The legal cannabis industry is experiencing rapid growth in the US, employing over 300,000 people and with anticipated sales of nearly $30 billion by 2025. Cannabis is now only fully illegal in eight states – the remaining states either decriminalized it, legalized it for medical use, or legalized it additionally for recreational use.
Despite the fact that cannabis sales can be a completely legal, legitimate and lucrative business in many places throughout the US, cannabis businesses (such as dispensaries, cultivators, wholesalers, CBD/hemp businesses, etc.) face significant challenges that other types of businesses do not – specifically regarding payments.
Brand name credit card companies, such as Visa and Mastercard, or companies like Stripe and Venmo, refuse to work with the cannabis industry, in part because of federal regulations that can put them at risk of penalties for doing so. Until the federal government makes some changes (such as removing cannabis from the Controlled Substance Act), credit card companies, payment processors, banks and other financial institutions may be reluctant to engage with cannabis-related businesses.
The result of this is that many such businesses are forced to accept cash-only payments from their customers, and use cash-only to pay vendors, fees and taxes. From a payment perspective, cash-only is considered both outdated and inconvenient by many. More than 70% of Americans prefer to make their purchases electronically or with a credit card than with cash. The requirement to pay cash may deter some buyers and prevent sales.
Additionally, having to pay vendors and other expenses in cash tends to be more costly, inefficient and less secure than electronic methods.
And, according to the American Bankers Association, cannabis businesses are increasingly targeted by criminals, largely due to the huge amounts of cash they handle.
The SAFE Banking Act, which passed the U.S. House of Representatives in May 2020, opens up the opportunity for banks to serve cannabis-related business. It’s critical that financial institutions, payments/credit card companies and cannabis companies all make an effort to stay informed of the changing federal regulations, so they can work together to come up with solutions that allow legal businesses to grow, help boost customer service and the economy.
Some innovative banks and fintechs are now offering solutions such as ACH/e-checks, bank-to-bank transfers, cryptocurrency solutions and more to help cannabis companies overcome the hurdles they face. Valley Bank is pleased to be one of those innovators and is introducing a new payment solution called Valley Pay, which will give customers of a cannabis business access to a mobile wallet payment system. We are currently in pilot stage with select clients.
At Valley, we believe every business should have the opportunity to take advantage of banking services to support their business. That’s why we’ve evaluated the risks and have opened the door to having conversations with cannabis-related businesses about helping them with their banking needs. To learn more, visit the Cannabis & Marijuana Banking page on our website, or contact us today.