Payment System Architecture for the Colorado Pot Industry

The Colorado (CO) pot industry suffers from the war on drugs; the industry requires a payment system architecture that cannot use common settlement procedures available to all other commercial enterprises. Headline: Government Hypocrisy Makes Payment Architects Drool (excuse the puddle).

CO needs a bum’s pocket (small value gross real time payment system) for its pot industry, and I thought I would sketch out a design.  

Step 1: Assign a public account number to all payees. The number only allows credits to the account, no debits.

Step 2: Give payers a private number associated with a funded account. The funded account might be the same account as the public payee account, just assigned a separate number.

Step 3: Write a clearing application, which receives a message from the payer to move funds to a payee; moves the funds electronically; notifies the payer and payee of the results.

Step 4: Create a club of merchants and their customers. The club’s business is to serve its members but not participate directly in the marijuana trade. When members deposit money to their accounts the club pools all the money in a financial institution account but keeps track of money with normal accounting methods.

Payers will fund their accounts using the regular payment system infrastructure. Payers then go to any establishment connected to the Bum’s pocket. Retailers of all kinds should be able to join this new merchant payment hub. The payer initiates a payment to by using the publically accessible payee account number as a destination for the funds already in their account. The club’s clearing system moves the money to the correct account. Whenever a member wishes to cash out, the club deposits their money in a bank account if the member is fortunate enough to have one or pay cash otherwise.

It may be hard to convince a financial institution to create a bank account for the club. However since the money deposited at the club comes from private citizens and not marijuana businesses it should not be denied access to banking services. I encourage any reader with legal training to comment on whether this payment hub runs afoul of the bank blab everything act.

Next Blog: A clearing house for barter services