Stuck between state legalization and federal prohibition, cannabis businesses have historically been forced to be cash-only operations. Even for those with stable banking relationships, the decision by all major credit card and debit card companies to veto card transactions for this federally illegal substance put legitimate, transparent, cashless purchases out of reach. But recent events have caused businesses to find new solutions.
In an unprecedented move for the cannabis industry, Hawaii announced in September 2017 that the state’s newly opened medical marijuana dispensaries would be cashless by Oct. 1, 2017. The state adopted CanPay, a mobile debit app that provides cashless payment solutions for the cannabis industry, as the only state-approved alternative to cash transactions in Hawaii’s medical dispensaries. Despite some initial confusion about whether dispensaries could still accept cash (they can) and if offering the state-sanctioned cashless option was mandatory (not yet), the announcement garnered lots of attention within the U.S. cannabis industry.
Helen Cho, director of integrated strategy at Honolulu-based Aloha Green Apothecary, feels that CanPay provides patients who are uncomfortable carrying cash with an important, state-approved alternative. Roughly 10 percent of the dispensary’s transactions are through CanPay, and that’s with clientele predominately aged 55 years or older. “They like to stick by the rules; they like to do things that are legal. It was important that they had an option that they knew was sanctioned by the state,” Cho says.
Photo courtesy of Hypur
Cash-only transactions don’t only affect how businesses operate, they also affect customers’ and patients’ convenience in making purchases. As the industry becomes increasingly competitive, the consumer experience is becoming increasingly important as well. Cannabis consumers are seeking the same ease and frictionless experience they enjoy when purchasing any other legal product.
Tim Cullen, CEO of Colorado Harvest Company, views traditional payment methods as a right for the industry and strives to provide them at the company’s three Colorado dispensaries. Each store accepts cash (there are ATMs on site) and the CanPay app as payment options. “I want people to have an alternative to carrying cash with them,” Cullen says. “In today’s society and economy, it’s actually quite rare that someone pays for something in cash outside of shopping in a dispensary.”
Arizona-based Nature’s Medicines implemented a digital payment option offered through Hypur, an Arizona-based payment solutions provider. Nature’s Medicines Marketing Director Nathalie Porter says the Hypur system “has shown to be very convenient for a lot of our patients, and it also helps cut out a lot of those [patients’] bank fees.”
Making Cashless Happen
Your success and ease in adopting cashless payments will depend largely on your choice of service providers. Information about CanPay and Hypur is offered here, not as endorsements, but as examples of companies willing to speak openly and on the record about their services, whose customers (contacted independently) were also willing to speak about their experiences with those services.
For both CanPay and Hypur, dispensaries must have a banking relationship with a cannabis-compliant financial institution operating within their respective member networks to ensure cannabis-related transactions can be fully transparent at every step. Depending on your situation, these companies may be able to help you connect with a cannabis-compliant bank or credit union that can help you offer cashless payment options or help your compliant banking partner participate.
CanPay, which operates only in the cannabis sector, is available in 10 states and approximately 100 dispensaries as of March 2018, with more states being added soon. Hypur, which works in several industries, is available for cannabis businesses in seven states. Tyler Beuerlein, Hypur’s vice president of business development, expects those numbers to grow dramatically this year. Both companies have launched operations in California, where Beuerlein reports multiple financial institutions are entering the cannabis market now that a finite regulatory system has been established.
For CanPay, the focus remains on its mobile debit app and providing that service extremely well. “Our primary service is enabling dispensaries to accept electronic payments from their customers in a transparent way,” Dustin Eide, CanPay’s CEO, explains. In contrast, Hypur offers its cashless payment service plus a portfolio of compliance-related technologies—such as Hypur Comply, a “transaction monitoring and electronic reporting system designed for highly regulated markets,” as explained on the company’s website—to help financial institutions ensure participating businesses are compliant.
Photo courtesy of CanPay
What the Future Holds
As the industry grows, options for cashless payment services will undoubtedly grow, too. With nearly a decade in business—and several service providers behind him—Cullen offers dispensary owners some sound advice: Vet cashless payment providers carefully, get your bank in on the vetting process and never do anything to jeopardize your bank’s trust.
“That relationship is one of the most important business relationships we have,” Cullen says. “We have been in situations in the last nine years where we did not have a bank account. It sounds like a fun reality TV show, but it’s a nightmare.” While legitimate cashless payment solutions are just one piece of the banking puzzle, they represent one less cause for sleepless nights for dispensary owners.
Jolene Hansen is a freelance writer and former horticulture professional. Reach her at [email protected].
