The legal pot industry braces for a 4/20 spike in payments
As the cannabis industry has inched toward legitimacy, it hasn’t abandoned its roots. And that includes the infamous pot smokers’ “holiday,” April 20.
A huge spike in payments is expected this year. Tracking presale volume against prior years, cannabis technology company MJ Freeway projects $80 million in sales on 4/20, up 48% over a year earlier and up 300% over an average day. By comparison, avocado sales on Cinco De Mayo in 2017 totaled $54 million, and pizza sales during the Super Bowl in 2018 totaled about $300 million.
The legal cannabis industry is becoming like any other merchant category, in need of processing variable payment volumes, migrating consumers away from costly payment methods, and tying payments to business functions like marketing and inventory.
“From a B2B standpoint, we see that brands want to capitalize on this holiday in a big way,” said Ryan Smith, CEO of LeafLink, a New York company that provides order execution, CRM and other services for the cannabis industry.
Cannabis has always been an industry that succeeded in spite of its stigmas. While regulations have loosened in many states, banks largely stay away from providing credit or financial services to dispensaries, forcing them to use alternative payment methods if they don’t want to exclusively take cash.
The political climate is also turbulent. On the conservative side of the aisle, Attorney General Jeff Sessions has called for crackdowns, while former House Speaker John Boehner has joined the board of legal cannabis company Acreage Holdings. Among Democrats, Cynthia Nixon, a candidate for New York governor, has made cannabis deregulation a central part of her platform.
Jeff Sessions’ posturing aside, the trend is toward more deregulation, more dispensaries and more transactions.
This creates pressure to come up with a more mature method of processing to handle the general growth and the periodic spikes as new markets open, or around “holidays” such as 4/20. The prevailing workarounds for handling payments, such as cashless ATMs or special cryptocurrencies, may not be enough to handle the volume on their own.
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