How Digital Identity Solutions Can Ease Compliance Challenges at Cannabis Vending Machines

Legalized marijuana has spread like wildfire in the past several years, and its popularity is projected to grow even further as more states relax or repeal laws prohibiting its use. Legal cannabis sales reached $12.7 billion in 2019, and this total is expected to swell to $41.8 billion by 2026. Nearly 7,500 dispensaries are currently operating across the U.S., selling cannabis to both recreational and medical customers.

Many cannabis entrepreneurs are looking to expand their reach by introducing automated vending machines that sell legal marijuana, just as other machines offer candy or soda. The advantages of marijuana vending machines are clear, according to Zane Gilmer, an attorney for Stinson LLP, which represents many marijuana-related businesses.

“It means that you don’t have to have an employee facilitating the transaction,” Gilmer said in an interview with PYMNTS. “But you otherwise have to meet all the other requirements, including record-keeping, quantity, age and [identity] verification — all of those things still have to be met.”

Meeting regulatory requirements can be a significant obstacle for any automated cannabis vending machine system. Digital ID solutions, however, can ease these challenges significantly.

Challenges of Automated Cannabis Vending Machines

There are several challenges that arise when implementing cannabis vending machines. Those introducing these machines must confront the existing hurdles of operating a dispensary along with the added struggle of maintaining one without human staff. One of the most important rules to follow is ensuring that customers are legally permitted to buy marijuana in the first place.

“You have to identify and verify who the consumer is and that they’re permitted to purchase whatever product that they’re purchasing and the quantities that they’re purchasing,” Gilmer said. “It’s even more challenging on the medical side because there’s further verification of what type of products they’re entitled to purchase.”

Human employees can handle these rules with relative ease, but these tasks become much more difficult to achieve when trusted to an automated solution. The legal issues that can arise from substandard verification practices can be substantial.

“You’re putting a lot of faith and trust into the technology to work, and that’s directly tied to your ultimate compliance as a dispensary,” Gilmer said. “You need to trust the technology to work from a record-keeping, consumer verification and dispensing perspective. [You must also] make sure the right products and quantities are being dispensed and that, ultimately, all that stuff is tracked, so there are no compliance issues on the back end.”

This is a tall order, but digital identity solutions like biometrics can make it much easier.

How Digital ID Solutions Can Facilitate Automated Vending Solutions

One of the best ways to ensure that customers are who they say they are and are qualified to purchase cannabis at vending machines is via digital identity solutions. Biometrics have a great deal of potential in the industry, ensuring that illegitimate customers are not passing themselves off as recognized customers.

“You basically provide your identity to the machine through facial recognition, fingerprints and then your photo ID, and it compares all those things and then knows who you are,” Gilmer said. “And then it stores your data so you can do the same thing when you come back in to purchase more products.”

The implementation of this technology is in its infancy, however, and companies in the field are still experimenting to find the best ways to execute these concepts. Many questions remain regarding how these machines accept customer payments, for example.

“You’re still largely limited to cash transactions right now, but there are FinTech companies that are trying to automate and digitize payments in this space outside of the credit and debit rails,” Gilmer explained. “They’re looking into how — and if at all — new payments technologies can be overlaid with the vending machine to further automate and digitize transactions and make them electronic as opposed to feeding the machine with cash. I think it will be an interesting next step to see if that fully gets integrated or not.”

Much like legal cannabis itself, there are still several legal and logistical challenges standing in the way of more widespread automated cannabis vending solutions. Figuring out the customer verification angle is an important step, but it is by no means the end of the road.