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The story behind Dutchie Pay: Q&A with Zach Lipson, CPO at Dutchie

Jay Rosenthal
August 5, 2022

In our inaugural episode of This Week in Cannabis Retail, I sat down with Dutchie CPO Zach Lipson to get the story behind the launch of Dutchie Pay. The first of its kind, Dutchie Pay is a fully-integrated digital payment solution that both dispensaries and consumers can trust. Using a closed-loop automatic clearing house (ACH) solution, Dutchie Pay allows consumers to purchase their favorite cannabis products while automating compliance so that dispensaries can focus on growing their business.

Zach discusses the top pain points experienced by today's cannabis retailers (spoiler, it's cash management!) and how Dutchie worked closely with NACHA and others to create a truly innovative cannabis payments offering that drives bigger order sizes and increases customer loyalty and retention for dispensaries.

What are some of the key pain points that Dutchie Pay aims to address?

Zach Lipson: Something we're always doing with our customers is talking about the challenges that they're facing in the industry right now. What's holding back these operators from being more efficient, running better businesses, and/or being able to serve their customers in a better way? Payments is the big one. And the reason for that is because of cannabis’s federal status. Credit card companies aren’t willing to allow payments to process through through their networks. So if we can't take credit cards in the space, that forces these dispensaries to rely very heavily on cash. And we're seeing that a lot today. The vast majority of payments in the cannabis industry at the retail level are processed in cash. Cash is still king here. And the reason that that's a problem, aside from the fact that it’s just not something we're used to from a consumer perspective; for businesses, it creates a lot of challenges. One, cash is expensive. When you're managing large amounts of cash at the retail level, you're having to pay for security. You're having to pay for things like transportation of that cash. So it’s a cost, it's an actual cost for these dispensaries.

And then you look at it from an operational perspective and it's inefficient to manage cash. You’re introducing human error as budtenders are handling cash. It's just natural that, from time to time, you're going to have some sort of error when a value is in, put it into the system. And that leads downstream to all kinds of challenges. When you do reporting, or you're working on your taxes, you know, just a number of challenges there. And then let's talk about the biggest problem—and that is that it's not safe to handle large amounts of cash. Some of these businesses are dealing with some pretty scary and dangerous things, like theft and robbery. They're being targeted because they're having to handle these huge amounts of cash. We talk to these dispensaries. We want to be able to provide a solution here. Our mission, as a company, is to provide safe and easy access to cannabis. So this is something we've been leaning into hard since the beginning of the company five years ago. So when we looked at this problem, this was an opportunity to to really lean into that mission even further and help provide a more normalized solution for cannabis payments.

Tell us a little bit about what Dutchie Pay actually is and how it works.

Zach Lipson: We started to talk to our customers about what they were looking for and the types of experiences that they want to offer. Specifically, we were looking at how to normalize payments in the space and the avenues we had at our disposal to do that. We started working with NACHA which is the national governing body of the ACH network, the way that money moves digitally here in the United States. And that was an opportunity for us to to basically work with them and to utilize a digital payment solution that uses the ACH network to allow consumers to hook into their bank accounts and do a direct debit transaction for their orders. I think the unique thing for us when we started to look at the opportunities that we had is that we basically because of our other offerings—our Ecommerce solution, as well as our Point of Sale solution, we had the opportunity to build a fully integrated system and that was unique. So instead of just offering bank payments through our Ecommerce solution, we said, you know what, let's utilize the power of of the ecosystem that we've built and let's create a more seamless solution for our dispensaries. And that was kind of the the the origin of of the product.

