Most transactions at marijuana dispensaries are in cash, but Hawaii wants all of its eight licensed dispensaries to go cashless by October, the governor's office announced earlier this week. Dispensaries will still accept cash, but the governor would like to reduce the amount of cash in cannabis business to prevent robberies, crime, and other burdens associated with physical currency, the Associated Press reports. Banks in Hawaii did not want to serve the industry, so a Colorado-based mobile payment app and a Colorado credit union will help Hawaii's dispensaries accept payments and move away from cash transactions.
CanPay, a mobile payment app specifically made for the cannabis industry, connects to a user's checking account so customers can make payments with an Automatic Clearing House transfer (ACH) to a dispensary's bank account. CanPay is helping 60 dispensaries across seven states to accept bank transfers and has partnered with 14 regional and local banks in the U.S.
Companies like CanPay are trying to help normalize how dispensaries conduct business, Dustin Eide, CanPay founder, says. Dealing only in cash is a big burden, and danger, to businesses and customers.
"Serving this industry has risks, but providing electronic records is good for the industry and good for industry compliance," says Eide.
Although many banks shun marijuana businesses because cannabis is still federally illegal, Eide, says the company has teamed up with the cannabis banking division of Partner Colorado Credit Union, a Colorado-based financial institution. Partner Colorado's cannabis department, called Safe Harbor Private Banking, follows the Treasury Department's Financial Crimes Enforcement Network's marijuana banking guidelines and the Cole Memo, both of which are Obama-era regulatory road maps to help banks accept marijuana clients and avoid running into federal enforcement issues.
But the FinCen guidelines and the Cole Memo are not enough to convince federally-insured national banks that it is safe to accept cannabis clients. Plus, both memos make the banks responsible for making sure marijuana companies that use the bank are not fronts for cartels, do not sell to minors, and abide by the patchwork of state marijuana laws.
CanPay, Hawaii dispensaries, and Safe Harbor Private Banking are all still at risk from the federal government, Eide says. The FinCen guidelines and the Cole Memo, which was written by a U.S. deputy attorney general, are not laws; they're guidelines for banks to follow and can be changed.
President Trump has made contradictory statements about his stance on marijuana, but the U.S. Attorney General Jeff Sessions is known for being staunchly in support of prohibition and he has threatened federal enforcement.
"We always need to be sensitive about what happens at the federal level until Congress acts," Eide says, referring to how Congress could remove marijuana from its position as a Schedule I drug on the Controlled Substances Act. "But, we also need to move forward as an industry and we are trying to bring a legitimate option to cannabis businesses to accept debit payments."
Bryan Meltzer, partner at law firm Feuerstein Kulick, which specializes in the legal cannabis market, says the fact that the guidelines are only memos has resulted in only about 300 regional or local banks across the U.S. taking the plunge into the legal cannabis space. (Twenty-nine states and Washington, D.C. legalized medical marijuana; eight states legalized adult-use.) Meltzer says big, national and international banks will avoid the industry; as will MasterCard and Visa, until federal law changes. But, this poses an opportunity for the small local banks and credit unions that see an upside to serving the industry while the big banks still won't.
"That said, it's a calculated risk--the FinCen and Cole memos are just memos, they can be ripped up," says Meltzer.
In order to accept bank transfer payments with CanPay, the eight Hawaii dispensaries need to bank with the Colorado credit union, Eide says. Before facilitating payments, Safe Harbor must make sure the dispensaries are following all the rules and guidelines set by FinCen and the local laws in Hawaii.
By using ACH transfers and partnering with a bank willing to take on extra regulatory and compliance work, Eide says CanPay helps the dispensaries gain access to a financial system that has been traditionally hands off when it comes to the industry.
Other companies like Tokken, Hypur, Flowhub, and Kind Financial are all trying to help dispensaries stay compliant and gain access to the banking system by offering compliance software to help reduce the amount of compliance work banks have to do to accept cannabis clients.