Cannabis Payment Processing: How Lüt Built a Multi-Cloud System Without Single Points of Failure

From MJ Biz Con Week: A conversation with Mark Lewis on eliminating payment failures, next-day funding, and why budtenders earn 0.1% on every transaction

In an industry where payment processors can shut you down without warning and hold half a million dollars hostage, having a payment partner that understands cannabis-specific challenges isn't just convenient—it's essential for survival.

Mark Lewis of Lüt comes from a long line of finance, specializing in high-risk lending since his days in subprime banking. But what makes Lüt different isn't just their comfort with risk—it's that they built their entire cannabis payment processing ecosystem from scratch, eliminating the single points of failure that plague cobbled-together third-party platforms.

The result? PCI-DSS Level 1 certification (the same standard required to run Visa and MasterCard transactions), multi-cloud redundancy for 4/20 traffic spikes, and a closed-loop system that operates outside traditional card rails entirely.

Building From the Back Forward: No Single Points of Failure

Most payment processors in cannabis take existing third-party platforms, cobble them together, and hope everything works. When one component fails, the entire system collapses—and they can't fix it because they don't control the infrastructure.

"We built the ecosystem rather than purchase. Most people take a third party platform, cobble it together with other third party platforms, and then try to make something work. But if one single point of failure happens, they don't control the whole—the whole system breaks. We don't have that."

Lüt invested heavily in building their own platform from authorization to settlement, hiring over 40 developers from India's UPI (Unified Payments Interface)—the fastest-growing and largest payments ecosystem in the world. They also brought on five IBM engineers, including team members who built Watson, IBM's legendary chess-playing AI system.

These aren't contractors or consultants—they're full-time employees with subject matter expertise in every category. This level of investment in proprietary infrastructure is what separates serious cannabis payment processing solutions from temporary workarounds.

Understanding Open Loop vs. Closed Loop Systems

Cannabis payment processing requires navigating complex distinctions between payment types that most merchants never consider. Open loop systems run on Visa and MasterCard rails—the traditional card processing infrastructure. Closed loop systems operate peer-to-peer, outside those rails entirely.

Lüt specializes in closed-loop cannabis payment processing, launching their e-commerce and delivery solution in October 2024. This approach bypasses the Visa/MasterCard restrictions that have shut down countless cannabis operators mid-transaction.

The mobile technology eliminates the need to purchase expensive terminals. Dispensaries, wholesalers, distributors, and grow operations can download terminals onto any phone they currently own—and Lüt doesn't charge for the terminal software. If you need the physical phone, they'll supply as many as you want (for a fee), but the goal is flexibility: let the system run the payments, not let payments run the system.

Multi-Cloud Infrastructure: Built for 4/20 Spikes

Anyone who's worked in cannabis retail knows what happens on April 20th: transaction volumes spike dramatically, systems crash, and processors scramble to handle unexpected load. Lüt's patent-pending multi-cloud system was built specifically to handle these surges without failure.

The redundant infrastructure means that when transaction volume spikes 20x on high-traffic days, the system scales automatically across multiple cloud providers. This isn't just theoretical—it's the same approach that would be required for Visa and MasterCard to process cannabis transactions at scale if federal restrictions ever lift.

"Our multi-cloud system, which is patent pending, we're the only ones that have that technology. I'm not saying that Visa, MasterCard won't build it once we start proving that the transactions can have a very limited failure rate. They will build it or they're going to look to try to consume us. And we are positioning ourselves for that fight as well."

Next-Day Funding: No Batch Holds

One of the most frustrating aspects of cannabis payment processing is waiting for funds while batches are held for "review." Lüt offers next-day funding on every transaction processed before 11:59:59 PM. No exceptions. No holds past that timeframe.

This consistency matters enormously for cannabis operators managing tight cash flow in an industry where traditional banking relationships remain elusive. When competitors might hold batches for days or weeks—or lose them entirely in disputes—predictable next-day funding becomes a competitive advantage for dispensaries and delivery services.

Budtender Ambassador Program: 0.1% on Every Transaction

Here's where Lüt gets creative with cannabis payment processing incentives. Their Ambassador Plus program pays budtenders 0.1% on every transaction from customers they sign up—paid directly by Lüt, not from merchant funds.

Every Friday is Lüt payday. If a budtender signs up 50-60 customers during a month, they can earn an extra $400-500 per shift, recurring every month for as long as they work at that company. This addresses the chronic retention problem in cannabis retail while gamifying adoption of the payment system.

"We thought about loyalty and rewards programs—everybody gives points and says you're gonna get a discount on something you want in the store. But we thought, why wouldn't I give a discount for you to go buy more product when you get product all the time? So why don't I just reward you in dollars?"

