The cannabis industry, a burgeoning sector in recent years, is facing a storm that could potentially disrupt the growth it has experienced. Cannabis payment processing has always been a thorny issue for dispensaries due to the plant’s federal illegality in the United States. However, another recent crisis has sent shockwaves throughout the industry, leaving dispensaries, deliveries, and other brands struggling to accept payments or pay their vendors.
Let’s explore the recent cannabis payment processing challenges in the cannabis industry and how they impact dispensary revenues. We will also discuss what to do when payment processing goes down and introduce Ian Rassman as our recommended solution to these issues.
The Cannabis Payment Processing Predicament
For years, the cannabis industry has grappled with payment processing issues, primarily stemming from its federal status as a controlled substance. As a result, major banks and credit card companies have been cautious about engaging with cannabis businesses, forcing dispensaries to operate primarily on a cash basis.
Security Concerns: Handling substantial amounts of cash exposes dispensaries to significant security risks. The sheer volume of cash transactions makes them vulnerable to theft, posing dangers to employees and customers.
Limited Consumer Options: Cash-only transactions inconvenience customers who have become accustomed to electronic payment options. This limitation also acts as a barrier for potential new customers who might be hesitant to visit dispensaries without electronic payment options.
Regulatory Hurdles: Managing compliance with strict state and local regulations becomes a cumbersome and time-consuming process in a cash-heavy environment. Maintaining accurate records and ensuring the legality of transactions are ongoing challenges.
Impaired Revenues: Arguably, the most significant issue is the impact on dispensary revenues. Customers often have a finite amount of cash on hand, restricting their spending at dispensaries, and thereby hindering the growth potential of these businesses.
The Recent Payment Processing Debacle
Despite long-standing issues related to payment processing, another recent event shook the cannabis industry to its core. Numerous times so far in 2023, several payment processors and financial institutions decided to sever ties with cannabis-related businesses. The reason cited was increased scrutiny from federal authorities, creating a sudden and severe disruption in payment processing for the industry.
RMR as even been impacted by this and we’re a music media company.
This unforeseen crisis forced many dispensaries into a precarious position, struggling to find alternative ways to accept payments and pay their vendors. Even those dispensaries that had managed to establish relationships with payment processors were left in the lurch, as many processors abruptly ceased their services.
Impact on Dispensary Revenues
The repercussions of this payment processing crisis were swift and brutal. Dispensaries experienced a range of adverse effects that had a direct bearing on their revenues:
Decreased Customer Traffic: The inconvenience of cash-only transactions deterred customers who preferred the ease and security of credit or debit cards. Many dispensaries reported a notable decrease in customer traffic as a result.
Reduced Sales Volumes: With customers having limited cash on hand, they tended to make smaller purchases, leading to reduced average transaction values. This, in turn, directly impacted sales volumes and overall revenue.
Increased Operational Costs: The surge in cash transactions forced dispensaries to allocate additional resources for handling and storing physical money, escalating operational costs.
Intensified Regulatory Challenges: Dispensaries already grappling with regulatory hurdles found themselves further overwhelmed as they struggled to maintain compliant financial records in a cash-intensive environment.
What to Do When Payment Processing Goes Down
In the midst of this payment processing debacle, it is imperative for dispensary owners to have a contingency plan in place.
Here are some strategies to consider:
Establish a Cash Management Protocol: Develop a secure and efficient cash management protocol to minimize security risks. This includes regular cash deposits, safe storage, and security measures to safeguard cash on-site.
Communicate with Customers: Keep your customers informed about the situation and encourage them to use cash. Consider offering discounts or incentives for cash payments to mitigate the inconvenience.
Seek Alternative Payment Solutions: Explore alternative payment methods that might be available to your dispensary. Seek the advice of a payments expert.
Diversify Product Offerings: Diversify your product offerings to cater to a broader customer base. Consider expanding into ancillary cannabis-related products, like smoking accessories or merchandise, to offset potential declines in sales.
Things often go wrong in cannabis, as well as in other new industries. We recommend having a plan in place, and one that specifically involves our partner Ian Rassman.
In the midst of this challenging cannabis environment, Ian Rassman has emerged as a resource for the cannabis industry. He has more than 13 years of payment processing experience with law firms, transportation companies, plastic surgeons, bars, restaurants, E-commerce, and many other small businesses. For the last 8 years, he has focused his time and energy on the cannabis industry. His approach to payment processing has allowed his partners to continue accepting electronic payments without being severely affected by recent disruptions.
By cultivating relationships with financial institutions that specialize in serving the cannabis industry, Rassman has managed to offer a secure and reliable solution to his network of dispensaries.
Banking Partnerships: Ian Rassman’s strategic partnerships with financial institutions and compliance companies willing to work with the cannabis industry have been a crucial factor in his success. These financial institutions have recognized the growth potential of the cannabis market and are committed to providing the necessary financial services.
Fintech Integration: Rassman’s forward-thinking approach incorporates fintech solutions tailored to the unique needs of dispensaries. POS integrations ensure seamless and secure electronic payment processing, minimize staff errors, and enable customers to make purchases using their preferred methods.
Regulatory Compliance: Ian Rassman’s payment processing solution takes the compliance burden off dispensaries. By working with institutions that understand the industry’s nuances, his partners can navigate the complex regulatory landscape with ease and provide reliable payment options.
Revenue Preservation: In contrast to many other dispensaries that have been significantly impacted by the recent payment processing issues, Ian Rassman’s partners have been able to preserve their revenues. Customers continue to make purchases with electronic payments, maintaining the revenue stream and profitability of the businesses.
The cannabis industry has long grappled with payment processing challenges, and another recent disruption has further intensified these issues. This disruption has left dispensaries grappling with decreased customer traffic, reduced sales volumes, increased operational costs, and intensified regulatory challenges.
Through strategic banking partnerships, fintech integration, regulatory compliance, revenue preservation, and staying nimble and forward-thinking, the industry can navigate these storms and emerge stronger on the other side.
Reach out to Ian Rassman at ian@rassman.com for more information. Mention RMR and Respect My Region for special pricing.