So when we actually looked at what it was going to be like, when we actually started to work on this and started to build out the solution, we wanted to create something that was just very convenient, very simple, very familiar for customers. And what that manifested as was an express checkout option. So if you're using as a consumer, a Dutchie online menu, it's actually an ecommerce menu, you're going to get to checkout, you're going to see a green button at the top of the page that says Dutchie Pay. When you click that for the first time, you're going to go through a very simple sign up, a few steps, you basically fill out a couple of pieces of information, takes just a minute, you hook it up to your bank account and that's it. The customer never has to do that ever again. It's stored to their account with the Ecommerce solution that we have and every time they come back, Dutchie Pay is already connected. And that's great, that is that is the familiar retail experience we're used to. You know, when you think about buying something on Amazon or shopping for something, you know, maybe like getting your lunch on DoorDash, you're not putting your payment information in every time it's set it and forget it. That's the experience. That's the convenience and the simplicity of of payments today. And we haven't had that in cannabis. In fact, it's been the total opposite. You've got to reach into your wallet, you've got to get cash out. You maybe have to go to the ATM, right? Pay a high fee, maybe. Maybe you  you even walk out of the dispensary because you're like, "I don't want to do that, I'll just go home. I'll come back tomorrow with cash I have at home." These experiences are horribly disjointed. So from the consumer perspective, Dutchie Pay just provides that convenience and that simplicity that we've come to expect from payments. And furthermore, you can utilize it at any of the dispensaries that utilize Dutchie Pay, you know, that utilize our Ecommerce solution and actually pay in conjunction with it.  So there's this really incredible network effect. And if you see that green button, you know that you're going to have a simple experience to log in and pay for your order.

Can you talk about what it means as a budtender or a store owner? How does it integrate with point of sale technology? How integrated is it? How seamless is it?

Zach Lipson: Yeah. So the experience is really simple. It's really convenient for consumers. What was really important to us in building out Dutchie Pay and creating the solution is that we were able to bring that convenience and that that sort of efficiency and that simplicity to the bartender experience as well. So as we kind of like turn to look at what the budtender now experiences, that Dutchie Pay order is going to move seamlessly from the ecommerce solution, the ecommerce experience directly into the register, right? So that customer then walks into the store, they walk up to the budtender or someone to the front counter. They say, I'm here to pick up an order for X, their name. And basically the budtender has an incredibly simple experience. In the past, they'd have to go through a number of different steps to tender;  grab cash, input the amount of cash, grab the change, give it back to the consumer. Of course, we talked about the potential for human error there.

Now, with the Dutchie Pay order, it simply just says this order's already been paid for with Dutchie Pay and that's it. That's really it. And again, we have the exact value, of course, that we can just simply move into the transaction. It literally eliminates the risk of human error, and it creates a really simple and efficient process for that budtender. Now compound that. Like, look at that on a much higher level. Imagine that that's happening all day. What that leads to is businesses are dispensaries being able to serve more customers and serve more customers in a safer way? It's easier. It's simpler. It's going to, again, reduce, you know, human error and any type of risk. And and they're going to just be not relying they're not going to rely on cash anymore because of this. So that's that's kind of another really, really exciting part about this is just that budtender experience. It's like incredibly simple, the feedback that we've gotten from our our customers, our testing, this is just like they love it. It's, you know, it just makes their job so much easier and so much faster. And that's really important for these dispensaries.

From a consumer perspective, does it impact the way consumers shop?

Zach Lipson: So that's one of the one of the exciting things about this product so far. We've been in testing with it for for many months now with real dispensaries that have been giving us incredible feedback. And you know, of course, when we build products like this, we want to see the data. The data tells the story. And the data is telling an interesting story for us. We're seeing average order values go up 20%, sometimes even 30%, which is really, really exciting. So because consumers are able to use a simple payment method, a digital payment method, they're not reaching for cash. We're actually seeing them purchase more, which is which is great. It's something that's very exciting. We're seeing a decrease in abandoned carts, you know, so they're actually completing the shopping experience. I think when we peel back the layers of that and start to do a little bit of more analysis, it really comes down to drop off at the final piece of the funnel, which is checkout. And oftentimes we're going to probably see that because they're going to look at the payment methods that are accepted and the customer is going to go, well, I don't have cash on me and I don't want to pay in cash. So, you know, I might go somewhere else. And that's the beauty of Dutchie Pay. It's not it's breaking down that barrier at the end of the process and allowing that customer to just quickly and seamlessly checkout. So really exciting stuff there.

We're seeing customers come back more frequently, which is also super exciting. Higher retention rates are of course, great for our dispensaries. It means that, you know, the service is really working. You know, the offering is really complete and in giving a great experience for that customer. And then of course, we talked about the problem of cash and the fact that it actually costs money to handle cash. We're seeing those numbers go down as well. So roughly about 15% is the reduction that we're seeing in cash management fees so far for dispensaries.

About the author
Jay Rosenthal
Lead Content Producer @ Dutchie