The wallet-based system works anywhere Lüt is deployed—not just dispensaries, but also gaming, convenience stores, and quick-service restaurants. This cross-industry functionality means budtenders can spend their Lüt earnings wherever the platform is accepted.

Strategic Partnerships: Building Legitimacy

Lüt recently announced partnerships that signal serious industry credibility:

• Green Check Verified partnership

• Safe Harbor integration

• First Federal Bank out of Tampa (their first federal banking partnership)

• Multiple additional partnerships in development with "very, very large" institutions

These partnerships matter because they demonstrate that established financial institutions are willing to work with Lüt's infrastructure. For cannabis operators who've been burned by sudden account closures and frozen funds, this institutional backing provides reassurance that Lüt isn't another fly-by-night solution.

The Real Cost of Visa/MasterCard Violations

Marc shared a cautionary tale that every cannabis operator should hear: a client processing transactions through traditional card rails lost over half a million dollars when MasterCard sued him for "hurting the brand." The lawsuit is ongoing, the funds are still being held, and the legal fees are mounting.

"MasterCard sued him and said, you hurt the brand. He's still going through that lawsuit right now, trying to fight for his money, and it's still being held. And he'll lose it all by the time they get there, because Visa, MasterCard do not lose. Once they earmark you as you hurt the brand, it's in your MPA—your merchant processing agreement."

Cannabis is on the restricted list in every standard merchant processing agreement, typically on the third or fourth page. Operators who think they can fly under the radar are playing Russian roulette with their revenue. When card companies decide to enforce, they don't just shut you down—they take everything in the pipeline.

This risk extends beyond plant-touching businesses. Ancillary brands—event planners, consultants, anyone accepting payments from cannabis companies—face the same risks. Taking payments from cannabis operators can trigger account shutdowns even if you're not touching the plant.

24-Hour Integration for E-Commerce

For cannabis payment processing in e-commerce, speed matters. Lüt can complete integrations in 24 hours if your developers are responsive—a stark contrast to the weeks or months typical in traditional payment processor onboarding.

The challenge isn't Lüt's capabilities; it's how fast their clients move. The company has built four main APIs that allow rapid integration if merchants provide access. For small mom-and-pop operations without dedicated developers, Lüt will write the code themselves if given API access.

The biggest adoption barrier? POS systems that think they're payment companies, locking merchants into long-term contracts that actually hurt the industry rather than help it. This territorial approach prevents merchants from accessing better cannabis payment processing solutions.

Volume Over Margin: A Different Business Model

Unlike traditional acquirers who pre-negotiate costs and try to "fill the bucket" before stepping in the door, Lüt operates on volume rather than maximizing per-transaction fees. They can spread costs across every transaction, looking at each business individually to determine sustainable pricing.

"We're looking at you as an individual business and saying, what is our cost? What is your ROI that you need to make? What are the cost points that we need to be aware of as we negotiate this contract? We fit you in a contract that makes sense."

This approach builds sustainable relationships rather than extracting maximum revenue from each client. It doesn't serve Lüt to set up clients who can't sustainably pay for and support their services—a refreshingly honest acknowledgment that partnership matters more than short-term profit.

The Wallet-Based Future

Mark points to Starbucks as proof of concept: $124 million in wallet loads last quarter alone. Consumers want quicker, simpler, faster transactions. They want to tap their phone, scan a QR code, and move on—not swipe cards, sign names, pump in four digits, only to have the system fail.

Cannabis payment processing is heading in this direction whether traditional card rails accommodate it or not. The question is whether operators will adopt wallet-based systems proactively or wait until they're forced to after losing another batch of funds.

Partnership Over Revenue Extraction

What distinguishes Lüt's approach to cannabis payment processing is the underlying philosophy: focus on partnership production rather than revenue production. They want good people, good values, good morals—not merchants who'll stretch the truth about their processing history.

"We don't want partnerships, we want good people, good values, good morals. Don't come to us with some song and dance that you've never touched a credit card. Just tell me how many credit cards, how much volume are you doing. Tell me what your MCC code is on that."

Transparency matters, especially with money. Cannabis operators need payment partners who can handle the reality of their situation—you can't fix what you don't know the truth about. In an industry facing another year of hemp ban uncertainty and continued federal prohibition, having a payment processor built specifically for high-risk cannabis transactions isn't optional anymore.

It's survival.

Want to hear the full conversation? Listen to the complete podcast episode to dive deeper into Lüt's multi-cloud infrastructure, Mark's experience in high-risk lending, and why fighting over hemp vs. THC is missing the bigger picture.

Want to connect with Mark? Find him on Linkedin!

https://www.mylut.com/

This conversation was recorded at MJ Biz Con Week 2025.