Tag Archives: Mastercard

As Mastercard Exits Cannabis, There’s a Cash Opportunity

By Shawn Kruger
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Late last month, Mastercard decided to halt their debit card transactions with cannabis dispensaries, notifying financial institutions and payment processors to stop processing purchases. This isn’t the first digital payment solution to swiftly exit the industry – late last year, vendors turned off services to their cashless ATMs. These abrupt decisions have made major headlines, shocking cannabis dispensary owners, operators and consumers as they scramble to shift focus back to the remaining legal payment tools.

For the cannabis industry veterans like myself, these exits aren’t a surprise at all. Why? Cannabis is federally illegal and federal regulations restrict banks and other financial services companies from working with cannabis businesses – even if it is legal at a state level. Due to this massive legal hurdle, cannabis dispensaries often lack access to typical banking services and have limited payment options for consumers, making it challenging to manage and facilitate payments.

Some believe that this decision by Mastercard, the second largest payments provider in the world, and by other payment vendors, coupled with the political pressure to legalize cannabis could help push legalization or the Secure and Fair Enforcement (SAFE) Banking Act to help mitigate the lack of access to banking services in the longer term. Even though cannabis represents an economic opportunity – MJBizDaily estimates that combined medical and adult use cannabis sales could reach $33.6 billion by the end of 2023, and $53.5 billion by 2027 – hurdles to legalization mean that, for now, cash will be the most prevalent payments option.

Let’s Talk About Cash

Physical cash is difficult to manage for dispensaries

Cash remains the longstanding and most prevalent payment option in cannabis. However, it presents difficulties for businesses. Physical cash is difficult to manage for dispensaries for several reasons, primarily due to the costs to count, track and manage cash volumes and the labor required to count the cash. In fact, in most dispensaries, associates count cash an average of six times a day. Each time cash is manually counted, dispensaries risk miscounts, shrinkage, security and safety concerns due to robberies.

This manual labor required to oversee a business’s balance sheet and keep dispensaries operating is inefficient and unsustainable, and many have attempted to incorporate debit payments or cashless ATM transactions to help mitigate the costs associated with cash. However, while cash presents logistical and operational challenges for dispensary owners, it remains one of the more dependable payment options consumers and dispensaries have for cannabis transactions. Dispensaries can integrate simple strategies to improve their cash handling and operate more efficiently.

Best practices with cash management for dispensaries 

The biggest and most impactful strategy is incorporating cash automation tools to help secure, count and manage their payments. The largest and oldest dispensary in Washington D.C. incorporated sophisticated automation tools into their cash handling practices, which have alleviated massive headaches and burdens from store associates, managers and its accounting team, who previously relied on manual cash processes to count, sort and manage their cash.

Mastercard halted debit card transactions with cannabis dispensaries just weeks ago

This cash-handling technology has improved count accuracy, saved time for staff, improved visibility and enabled real-time reporting. These tools have transformed the day-to-day duties of staff. The dispensary’s accounting team and associates no longer get overwhelmed when anticipating increased cash flow on 4/20 or other holidays because they have tools that eliminate the extreme costs of handling cash. Additionally, they now confidently support audits as they have complete reports of each transaction by user, date and time. Before automation, audits were next to impossible to execute confidently.

The greatest benefit of cash automation tools is the near elimination of shrinkage, a term referring to the cash lost due to employee theft or miscounts. With cash automation, cash is as affordable as digital payment options, with the added confidence that cash won’t disappear as a payment option for consumers.

Have a Cash Strategy

While Mastercard’s decision to leave the cannabis industry leaves dispensaries in the lurch, the cannabis payments ecosystem continues to evolve and transition quickly. Dispensaries must be agile and incorporate strategies for the payment options, both inbound from consumers and outbound to their vendors, that they can rely on.

As the cannabis industry continues to evolve, embracing cash automation will be crucial for sustainable growth and success. Cash automation is a transformative solution for cannabis reducing the cost of managing cash while addressing the unique challenges associated with high cash volume operations. Embracing cash automation allows dispensaries to thrive in an evolving industry while maintaining control over their cash ecosystem, no matter who enters or exits the payments space.

