4 Reasons Why More Service Providers Should Offer Solutions to the Cannabis Industry

Cannabis may be legal in some form in the vast majority of states, but it doesn’t mean everybody is on board — including professional products and services like payroll processing, business insurance, lending, and point-of-sale (POS) systems. Operators focused on the day-to-day of running their company want knowledgeable and reliable partners, without a needlessly-complicated search for the right ones.

Offering your services to this expanding industry can be a lucrative opportunity for your company. And with the rescheduling of cannabis on the horizon and an ever-growing list of states rolling out retail, now may be just the right time to get involved. These four reasons illustrate the need for more service providers in the cannabis industry.

1. The market opportunity is massive

Market projections from Statista suggest the U.S. legal cannabis industry could bring in $40 billion in revenue in 2024. If all goes as predicted, this is just the beginning. By 2028, according to that same report, the industry may drive more than $67 billion in revenue annually.

The real opportunity may be even greater as more states join the majority and more changes advance on Capitol Hill. Steps toward a post-prohibition future are underway, the most notable development of late being the possibility that the U.S. Drug Enforcement Agency’s (DEA) may reschedule cannabis as a Schedule III substance. And while full federal legalization is likely still some time away, the opportunity for professional service providers is here now and growing with each passing day more legal barriers are dismantled.

While the legal cannabis industry has already entered double-digits in age, getting in on the ground floor, so to speak, gives you ample time to establish your company as a leader in the long haul. Take the opportunity now to be among the earlier adopters and earn the trust and loyalty of cannabis operators who are making those same crucial first steps to enter the industry.

2. There’s high demand for B2B solutions

Just like any gift shop, farm, or grocery store, cannabis businesses need the support of professional service providers to sustain and grow operations. Unfortunately, finding that support doesn’t always come easy, especially when it comes to financial services like payment processing and lending. And the lack of these services can have a big impact on a company’s ability to grow.

For example, data from cannabis retail software provider Flowhub suggests that cannabis retailers with debit card processing capabilities earn $4,627 more per day than their competitors who cannot process debit card transactions. No retailer wants to miss out on that opportunity, but finding a willing partner is no small feat. There are only a few hundred financial institutions currently working with cannabis businesses, and not all of them advertise to the community. With more than 12,000 dispensaries in the U.S. — a number that grows week over week — the demand for cannabis payment providers is clear.

Lending to the cannabis industry faces similar challenges. In the industry’s early days, selling equity and raising capital from friends and family were the primary ways to get funded. Today, private lenders are providing more debt financing opportunities than ever, but it’s only a drop in the bucket. Especially when cultivators, manufacturers, and dispensaries are in the most cash-intensive pre-opening stage, capital raises are a top priority for entrepreneurs. And yet, traditional lending products like conventional loans and lines of credit are not available at the scale that the cannabis industry needs.

The demand isn’t just for financing — it extends to tech stacks. Many traditional POS companies, for example, won’t serve cannabis businesses due to the compliance challenges and a lack of expertise in the field. But the opportunity to serve this market in the U.S. and Canada is significant. There are an estimated 71 POS providers, and cannabis companies switch between them with relative regularity. Tuning your platform to service the needs of the multi-billion-dollar cannabis market may be just the right thing to boost revenue and reach a new audience of attentive, ready-to-spend customers.

3. Regulatory frameworks already exist

You may be hesitant to work with cannabis companies because you’re concerned about legal implications. Thankfully, there are robust frameworks in place that other FIs have been using for years to successfully and compliantly bank the cannabis industry.

While risk tolerance and concern around cannabis stigma varies from company to company, FIs are allowed — and are even encouraged, to some degree — to bank the cannabis industry.

Second, in many cases, you are not reinventing the wheel. For many professional service providers, a regulatory framework already exists. Federal regulatory bodies have been issuing guidance for several years on the subject. Much of these rules center around Know Your Customer (KYC) and Anti-Money Laundering (AML) provisions laid out in the Bank Secrecy Act. They’re further explained in guidance from the Financial Crimes Enforcement Network (FinCEN). For financial service providers, compliance with FinCEN guidance makes it possible to work with state-legal cannabis businesses without running afoul of federal law.

4. Unique social equity and DE&I initiatives abound

The cannabis industry emerged from the waning hold of the War on Drugs in the U.S., which had an extremely disproportionate impact on Black and Latino communities. As the legal industry advances, many companies and regulators are called to fold in social equity and diversity, equity and inclusion (DE&I) opportunities to begin repairing the economic, physical, and mental toll the War on Drugs took on minority communities.

Where companies in other industries are actively adopting social equity and DE&I policies as part of their ethos, many cannabis businesses were built with these philosophies at their core. That gives professional service providers a unique opportunity to get involved with these initiatives in a meaningful way.

That’s important not just for social progress, but also because consumers are increasingly conscious of businesses’ social impacts. That means companies that serve cannabis companies and get involved with the social equity movement in a meaningful, tangible way can better connect with decision-makers who factor corporate social responsibility (CSR) into the vendors they choose to work with.

How to get involved in the cannabis industry: 5 steps to take

Since the cannabis industry is a unique, complex space, we recommend the following tips to set your company up for success.

1. Do your research: Examine your local market, and read lessons from other state cannabis markets to see how they’ve evolved in their own ways. Attend networking events and conferences to get a full sense of the opportunity before you dive in.
2. Determine the market need: Every state is different, so take a look at the competitive landscape in your target area, whether that’s one state, a region, or nationwide. Are any of your competitors already providing services to cannabis businesses? If not, have any cannabis-specific service providers launched to fill the need? What’s your competitive advantage? Once you’ve done some market research and narrowed down the opportunity, it will be easier to develop a business plan around it.
3. Find a partner with cannabis expertise: If you haven’t worked in cannabis before, look to experts who can guide your path forward. Partners like Green Check manage the largest and most trusted network of FIs servicing the cannabis industry. We offer compliance tools and advisory services that help you build your cannabis program from end to end. Lean on resources like these to start your program on the right foot.
4. Keep learning and evolving: Continuous learning is crucial in cannabis, as this industry is constantly growing and changing. From new FinCEN guidance to fluctuating government regulations, it’s important to stay on top of all your obligations as it relates to cannabis. For financial services, we recommend maintaining cannabis banking accredited professionals on staff to ensure you’re on top of the latest happenings in the industry.
5. Market to the industry: There’s a whole ecosystem of media, directories, and platforms that cater directly to cannabis companies. Explore advertising on some of these platforms, including submitting your company to the Green Check Connect Marketplace. Our vetted vendor database is trusted by more than 10,000 cannabis companies eager to find reliable and trustworthy professional services.

The time is now for service providers to enter the cannabis industry

The future of cannabis is bright. Now is the time to begin laying the groundwork, building your portfolio, and honing your reputation in the industry. B2B service providers who enter the space today will be trusted names as the industry grows and stand to be a part of the fastest growing industry in the U.S.

However, if you want to do it right, you shouldn’t go it alone — that’s where Green Check comes in. From helpful solutions for service providers to a robust network of verified cannabis operators in need of support, Green Check has got you covered.