Banks tend to follow the laws of the federal government, even when it comes to states where cannabis has been legalized. Not only does growing, selling and consuming cannabis violate federal law; handling the proceeds of any related transactions is as well. Very few banks are willing to take the risk. Nevertheless, the state of cannabis payment processing is hopeful.
Not being able to access banking pretty much requires that businesses operate on a “cash-only” basis. People know cash; they get how it works. However, this is a huge pain for cannabis businesses attempting to modernize. Because of the aforementioned banking difficulties, businesses are forced to store hundreds of thousands of dollars in cash (along with product). This is an insane security risk.
Running on a cash-only basis ultimately increases the cost of running your business because you will need to pay for added security and transport. Cash is tough and inconvenient for customers as well; cannabis is one of the few industries that demand the use of cash, and it’s no secret that ATM fees will eat a major hole in your wallet.
You may have visited a dispensary before that accepted cards. There are several options for cannabis companies to circumvent the cash-only policies in place right now. Point of Banking is by far the most common method. One can tell when a dispensary is using a POB because they will give you change back for a debit card transaction. The reason for this is that these systems operate via a noncompliant use of the ATM network, essentially turning the cashier's station into a cash dispenser.
If that dispensary or delivery service accepted credit cards, it was probably using overseas accounts. These systems work by routing your funds to an international merchant account before wiring them back into the states at a later date, essentially hiding the source of the funds from regulators. Aside from being illegal, these types of programs create a ton of issues for merchants. For one, overseas accounts usually require a rolling financial reserve that must be maintained in the merchant account. In the case that this solution is shut down, which is very common, the merchant has no recourse for recovering those funds due to cannabis' federal illegality. We've spoken to several merchants who have lost anywhere from $5,000 to over $150,000 in this fashion.
So if cash is burdensome and dangerous, but required, and the primary options for skirting cash-only sales are unreliable and illegal, where can we go from here?
E-wallets could be a direction worth exploring, at least for consumers. E-wallets are essentially digital accounts which you can load funds into. After you load funds, you can use these accounts to pay for high-risk products like cannabis online. However, the problem with this method is that the loading period for e-wallets is usually two to three business days, so you aren't able to make spur-of-the-moment or emergency purchases. If you want to buy cannabis with an e-wallet, you need to plan several days in advance.
Many people think that cryptocurrencies are the wave of the future. Crypto solutions in cannabis generally accept the customer's funds, convert them into a cryptocurrency of choice, transfer them to the merchant's account, then convert them back into U.S. currency. The problem with these solutions is that the technology and currency they are built on is not fleshed out enough to base an entire business on. Cryptocurrency is very promising, but in its current form, it is unreliable.
