In December 2018, Michigan became the 10th state in the U.S. to legalize cannabis for recreational use.
From January to August of 2020, recreational sales climbed to $65.5 million.
As with many recently-legalized states, Michigan’s recreational market is expanding at a break-neck pace.
Where Michigan differs is in its average basket size.
Customers in Michigan spend more than $84 per transaction, the largest average for any state according to a 2020 study from Headset.
This is great news for retailers, but with so much money coming in, how are business owners keeping track of all that cash?
Cannabis is still largely a cash-only enterprise, with an estimated 70% of legal cannabis businesses operating without a bank according to New Frontier Data.
That doesn’t mean regulators aren’t tracking those dollars.
Each cent is accounted for and that leaves an onerous burden on retailers. Cashless payments are one method providing some relief to cash-weary store owners.
Dean Scanlon, regional account manager for GreenHouse Payment Solutions, was born and raised in Michigan and understands the complex retail environment.
While acknowledging the difficulties with cannabis banking, he believes cashless payment is the most effective way to ensure state compliance and accurate reporting.
“Cashless payment makes it safer for the budtenders, easier on the owner to track transactions in real-time, and provides the accounting department the reporting needed to reconcile sales,” said Scanlon.
Compliance and Oversight
Michigan is one of few states in the U.S. to house all their cannabis-related regulations within one governmental body.
The Bureau of Marijuana Regulation (BMR) oversees both medical and recreational cannabis licensing and regulation.
Department of Licensing and Regulatory Affairs Director Shelly Edgerton noted, “While many other states have various licensing, regulation, and patient programs spread throughout different departments and agencies, BMR will keep marijuana-related services in one place in order to best enhance consumer protections and make regulations more efficient for business customers.”
While this makes compliance easier, dealing with piles of cash can complicate reporting.
Each sale is recorded through METRC, the state’s tracking system.
Every penny tracked has to match up to daily totals. For Michiganders looking to avoid scrutiny and streamline accounting, accepting debit cards and other forms of cashless payment are an ideal solution.
“It is so much easier than counting cash at the end of the day,” Scanlon said.
Paper or Plastic?
Compliance and reporting aren’t the only reasons to offer cashless options.
According to Scanlon, offering customers an option to pay with their debit card can have a significant impact on how much they’re willing to spend.
In fact, according to a U.S. Consumer Payment Study conducted by TSYS in 2018, people will spend up to 83% more when using a card versus paying cash.
Though the recreational market is still in the early stages for Michigan, it’s important entrepreneurs set themselves up for success for the years ahead. Instituting cashless payment options is one innovative way to meet the needs of a growing demographic.
“As our industry evolves, we are evolving with it,” Scanlon said.
It’s a phrase every cannabis entrepreneur will have to abide by if they’re to thrive in this emergent and quickly changing sector. ϖ