Utah’s medical cannabis patients are now allowed by the state to spend their money inside marijuana pharmacies, but that doesn’t mean the nation’s major financial institutions want their fingerprints on transactions involving the federally illegal substance.

Credit card companies generally avoid cannabis transactions, for fear of federal repercussions. PayPal and Venmo are also leery of wading into the industry, state health officials say.

That leaves many patients carrying wads of cash into Utah’s medical cannabis pharmacies — a less-than-ideal situation when many are turning to contactless payments to avoid spreading COVID-19.

But over the past few weeks, Utah’s cannabis pharmacies have started to experiment with an app that caters to marijuana transactions and gives patients a payment option that doesn’t involve paper currency.

“People want a very similar experience to what they have with CVS or REI or anywhere else, where you do curbside pickup,” said Chris Jeffrey, managing partner and CEO of WholesomeCo Cannabis, which has a West Bountiful pharmacy. “Avoiding the whole need for cash is something that consumers want.”

Richard Oborn, who heads the Center for Medical Cannabis for the Utah Department of Health, said WholesomeCo, Dragonfly Wellness in Salt Lake City and Deseret Wellness in Provo are all accepting electronic payments over the app, called Hypur. He expects more pharmacies will follow to satisfy a customer demand for cashless transactions.

“It just makes it so patients now don’t have to carry a bunch of cash with them, and that is a major public safety concern,” Oborn said. “I can understand why they wouldn’t want to be running around with $100 or $200.”

Electronic payment can also help a patient avoid ATM fees and touching cash that has been passed from hand to hand. It also lends a greater sense of legitimacy to the medical cannabis industry, where patients and retailers sometimes still feel regulated as if they’re doing something wrong, said Narith Panh, chief strategy officer for Dragonfly Wellness in Salt Lake City.

It’s no longer this back alley transaction,” Panh said. “[Hypur] makes people feel like it’s OK what they’re doing.”

For a user, the Hypur app feels similar to Venmo, explained the tech firm’s chief revenue officer, Tyler Beuerlein. Through the Hypur system, funds move directly from the user’s bank account to the pharmacy. The app works because Hypur partners with financial institutions that are willing to operate in the cannabis industry and are capable of transferring money from a patient to a retailer, Beuerlein said.

The app is free for users, he added, although cannabis pharmacies are charged fees.

It’s an expense that Deseret Wellness is more than willing to pay, said Jeremy Sumerix, the company’s market president.

“We’re happy to do that because we know cash is cumbersome, and quite frankly, it’s not always safe,” he said. “And it’s gone really, really well out of the gate.”

(Trent Nelson | The Salt Lake Tribune) The Hypur app on a phone at Dragonfly Wellness in Salt Lake City on Wednesday, Sept. 23, 2020. Dragonfly Wellness is one of three cannabis pharmacies in Utah that are now accepting electronic payments over the Hypur application, allowing patients to pay without using cash.

Oborn said he doesn’t expect cost will be a barrier to widespread adoption of the app, but he acknowledged some patients might have reservations about paying for cannabis over Hypur. Since the substance is still federally illegal, patients can be reluctant to register with the state as a medical cannabis user or pay for the plant-based treatment across an electronic platform, he said.

“But I think the trade-off is worth it for many cannabis patients,” he said, adding that more than 10,500 Utahns have registered as medical cannabis cardholders since the state rolled out its program about seven months ago.

And Hypur, which has been approved by state financial regulators for cannabis transactions, will be particularly useful when pharmacies begin offering home delivery in coming months, Oborn said.

WholesomeCo is using the app in combination with Dutchie, an e-commerce platform that displays the pharmacy’s merchandise and allows patients to make online orders. With this system, customers can purchase their cannabis treatments over the WholesomeCo website for curbside pickup.

Jeffrey said WholesomeCo has already completed thousands of dollars in cannabis transactions over the Hypur app, and patients have placed tens of thousands of dollars in marijuana orders over the Dutchie platform.

Dutchie, a tech firm based in Oregon, processes 10% of all legal cannabis sales globally, according to a news release announcing the partnership with WholesomeCo.

“It’s a nascent industry, and we’re in the early inning,” Ross Lipson, CEO and co-founder of Dutchie, said. “It’s all uncharted territory, and there’s a lot of rules and regulations ... that we have to build into the system to help the dispensaries stay compliant.”

For instance, online ordering systems in the cannabis industry might have to screen out underage customers or — in the case of recreational marijuana — apply the correct state and city taxes. One of the biggest challenges is making sure the site offers a real-time look at a pharmacy’s inventory, Lipson said, since these businesses are constantly bringing in and selling medical cannabis products.

But if the online platform works well, it can give cannabis patients a more convenient way to browse a pharmacy’s merchandise and research products from their homes, he said.