With legalization in dozens of states, the cannabis industry is experiencing huge growth. But it also remains a complicated and tenuous industry as a result of its complicated legal status and other issues it faces. These problems create a number of pain points. First, its legal status creates payment problems: it is difficult to accept bank or credit card payments for CBD products, and virtually impossible to accept them for THC products. Even if you can find a bank to start a cannabis business account with, you run the risk of having your account shut down or your money seized by federal authorities. Second, given this tenuous payment status, payment processing fees are significantly higher than in other industries, which increases your overhead. Third, as cannabis finds its footing, it faces data security problems, including data breaches that expose customer information and decrease customer confidence and loyalty when you expose their data. Fourth, as with most high-risk industries, it faces the problem of chargebacks.
Fortunately, the growth of cryptocurrency offers new possibilities. By allowing you to take greater ownership of your payment process and assuring your customers of increased privacy and security, crypto offers ways to avoid these pain points. RocketFuel is the only crypto payments solution provider to offer a Price Settlement Guarantee to protect merchants from cryptocurrency volatility. Mechants will always receive full settlement for the price of goods or services purchased without having to worry about crypto exchange.
While cannabis customers have the money to purchase your product, payment processing issues result from the contradictory laws that regulate the industry. Specifically, the biggest problem cannabis businesses face in the US is their inability to accept bank and credit card payments. While cannabis legalization occurs at the state level, which makes purchasing it legal within specific states, it remains illegal federally. This creates both confusion and complications in terms of purchasing it. Because of the federal regulations, banks are barred from facilitating cannabis transactions. Moreover, while some vendors claim to accept credit card purchases, major credit card companies have adopted a no-cannabis-purchase policy, including shutting down accounts that fail to comply with this policy. This reduces many dispensaries to only accepting cash purchases.
Crypto offers a legal alternative for cannabis purchases. On the one hand, customers can use crypto directly for cannabis purchases, using blockchain technology or digital wallets. On the other, they can use their credit card or bank account to purchase crypto and then make their purchase. Either way, by accepting crypto, you can create a larger pool of shoppers for your business. Moreover, it avoids the security problems you face when solely accepting cash payments.
While the cannabis industry can take advantage of some payment options, such as ATM machines on location or bank transfers, these present their own problems. To begin with, these payment options come with high processing fees. Currently, the payment processing fee in the cannabis industry is about 6%. Adopting crypto and cutting out high-cost intermediaries, you can lower this fee into the 1-3% range. Moreover, it’s quicker; there are no long waits, as there are with bank transfers. This allows your customers to make purchases without having to wait out long payment processing times.
High-risk industries face frequent chargebacks. Traditional payment solutions present problems when it comes to chargebacks. Essentially all of the power is in the hands of the payment processor, whose interests lie in serving the customer not you. This puts the onus to prove fraudulent chargeback claims on you, which can be both time-consuming and expensive. Because crypto puts payment processing in your hands, it avoids fraudulent chargebacks being refunded automatically by payment processors. Instead, you can put the onus on customers to prove fraud and save time and money.
While cannabis is a growing industry, it is still relatively new. As with many new industries, it is still finding its footing with data privacy. As a result, data breaches can occur. In one data breach in 2020, a server used by major dispensaries in the US was breached, exposing personal information from 85,000 cannabis customers. Given problems around laws regulating cannabis and concerns about insurance companies' use of data like cannabis usage, offering privacy and security in the cannabis industry should be a top priority. Crypto brings an extra layer of security against these types of breaches. To begin with, it doesn’t require users to add their banking, credit card number, or other personal information. This provides users with anonymity. Moreover, crypto transactions are encrypted, making them virtually unhackable and untraceable. Both of these benefits give cannabis customers peace of mind if there is a data breach or hacking incident.
Given the pain points they face with their complicated legal status, the cannabis industry stands to reap major benefits from adopting crypto as a payment method, including increasing their customer base, lowering fees, avoiding chargebacks, and assuring privacy and security to customers. Rocketfuel’s blockchain technology offers these benefits in a seamless, 1-click solution to take advantage of these benefits. For information on more benefits that accepting crypto can bring to your cannabis business, book a demo of Rocketfuel’s blockchain technology.