SINCE THE INCEPTION of legal cannabis, licensed operators have relied on cash as the primary—and often sole—means of transacting business. Most major financial institutions do not work with cannabis businesses. According to a study by UK-based insurance broker New Dawn Risk, some 70 percent of cannabis businesses in the United States do not have any relationship with a financial institution.
If it seems to you like cash-as-king is here to stay for a long, long time, you’re not alone in that belief.
But there are alternatives—and forward-thinking cannabis retailers and e-tailers are using them to streamline operations, offer more payment options to customers and profit from doing both.Advertisement
The Downside of Cash
Relying on cash alone to do business offers its own set of challenges. If you’re running a dispensary or store, you’re probably well aware of the logistical headache of ensuring there is always enough cash on hand to make change. Here are some more ways that cash can create problems:
- It’s expensive to move cash around and keep secure.
- Having cash on hand puts your store and staff at greater risk of break-ins and robberies.
- Cash is a prime target of insider theft by employees.
- It can be difficult to track and record cash transactions.
Cash-only operations are also effectively closing off a growing portion of consumers from buying what they sell. Cash-only businesses rely on their customers to have cash on hand. But recent studies show that only 16 percent of U.S. consumers carry cash. Tired of waiting in ATM lines and paying fees to get cash, some 58 percent of consumers say they plan to eliminate cash completely from their lives.
Offering bank-to-bank payments, including hands-free options that make consumers feel safer, can dramatically increase retail sales. This is just as true in cannabis as in other industries.
We’ve found that dispensaries offering AeroPay as a cashless payment option see an average 25 percent increase in transaction size and sales volume. Cannabis retailers who also offer online ordering with in-store or curbside pickup have seen their sales volume increase by up to 30 percent, according to our tracking.
Problems with Cashless ATMs
One of the alternatives to cash some dispensaries use is something called cashless ATM transactions. In this model, a shopper uses their ATM card to perform a withdrawal at the time of checkout for the total amount of their purchase. The dispensary’s point-of-sale (POS) system acts as an ATM but instead of doling out cash to the customer, the store keeps it and the customer gets the product.
This method of electronic payment can help cannabis retailers skirt around the cash-only problem. But it has downsides.
For one, transactions typically have to be rounded to a number that mirrors other withdrawal methods or involve cash given as change. This means the pricing of items is often dictated by ATM denomination amounts, rather than more naturally set in response to market demand.
What’s more, the most powerful financial services providers are lobbying hard against the cashless ATM workaround. Recently, Visa issued a specific warning to cannabis dispensaries that cashless ATM transactions go against their terms of service. Visa said it will be cracking down on both shoppers and retailers using this alternative payment method.Advertisement
A Path to a Cashless Future
Contactless, cashless solutions for cannabis don’t have to be workarounds. They can be above board, compliant and still serve up what we all want—a method for electronic, hands-free payments that faithfully record all transactions between cannabis businesses and their customers.
With AeroPay for example, customers can create an account by scanning a QR code, link to their bank account and pay for their order, all from their mobile device. There are no downloads, no apps and no sensitive information required, and the solution doesn’t resort to the cashless ATM workaround.
When you’re shopping for such a solution, look for one that ticks off all the boxes to best ensure you meet all the regulatory compliance requirements in jurisdictions where cannabis is legal. An electronic payment solution for cannabis should:
- Show truthful and transparent information in receipts.
- Stay off the credit card rails.
- Work closely with, and ideally get the blessing of state regulators.
- Monitor those attempting to use their platform for bad acts like fraud and money laundering.
You will also want a cashless payment solution that is backed by or partnered with a reputable financial company. AeroPay, for example, partners with Safe Harbor, a division of Partner Colorado Credit Union. Safe Harbor is a leading compliance-based banking program for cannabis businesses.
Legitimate providers of payment solutions for the industry work closely with such reputable financial institutions and state regulators to assure that payment processing is secure and compliant. Don’t settle for anything less.Advertisement
Cannaconvo with Peter Su of Green Check Verified
Cannabis Last Week with Jon Purow interviews Peter Su of Green Check Verified. Peter Su is a Senior Vice President with Green Check Verified, the top cannabis banking compliance software/consultancy in the space. A 20+ year veteran of the banking industry, Peter serves on the Banking & Financial Services committee of the National Cannabis Industry Association. He chairs the Banking and Financial Services Committee for the NYCCIA & HVCIA. He is an official member of the Rolling Stone Cannabis Culture Council. And, he is on the board of the Asian Cannabis Roundtable, serving as treasurer.