Cannabis dispensaries that process large sums of cash put themselves at risk for theft and criminal acts. Banking solutions provide essential security and efficiency.
Yet only approximately 700 depository institutions work with cannabis businesses, fearing violating Bank Secrecy Act laws and anti-money laundering regulations enforced by FinCEN guidelines. With passage of SAFE Banking Act would come relief for banks in regards to these restrictions.
Financing Options
As cannabis continues to gain widespread acceptance across multiple states, banks are beginning to recognize the immense business opportunity it represents. Unfortunately, federal prohibition and a lack of clear regulations surrounding marijuana businesses prevent many depository institutions from working with these businesses.
Cannabis businesses find it challenging to secure the funds necessary to expand their operations and meet state-specific security measures, necessitating them to seek short-term financing from alternative lenders. As a result, cannabis businesses often require short-term funding solutions from alternative lenders in order to meet state requirements and maintain security measures.
Pre-loaded card systems and ACH vending are temporary solutions similar to debit cards that are loaded up with funds before use; although not ideal in terms of long-term solutions, these tools can help cannabis businesses cover expenses until banks provide solutions. Lack of banking solutions also forces cannabis businesses to operate cash-only, leaving them susceptible to theft and increasing security risks.
Point of Sale (POS) Options
POS systems enable cannabis businesses to track sales and inventory, organize information for taxation purposes, observe customer purchasing patterns and initiate loyalty programs. A quality POS system also facilitates fast payments which reduce wait times while creating an enhanced customer experience.
An advanced cannabis POS system offers seamless integration with state compliance systems like Metrc, automating reporting and reducing compliance violations – offering substantial time and cost savings for cannabis retailers.
Flowhub, for instance, is an attractive POS provider with excellent customer support and cashless payment solution specifically tailored for retail and delivery businesses alike. Flowhub features crypto, mobile customer queuing and branded gift cards among its array of features – as well as built-in analytics designed to integrate with online cannabis marketplaces – plus offers special compliance systems like METRC as well as COVA tailored specifically for the marijuana industry.
Payment Processing Options
Due to cannabis being illegal under federal law, credit card processing companies do not work with cannabis-related businesses (CRBs). Luckily, there are alternative solutions which may provide assistance.
ACH (Automated Clearing House) payments are another popular payment method, working by directly transferring funds from customer’s bank accounts into merchant’s. This type of transaction provides greater security than cash transactions and can be combined with POS solutions to ensure seamless, safe customer experiences.
PIN debit payments offer another popular alternative to ACH payments, enabling customers to authenticate transactions using debit cards with merchants providing dedicated PIN pads for this purpose. Like ACH, this method provides added security, while it can be integrated seamlessly with point of sale solutions for an unhindered, secure experience for consumers as well as helping prevent fraud by verifying if each transaction matches up with a customer’s identity.
Security
Cannabis may be legal in most states, but the federal government still classifies it as a Schedule I controlled substance, restricting their access to banking and financial services such as loans or 401(k) plans. Therefore, cannabis businesses often operate using only cash payments, creating significant security and safety risks for employees.
Banks offer secure banking and payment processing solutions to industry, but must abide by strict regulations. This requires implementing comprehensive anti-money laundering (AML) and Bank Secrecy Act (BSA) compliance programs, with enhanced monitoring procedures in place to detect suspicious activity.
In 2023, we anticipate an increasing number of financial institutions entering the cannabis market by opening new accounts and conducting transactions. To do this effectively requires having an in-depth knowledge of both state and federal money transmission laws as well as banking legislation and FinCEN guidance as well as being able to tailor policies and procedures accordingly to accommodate customers without incurring additional risks.