Cannabis Logistics Finds Opportunity In Uncharted Territory: WAYV


FinTech innovation is often a layered process, taking existing infrastructures and processes, and developing new tools to improve upon them. In the rare instance that a new market emerges, using the blueprints that other industries have created in supply chain management, logistics, procurement and other areas may seem like the easy path to take.

The problem with that, according to CEO Keith McCarty of cannabis logistics company WAYV (which recently raised Seed funding), is that many of the existing tools and processes are broken. With legal cannabis a fast-growing market, the industry has a unique opportunity to innovate and adopt technologies from scratch adopting best practices from the get-go, rather than trying to fix another industry’s strategy.

Take, for example, markets like the food and beverage, pharmaceutical and medical supplies space. These markets have similar challenges to the legal marijuana sector: products that are regulated, expire and have unique needs in terms of compliance and shipping. According to McCarty, the best way for cannabis players to establish the right supply chain and logistics strategies may be to learn from other industries’ mistakes.

“It’s a big lift to change an industry once it’s already established, as opposed to starting from the ground up and driving innovation from the very beginning,” he told PYMNTS in a recent interview. “So yes, we look at those other industries, but we’re not trying to replicate something that, in my opinion, is already broken. We’re trying to innovate that because we have a huge opportunity ahead of us.”

It means that, from the start, companies operating in the legal cannabis industry  including retailers, brands, distributors and more along the supply chain — can leapfrog to digital solutions like eProcurement. It’s a significant benefit for a market that is otherwise held back by regulatory pressure, legislative uncertainty and hurdles that don’t plague other industries. The fact that marijuana remains illegal under federal law means industry players struggle to access banking services.

It creates a bit of a contradiction for the marijuana market: While companies can embrace innovation from the beginning, many are forced to rely on cash, shut out completely from digital banking tools.

In California, where WAYV operates, and where the legal cannabis market is expected to reach a $5.1 billion valuation by the end of the year, accepting cash at the point-of-sale (POS) and using cash to pay vendors, business partners and taxes remain commonplace. According to a report from the California State Treasurer’s Cannabis Banking Working Group published last November, this reliance on cash makes cannabis businesses “targets for assaults and puts the general public in danger,” preventing transparency and limiting the ability of the state to collect taxes.

The $1 billion in new tax revenue that lawmakers predicted as a result of legalizing marijuana in California was a key motivation behind the campaign. Yet, according to McCarty, the conflicting views between state and federal laws make collecting those taxes one of the largest hurdles in the market today.

Payments in this market require “transparency, integrity and trust with regulators,” he said. “It’s not just about the retailers and distributors and brands; it’s about the state and local taxes.”

With the current regulatory climate, WAYV, which offers industry retailers a way to procure goods and manage their supply chains, can automatically calculate taxes for its business users. However, payments both to vendors and other service providers operating on the platform often occur in cash. To boost transparency in both accounts payable and receivable, the company allows businesses to choose a Cash-On-Delivery option at checkout to pay vendors in cash when deliveries arrive or a Pay Later option that notifies sellers that they will be paid at a later time.

McCarty added that, moving forward, WAYV will explore how to integrate additional payment options, including credit card and ACH, while remaining within the confines of regulatory red tape.

It’s the dual-edged sword of regulation for the cannabis market. Regulation limits access to the banking sector and, therefore, may force businesses to rely on legacy and manual financial management and payment tools. Yet, regulation also demands heightened transparency, leaving the opportunity open to embrace technology in other areas of the enterprise.

Regulatory pressures around track-and-trace, remittance and tax calculations, coupled with the bank barriers, make this market particularly challenging for industry players, which are often small businesses, he explained. At the same time, however, embrace of technology is high.

“There really is not a willingness, but a need to utilize technology,” McCarty said, “because phone calls, emails, texts to place orders, paper and Excel spreadsheets no longer become scalable with all the complexities of the regulations. I think the most exciting part about the cannabis industry is we have the opportunity to start from the ground up. To innovate based on what technology we have, and what is available to use today.”