In certain states (not currently including Massachusetts), cannabis-related businesses have been deemed “essential” businesses by local governments. In those states, medical and/or adult-use programs have continued to operate during the COVID-19 pandemic. Nevertheless, cannabis business operators have had to quickly adapt to the changing environment and implement new safety protocols, including limiting the number of patients and customers in retail shops at one time, and providing new online and telephone ordering channels for products that can now be delivered and/or picked up curbside. Changes to standard operating procedures bring new challenges to the industry, including how to accept payment for purchased products.
Historically, state-licensed cannabis-related businesses have been cash intensive because marijuana remains illegal under federal law. Not only has the conflict between state and federal law caused banks and credit unions to stay away from marijuana-related business relationships, but it has also caused the largest payment card networks to prohibit cannabis credit card transactions.
Cash intensive businesses are often considered higher risk entities, in part, because of safety concerns that include being easy targets for theft. These concerns are heightened with the COVID-19 pandemic and worries about viral transmission via cash. Regardless of whether the new COVID-19 cash concerns are justified, cannabis operators are exposing their businesses and employees to unnecessary safety risks if they do not implement cashless payment solutions—especially in those states that allow deliveries and/or curbside pickup. Moreover, operators without cashless payment solutions are missing out on the higher value sales transactions that cashless payment solutions provide.
Because identifying and implementing reliable cashless payment solution(s) are not easy tasks, now is the time to evaluate available options in order to determine the solution that best fits a particular business and its customers. However, before any cashless payment solution can be implemented, a cannabis merchant must have a bank account. Prospective merchants should contact their financial services provider to verify whether potential payment solutions can be used and deposits will be accepted. Certain compliant cannabis banking providers already have relationships established with cashless payment solution providers thereby making implementation and compliance easier. In fact, Green Check Verified, LLC has solutions integrated into its automated platform, and will assist prospective cannabis related businesses in finding banking services that fit their needs.
Some considerations, and currently available solutions, related to cashless payment solutions are outlined below. The list is not extensive and prospective merchants should conduct their own due diligence, as well as, review any service agreements carefully. Additionally, it may be advisable to utilize more than one solution in case one is not available in a certain region or discontinues servicing the marijuana industry. Generally, effective cashless payment solutions fall into two broad categories: cashless ATMs/PIN debit and digital payment applications.
- Cashless ATMs/PIN Debit
Likely the most widely used and available throughout the country, cashless ATM solutions allow customers to pay for dispensary purchases using their debit cards and personal identification number like in a grocery store. Cashless ATMs work similarly to on-site ATMs in that they provide cash withdrawn from a customer’s bank account using the ATM network rails; however, cashless ATMs do not dispense cash to the customer. Rather, the customer requests an amount to be withdrawn from his/her bank account to cover the cost of a cannabis purchase and enters a PIN to authorize the transaction. The amount is typically rounded up in increments of $5 or $10. In addition, the merchant may charge a fee to use the cashless ATM like a non-network ATM charges for an actual cash withdrawal. The money used to pay the purchase price, including taxes, is credited to the merchant’s account and any amount debited above the purchase price is refunded in cash to the customer. Often times, the overage amount is then given to the dispensary employees as a tip. Cashless ATMs are small and placed near point of sale terminals. Some providers, like TransactFirst, issue wi-fi and cellular enabled mobile units which allow for payment at curbside pickups and/or for home deliveries. Making this technology available allows cannabis merchants to comply with rapidly changing emergency regulations such as the one recently issued in Colorado that prohibits payment with cash for curbside transactions.
- Digital Payment Applications
Fintech company Hypur offers a digital, contactless payment solution called Hypur Pay that allows its customers to accept digital payments, as well as, tip drivers and budtenders using an app on a mobile device. Although the solution may now only be available in limited markets, Hypur encourages both cannabis related businesses and cannabis consumers to contact them for more information.
CanPay is another company that offers a mobile debit app that allows consumers to access their bank account without any convenience fee. Consumers do not need to plan ahead for a trip to the dispensary, nor carry cash, and merchants that accept CanPay may experience increased spending and sales that electronic payment options bring. CanPay’s network includes financial institutions that offer compliant banking solutions and availability may be limited in certain areas.
Like the cannabis industry, the electronic payments space is constantly evolving and developing new solutions that cannabis related businesses and consumers can use despite the continued conflict in federal and state marijuana law. Right now, cannabis businesses are deemed essential businesses and utilizing cashless payment solutions is one way the industry can mitigate risks associated with cash transactions—both to allay concerns related to theft, and those related to possible viral transmission.
About the Author: Katrina Skinner
Katrina Skinner is an experienced attorney and subject matter expert in the financial services industry for banking legal cannabis-related businesses. As the former President and General Counsel for Safe Harbor Services, LLC, she learned the intricacies and practical applications of cannabis law in multiple states, federal and state regulations, and finance, and is often asked to speak about them. She can be reached at firstname.lastname@example.org or 303.568.6940.