The payment transaction at the dispensary checkout counter is one of the most pivotal exchanges between a licensed cannabis business and the customer. Paybotic, a payment solutions company working in the industry, helps make it a frictionless, familiar experience for all.
Now, the Florida-based financial services provider is helping other cannabis-facing businesses ease their way into convenient payment processing.
“Our core business is offering processing services to retail dispensaries, but we’ve expanded to offer to ancillary customers of the cannabis industry—like testing labs, lab equipment [manufacturers], grow equipment [manufacturers] and things of that nature,” CEO Max Miller said. “We are now able to support those for all different types of payment systems, whether retail-facing or enterprise payments for wholesale. Those solutions are now becoming available to our existing customer base, because they desperately need them.”
The reality of the situation is that cannabis banking reform may not be right around the corner, despite headlines trumpeting the SAFE Banking Act and similar state-by-state legislation.
“Cash is very relevant in this industry,” Miller said. “As much as these businesses don’t want it to be, it’s still here.”
In order to understand an individual business’s relationship with cash and other financial instruments, Miller’s team first looks at how it’s getting along presently. What do the company’s transactions look like? How is it managing payments to vendors and clients? What pain points is the company feeling?
Miller groups these companies into two buckets: ancillary plant-touching business and ancillary businesses that don’t touch the plant. “They both have a lot of the same issues,” he noted.
As the commercial cannabis ecosystem expands, it’s not only the licensed growers and retails that are caught in the maw of federal prohibition. That disconnect between federal law and state-by-state legalization also ensnares companies that are mostly working on the sidelines of this industry.
“You would think that somebody selling grow lights would have no issues with getting payment facilitation services or bank account services, but they do,” Miller said. “I call them ‘guilty by association,’ because they surround the plant. These banks think they might as well be touching the plant—and treat them that way. We try to treat them as traditionally as possible and understand their business.”
More and more, he said, legacy companies are moving into the cannabis space from some other long-running enterprise. Maybe it’s a packaging company that’s worked with beverages for the past 20 years. Now, this company is backing into the cannabis space by offering packaging solutions for THC-infused beverages and edibles. This is becoming a common path into the cannabis space, and it’s one with plenty of obstacles.
“One of the mistakes I find they make is that they’ll treat it like any other vertical they want to go into,” Miller said. “As everyone is familiar, cannabis is a very complex industry when it comes to compliance and legal and all of those things. They sometimes treat it just like another industry because that’s what they think it is and find out quickly that it’s not—that it has a lot of complexities.”
The mere entrance into the cannabis space can present risk to a company’s core business outside the industry.
On the same token, that entrance into cannabis presents a new suite of business challenges (or opportunities) that might reshape how a company operates. This is where a solutions provider like Paybotic comes into the picture—a guide that can help a business navigate the inherent complexities of a tightly regulated space like cannabis.
Miller’s team brings its experience in the retail space (state-licensed dispensaries) to the wholesale and b2b segments. There, the average transaction size is higher and the payment terms are different. These aren’t in-store purchases, but rather transactions that necessitate invoices and strict payment collection. The underwriting is similar, Miller said, but the actual needs of the business will differ.
Let’s say you run a packaging business. Miller’s team will set you to ensure that you can transact with your clients as traditionally as possible. Paybotic will look into a business’s current licensing and compliance record, and will find them a proper merchant account and the appropriate electronic check processing services with a bank that is amenable to the business. This includes specific invoicing and payment collection needs.
“When you look at it, … these businesses really want the same thing any traditional packaging company would want,” he said.
Outside of any meaningful change from Washington, D.C., which would still take some time to implement, it’s important for companies to align their needs with their capabilities—and that’s an intersection that third-party financial services providers can tend.
“I’m watching the SAFE Banking Act, and I’m very much rooting for it,” Miller said. “I’m hopeful that we get a good forward push and things speed up a little bit, but it’s been very slow. At the federal level, there’s really been no change.”