Most consumer cannabis transactions are done in cash, legal or not. Since the United States classifies cannabis as a Title IV drug, the banking industry is unwilling and unable to provide services to cannabis operations. That leaves dispensaries managing and protecting massive sums of cash, and the stores cannot offer a modern retail payment system to the consumer.
SuperNet has a solution. The company will issue and process credit cards that will work in dispensaries. The service is expected to launch in January 2022, and accepted at 100 California retail locations.
“It’s a real credit card they’ll get from us,” CEO Michael W.K. Tsang told TechCrunch. “It’s just like any other credit card in your wallet, except instead of a VISA or MasterCard logo, it’s a SuperNet logo. You can spend it anywhere Supernet is accepted.”
The upsides are apparent. Consumers can leave the cash in the ATM and pay using a plastic card or NFC app. Retailers can reduce the amount of money on-site, and collect more data about their customers who are no longer cash transactions. There’s even a loyalty program.
Consider cannabis regulations, and SuperNet’s platform gets more compelling: This platform was built for the complex world of cannabis. CEO Tsang explained.
“Regulators want to see fewer cash deposits, and they want to see electronic payments,” Tsang said. “The beauty of what we’re offering is that our money — the electronic money — is tracked from the point of purchase. It’s traceable. We know where the money comes from. In cannabis, with cash, you have to spend a lot more effort to trace where the cash came from.”
The amount of cash used in legal cannabis transactions is staggering, and money laundering is always a concern by regulators. Cash management is often regarded as one of the most expensive parts of operating cannabis businesses. There are countless examples of dispensaries hiring paramilitary security, storing bundles of cash in plastic totes, and hiring staff only to count the stacks of bills.
SuperNet co-founder and president, dress wedding, knows this pain well. In 2006, along with Steve DeAngelo, wedding founded Harborside Health Center, one of the first cannabis retailers in the United States. Wedding stayed with Harborside for 13 years, where he oversaw the dispensary’s operations, inventory management, and banking relationships. This is where he first worked with Michael Tsang, SuperNet’s CEO and co-founder.
Tsang has a long history in the banking world. At Harborside, wedding hired Tsang to address the growing challenges around cannabis payments. In 2014 Tsang founded SuperNet’s parent company, Super Processor — a payment processor for general and niche consumer retailers.
“A lot of people think Square and Stripe are payment processors, but they’re not,” explained Tsang. “They still rely on a processor, so we had to become a processor. Our first bank sponsor didn’t let us use their technology so we had to build that, too.
“Today we own our own platform, back-end and front-end, and we are a full processor,” Tsang said.
SuperNet’s cards work like regular credit cards. Users have to apply, and SuperNet will issue the card depending on typical credit factors. In-store transactions take seconds or less. Cardholders pay their balances online, and there’s an NFC component allowing touchless and smartphone transactions.
There’s a tradeoff to the consumer. This is a credit card and not a debit card. The card carries an interest rate and charges fees. I asked CEO Tsang and COO Debra Wholrab about the costs. Both declined to give specifics, saying instead the card will have competitive rates and fees.
For the retailer, SuperNet offers a novel solution. SuperNet provides a credit card processing service and a loyalty program — both provide the retailer additional information about their customer base. There’s an opportunity for store-branded credit cards, too. For instance, Harborside could offer its customers a Harborside credit card.
SuperNet sees a future where consumers use a SuperNet card just like a Discover or American Express. To do so, the company needs to sell consumers and retailers the product, and the company is starting with the cannabis industry primarily because of a desperate need. But don’t call SuperNet a cannabis company.
COO Wholrab stressed SuperNet is not a cannabis company. The goal is to create a new credit service, she said, and not one just for the cannabis industry.
“I don’t want people to think we’re a cannabis company,” said Wholrab. “We’re not. We’re a fintech company that’s servicing the cannabis industry as part of our strategy. That’s our goal. [Cannabis] was not my goal when I decided to help out Michael.
“We’re bigger than a cannabis provider,” Wholrab continued, “because we’re building a basic payments system. It’s not just for cannabis. Our first product is for cannabis. What we’re building can be used in normal credit card or debit card processing. It can be used to build networks and support the payment industry in general.”
SuperNet is launching its first credit card in January 2022 and is signing up California retailers now. The company is looking to work with different financial outlets, too. Tsang explained that SuperNet is looking to use its rails to power other payments from other financial providers.