Le­gal Pot Pay­ments Re­main Murky

The in­con­sis­tent le­gal­ity of mar­i­juana sales has the pay­ments in­dus­try cre­at­ing elab­o­rate so­lu­tions to breed cash out of the sys­tem.

ISO & Agent - - INSIDE 07/08.2017 - BY DAVID HEUN

De­spite the growth in the le­gal cannabis in­dus­try, many com­pa­nies strug­gle to find part­ners to help them ac­cept pay­ments. This is lead­ing to some cre­ative ap­proaches to sell­ing in dig­i­tal chan­nels.

E-com­merce can bring many ef­fi­cien­cies to a re­tailer’s op­er­a­tions, but in the le­gal­ized cannabis in­dus­try, pay­ments must still be han­dled off­line. This places mar­ket­ing au­to­ma­tion provider Baker in the odd sit­u­a­tion of launch­ing a white-la­bel e-com­merce plat­form for mar­i­juana dis­pen­saries that will pro­vide tools for pre-or­der­ing, pickup and de­liv­ery — but not pay­ments.

So what does the plat­form’s “Buy Now” but­ton ac­tu­ally do?

“Cur­rently, the Buy Now but­ton is a fast track to the shop­ping cart, al­low­ing the cus­tomer to quickly add prod­uct to their bas­ket and pro­ceed to the last step of the order flow with one click or tap,” said David Cham­pion, Baker’s co-founder and chief prod­uct of­fi­cer. “The pay­ment trans­ac­tion, for now, still hap­pens dur­ing pickup or drop-off.”

Call­ing it the “Shopify for Cannabis,” Den­ver, Colo.-based Baker de­vel­oped the Shop plat­form to give mar­i­juana re­tail­ers and dis­pen­saries an e-com­merce so­lu­tion that can han­dle pric­ing by weight,

med­i­cal ID ver­i­fi­ca­tion, point-of-sale in­te­gra­tion and state or­der­ing and tax lim­i­ta­tions.

More than 100 mar­i­juana re­tail­ers across the coun­try are al­ready us­ing Shop, and Baker also works with 250 dis­pen­saries across Ari­zona, Cal­i­for­nia, Colorado, Con­necti­cut, Hawaii, Ne­vada, New Mex­ico, Mas­sachusetts, Ore­gon, Wash­ing­ton and On­tario.

Law­mak­ers and le­gal­ized mar­i­juana sup­port­ers alike have broached the topic of re­solv­ing the pot pay­ment process, which is of­ten han­dled by cash or by con­vo­luted sys­tems that avoid tra­di­tional card net­work rails. To­day there are closed-loop card schemes through part­ner­ships with state or lo­cal gov­ern­ments, es­tab­lish­ing a ten­ta­tive re­la­tion­ship be­tween banks and mar­i­juana sell­ers.

But be­cause of the in­con­sis­tent le­gal stand­ing that mar­i­juana dis­pen­saries face, Baker and other ven­dors have taken a cau­tious ap­proach to han­dling pay­ments in the med­i­cal and re­cre­ational mar­i­juana busi­nesses.

“There are no fully ap­proved pay­ment pro­cess­ing com­pa­nies for re­tail cannabis prod­ucts,” Cham­pion said. “There are sev­eral ser­vices op­er­at­ing in the gray area of the law and, in many cases, of­fer­ing a ser­vice that is con­ve­nient to the cus­tomer.”

Cham­pion prefers that his com­pany pri­or­i­tize le­gal­ity in all phases of its prod­uct de­ci­sions and thus is “willing to be pa­tient un­til a fully au­tho­rized pay­ment pro­cess­ing ser­vice be­comes avail­able,” he said.

When that hap­pens, Cham­pion is con­fi­dent his com­pany will quickly in­te­grate full pay­ment func­tions for cus­tomers of mar­i­juana re­tail­ers and dis­pen­saries. In the mean­time, Cham­pion has had a for­mi­da­ble task in sim­ply set­ting up an e-com­merce plat­form at Baker for the mar­i­juana busi­ness.

“Al­most all dis­pen­saries op­er­ate off­line only,” Cham­pion said. “The hur­dles in set­ting up any kind of on­line re­tail have been ex­tremely high.”

Some of those ob­sta­cles cen­ter on med­i­cal vs. re­cre­ational pric­ing dif­fer­ences, and the fre­quency of prod­uct turnover.

In mak­ing Shop a cus­tom-built plat­form, Baker had to ad­dress all of these fac­tors unique to re­tail mar­i­juana. In­dus­tries with fewer reg­u­la­tions — and less per­ish­able prod­ucts — don’t face the same con­cerns.

Shop is avail­able in all reg­u­lated states for both re­cre­ational and med­i­cal mar­i­juana sales. It has been launched in 12 states and Bri­tish Columbia and On­tario in Canada.

Be­cause of var­i­ous reg­u­la­tions in each state, Baker built a “busi­ness rules en­gine” for the Shop plat­form that al­lows sep­a­rate con­fig­u­ra­tions for each state, while as­sur­ing any dis­pen­sary in those ter­ri­to­ries adopts the proper ad­just­ments.

Baker is care­ful not to make any sort of po­lit­i­cal stand as it re­lates to the le­gal­iza­tion of mar­i­juana, though Cham­pion ac­knowl­edges “the med­i­cal ben­e­fits fi­nally be­ing proven through re­search can’t be ig­nored, es­pe­cially in a cul­ture that has be­come re­liant on po­ten­tially harm­ful phar­ma­ceu­ti­cal drugs.”

That this con­ver­sa­tion is even hap­pen­ing at all in the U.S. is a sign of a po­lit­i­cal shift.

A year ago, the re­la­tion­ship was far less chummy. Serge Chis­tov, the pri­mary in­vestor and fi­nan­cial con­sul­tant for Hon­est Mar­i­juana, a re­cre­ational grow house in Den­ver, Colo., de­scribed his com­pany’s former bank­ing re­la­tion­ships this way: “They don’t ask and we don’t tell.”

Not that long ago, if a bank or credit card com­pany found out a client was in the le­gal mar­i­juana busi­ness, it would close those ac­counts, Chis­tov said. This forced cannabis com­pa­nies to ac­cept mainly cash, which can not only be an in­con­ve­nience for cus­tomers but also a se­cu­rity risk for busi­nesses.

Ly­ing to banks was “a nec­es­sary way to get fi­nan­cial ser­vices,” Chis­tov said.

“It was a very un­healthy re­la­tion­ship,” Chis­tov added.

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