The Future of Payments
The recent surge of states like Missouri, Connecticut and Maryland passing legislation for legalized cannabis in some form has been nothing short of revolutionary. Not since the end of alcohol prohibition in 1933 has a product been rapidly unleashed onto the licensed market with such high and widespread demand. With each passing year, cannabis legalization, normalization, and demand continue to grow.
While the industry looks optimistically towards the future, the current federal classification of cannabis brings substantial challenges for dispensaries when it comes to payments. A common issue faced by rising cannabis businesses is the need for reliable, consistent, and fully compliant cannabis payment services.
As technology endeavors to provide cannabis companies with compliant solutions, what does the future of paying for legal cannabis look like?
It’s no surprise that experts are forecasting big moves on the tech side of the cannabis industry in 2023. With a growing customer base and new technology, the cannabis industry is likely to continue experiencing growth in the next few years. The number of legal cannabis consumers is expected to reach close to 71 million by 2030. New products and services that could help propel the sector even further are likely to be launched in near future, especially concerning payments for cannabis dispensaries.
What are some other trends we expect to see in the future for cannabis payments?
We’ll see bigger players entering the cannabis market.
Emerging markets in states like New Jersey are being closely watched and are setting the precedent for legal cannabis markets on the east coast. In Q3 alone, New Jersey saw over $100 million in recreational cannabis sales. Experts believe the success of adult-use cannabis legalization in New Jersey has pressured neighboring states like New York to do the same.
The legalization of cannabis in New York is a big step toward seeing mainstream ancillary businesses including financial services, banking, accounting and more enter the cannabis space. This will provide the industry with much needed support and enterprise-level solutions. As the Safe Banking Act failed to pass in 2022, showing a stronger need for cannabis normalization, we can only hope to see more mainstream companies entering the cannabis space sooner rather than later.
Shoppers will leave the cash behind.
Less and less American consumers are using cash when they shop. A survey from U.S. Bank found that 50% of the respondents carried cash less than half of the time when they went out. Millennials have flocked to new digital payment trends like Apple Pay, Zelle, and Venmo. What does all this mean for cannabis payments?
Though cash payments are the most common way to transact in the cannabis retail space, it is not without its share of complications. Transacting predominantly in cash, especially when operating at a high-volume location, can create unforeseen additional costs associated with cash management. With digital payments, e-transfers, and smartphone wallets now seen as the common form of payment, more customers are moving away from cash.
Cannabis retailers have been using cashless ATMs, or “point of banking” systems, as a workaround to allow customers to use their bank cards at checkout. Business owners can “mask” payments to hide transaction details like the name of their business and the products sold. As the industry continues to evolve, staying current on the latest payment solutions is crucial in staying competitive, compliant, and transparent. Because cannabis is still federally illegal, accepting payments like this is technically unlawful. Credit card companies like Visa have warned the industry against cannabis payments that run on the card rails.
The recent crackdown on using cashless ATMs will have a large impact on the industry and there will be an increase in digital cannabis payment processors for dispensaries.
Cashless payments will continue to increase in popularity, allowing customers to pay with mobile devices at dispensaries and other cannabis businesses via contactless and digital payments. Expect to see bank-to-bank transfers via ACH overtake alternative payment methods and “workarounds” such as Cashless ATMs. Differentiators for contactless payments will go beyond transaction fees with a focus on speed and settlement times, risk and fraud protection measures and supporting marketing programs. Secure and safe transactions will be key as risky cash transactions continue to dwindle.
Technology will start to bundle up.
Partnerships with large-scale tech companies and other big players will lead the way by offering integrated solutions for cannabis businesses with much more flexibility, choice, and scalability. More companies want bundled integrated solutions for limitless combinations of one-stop shopping. Digital payment providers like Aeropay, for example, have already partnered with some of the top technology companies, including Jane, Akerna, Flowhub, Dispense and Mosaic, among many others, to offer all-in-one payment and business management opportunities.
These robust integration solutions will allow business owners to integrate all aspects of their dispensary, including e-Commerce or cannabis delivery, for seamless digital transactions and store management. For developers and business owners, payment processors will continue to offer the latest easy-to-implement SDK, a more extensive library for complete customization, and access to more advanced out-of-the-box integrations with numerous point-of-sale and cannabis eCommerce platforms.
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