Payment startup aims to capitalize on marijuana gap
Calgary-based Merrco banking on loyalty from licensed sellers rejected by majors
Marijuana payment processor startup Merrco Payments Inc. is among a new crop of companies marrying two of today’s trendiest business pitches — financial technology and marijuana — in an effort to capitalize on the gap for marijuana companies left by risk-averse big banks and payment companies.
The Calgary-based company pitched a room full of marijuana industry insiders Friday at the O’Cannabiz conference in Toronto on its e-commerce payment processing plan that will offer licensed marijuana sellers a tech solution that complies with the proposed Cannabis Act.
The startup’s pitch might still be half-baked, but Merrco, which started talks with licensed producers in January, knows it needs to act fast to carve out a niche before recreational marijuana becomes legal, a move expected in July 2018.
Chief compliance officer David Andrews said the company gets calls on a daily basis from illegal dispensaries, but it’s only interested in those complying with federal laws.
He hopes licensed producers, which have been ignored by the big banks, will find the alternative startup attractive enough to give it a shot and stay with the payment processor even when major banks and processors decide it’s safe to do business with cannabis companies.
“Traditional banks and payment companies have been reluctant to embrace this industry,” he told a room of about 100 people in his talk called “Turning Green into Green.” “I think they take for granted the notion that once legalization happens in July 2018, you’ll all come rushing back and bang on their doors.”
Canadian banks are steering clear of involvement with the burgeoning marijuana industry, refusing to provide financing to marijuana companies until the recreational market is legal, closing bank accounts from Canada’s licensed medical marijuana producers, while U.S.-based PayPal refuses to process payments.
Their attitude is expected to change once Canada’s recreational market, expected to be worth as much as $8 billion, becomes legal.
But Merrco’s Andrews is banking on loyalty from licensed pro- ducers, who have been spurned by the majors. Andrews was sparse on details, but said the company has signed on a number of companies, has partnered with an undisclosed family owned Alberta-based bank — and would earn a revenue by charging a percentage of each sale that is “competitive” with industry standards.
The company’s CEO has experience operating in the highly regulated sector as it is already used to control age and individual purchase limits for online lottery purchases from provincial regulators, Andrews explained.
Merrco’s technology would ensure sellers comply with age restrictions and purchase limits using tools such as device fingerprinting, geo-fencing and big data collection. Buyers would go online to make a purchase from a regulated company, and enter credit card and other necessary information for Merrco to securely process the payment.