As cannabis continues its rapid expansion, financial institutions are taking steps to capitalize on its enormous potential. New entrants into this space are undertaking KYC/DD/Fraud monitoring as part of their core operations in addition to traditional banking services.
Selecting an ideal cannabis bank can help ensure your business remains compliant and free from legal complications. Here are some key points for consideration:
1. Non-Cash POS Options
Cannabis businesses continue to find it difficult to open bank accounts due to federal law’s classification of marijuana as Schedule 1 drug and the fear that doing so would violate federal regulations.
Some local community banks and credit unions are accommodating of cannabis businesses, offering similar banking services as other businesses such as checking and savings accounts, ACH and wire services, escrow/IRA accounts, loans and cash management services.
These institutions also provide marijuana business owners with the option of depositing funds at physical branches or through mobile apps, providing armored carrier services for daily cash deposits, helping secure capital equipment, commercial real estate and mortgages while helping secure capital equipment, commercial real estate and mortgages for clients. Banking solutions from such institutions allow marijuana businesses to reduce cash reliance while operating more efficiently and safely – not to mention increasing revenue growth, diversifying a bank portfolio and improving market stability!
2. Cashless ATMs
Cannabis companies face many hurdles when trying to access traditional banking services. With bank closures, asset seizures, and arrests for money laundering looming as possible threats, companies have often sought alternative means of meeting federal compliance standards without incurring substantial legal liabilities.
One popular solution is cashless ATMs. These POS devices mimic standalone ATMs by running payment apps to mimic them and allow consumers to purchase cannabis without needing cash. Unfortunately, however, some cashless ATMs miscode transactions as actual cash disbursements posing risks of fraud or regulatory violations.
Banks can help cannabis businesses avoid this dilemma by providing compliant banking solutions based on state money transmitter licenses. These solutions may include ACH, business accounts, consumer payments, payroll and tax payments as well as reliable protection through an extensive array of insurance coverage options; giving cannabis businesses an advantage in competitive markets while protecting them against volatility in unregulated ones.
3. Rent or Own
Up until recently, cannabis businesses only had cash as an option for banking services, leaving them exposed to theft or seizures from police authorities, creating difficulties when trying to establish credit, and hindering accounting and compliance processes.
Fintech solutions designed specifically for the cannabis industry are quickly making an impactful impact in this space. Consumers can now pay with their phones while businesses can dispense with debit cards and bank accounts altogether.
Mobile payment systems offer security and transparency that enhance reconciliation, mitigate risk, and simplify cash handling within an organization. Not only are these solutions convenient for customers, but they help businesses meet regulatory requirements by keeping cashless operations out of the equation and eliminating the need for debit card withdrawals.
4. Alternative Financing Options
Although some national banks remain unwilling to venture into this industry, state-chartered banks and credit unions are slowly entering. Furthermore, alternative lending companies openly support cannabis businesses.
These companies provide a range of specialized financial products tailored to cannabis operators needs, such as business loans tailored specifically for the industry and working capital loans to meet day-to-day cash flow requirements. Equipment financing solutions may also be provided for growers and dispensaries looking to invest in new technology.
Banking cannabis-related businesses offers financial institutions many strategic benefits, including revenue growth and diversification opportunities as well as building long-term relationships with clients in need of industry expertise.