Pot payment companies team up to simplify online sales
The regulations for legal cannabis are slowly loosening, but whether they have loosened enough to support a “normal” online shopping experience in the U.S. is being put to the test by a new mashup of digital ordering and payment tools.
CanPay provides a closed-loop, mobile-friendly debit payment system, and Jane Technologies operates an online marketplace for cannabis products. Dispensaries using Jane’s online menu and ordering platform can accept payments through their website from consumers using CanPay. The platform supports order-ahead, in-store pickup and delivery based on the laws of the locations on both ends.
So far, the results for CanPay and Jane Technologies are promising. The two companies report tests in Florida have doubled average cart size to more then $200.
“It’s a significant jump, and we think it will be consistent across all of our state markets,” said Dustin Eide, the CEO of CanPay, which is based in the Denver areas. “It’s an opportunity to normalize something that’s available in any other industry.”
The wish to be “like any other industry” is elusive in the cannabis market, even as it becomes legal in more states and has drawn increasing interest from investors. Creating this sense of normalcy is the goal driving CanPay’s partnership with Jane Technologies. Even if their payments and shopping model aren’t cutting edge, what the companies want is a market that's not driven entirely by cash and cashless ATMs.
“Online shopping for Cannabis has to work the same as anything else,” said Socrates Rosenfeld, CEO of the Santa Cruz, Calif.-based Jane Technologies.
While all industries have compliance issues, they are particularly complex for cannabis. Laws vary from state to state, and because they remain strict at the federal level, the market has been deemed untouchable by most payment companies.
So a lot of Rosenfeld and Eide’s work involves ensuring and communicating location-based transparency. The experience that CanPay and Jane Technologies are pursuing is designed to be similar to a quick-serve restaurant.
“The compliance requirements are around local businesses,” Eide said, adding consumers link to a compliant checking account, and can then make a purchase from any retail outlet based where the transaction is legal. "So you can’t just purchase cannabis and ship it around the country," he said.
The two companies are just starting a wide rollout in CanPay’s 17 states—it bases availability on legality, and plans to expand as more states legalize cannabis sales. The companies charge no direct fees to consumers, though sellers pay a transaction fee of about 2 percent.
Online ordering and payment is rare in the cannabis industry, which Rosenfeld characterizes as transitioning from “black market” to legitimate market.
“The market regs haven’t advanced much; cannabis payments are still the Wild West. That’s what creates big opportunities for entrepreneurs,” said Rick Oglesby, president of AZ Payments Group.
These startups include Alt Thirty Six, which has used blockchain and cryptocurrencies such as Dash to move legal weed payment beyond cash. Another company, Tokes, combines cryptocurrency for weed payments, along with point of sale software.
Legal cannabis is a $10 billion market, though that’s expected to double over the next seven years. But the market is still in the hands of early movers.
“This is still a market in progress due to the contradictory state and federal laws,” said Raymond Pucci, director of merchant services at Mercator Advisory Group. “So for now, new retail store openings are seeing high traffic, and as more states have retail locations, there will be more payment industry certainty in the market.”