Cannabis customers no longer have to risk their health to pay for their cannabis with cash.
Cannabis online marketplace Dutchie and digital payments provider Hypur have teamed up to bring contactless payments to some 1,100 dispensaries nationwide. The development comes amid the coronavirus pandemic, which has made dealing in cash — a reality for many businesses in the federally illegal cannabis industry — even riskier.
“We came together to offer dispensaries and consumers a safe, healthy and compliant way to facilitate a contactless transaction,” said Dutchie co-founder and CEO Ross Lipson. “The consumer can come online, place an order, and also pay online. We are limiting the need to contact the actual dispensary or staff.”
Through the partnership, Hypur, which claims as clients roughly half of financial institutions in the U.S. that bank the cannabis industry at scale, will have access to Dutchie’s network of cannabis retail partners. The fintech company was previously serving some 600 dispensaries and retail shops. As for Dutchie, the integration with Hypur’s payment system promises to streamline the user experience and make it even more attractive to cannabis businesses operating under the extraordinary conditions imposed by the pandemic.
Lipson described Dutchie as “Shopify meets DoorDash,” because consumers have the option of browsing local cannabis shops and products on Dutchie.com or purchasing on their favorite shops’ websites through a Dutchie-powered menu. Prior to the Hypur integration, customers would check out online and then pay at pickup or in-person when a delivery driver arrived. Now, shoppers browsing on the website or through a Dutchie-powered menu can select Hypur as the payment option. After creating a profile with Hypur, shoppers enter their unique pins to have payments debited directly from their bank accounts — rather than dealing with cash.
“It streamlined the transaction from end-to-end — from purchasing online to paying online. And it limits the contact points between the dispensary and the consumer, which enables more of a safe, healthy transaction in these sensitive times,” Lipson said.
Because of regulations, customers can’t actually use credit or debit cards for cannabis purchases, but Hypur’s technology recreates that digital payment experience through ACH transactions and next day wire service.
Hypur’s sophisticated workaround cannot hide challenges facing the industry, from barriers to banking services. Cannabis industry advocates have long argued that those barriers pose a public safety risk.
“Prior to COVID, it was the risk of delivery drivers having cash on hand and driving around the state with that. It wasn’t as convenient, because a consumer was limited to the cash in their pocket,” said Hypur Chief Revenue Officer Tyler Beuerlein.
In the time of coronavirus, cash transactions may pose a health risk, as well. Information varies about how long the novel coronavirus can live on surfaces and how likely it is that the virus spreads through touching contaminated objects (like cash), but the fear of infection, alone, has prompted increasing numbers of businesses to go cashless or discourage the use of cash as a payment method, according to the Associated Press.
Cannabis businesses don’t have that luxury. Because the industry is federally illegal, many financial providers like banks and credit card companies won’t serve cannabis businesses.
It’s these exceptional conditions that prompted Dutchie and Hypur to come together in the first place. Lipson said he and Beuerlein started talking a few months back, before the World Health Organization had declared COVID-19 a full-blown pandemic. But the outbreak sped things along.
“We were circling the idea of a partnership, and then COVID happened. And really COVID accelerated the need and the demand for this partnership from our consumers and our retailers that we both share,” Lipson said. “We just saw heightened demand and need for it.”
Each company, on its own, has proven quite popular during the pandemic. Lipson said Dutchie has signed an additional 450 retail shops or dispensaries within the past two months and reported a 650 percent surge in annualized sales to an estimated $2.1 billion from $350 million since the onset of the pandemic. He doesn’t expect growth to stop after the pandemic, either.
“The pandemic has shifted the consumers’ journey to start online,” Lipson said. “It’s accelerated the education for retailers on the need and value online ordering provides them and their consumers.”
Beuerlein said Hypur, for its part, has inked deals with major retail, software and banking partners since the pandemic started. Together, the companies expect their new partnership to yield even more growth.
“It’s been bittersweet, but we have seen a massive influx of new business due to COVID,” Beuerlein said.
“We fully expect to be in thousands of retail locations by the end of the summer,” he later added.
Hypur and Dutchie’s announcement comes at a time when there is increased focus on banking and financial services for the cannabis industry. Advocates have been calling for aid for the cannabis industry, which has been operating as essential in most markets, but lacks access to federal aid, like small business loans and disaster relief.
On Tuesday, Democrats in the House of Representatives unveiled a coronavirus relief fund that contains the Secure and Fair Enforcement (SAFE) Banking Act, which provides a safe harbor for banks looking to serve the cannabis industry. The provision should face little opposition in the House, which passed the standalone SAFE Banking bill in a historic vote last September, but it faces a less certain fate in the Republican-controlled Senate.
The House is set to vote on the bill Friday.