Cashless cannabis society?

CannaCard aims to take cash out of pot biz by mimicking Starbucks

Tom Gavin IV talks about the CannaCard at the CannaTrac offices in suburban Palos Heights. (One Illinois/Ted Cox)

Tom Gavin IV talks about the CannaCard at the CannaTrac offices in suburban Palos Heights. (One Illinois/Ted Cox)

By Ted Cox

Economists talk increasingly about a “cashless society,” and it can’t come soon enough for the burgeoning cannabis industry.

Although legalization is spreading from state to state, with Illinois weighing the move in the General Assembly with the full support of Gov. Pritzker, for now marijuana remains illegal in the United States, which complicates money transfers. Because interstate banks can’t accept marijuana money, many state-legal pot dispensaries, including those for medical marijuana, can’t use those banks’ credit or debit cards.

Which makes buying even legal pot a cash-and-carry transaction, and that’s for most buys, which adds up fast. That is “an opportunity for disaster,” according to Tom Gavin IV, chief executive officer of CannaTrac.

“You know you’re a target,” Gavin said this week, sitting in his CannaTrac office in suburban Palos Heights. “What better target for a criminal than a car full of money and drugs? And that sounds terrible, but that’s the reality of it. So, yeah, we obviously want to discourage that, and we want to give an alternative that takes cash out of the equation.”

Which is why his firm has developed the CannaCard in an attempt to take cash out of the cannabis industry.

“There is a necessity for us in the industry,” Gavin said.

CannaCard basically creates what Gavin called a “closed loop” in the financial world. The money goes in, and it comes out. He said it’s based on Starbucks’s successful loyalty program, which uses both hard cards that can have their value replenished or a smartphone app that can be restocked online.

“We looked at that and we tried to figure out what would be the easiest for the consumer to relate to, and they’re already using that,” he said. “We kind of took that and ran with it. So I guess you can say we kind of replaced coffee with cannabis.”

Sounds easy, but it’s not. Their system places the same initial demands on customers and dispensaries that banks do, in order to ensure financial transparency. “We are doing basically what the bank has to do to open an account,” Gavin said. “We don’t want any problems, you know, we don’t it to be used as another alternative for money laundering. That’s exactly what we’re trying to get around. We want to be able to offer these businesses full transparency, no different than any other business that’s out there.”

At the same time, however, the system has to meet the stringent demands for medical privacy in federal laws — at least as long as it’s serving customers for medical marijuana. “That was a very difficult thing, to try to figure how to show transparency, but still yet have privacy,” Gavin said. “We have a heck of a development team, that’s all I can say.”

CannaCard can be used as a smartphone app or as a reloadable hard card. (CannaTrac)

CannaCard can be used as a smartphone app or as a reloadable hard card. (CannaTrac)

They did some beta testing last year out in Colorado, the first state to legalize, starting with a dispensary on the Western Slope that offered a little bit of everything in the pot field — medical and recreational, for locals and for tourists — and captured a fifth of its market. By December, it was linked up to more than 900 cannabis-related businesses through the Adilas point-of-sale platform, and it relaunched in January with the app available through Apple and Google Play. It recently added a chain of 18,000 convenience stores, dispensaries, smoke shops, and vape shops, where cards can be bought and replenished, so the business, one might say, is growing like a weed.

Without going into industry secrets, Gavin said the firm is also looking into a handheld device that will allow GPS monitoring, the better to handle wholesale deliveries from cultivators to dispensaries, but for now their main focus is on the transaction between business and consumer.

CannaTrac makes its money through a 95-cent transaction fee for customers loading a card or restocking an app — cheaper than most bank ATM fees, he pointed out — with a 50-cent charge and a 2.45 percent fee on the business end, or $2.95 on a $100 purchase.

And what about when full U.S. legalization comes about? That’s a position backed by many of the already announced Democratic presidential candidates for next year. Gavin said the goal is to make the CannaCard so essential and convenient that it will hold its own — the way, again, the Starbucks loyalty program has.

“Our card is universal,” Gavin said. “So realistically we can do retail merchants as well if they opt to do that. And if they opt to become loading stations or actually take the card as payment, we can do a little bit of everything here.

“Once this is legalized, we see ourselves as being probably more important than we are even now,” he added. “Just because it’s legal doesn’t mean it’s going to be a free-for-all. They’re going to probably become more strict, put in more stringent regulations on the banks for banking this money, and we’re in a position — following the guidelines the way we already are — to being that alternative, to be the go-to for banks to use our system and for the dispensaries to use our system.”