JEFFERSON CITY, Mo.–Is it true most cannabis businesses are unbanked? No, according to one person’s analysis.
Instead, the industry is largely underbanked and underserviced, according to Brian Bauer, the cofounder and chief strategy officer of Abaca, a fintech that exclusively serves the cannabis industry.
Writing on MoGreenway.com, a publication that serves the cannabis industry in Missouri, Bauer noted conventional wisdom holds that the cannabis industry is unbanked and that it’s nearly impossible to get a bank account and other traditional financial services for cannabis operators.
Moreover, the data indicate approximately 5% of U.S. banks report having cannabis customers, and that it’s no more than 100 banks and credit unions are servicing the majority of the $10-billion industry.
And yet the 2019 Marijuana Business Factbook found approximately 90% of marijuana-related businesses and 76% of plant-touching companies report they do have access to financial services, Bauer said.
“What gives? For those with boots on the ground, the problem may lie in what one means by ‘access to financial services,’” he observed. “Many banks offer only cash services. Admittedly, it’s a step in the right direction, but it furthers the industry’s dependence on cash and creates a compliance headache and makes it difficult to do business.”
Instead, said Bauer, the cannabis industry isn’t unbanked; it’s underbanked and underserviced.
As an example, he pointed to retail payments in the cannabis industry, where payment options remain slim.
“The majority of cannabis retail transactions remain cash, even though nearly every retail study shows that consumers prefer to pay cashless and that they spend more when they have the option,” stated Bauer.
Additional Findings
According to his company’s meta-analysis of 15,000 cannabis transactions over a one-month period in June 2020 at multiple Midwestern medical cannabis dispensaries that had recently added its cashless debit solution, AbacaPay, Bauer said the 14,942 retail transactions were examined according to cash and AbacaPay cashless transactions.
“The results were significant, and they surprised even us,” he said. “Based on consumers’ avowed preferences for card-based payments, we expected to see data supporting cashless, but the actual results beat our initial expectations.”
The findings, Bauer said, include:
- The average ticket was 25% higher for customers paying cashless, with cashless tickets averaging $136.35 versus $109.06 for cash. “What’s the explanation? We hazard an informed guess: When customers pay in cash, most of them make their spending decision at the ATM and not the point of sale with the budtender,” he wrote.
- Total revenues were 8.3% higher due to offering cashless.
- Dispensaries offering AbacaPay reduced the amount of cash handled by 38%.