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Cashless Payment Solutions to Overcome Cannabis Banking Challenges


There remain some major challenges for cannabis retailers when it comes to finding reliable, secure banking providers, and that has robbed customers of the convenience of debit card processing. Though there are signs that more financial institutions are willing to work with marijuana retailers, financial services for the industry still lag way behind those available for other small businesses.

In this article, we’ll briefly look at the challenges still faced by cannabis retailers, explain the risks of working on a cash-only basis, and then show you some alternative ways to ensure your finance and payment systems are secure, including the use of cashless ATMs.

Cannabis Banking Challenges

If you run a cannabis retail business in the US, you are probably already well aware of the difficulties faced by the industry when it comes to banking.

The SAFE Act, under which a bank cannot be penalized solely for banking cannabis, is one proposed solution, but there are problems with this act. For a start, it doesn’t recognize the basic distinction between THC and CBD, and is therefore more restrictive than it needs to be. Secondly, it's likely that banks will still be unwilling to work with cannabis retailers because a discrepancy uncovered related to cannabis accounts could likely entail tangential violations also, especially related to the Bank Secrecy Act (BSA) or anti-money-laundering (AML) violations.

The reality is that most banks could work with cannabis retailers, but they choose not to due to previous experiences working with other “high-risk” industries. Equally, it would be possible for the Fed to make it easier for banks to offer services to the marijuana sector – in Canada, for instance, retailers can simply use existing credit and debit card systems. 

The Current Norm - Cash Only

Given these difficulties, many cannabis retailers have taken a pragmatic approach, and decided to run on a cash-only basis. While many retailers felt they had no choice, running a cash-only retail business is extremely risky (and expensive), for a number of reasons:

  • It’s difficult to keep track of your accounts
  • It’s a security risk to keep lots of cash on hand: many cannabis retailers have piles of cash sitting around, and this is a major temptation for thieves.
  • You waste a lot of time going to the bank to deposit cash. And, as the NYT recently reported, there have been instances in which banks refuse to accept that this cash has been legitimately earned. If you can’t prove where your cash came from, you may not be able to pay it into “traditional” bank accounts.
  • You can’t pay many types of bill with cash
  • And many customers are turned off by an inability to use their card

In short, running any kind of retail business on a cash-only basis is a bad idea. And it’s even more risky for cannabis retailers, because it only takes a Google search for thieves to work out that many marijuana stores have huge amounts of cash on premises.

The Safe Solution - Cashless & Contactless Payment

Thankfully, things are changing. There are now a range of POS and banking options available for cannabis retailers. These solutions aim to provide all of the features available to retail stores in other sectors, but take different approaches to achieving this. Cova POS have vetted multiple companies who offer these cannabis payment solutions, and have found that at least two providers are reputable. They both provide simple solutions that make the process smooth and easy for both consumers and customers

Cashless ATM

One type of banking solution for the cannabis industry is to use a cashless ATM system. These systems allow retailers to take card payments in the US without falling afoul of federal banking regulations, and are a quick and effective method of moving away from a completely cash-based business. 

The user-interface used in cashless ATM systems is familiar to customers, who swipe their debit card and enter their PIN. The transaction goes through the regular issuing bank authorization process via the payment system. Instead of cash, the system approves a withdrawal amount in increments of $5 or $10 plus a convenience fee that the customer absorbs. Any difference in purchase price at the dispensary is returned to the customer from the store’s POS. Funds are paid into the merchants’ bank account in 24/48 hours, and show up as cash withdrawals on the customer’s statement.

Contactless Payment

Other companies offer more fully-featured banking solutions for cannabis retailers. Paytender Merchant, for instance, is a payment solution for cannabis retailers that will allow you to take contactless payments in a secure way. It also allows you to accept online payment for delivery and pick up orders with PayAhead. Customers can pay directly from their bank account, or load the app using their debit card.

The Future - Choice & Convenience 

Though it appears that things are slowly changing, it's likely to be a few years yet until the payment and banking experience for cannabis retailers and customers reaches the maturity of that found in other retail sectors. However, with the emergence of the new solutions we've mentioned above, the transformation of the industry might come sooner rather than later. We certainly hope so. 

Cova has partnered with two of the industry's top cashless payment solutions to help cannabis retailers offer the choice and convenience customers demand. Contact us today to discuss the best payment tech to suit your retail model, and ditch the "cash only" sign.




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