Payment Processing Evolves

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This article is part of a series of historical perspectives about the legal cannabis industry.

Having worked in this industry for nearly eight years, I’ve witnessed its growth, maturation, and normalization in many ways. Digital processes and automation have taken over where manual processes lacked consistency, accountability, and speed.


I also have seen a major shift in the modern cannabis consumer. Between pandemic precautions and the rise of the “buy now, pick up later” mentality, online ordering and self-driven sales at kiosks have taken off. The 2023 consumer is more discerning and has much more education than their 2016 counterparts, so they are shopping with a much clearer idea of the products they’d like to buy. At the same time, they continue to put trust in the recommendations they receive from budtenders and sales associates, leading to many upsell opportunities.

Product variety has changed, too. Back then, flower was the leading category by a large margin, with extracts just beginning to come on the scene. While flower still reigns, many other categories that didn’t exist or attracted only minimal interest are flourishing now.

Another notable difference: Compliance was nothing like it is today. When we think of compliance in 2023, we envision a robust technological system form-fitted to match each state’s requirements. In 2016, though, “compliance” primarily meant an informal standard upheld by proactive operators seeking to avoid potential legal issues.

When I began my journey in the industry, payment-processing and standard retail operating procedures were predominantly manual. Most transactions were conducted using pen and paper or very rudimentary spreadsheets. Sales primarily occurred through walk-ins, with customers selecting products from physical menus or binders. The online ordering, digital menus, and advertising we see today were nonexistent.

Sales were conducted entirely in cash. Some dispensaries skirted strict banking regulations by using credit-card or cashless ATM terminals that pretended to be located at garden-supply companies or similar businesses instead of in a cannabis shop, because the card networks wanted—and still want—nothing to do with “drug trafficking.” Nevertheless, a recent study estimated cashless ATM transactions still fund a significant portion of dispensary sales. In fact, about 25 percent of the projected $25 billion in sales this year will involve cashless ATMs. But they’re a dying breed. In December 2022, retailers experienced a massive crackdown on cashless terminals, leaving dispensaries in Massachusetts, Arizona, California, and several other markets scrambling for another option.

Thankfully, other cashless payment systems, including automated clearing house (ACH) and PIN debit solutions, entered the scene. ACH transactions allow consumers to pay directly from their bank account without writing a check, and PIN debit is as simple and seamless as swiping a card and entering a code, much like consumers are accustomed to doing at gas stations and grocery stores. Unfortunately, in July 2023 Mastercard prohibited the use of its branded debit cards for PIN debit cannabis transactions, too.

Even though many other things in the industry have changed for the better over the past eight years, the lack of security for cannabis payment processes continues to leave retailers and customers in an unsafe environment, prohibiting them from operating like more traditional merchants.

About 30 percent of consumers spend more money when a dispensary offers cashless payment options, but the industry still has a long way to go to achieve the eighty-twenty cashless-cash split traditional retailers experience. Today’s consumer is seeking ways to carry less cash, even if the distance is merely from the ATM to the budtender. According to both the Federal Reserve Bank of San Francisco and American Express, nearly three quarters of consumers—73 percent—strongly prefer digital payment options and 12 percent use only digital methods; only 10 percent of consumers say they pay for everything in cash.

The Secure and Fair Enforcement Regulation (SAFER) Banking Act, which would provide legal protection to banks and other financial institutions that offer services to state-legal businesses, recently passed out of the Senate Banking Committee in a historic bipartisan move. If it advances, the SAFER Banking Act would open the doors for established players in traditional retail and banking to enter the U.S. market, potentially transforming the industry’s financial ecosystem. However, the act would take time to implement, and companies like Mastercard and Visa may wait to engage with the industry until the plant has been rescheduled at the federal level. We eagerly anticipate the day when mainstream retail and banking services become commonplace in this industry, too.

John Yang CEO Treez John Yang is the chief executive officer of Treez and an expert in enterprise cloud-commerce technology. He co-founded Treez in 2016 in response to the demand for software solutions specific to the needs of the cannabis industry. Prior to Treez, he consulted at Slalom Consulting, where he specialized in program management, business improvements, software development, customer-relationship-management solutions, and business intelligence.