Startups

Dutchie Pay wants to help you stop paying in cash for your cannabis

Comment

Dutchie Pay for cannabis dispensaries - Payment checkout interface
Image Credits: Dutchie

Cannabis is now legal in a number of U.S. states, but because it isn’t federally legal, this “legal” status only does so much for cannabis businesses. While dispensaries can sell cannabis products legally in many states, they don’t have access to the same banking facilities that any other retail business would.

As a technology platform for cannabis commerce, Oregon-based startup Dutchie is cognizant of the complexity of the problem it is trying to tackle. “We are frankly a little bit and kind of in the stone age when it comes to payments and cannabis,” co-founder and chief product officer Zach Lipson told TechCrunch.

“It really forces the industry to rely on cash,” he said, pointing out that 90% of all dispensary transactions are handled in cash. This figure might be a tad high or slightly outdated, as it comes from a 2020 report by research firm Aite Group, prepared for Emerging Markets Coalition (EMC), an advocacy group for financial services in the cannabis space. But the point remains: Cashless transactions are often not an option for cannabis businesses.

Zach and his co-founder (who is also his brother and the company’s CEO), Ross Lipson, aim to solve that problem with Dutchie Pay, a payment solution that is designed for the legal cannabis market in the U.S.

How it works

If you’re buying legal cannabis for medical or recreational purposes, you might be able to place an order on your dispensary’s website, but you’ll still have to pay cash upon delivery or pickup. This is where Dutchie Pay comes in.

Dutchie Pay’s moniker is reminiscent of Apple Pay, and that’s not a coincidence — Dutchie also has ambitions to be a one-click payment system.

But because it’s in the cannabis space, there are a few differences. For starters, rather than using debit or credit cards, Dutchie Pay relies on ACH bank transfers, a bank-to-bank payment system that is fairly popular in the U.S. Once it is set up, though, it works similar to its mainstream peers.

Dutchie’s solution works well for repeat purchases, Zach said. “It feels just like it does when customers are using credit cards and other systems. The payment information is stored; you don’t have to think about it,” he said.

Dutchie Pay is e-commerce-only for now, but the company plans to let you make purchases in-store by the fall.

Reducing the cost of cash

“Providing modern payment solutions,” Dutchie argued in a release, “is essential for the industry to better compete with the illicit market.”

But why would payments have anything to do with competing with the cannabis black market? Dutchie argues that the lack of frictionless payments is partly a barrier to normalizing the cannabis shopping experience, and because it burdens dispensaries with what is known as “the cost of cash,” which is both direct and indirect.

Having to handle large amounts of cash, Zach said, “introduces a lot of liability and the potential for theft and robbery. It also increases costs for dispensaries, which already have a really slim margin because of other regulatory constraints that they have to deal with.”

The startup hopes Dutchie Pay will help decrease these costs. It seems to have been a little successful, too: after eight months of alpha and beta testing, the company apparently found that it had managed to reduce customers’ cash management costs by about 15%.

The startup also found out that there’s value in making online purchases more convenient for customers.

One of the platform’s early testers, Joshua Kahn, who owns the Takoma Wellness Center dispensary in Washington, D.C, said Dutchie Pay has improved customers’ overall shopping experience while resulting in higher basket sizes and customer loyalty.

On average, Dutchie claims, its customers’ order values have increased by 30%, while abandoned cart rates have declined by 32%.

There’s also value, Kahn added, in having a solution that is “fully integrated with e-commerce and point of sale.”

“It just simply says on the screen on their cash register that it was already paid for with Dutchie Pay, and the customer can go,” Zach said.

Access to cannabis

Dutchie Pay is now available to customers across the United States, but it first found its feet as part of a wider R&D effort to which Dutchie has made a significant $100 million commitment.

This R&D expense is funded by some of the $350 million the company raised in its Series D round last year, CEO Ross Lipson told TechCrunch at the time. Led by D1 Capital Partners, the round valued Dutchie at $3.75 billion and brought its total funding to more than $600 million.

All that cash will be handy, because there are plenty of problems to solve. “These are customers that have difficult businesses to run,” Zach said, speaking about dispensaries. “There’s a lot that we can do to make those businesses more efficient and make it easier for them to serve their customers.”

Investors investing in cannabis-related startups in North America are taking a similar view and hope that the plant and its derivatives will eventually be federally legal. “Morally and ethically, I take tremendous issue with cannabis’ current status as a Schedule I substance and its effect on communities from a criminal justice perspective,” Poseidon Investment Management managing director told TechCrunch in a recent investor survey.

Despite regulatory hurdles, these 4 US cannabis investors are planting seeds for tomorrow

But when cannabis is made federally legal, dispensaries will also have access to PayPal, Apple Pay and the like, which may wash the color out of Dutchie’s unique selling proposition. But Zach isn’t concerned about what this might mean for Dutchie Pay, saying it could adapt to additional payment methods.

As with all things related to cannabis in the U.S., when that will happen remains an open question. Here at TechCrunch, we plan to keep an eye out to see if alongside mainstream VCs, payments companies start questioning their policy of staying away from this space.

More TechCrunch

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo