FinTech: Cannabis Cash Spells Opportunity for Fintechs

March 6, 2020 | FinTech, Latest News, News
https://dailyalts.com/wp-content/uploads/2020/03/7525108682_afa35c3208_c-cannabis-money.jpg

The regulation-strapped but cash-rich weed industry is fertile ground for fintech innovation.

Legalization of marijuana, for medical or recreational use, has not addressed a very basic need of the industry – access to banking services. Due to the designation of weed under the Controlled Substances Act, the industry is still considered illegal under US federal law. As a result, banks shun the marijuana industry, thus relegating it to a banking desert. (Forbes)

Even cards avoid the sector. “Transactions in the U.S. involving the purchase or trade of marijuana are not permitted on the Visa network, until such time as federal law allows,” according to VISA (NYSE: V).

Can fintechs step in where banks fear to tread?

Being a banking pariah, the weed industry is forced to conduct its business in cash. Consider the implications: In California, the cannabis industry is worth $3.1 billion. Across the country, legal retail marijuana sales were over $8.5 billion in 2018 and may have exceeded $11 billion in 2019. However, the cannabis industry participants have to receive and pay most of their business accounts in cash. The problem is getting acute – currently, 11 states consider recreational use of marijuana as legal, while 32 states have legalized medical use.

For cannabis, cash is king…unfortunately

It’s a peculiar dichotomy. On the one hand, technological innovation by fintechs is upending the game for banks while cryptocurrencies now command market capitalizations in billions of dollars. On the other hand, an entire industry is relegated to the antiquated mode of conducting its business in cash.

There’s another dichotomy – one within the weed industry itself. The industry is strictly regulated “from seed to sale,” and all players are accountable for every gram of weed inventory. As a result retailers and suppliers have had to instal sophisticated systems and equipment for recording, reporting and compliance procedures. Yet, all this regulatory rigmarole is rendered toothless if ultimately it is cash that runs through the industry veins. Cash may be king, but it is also the source of many evils.

If the industry could migrate to electronic payments, there would a huge regulatory pay-off for government, not to mention better tax collections. For the industry, it would mean getting rid of the huge headache of accounting, stowing and handling of cash securely.

And herein lies the opportunity for fintechs.

They should step forward to convert cannabis cash into digital dollars.

Acknowledgment: Cannabis Payments Are Ripe For Fintech Innovation, by Ben Cukier, Forbes

Related Story: Simplifya Exec John Vardaman: Cannabis and Banking Bring Transparency

Image credit: Flickr                                                 

Free Industry News

Subscribe to our free newsletter for updates and news about alternatives investments.

  • This field is for validation purposes and should be left unchanged.


Shape

Latest Alternative Investment News

https://dailyalts.com/wp-content/uploads/2022/05/Michael-Saylor_HQ-2-scaled.jpg
Digital Assets: Michael Saylor Unmoved By Crypto Weakness; “We Think It’s The Future Of Money”
May 20, 2022     Digital Assets, News

Michael Saylor, CEO of MicroStrategy (NASDAQ: MSTR), who is permanently bullish on bitcoin, reiterated his positive outlook for the leading crypto in an interview on Thursday. Note that MicroStrategy currently…

https://dailyalts.com/wp-content/uploads/2022/05/bacteria-g0d4c93622_640-overlay.png
Digital Assets: Traditional Markets Could Suffer Contagion From (Un)Stablecoins (SEC Chair Gensler)
May 20, 2022     Digital Assets, News

The crypto world was dealt a body blow by the collapse of the TerraUSD (UST) stablecoin earlier this month. The Terra meltdown is now being referred as crypto’s “Lehman moment.”…

https://dailyalts.com/wp-content/uploads/2022/05/xendit-unit-combined.jpg
Venture Capital: Big-Ticket Funding Rounds In Fintechs
May 20, 2022     FinTech, News, Venture Capital

Fast-growing, Southeast Asia-focused payments infrastructure platform Xendit closed on a US$300 million Series D funding co-led by Coatue and Insight Partners with additional investment from Accel, Tiger Global, Kleiner Perkins,…

https://dailyalts.com/wp-content/uploads/2022/05/Hero_image_with_QR_code.jpg
FinTech: Sam Bankman-Fried Led FTX.US Makes Inroads Into Stock Trading
May 20, 2022     Digital Assets, FinTech, Latest News, News

FTX Stocks is an equity trading platform offered through the FTX US trading application. FTX US announced Thursday a private beta phase trading on the platform for US customers selected…