While cannabis remains an illegal Schedule 1 drug at the federal level in the United States, legalization efforts have been gaining steam at the state level over the last decade. Currently, 29 states have legalized cannabis. With legalization, the growth of cannabis dispensaries and sales have exploded: with more than 8,000 dispensaries, legal cannabis sales hit a record $17.5 billion in sales in 2020 and are estimated to reach $41 billion by 2026. While this shows the impressive market and potential of the cannabis industry, the conflict between state and federal regulations poses serious problems for dispensaries. Specifically, banking institutions come under federal laws where cannabis remains a prohibited substance. That means banks cannot accept or lend money to dispensaries. For dispensaries, this leads to a significant problem: customers cannot pay with credit or debit cards. While dispensaries can run as cash businesses, handling cash presents a number of pain points.
Enter cryptocurrency. Crypto was created as a decentralized, peer-to-peer digital currency. While crypto can help many industries, it offers particularly innovative solutions to the problems dispensaries face. Because it operates like cash, only on a borderless basis, it isn’t subject to the same federal regulations that banks and credit card companies are. But, even beyond the fact of solving the most basic payment problems, crypto offers dispensaries the ability to operate more efficiently while also decreasing much of the overhead required for cash-only businesses.
While it might seem easy enough, running a cash-only business presents major pain points for dispensaries.
To begin with, purchases are limited to the cash a customer has on hand. That means that upselling isn’t possible. Moreover, particularly when making large purchases, customers may have concerns about carrying cash to the dispensary. Installing an ATM machine on-premises provides a solution. However, ATM machines charge merchant and customer fees for withdrawals, which can be a disincentive for both vendor and customer.
Beyond these problems, because everything is done manually, a cash-only business is prone to human error, including money count or transaction errors. Tracking down and correcting these errors when closing the books at the end of day can be time consuming, particularly with a high volume of transactions.
Finally, running a cash-only business increases security risks. Dispensaries can have upwards of $100,000 on hand at any given moment. Sums of cash like this make them a target of theft. Certainly, security systems and safes can be installed. But this increases overhead costs significantly and may not fully address security concerns during hours of operation, when the well-being of employees is at risk.
An alternative to cash that dispensaries can take advantage of are automated clearing houses (ACHs). ACHs are a financial network that allows for money to be exchanged between customer and vendor bank accounts, much like a bank transfer. While ACHs work similar to banks, the network does not have a specific prohibition on cannabis transactions. But ACHs come with their own pain points. First, there are the fees: typical ACHs charge 3-5% per transaction on top of an additional 10-30¢ fee per transaction. Second, because it involves a third-party, customers need to create an account with the ACH and connect it to their bank account. This raises concerns about anonymity and security. Third, because ACH payments are processed in batches and have to go through banks, it can take anywhere from a few hours to as many as 5 days for payments to be processed. These long processing times are exploited by fraudulent users, which results in loss of revenue and product.
Crypto offers an easy solution to these pain points. As a digital currency, customers do not have to carry a physical sum of money with them. Rather, they have a digital wallet they can use to make dispensary purchases. This solves any concerns about carrying around large quantities of money. Moreover, customers can use their credit card or bank account to purchase crypto, which provides a legal and indirect route to using traditional payment options. Allowing customers to pay with crypto means funds are transferred from the customers digital wallet to the dispensary through blockchain technology. As a result, dispensaries do not have large quantities of cash on hand, which minimizes the overhead required to address many security concerns, including the need for safes.
Beyond this, crypto creates a more stream-lined accounting process for dispensaries. Rather than handling and counting cash, they have electronic funds and records to track all of their transactions at the end of day. This eliminates human error in cash counts. Additionally, it makes bookkeeping easier as every transaction has a digital record. Digital records provide transparency in transactions, which is necessary under strict government regulations for cannabis and in case a dispensary is subject to an audit by the IRS.
In addition to solving pain points associated with cash, crypto payments options have a number of benefits over ACHs. Rather than charging fees that start at 3% on top of a pegged transaction fee, the fees for blockchain technology can be 1% or lower. Moreover, because crypto operates like cash, there’s no need for customers to connect their banking information to a payment account. Instead, customers simply need to transfer the crypto from their digital wallet through encrypted channels for secure transfer of funds. Finally, payments are carried out like a cash transaction rather than being processed in batches. This removes the processing times and the possibility of fraud: once a customer completes a purchase, the crypto is transferred out of their digital wallet and cannot be recalled.
Because of the conflicting regulations for cannabis, dispensaries have been sticking with legacy infrastructures like cash or money transfers despite the pain points associated with them. But it’s time for dispensaries to step into the 21st century and adopt new state of the art technology. Cryptocurrency and RocketFuel’s cutting edge blockchain technology offer such an option.
With RocketFuel’s easy-to-integrate payment system, customers can transfer money from their digital wallets using more than 50 cryptocurrencies and with access to all of the major crypto exchanges. With this simple to use payment solution, dispensaries can lower the fees associated with on-premises ATMs or ACH payment options, including taking advantage of our current early adopters offer of 0% fees, 0 chargebacks and 0 declines.
Finally, because RocketFuel’s Price Settlement Guarantee locks in the price at the time of purchase and settles the transaction at that rate, dispensaries will be protected against fluctuations in crypto markets. All of this adds up to greater freedom of payment, streamlined accounting processes, and lower overhead costs. To take advantage of these benefits, sign up now.