Since cannabis remains federally illegal, many banks, who run on a risk-based assessment, refuse to do businesses with cannabis companies. With 24 states, Washington D.C, and Guam having fully legal operating cannabis markets under their own laws, banks are put in an awkward position because of the inconsistencies between state and federal law.
In 2021, only 518 of the almost 5,000 commercial banks in the U.S. have reported servicing the cannabis industry. Hence, finding banking solutions for cannabis businesses has proven to be difficult. Being frozen out of most traditional banking services, many cannabis companies are left to run like off-book operations, counting stacks of cash and struggling to find ways to pay simple bills like rent and payroll. Furthermore, theft and robbery are a serious risk for cannabis businesses considering they are primarily conducted in mostly in cash.
Though finding banking solutions in the cannabis industry can be challenging, it does not mean that you should settle for working with just any bank or subpar banking solution. This blog post will provide a guide to help address one of cannabis retailer’s biggest issues: dealing with cash-heavy operations and struggling with banking services.
One of the most frequently utilized solutions is cash-in-transit services. A cash-in-transit service is a service that physically transfers bank notes, coins, credit-cards, and items of value from one location to another. In this scenario, the cash is transported to a vault and counted, then the amount is transmitted to a bank. However, these services can be costly for high-traffic dispensaries that require daily pick-up.
Therefore, some companies choose alternative options such as smart safes and cash recyclers. Smart safes allow you to monitor the volume of cash you have in-house at a given time. They sanction you to use that cash in real-time based on the volume you have, with no cash loss availability. Cash recyclers allow you to keep a certain amount of cash in-store for change.
Additionally, some cannabis retailers select to use pre-loaded “card” systems or ACH vending. Pre-loaded “card” systems work like debit cards, by allowing customers to load funds ahead of time to purchase products in-store. ACH vending works similar to cutting a check, by pulling cash directly from a banking account. This allows companies to pay using a 3rd party service. However, retailers should be cautious of such services to ensure they are run compliantly and legally given the risk of money laundering or fraudulent third party services.
The federal ban disallows the straight payment of credit to cannabis dispensaries. Additionally major multinational payment card service corporations such as VISA and Mastercard have put out statements saying they prohibit all cannabis transactions through their channels. Thus, legal and compliant payment solutions (beside cash) can prove difficult to identify.
Due to the federal status of marijuana, banking services and payment options are challenging, but there are options. Cannabis companies should conduct due diligence when selecting a banking or payment option to ensure they operate legally and compliantly within federal law and the applicable state and local laws for that company.
Sources:
https://www.covasoftware.com/blog/navigating-cannabis-banking-challenges-2024
https://www.investopedia.com/challenges-for-the-cannabis-industry-8771674#:~:text=1%20While%20a%20final%20rule,matter%20what%20the%20DEA’s%20rule
https://www.usnews.com/news/best-states/articles/where-is-marijuana-legal-a-guide-to-marijuana-legalization
