The young and reemergent cannabis industry is being held back by the big elephant in the room. Let’s look into the trust and credibility factor in cannabis.
The cannabis industry has become legal and regulated only recently. In many jurisdictions, the US Federal Government’s being the clearest case, regulation is confusing and often inconsistent. As a new legal industry, trust and credibility are critical for growth.
Trust and credibility are tough subjects in an industry that is booming at light speed. The cannabis industry is growing very quickly and is expected to be worth more than $30bn in the US alone by 2025. Cannabis crops are diverse and applied in many industries. Cannabis plants and their cannabinoids have also recently been studied more thoroughly for medical potential.
All things considered, the cannabis industry’s growth is outpacing its regulatory framework. Given regulations, public image and stigma, and (in some cases) the lack of traditional financial services, the cannabis industry must overcome these challenges and foster trust and credibility to thrive.
Fortunately, there are already many solutions to these issues being explored. Let’s look at those issues and the potential solutions.
Lack of payment solutions
In some places, the cannabis industry is stuck in an awkward corner. In the US, banking is a constant challenge. Cannabis is still illegal at the federal level. All the while, medicinal cannabis is legal in three dozen states and recreational cannabis is legal in 17. Despite most of the country allowing access to legal cannabis, banking services are usually unavailable to them.
The result of this situation is that most cannabis businesses in the US are relegated to cash alone. Cash-only businesses become increasingly difficult to manage the larger they grow. Many in the US cannabis industry believe that access to banking services can’t come soon enough.
While the lack of banking services in the US cannabis industry is very strange, it’s not a uniquely American issue. Many European businesses face a similar problem but under different regulatory circumstances.
The UK may not be the largest CBD market, but it’s still a rapidly growing one expected to reach £1bn per year in 2025. The problem is that while many CBD products have grown popular, many payment processors may force businesses to clear their stock.
Finding a reliable payment processing option is difficult for cannabis businesses worldwide. Unlike other businesses, cannabis businesses can be sent an ultimatum: clear their cannabis inventory or have payment processing halted.
This all leaves cannabis businesses in a difficult situation. First, cashless payments are a trend that is only increasing. Many people in countries around the world are already almost forgoing on cash altogether. Cannabis businesses, including CBD ones, rely on e-commerce online payments and deliveries. Some payment processors have been known to cease their payment processing suddenly.
When cannabis businesses are faced with the absence of payment processing, it hurts their reputation. The cannabis industry’s reputation has been carefully cultivated. But for a public that relies on cashless payment options, this threat to cannabis businesses is very real. So, some cannabis businesses must rush to find alternative payment service providers. In some cases, they rush to sub-par payment service providers. This can cause them to have difficulties providing adequate customer service.
It’s clear that the cannabis industry needs reliable payment solutions to grow and maintain trust. At Canxchange we are proud to host a payment solution operated by the conventional banking system that we provide our members.
There are a growing number of cannabis payment services. While these cannabis-industry-specific solutions do offer an alternative, many of them still miss out on credit card processing. This depends on your jurisdiction, of course. In the US, cannabis companies cannot legally accept credit card purchases.
Options that still work and are legal include ACH payments and eChecks. Also, there is the option of a dispensary credit card, essentially a merchant account for customers. They typically use P2P technology like Venmo to facilitate card transactions.
Of course, if possible, find a reliable processor that can accept major credit cards. Fortunately, the startup space for cannabis payment processing is very active. Legal solutions to the payment processing issue are quickly establishing themselves.
Shady and illegally operating companies
Unfortunately, this factor is beyond the control of most legal and honest cannabis businesses. The fact of the matter is that many illegal cannabis businesses have emerged alongside the businesses that operate legally. Of course, illegal cannabis dispensaries do not need to follow the same rules as their legal counterparts. This is not a good look for the cannabis industry. It’s even formed a wedge between the legal medicinal and recreational cannabis communities in some areas.
The cannabis industry has already produced several scandals. The confusion surrounding regulation has allowed some illegal businesses to thrive while maintaining the appearance of complete legality and legitimacy. It’s safe to say that many cannabis consumers have likely ordered cannabis from an illegally operating business while having no idea that they have been doing so.
Also, legal cannabis businesses face the challenge of shady payment solutions providers. Most are just looking for a legal and sustainable way to enable their customers to pay them the way they want to.
These issues have several solutions that all serve to promote transparency and promote confidence in legal and ethical businesses involved in any part of the cannabis industry. “Seed-to-Sale” POS systems are developed specifically for the cannabis industry.
They enable the tracing of all transactions and actions from the purchase of seeds by a grower to the sale of finished products by retailers and dispensaries. This removes much of the “shadiness” associated with the cannabis industry in the eyes of the regulators and the consumers.
Cannabis businesses can take part in promoting trust by making licensing and certifications public knowledge. They can also provide educational materials on these topics through handouts or on their websites.
The bottom line
Cannabis is becoming more accepted by society. Whether the plant’s cultivation is for medical, industrial, or recreational use, more people want it.
However, the industry must still confront the stigma stemming from a generation of illegality. Then there’s its past, sweeping association with psychoactive drug abuse. While regulators are often slower than the general public to react to these changes, there are steps that those in the cannabis industry can take to further build up trust and credibility with both regulators and consumers.