What Cannabis Legalization Means For The Fintech Industry


Justin Trudeau made significant moves this week to legalize cannabis in Canada and last year’s US election saw several states do the same for recreational use. In 2016, the US and Canada spent a total of $53.3 billion on legal cannabis products, according to Arcview Market Research, so it is safe to say this industry is already booming and will continue to do so if more markets legalize marijuana. What does this mean for the fintech industry? Money is handled and exchanged within all business sectors and that is why payment technologies are being taken up quicker and used extensively in comparison to the likes of self-driving cars, for example.

Last year saw Microsoft’s cloud computing business partner with Los Angeles startup Kind to  create a product that would track marijuana plants from ‘seed to sale’, according to The New York Times. Executive director of state and local government solutions at Microsoft, Kimberly Nelson, believes that there will be growth in this sector. ‘As the industry is regulated, there will be more transactions, and we believe there will be more sophisticated requirements and tools down the road,’ Nelson said. The article went on to describe how Microsoft’s name attached to the marijuana industry will somewhat legitimize it, which I think will be the cannabis fintech arena’s biggest problem in the future.

The New York Times also highlighted in an earlier article the importance of fintechs for the legalization of cannabis. Despite Colorado decriminalizing the drug in 2014, Visa and Mastercard refused to process transactions made at dispensaries and in turn, banks refused to open accounts for them, which then left a lot of cash in limbo. This is where the fintech startups come in and will solve issues that the traditional banking sector may not know how to handle. I spoke to representatives from Tokken, Green Bits, WebJoint, M. J. Freeway and Merry Jane about what they’re currently working on and that is revolutionising the marijuana industry.


Tokken’s director of government affairs and communications Jenaya McGowan explores how payment processing will not be resolved if cannabis is descheduled. ‘One common misconception people have is that cannabis industry banking and payment processing will suddenly be resolved if marijuana is descheduled. In fact, cannabis will still be treated by banks and bank examiners as “high-risk,” similarly to the alcohol industry,’ McGowan said.

Tokken offer an app that acts as a wallet on which customers only have to enter their name and phone number in order to use it. ‘Those customers can simply add a credit or debit card to their TokkenPay SmartWallet and use their app at the point-of sale to purchase their goods and even tip their budtender.

‘We also offer a referral code for all TokkenPay customers. They can share their code with a friend and get discounts on future purchases if their friend makes a purchase using that code. Our dispensary partners have a web-based dashboard where they can monitor

TokkenPay transactions. We require a rigorous background check on our dispensary partners and assign them a risk assessment score, which allows us to determine a reasonable fee structure for businesses that pass our due diligence and to connect the business with one of our partner financial institutions.’