There’s plenty of cash circulating in the cannabis industry. The problem is finding a place to deposit it.
Cannabis businesses don’t want to conduct cash-only transactions, which can pose huge safety and security risks. Manufacturers and dispensaries end up with large amounts of cash on hand, making them prime targets for theft and graft.
Many companies looking to process credit card transactions have been turned away by the banking industry. Major credit card companies such as Visa, MasterCard and American Express have rejected PIN debit or credit card transactions in both the United States and Canada.
According to Mike Herron, Chief Operating Officer of Amercanex, an online marketplace for cannabis participants, there are literally hundreds of millions being carried around, hidden away or buried underground.
Herron calls it “tremendously risky,” adding that the growers and dispensaries haven’t had another choice.
Under U.S. federal law, marijuana is classified as a schedule 1 drug by the Controlled Substance Act. But it’s medically legal in 29 states and recreationally legal in eight. In Canada, which plans to legalize cannabis by June of 2018, the entire country will allow the sale of recreational cannabis.
Legal cannabis businesses need access to banking and other financial services to succeed. Some dispensaries have circumvented these restrictions by changing the Merchant Category Code (MCC) for miscellaneous retail or other uses. These codes are not technically the right ones and could spell trouble for dispensaries down the road.
Those looking for a safe, secure and compliant banking solution are turning to closed-loop payment systems, where growers and producers can process private credit cards via banks. These systems can process major credit cards in areas where marijuana has been legalized.