5 Cannabis Fintech Companies Striving To Overthrow Cashless ATMs: Is This Possible?

The burgeoning recreational marijuana industry – illegal at the federal level yet legal for adults in some 18 U.S. states and Washington DC – has faced multiple challenges throughout the years, mostly because of the Schedule 1 status of the cannabis plant. 

The biggest problem? Banking, of course. 

Fortunately, over the years things have changed and cannabis businesses and their customers now have more options. Some of the companies they can be thankful to include CanPay, Hypur Aeropay, Dutchie and KindPay. 

While many industry experts agree that federal cannabis legalization would solve this persistent problem, they also concur that it is unlikely to happen anytime soon. They, therefore, are placing their hopes on the SAFE Banking Act this year. 

What About Cashless ATMs? 

Until either of the two pieces of legislation actually pass, marijuana companies need other solutions. As in life, retailers have already had to find ways to work around the system. Some cannabis merchants have begun using cashless ATMs to bypass limitations on the types of sales payment cards they can legally accept. 

What are the benefits of using cashless ATMs? There are at least two. One is luring consumers to buy more when using plastic cards instead of real money and another is enabling dispensaries to avoid armed security and armored trucks to take care of cash.

That said...what are their downsides? According to Bloomberg, they cover up some $7 billion in marijuana sales as ATM transactions, which can run on the rails of credit-card companies such as Visa V and Mastercard MA and be routed via bank, raising compliance concerns.

To exacerbate the situation, Visa issued a compliance memo in December warning customers that incorrectly coding point-of-sale transactions via cashless ATMs could be penalized or punished by unspecified enforcement procedures. Visa, one of the largest payment processors in the world, proceeded to reveal that it was “aware of a scheme” in which retailers are utilizing cashless ATMs to avoid limitations on the types of sales for which payment cards are allowed to be used.

On the other hand, who needs Visa? Curaleaf Holdings CURLF, one of the largest U.S. multi-state cannabis operators, processes around a third of its sales via cashless ATMs, disclosed the company’s senior vice president of retail, Talley Wettlaufer, as reported by Bloomberg. The company had to go through a due-diligence process to make sure everything is legal and compliant, she noted, adding that it uses the processor that works on an alternative system that is not owned by Visa or Mastercard.

What Are The Other Options? 

As for Curaleaf, it also offers another solution – payments based on the automated clearing house technology, or ACH, that transfers funds directly from bank accounts. The benefit? Not using the credit card system. The drawback? Consumers need to share their bank and routing info to sign up.

“The biggest challenge for ACH is to get the consumer to sign up. Once they have, it’s easy to use at any place that accepts CanPay,” Dustin Eide, chief executive officer at CanPay told the outlet.  

CanPay provides an easy-to-use app that allows consumers to pay for purchases at cannabis retailers with a simple debit from their checking account, which is being used at more than 800 participating merchant locations in 31 states in the U.S. Moreover, it is accepted by 10 of the top 13 public-company, multi-state operators (MSOs), including Curaleaf. 

Recently, the company confirmed it has surpassed half a billion dollars in transparent transactions in states where cannabis is legal.

Another fintech company, Chicago-based Aeropay offers a different ACH-based solution.

"Our API-first solution enables us to embed payments into other platforms such as POS and eComm to provide an omnichannel experience for retailers and consumers alike. This optimization is important to create a seamless checkout flow that meets the expectations of the modern buyer when purchasing cannabis both in-store and online," founder Daniel Muller explained the company’s system.

Last fall, the company teamed up with the online cannabis marketplace Jane Technologies, Inc. The goal of this partnership was to enable online payments via AeroPay for the 2,100-plus dispensaries and 300-plus brands leveraging Jane's solutions across 36 U.S. state markets. With AeroPay’s payment solution, cannabis consumers can pay for pickup or delivery orders directly from a dispensary or brand's checkout page on mobile or web.

There’s also the Scottsdale, Arizona-based Hypur that claims to have processed 750,000 cannabis transactions since its launch six years ago. 

Dutchie, a company operating an online cannabis marketplace offering home deliveries, announced its plans to launch an ACH-based technology dubbed Dutchie Pay soon. 

And, there‘s KindTap Technologies, a company behind a financial technology platform for highly regulated industries, which last fall launched a consumer credit product. The company says this is “a first-of-its-kind” service for the marijuana industry that provides consumers with revolving credit lines for upfront cannabis purchases and enables stores to utilize digital credit payments.

Nevertheless, ACH issues are slowing further development. “ACH is still very, very small,” Curaleaf’s Wettlaufer said. “Cashless ATMs are more understandable to customers. It's familiar to them, like any other retail experience.”

Photo: Courtesy of Esteban Lopez on Unsplash

Posted In: CannabisNewsMarketsAeroPayBloombergCanPayDaniel MullerDustin EideDutchieHypurKindTapTalley Wettlaufer

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