CannabisNewsWire Editorial Coverage: The legal cannabis industry, which anticipates massive growth over the next few years, is seeing constant innovation as companies move to provide essential services needed for that growth.
- The global cannabis industry, which was worth $7.7 billion in 2016, is expected to reach $65 billion by 2023.
- The industry’s upward trajectory is happening despite legal restrictions that have forced cannabis businesses to seek alternative payment solutions.
- These solutions are among many innovations in the sector, which has a strong strand of research and design.
Net Element (NASDAQ: NETE) (NETE Profile) recently launched a compliant, secure payment processing solution focused on serving the legal cannabis industry. Medical cannabis company Tilray, Inc. (NASDAQ: TLRY) is supplying materials for a range of research projects around the world that are studying cannabis’ potential in medicine. Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) has received massive investment from a beverage company and is likely to be one of the first companies selling cannabis-infused drinks. And the first U.S. Food and Drug Administration (FDA)-approved cannabis-based drug has just gone on sale from GW Pharmaceuticals Plc (NASDAQ: GWPH). Meanwhile, new uses for the plant are being found, as exemplified by Cronos Group, Inc.’s (NASDAQ: CRON) (TSX: CRON) research on the use of cannabis in skin cream.
Cannabis Payment Solutions
The cannabis industry is currently growing at an astonishing rate. Since 1996, its use for medical purposes has become legal in 31 U.S. states and Canada as well as a number of other countries around the world, most recently the United Kingdom. This remarkable pace of change has been accompanied by the emergence of related industries producing industrial hemp, cannabidiol (CBD) oil and support services for cannabis growers.
Despite this, legal cannabis sellers in the United States face serious problems in accessing basic business services. Because banks and payment providers are often wary of working with cannabis companies — even legal ones — these companies are forced to either accept the risks and inefficiencies of a cash-based business or seek alternative payment options. Fortunately, payment solutions are becoming increasingly viable.
The Challenge — And Opportunity
The challenge — and opportunity — with cannabis payment processing is significant enough to have drawn in businesses from outside the sector, such as global technology company Net Element (NASDAQ: NETE).
With the growth of the medical cannabis market has come more people are looking for one of the sectors most in-demand products — CBD oil, which is the concentrated liquid extract of the cannabis plant. Previously most CBD products were sold in head shops, but increasingly these products are found on the shelves of natural food stores, beauty aisles, cafes and doctors’ offices. This spread to other venues has created an even greater need for smooth transactions between merchants and consumers.
While the majority of states now allow the legal sale of some form of cannabis or its derivatives within their boundaries, cannabis providers may still find it challenging to find payment options that allow mobile payments, offer value-added transactions, and are easy for both the business and the end user. Fortunately, companies such as Net Element are positioning themselves to provide exactly what this underserved industry is looking for.
These alternative solutions, including Net Element’s Aptito and Unified Payments systems, solve the problem by offering a compliant, seamlessly integrated payment solution that is simple to use. The systems rely on the latest digital technology, which allows retailers to accept payments outside of conventional routes while remaining user friendly for customers.
More Sales, More Payments
It’s a good time for companies to expand their reach in the cannabis market, as Net Element is doing. The industry is experiencing a period of huge growth. According to recent research, the legal cannabis market was worth $7.7 billion in 2016 and is forecast to reach $65 billion by 2023, a staggering 37 percent rate of compound growth per year.
Various factors are playing into this. Cannabis is already a huge industry, but one historically run by criminal gangs. One of the reasons for wide legalization is to take that trade out of criminals’ hands. In the United States, 70 to 75 percent of the cannabis trade is still illegal, but only 30 percent of it is illicit in states with legal options on the books. As legal cannabis from regulated suppliers becomes more widely available, the expectation is customers will move away from illegal businesses. The customer base is already there, and it’s huge.
Ongoing changes in the legal landscape are also a factor. The White House has hinted that it is considering liberalizing federal cannabis laws. Shifts in medical-use cannabis are taking place in Germany and the United Kingdom. In the United States, the current Farm Bill has enough support that it is expected to legalize the widespread cultivation of industrial hemp for nonrecreational cannabis uses.
This last change ties into an unexpected and significant trend in the cannabis industry. Hemp, a nonpsychoactive form of cannabis, was used in manufacturing rope and cloth before being made illegal during the political campaign against marijuana. Now, it’s returning to legality as a source of a new material — CBD oil. This active ingredient of cannabis is used in a growing number of health and well-being products. The hemp and CBD parts of the industry alone are set to reach $22 billion by 2022. While CBD sales are still largest in the stores supported by companies such as Net Element, these products are moving towards the mainstream via health stores, beauty aisles and cafés.
Rising to the Problem
A growing sector with a need for innovative solutions is the perfect place for a company such as Net Element to act on its vision.
“We are excited to launch a legal cannabis payment acceptance solution to meet the needs of sales partners and merchants for this emerging market,” commented Vlad Sadovskiy, president of integrated payments for Net Element. “Addressing the needs of our merchants is our number one priority and we work closely with various vendors to bring our merchants state-of-the-art payment acceptance solutions.”
The cannabis sector is more than just cultivators and retailers. It also includes the companies that support those businesses, companies that are set to thrive if the industry maintains its spectacular growth. The industry’s circumstances have ensured that it has become a forward-looking one.
A Future-facing Industry
Cannabis companies constantly have an eye on the state of the legal landscape and the new opportunities it may create for the market. Because those companies are working in an industry that has been illegal, industry-building techniques and products are only beginning to be properly discussed now, with innovations in research and design being announced as a result. Constraints such as those established by the U.S. government are forcing them to find technological solutions to problems other companies don’t face.
Medical cannabis company Tilray, Inc. (NASDAQ: TLRY) prides itself on the part it plays in pushing the industry forward. With a strong emphasis on industry and innovation, Tilray is committed to research that will expand the possibilities of cannabis, carried out in partnership with hospitals and universities. It is currently supplying products for a range of clinical trials in Australia and Canada that promote the safety and effectiveness of cannabis use in tackling ailments such as childhood epilepsy and chemotherapy-induced nausea.
Research and design work at Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) has been super-charged by a recent investment of billions of dollars from American drinks company Constellation Brands. One of the reasons for Constellation’s move into cannabis is the potential for drinks infused with cannabis and CBD. The partnership with Canopy Growth is likely to lead to novel products that will become part of Canada’s large licensed cannabis market next year.
GW Pharmaceuticals Plc (NASDAQ: GWPH), a company with a strong history of research in the cannabis sector, has created the first plant-derived cannabinoid medicine to be approved by the FDA, which has just become available by prescription in the United States. This introduction of a federally approved cannabis-derived medicine is an important moment for the industry and may lead to the softening of political and regulatory attitudes that have previously held business back.
Cronos Group, Inc. (NASDAQ: CRON) (TSX: CRON) is investigating the use of cannabis in a relatively new area – skin care. The company has announced that it will be working with the Technion–Israel Institute of Technology to research the use of cannabinoids in skin care, research with potential to carry cannabis into more parts of the high street and the consciousness of more consumers.
From payment solutions to new products, the cannabis sector’s growth is fueling a rich wave of innovation.
For more information on Net Element, visit Net Element (NASDAQ: NETE)
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