Startups worth watching: Payment startups are tapping the cannabis industry with solutions aimed at digitizing the historically cash dependent sector.
Why it matters: The cannabis market is huge—but federal regulation prevents mainstream FIs from offering payment services to customers and merchants.
Legal cannabis sales in the US hit a record $17.5 billion in 2020—a 46% year-over-year (YoY) increase, per data from BDSA cited by Forbes. Overall sales are likely significantly larger if illicit marijuana sales are taken into account. Cannabis is also growing more popular as an investment: 43% of US investors currently hold at least one cannabis-related stock, according to a 2021 MagnifyMoney study.
But because cannabis is still illegal at the federal level, banks are hesitant to offer transaction services for the industry.
The big takeaway: Startups like CanPay, SuperNet, and POSabit see an opportunity to fill the digital payments gap in the cannabis space.
The overwhelming majority of cannabis transactions (legal or not) are cash-based, per TechCrunch. This creates security issues for dispensaries, and managing these transactions requires a lot of time and effort. Offering digital payment acceptance and processing solutions can mitigate these issues—and the startups enabling those solutions can capitalize on a mostly untapped market.