The issue with this fee goes beyond its financial impact- it was fundamentally unjust at the outset. In the early days of cannabis legalization, some might argue that caution was warranted. However, with the degree of regulatory oversight and an industry-wide chargeback rate as low as 0.5%, there’s absolutely no justification for this fee. The legal Canadian cannabis industry is thriving, and cannabis must not be categorized as a risky business by Mastercard any longer.
Mastercard vs. Visa: Why MasterCard is offside
The contrast between Mastercard and Visa couldn't be starker. Upon legalization, Visa refrained from imposing such charges on cannabis retailers. In an industry where every dollar is scrutinized, Mastercard's $500 fee becomes a significant annual burden. It's also worth mentioning that no other card network in Canada levies such a fee on the industry. This particular approach solely by Mastercard leads us to question its basis and intent.
The Canadian Cannabis Industry: Proven Safety and Reliability
After five years since its legalization in Canada, recreational cannabis can no longer be labeled as "new." The industry has demonstrated remarkable safety and reliability, evidenced by chargeback rates significantly lower than card averages from other regulated sectors, such as alcohol. The safety record of the cannabis industry is well established, with extensive data as evidence, dispelling any notion that it poses a significant financial risk to Mastercard.
Why Mastercard Must Change Its Stance
We must emphasize again that no other major card brand imposes such a fee on cannabis retailers in Canada. The assessment of the US $500 fee lies squarely with Mastercard. This fee is passed down to credit card processors, who sometimes mark it up even more, and it's then passed down to the merchant, eating into their profits. What is even more troubling is that if a merchant decides to switch processors, they are charged the fee again within the same year, compounding the financial burden.
Mastercard has categorized cannabis as part of its Business Risk Assessment and Mitigation (BRAM) program which includes many other industries. However, it's imperative to recognize that most of these businesses are actually risky, unlike the Canadian cannabis industry. Hence, we appeal to Mastercard to remove cannabis merchants from this program.
How Cova Software Supports the Cannabis Industry
Cova Software stands at the forefront of the fight against these unjustified fees. We have joined hands with Canadian cannabis retailers and technology service providers to petition Mastercard for a change in their stance. We firmly believe that the time for collective action is now. As an industry, we have matured, evolved, and proven our reliability and commitment. By banding together and advocating for fairness and equity, we aim to secure just treatment for every cannabis retailer in Canada.
The Path Forward
Mastercard holds the key to abolishing this unjust fee, and we hope that they will recognize the cannabis industry's evolution and the evidence of its safety and reliability. We call upon Mastercard to provide a written commitment to eliminate this fee immediately. Doing so would earn Mastercard the commendation it deserves for making the right decision.
In conclusion, the Canadian cannabis industry is thriving and mature, and it's high time that Mastercard aligns its practices with the current realities of this dynamic sector. Cova Software and our partners are proud to champion the cause of cannabis retailers and service providers in our quest for fairness and equity. Together, we can create a level playing field for the cannabis industry and ensure that unjust fees become a thing of the past. Click below to sign the petition now.