I’ve had another business idea. I want to open up a new market sector. My slogan will be “Buy your Camberwell Carrot with Doobie Debit”.
It’s not often that we get to discuss recreational drug use on this blog, since we don’t generally pay any attention to news stories that do not involve electronic transactions. That’s why, for example, there is no story here concerning self-confessed dope smoker Nigella Lawson and her ex-husband’s socially irresponsible habit of using cash. However, recent events in the US mean that we can no longer avoid the topic.
Now that several states have legalized medical, and in some cases recreational, use of marijuana, card networks have to decide if they will process these transactions on their network.[From Card Networks Take Positions on Marijuana Purchases – PaymentsJournal]
As Mercator point out, this puts the networks and acquirers in an interesting position. After all, while it is not legal everywhere, it is a huge cash-based business that is ripe for conversion to electronic payments.
The broad acceptance of credit and debit cards could eventually be a big boost for the card industry, which is eager to convert everyday cash purchases into plastic. Colorado marijuana shop owners estimated that they rang up $1 million in sales on New Year’s Day, the first day recreational pot became legal.[From Card Conundrum Develops in Colorado Over Marijuana Sales – WSJ.com]
Reading this led me to wonder whether cards or other electronic payments are used to facilitate marijuana sales elsewhere? It’s very hard to find any actual figures for this. In the UK, for example, it’s illegal to sell marijuana. So while I don’t doubt for a moment that enterprising unregulated pharmaceutical executives are already using mPOS and P2P and FPS to facilitate transactions, there are no statistical analyses that I can refer to. Then it struck me: Amsterdam. That’s the only place I can think of where people can buy marijuana. Given that The Netherlands is a heavily debit-centric market that is making an effort to reduce cash usage, surely the famous coffee shops might provide a case study. But alas not, and for a reason that hadn’t occurred to me when I first wrote on this topic.
These coffee shops are being pressured to start accepting cards so that more of their operations are on the books. This is, of course, a good idea… But the coffee shops, tolerated under the Dutch system, have a supply chain chain that is not. The wholesalers, so to speak, have expressed a marked reluctance to be paid by SEPA credit transfer.[From The Dutch retailers and the war on cash – Tomorrow’s Transactions]
Why does any of this matter? Well, it seems to me that the use of electronic payments is a badge of respectability. People who run legitimate business want to accept electronic payments: it marks them as being socially responsible, taxpaying businesses mindful of their role as guardian of the complex rights and responsibilities that create the conditions for commerce to take place in ways that benefit all of us. Conversely, if I see a sign on a restaurant door that says “cash only”, I naturally assume that the owners are tax evaders or a front for organised crime.
In ten years time, one panel moderator predicted, “cash won’t be something that nice people do.” Instead, he thought, “the C word” will be tied to drugs and other illicit dealings.[From A Dispatch from the Future (of Money and Technology Summit) — Cultural Anthropology]
This echoes one of my all-time favourite quotes from one of my all-time favourite books from one of my all-time favourite authors. In the brilliant “Count Zero” by the brilliant William Gibson, we read:
He had his cash money, but you couldn’t pay for food with that. It wasn’t actually illegal to have the stuff,it was just that nobody ever did anything legitimate with it.
I can see the problem in the US because of the difference between state and federal law but I can think of at least one solution: why doesn’t an issuer in Colorado come up with a “Colorado Card” that can only be used within the state? Then the acquirers and processors could handle the transactions and everyone is happy. I’ve said before that I would be perfectly happy for Barclays to mark my debit card as UK only and block all CNP usage. Since almost all physical retail transactions are local (I don’t know what the figures are for the US exactly, but I’d imagine that 98% of offline debit card use is local) this should be workable. If the issuers don’t do this, then a State-only decoupled debit or ACH front end is on the way! I’m going to nip out and register “Doobie Debit” as a trademark.
As Karen Webster says, though, “there’s always Bitcoin”. Could legal marijuana sales be an opportunity for Bitcoin to gain some mainstream transactional action? It would be lovely to think so, but I’m afraid I doubt it. The comments of the marijuana sellers quoted in the articles above, and others than I’ve read, make it clear that the preferred option of both buyers and sellers are, as in all other retail environments as far as I know, debit cards. Hence if anything I would expect to see a measurable growth in Square, GoPayment, PayPal Here and friends rather than a spurt in Bitcoin transactions. Maybe some people might think it is cool to buy illegal drugs using Bitcoin (although, frankly, almost all illegal drugs are purchased with cash) but once the excitement of the black market is removed, buyers and sellers of reefer will judge the payment mechanism the same way as buyer and sellers of shoes: convenience, costs and consumer protection.
What’s the direction of travel then? When it comes to weed, maryjane, grass, hash, bhang and ganja, I’m certain that payments will follow the trajectory of the sector as whole (although possibly with a greater focus on two-sided conditional anonymity as a transaction model) and the payment will soon vanish into the app.
The U.S. medical marijuana industry now has its own mobile app. Medical Cannabis Payment Solutions, which describes its mission as providing end-to-end management across multiple systems for medical marijuana operations, announced the launch this week.[From Medical marijuana payment company launches mobile app | MobilePaymentsToday.com]
I looked it up. The app handles push notifications, in-app messaging, social media integration, e-commerce, third-party integration and multimedia but not, as far as I could see, payments. It’s only a matter of time. Surely some enterprising venture capitalist is even now funding the bastard son of Uber and GrubHub with in-app payments, ratings and one-click Ben and Jerry’s. And if the gear doesn’t show up in 30 minutes, it’s free.