Cashless Payment Systems Streamline Cannabis TransactionsCannabis has a cash problem. Cashless payments may offer the solution.
National banks continue to give the industry a wide berth, making it near impossible for licensed and legitimate business to access even basic financial services. The entire industry is awash in cash, yet struggling to manage it in a safe, traceable, and transparent manner.
Operating a business entirely outside the ecosystem of the traditional banking system is no easy task. Cash poses a physical security risk to store and to transport, plus everyday business transactions become a logistical nightmare.
With so much cash, all transactions take more time and more physical processing. It’s a burden on the business no matter which way you cut it. And when it comes to the cannabis industry, cash is both a security risk and a financial strain.
Retailers and consumers both want better banking options. It's 2019, and the world long ago decided its preference for credit, debit, and other cashless options. It’s time for cannabis to come online and out of the shadows.
Better Financial Services on The Horizon for Cannabis
With such a strong impetus to change, it was only a matter of time before tech stepped into the picture. Cannabis-focused, cashless payment systems are rapidly moving into this space to solve the dilemmas of cash. These new options are providing the first real financial services to a dreadfully underserved industry.
Cannabis Tech spoke with Tom Gavin, Vice President and CEO of CannaTrac, on the state of an industry drowning in cash. The CannaTrac system solves a few issues all at once: allowing for retailers to pay taxes without delivering bags of money to regulators, giving financial institutions full transparency to the backend, and providing customers a genuinely cashless payment.
It's one example of a unique, cannabis-focused financial solution that is working to reduce the risk for everyone.
Cashless Systems - Not Just for Convenience
Much can be built into the backend of a mobile payment app to reduce the risks for regulators, improve the shopping experience for consumers, and ultimately drive more sales for the retailer. In this landscape, it's not just convenience that counts.
Gavin and the development team at CannaTrac were unabashedly inspired by the Starbucks app. The simple user experience of the platform combined with push notifications and a popular rewards program became crucial components to the CannaTrac application.
The rewards program is just getting started, but already, customers can gain points for every purchase made through the app. Rewards go towards merchandise, in-store purchases, and coupons issued through participating retailers. If a customer chooses, they can also opt into CannaTrac's geolocation targeted marketing.
For the retailer, moving away from cash-based transactions is a choice to run a tighter ship. Pay taxes instantly, pull detailed sales reports, examine consumer intel, and take advantage of in-app advertising options. It means no bags of cash and no security risks.
Going cashless, through an app like CannaTrac, also encourages consumers to spend more. Researchers have known for a while now that consumers tend to feel better about spending more if they don't pay in cash. Study after study shows that when consumers pay through debit, credit, and mobile technology, spending feels less stressful.
Cashless payment systems at the cannabis dispensary are no different. Retailers could see sales improve if they ditch the ATM and suggest a mobile payment option in its place.
As Gavin stated, going cashless is a "no brainer."
Cashless Systems Already Rolling Out in Hawaii and Louisiana
CannaTrac may be one of the newest and most comprehensive cashless systems, but they were not the first within the space. Hawaii launched the first statewide cashless system for cannabis in 2017.
The state announced the decision after recognizing the difficulty and security issues their licensed dispensaries faced sourcing traditional banking services on the Island. Although Hawaiin dispensaries still accept cash, the state-sponsored CanPay program gives consumers another method of payment. CanPay partnered with a Denver-based credit union to provide all-island dispensaries access to urgently needed financial services.
Dustin Eide, the CEO of CanPay, told Forbes back in 2017, "Removing cash from the equation leads to a more transparent and legitimate way to do business that's both convenient and secure for all involved," Unsurprisingly, new markets have taken the Hawaiin approach and run with it.
This August, Global Payout Inc. subsidiary MTrac Tech Corp launched a similar program in Louisiana's new medical cannabis program. Their system, which went live on August 6, 2019, was "designed to facilitate payments down the marijuana supply chain."
According to the press release, they are working with one of the leading banks in the state to provide banking services to an industry typically isolated by traditional financial services.
Federal Policy on Banking and the Crypto Option
Over the last year, federal policymakers have begun to discuss the problem of legal and licensed state-based cannabis businesses and their banking issues. Despite initial excitement this spring, there has been little progress over the summer.
The Secure and Fair Enforcement (SAFE) Banking Act received a lot of attention earlier this year for its promise to make banking more accessible for cannabis. At the time of this writing, hope in the industry is dwindling as the current bill struggles through the Senate. With poor attendance by both parties at a Senate hearing in July, it's unclear how this bill will play out. For now, any solutions for banking in cannabis are going to have to be outside of the federally regulated system.
As discussed frequently on Cannabis Tech, there is a lot of potential for crypto and blockchain technologies in the cannabis space. There could be an application for them within the financial services sphere as well.
But unlike a user-friendly rewards program that works a lot like everyone’s favorite coffee chain-app, there is a substantial learning curve between consumers and a crypto-currency solution. Most customers, and maybe even some retailers, just aren’t ready for the advanced technologies offered by blockchain solutions.
Despite the promise of blockchain, customers are much more comfortable with the Starbucks mobile app than they are with any cryptocurrency. These options are perhaps better suited to the backend of the business and have less application for customer-facing areas.
Going Cashless is the Only Way Forward
Cashless options may be the only way around the cash problem. While federal rescheduling of the plant is undoubtedly in the works, it's going to take years to roll out. With the industry expected to reach $80 billion in the same timeline, cash is going to become a bigger problem than it already is today.
Hawaii and Louisiana are already on board with cashless tech solutions. CannaTrac is also on the cusp of a national roll-out through thousands of retailers. Certainly, it seems as if, after years of a cash problem, the industry is on the verge of witnessing a financial services revolution through cashless mobile solutions.