The marijuana industry has a problem.
Well, it’s got a bunch of them. But one of the biggest ones is the logistical nightmare of dealing in a virtually all-cash business. It poses security threats and tracking issues that the industry has had trouble handling.
York County company KioWare Kiosk Software is trying to be one of the companies that offers a solution. It recently has partnered with two other companies to design and manufacture a secure cash-accepting kiosk specifically built for the marijuana industry.
“It’s something that was brought to us that is almost universally seen as a problem,” said Laura Miller, director of marketing at KioWare, a division of Analytical Design Solutions Inc. “And that’s what we do, we provide solutions.”
KioWare is writing the software for the kiosk while California-based Olea Kiosks Inc. is designing and manufacturing the actual kiosk. Malvern-based Crane Payment Innovations is designing equipment for handling money inside the kiosk.
The point-of-sale kiosk is designed to take in cash and allow buyers to complete their orders in marijuana dispensaries, which will be opening over the next few years in Pennsylvania. The kiosk spits out a receipt that the buyer can hand to a dispensary employee in return for products.
The system frees dispensary employees from having to handle cash and allows them to concentrate only on the dispensing portion of the job. It also allows for efficient tracking of inventory and cash.
The kiosk itself is secure as well, keeping the cash safe instead of in a cash register during business hours.
“I look at it like the kiosks that are coming into the fast food industry now,” said Frank Olea, CEO at Olea. “You place your order yourself on an electric board, and you take the receipt to the front counter where they hand you your food. That’s how it works.”
Banks still leery
Cash is king in the legalized marijuana industry because banks that issue credit cards have been wary of — or refused to process — payments in the sector. The banks cite marijuana’s status as illegal under federal law.
One company, Jane, a Denver-based financial services technology company for marijuana retailers, markets kiosks in marijuana dispensaries in states where the substance is legalized. CEO David Ellerstein said he and his partners recognized the need for the kiosks about two years ago, around the time the company’s home state of Colorado began allowing the recreational use and sale of marijuana.
He said that because banks were wary of the marijuana industry, dispensary owners would have to hide their cash before taking it to financial institutions that had agreed to work with them.
“We’d be visiting with these dispensary owners and riding with them, and they’d tell me, ‘You know you’re sitting on about $200,000,’” Ellerstein said. “And I would remember thinking, ‘I’m not sure if I want to be in this car.’ We could see there was this problem.”
Ellerstein said Jane is planning to expand into Pennsylvania as the medical marijuana business ramps up.
He said one of the advantages of a kiosk is that it provides a paper trail of receipts that can make banks more comfortable in servicing the marijuana industry.
“It’s what banks are looking for,” Ellerstein said. “There are banks and credit unions that are starting to come around on this, and having this kind of paper trail and record keeping at least can show the dispensary owner is trustworthy.”
Miller and Olea said their kiosks will have the ability to use big data to capture the preferences of their users and help track purchase habits. Miller said that kind of information is protected by KioWare’s security software, which keeps the user’s personal data secure.
Miller said KioWare expects the marijuana industry to be a small piece of the company’s overall portfolio — it deals mainly in the banking, retail and health care and government industries and has 100,000 licenses for its kiosk software in 100 countries — but right now, the company is entering the industry because of the glaring need for security.
“We’re still going to be across all our verticals,” she said. “This is just where there is an identified need right now and our company and our partners can provide a solution.”