Pay startup aims to fill marijuana niche
• 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 firm 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 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 the marijuana industry, refusing to provide financing, closing bank accounts from Canada’s l icensed 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 up to $8 billion a year, becomes legal.
But Merrco’s Andrews is banking on loyalty from licensed producers, 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 has experience operating in the highly regulated sector as it is already used to control age and individual purchase limits for online lottery purchases, 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 firm, and enter credit card and other information for Merrco to securely process the payment.