Harborside, CanPay Announce Partnership, Launching Debit Payment System

By Aaron G. Biros
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CanPay, a debit payment solution for the cannabis space, announced today their partnership with Harborside, the largest medical dispensary brand in the United States. The partnership will allow Harborside’s more than 200,000 patients to use a mobile debit app when purchasing cannabis through their delivery service, instead of bringing cash.

For deliveries, patients would use the CanPay app on their device “to generate a secure, single-use payment token that includes no personal identifiable information,” according to the press release. A Harborside delivery employee scans the token and the money is transferred from the patient’s checking account to Harborside. This allows for delivery employees to make less cash transactions and affords patients the luxury of not having to take out cash to get their medicine.

Harborside, founded in 2006, is recognized as the largest nonprofit cannabis dispensary in California, and the United States. They were reportedly the first dispensary to lab test their products. Being an advocate for patients and their safety, they offer a variety of free health and wellness services. “It’s important to us that we stay on the forefront of patient care and access to the products our community needs to improve their quality of life,” says dress wedding, co-founder of Harborside. “CanPay enables us to continue delivering on those goals by normalizing the payment process for our patients and staff.”

CanPay launched last year in November and has since expanded to over 50 dispensaries and six different states. The premise of their system is a secure and safe transaction for customers or patients of dispensaries. “To ensure privacy and security, all purchases are made using non-identifiable, single-use, and random payment tokens generated in the CanPay App,” reads the press release. CanPay is currently serving businesses in Washington, California, Colorado, Maine, Florida, and Oregon.

Dustin Eide, CEO of CanPay

“Patients who rely on cannabis for preexisting medical conditions should not have to be inconvenienced or have their safety put at risk by a cash-only model,” says Dustin Eide, chief executive officer of CanPay. “Delivery is a mainstream solution and payments should be able to keep up with the industry. By partnering with Harborside, we are providing their patients the benefits of more secure, transparent transactions.” According to Eide, their service is compliant with federal medical cannabis policy and guidance. “CanPay’s service operates under compliance programs built around the Cole Memo and FinCEN Guidance issued by the Department of Justice and the Treasury, respectively, and updated on Feb. 14, 2014 which provided guidance to financial institutions on the conditions with which they can provide banking services to the state regulated cannabis industry without incurring federal action,” says Eide. “Also, CanPay utilizes the Automated Clearing House (ACH) network to affect our services in full transparency. While Visa and MasterCard have established clear rules prohibiting cannabis transactions on their networks, the ACH network relies on the individual financial institutions to determine what type of transactions may occur.” Because of that, Eide says, there’s no need to hide transactions, unlike services that use Visa or MasterCard that require using an obscure legal entity name or a financial intermediary’s name.

According to Dustin Eide, CanPay is designed to be a long-term solution for the cannabis industry’s cash transaction woes. “At approximately 2% fees to the dispensary (and no cost to the consumer), CanPay will be a low cost payment service compared to Visa and MasterCard when they do enter the market, which we’ve been told by our contacts at the companies that this won’t be until federal law changes,” says Eide. He thinks that when MasterCard and Visa begin working with cannabis businesses, they will charge higher transaction fees in the 3-4% range, given the high-risk nature of the market. “CanPay’s challenge is to gain sufficient breadth of coverage with dispensaries and adoption among cannabis consumers to be able to offer that value on a wide scale prior to Visa and MasterCard’s entry into the market.”

Looking to the future, Eide hopes the partnership with Harborside will lead to more business. “CanPay couldn’t ask for a better partner to enter into the California cannabis market, which is expected to top $20 billion by 2020, than Harborside, one of the world’s most respected and well-known cannabis organizations,” says Eide. “It is an honor to be chosen by Harborside, who has their pick of services for the cannabis industry, to facilitate their cashless delivery payments and enhance the safety and convenience of purchasing medicine from Harborside for both their patients and their employees.”