Cannabis businesses are often reluctant to fully embrace electronic payments because of the fees – but fees are only one part of the equation. A proper analysis of electronic sales vs cash sales needs to include the benefits of electronic payments too.
Electronic payments increase profits by:
- Allowing customers to spend more
- Costing less than cash
- Attracting new customers
Increased customer spending
It’s widely accepted that when customers can pay electronically and aren’t limited by the cash they have on hand, they spend more. How much more depends on the study but generally ranges from 2x to 5x more.
To eliminate the impact of credit cards and large dollar purchases, the assumption that customers paying electronically spend 25% is reasonable.
Cheaper than cash
Cash is expensive. In fact, on average it’s 3-4x more expensive than merchant service fees. See our article on the cost of cash for cannabis businesses for deeper dive into the cost of cash.
It’s easy to underestimate the cost of cash because it’s buried in multiple line items, but the average cost of cash for non-cannabis retail businesses is 9.1%. With the high volume of cash processed by cannabis businesses, their cost of cash could easily exceed the average.
Attracting new customers
Electronic payments have been growing steadily but the COVID-19 pandemic accelerated the shift. The Federal Reserve Board of San Francisco Diary of Consumer Payment Choice annual study released in May 2021 showed debit payments accounted for 43% of payments, credit 33%, and cash 18% (cash payments declined five percentage points between 2019 and 2020).
More than ever, consumers prefer to pay electronically, and many cannabis directory sites allow consumers to search for stores that offer electronic payments. These searches can be an easy way to attract new customers looking to pay electronically.
Running the numbers
When comparing electronic sales and cash sales, the benefits of electronic payments outweigh the fees, and it’s not even close.
We developed a free calculator to help you analyze the impact electronic payments can have on your business.
After you see the increased profits electronic payments can generate for your business, check out our article on how to drive more electronic sales.