by Todd Glider, MobiusPay, Inc
It would be naive to suggest that the cannabis retailer isn’t also facing headwinds resulting, simply, from a century of bad press. Putting the questions of federal vs state legality aside, it’s important to note that payments and banking issues are not unique to the plant-touchers, or Cannabis-Related Business Tier I, or CRB Tier I. CRB Tier II, the ancillary, or cannabis-adjacent businesses, have challenges of their own.
On any given day, there are a galaxy of companies, consultancies, medical practices, and professional organizations expanding their reach into our growth industry. And why not? The legalization of cannabis is a bona fide 100-year event, and intrepid business owners of all shapes and sizes sense opportunity, a new market for their wares and expertise.
And while they may be welcomed with open arms by their new colleagues and contemporaries in the cannabis community, they often find their banking relationships suddenly souring.
A message from their payment processor arrives.
It says, “Sorry, Gayle Force Grow Lights. Your processing has been suspended.”
A message from their bank hits the Inbox.
It says, “Sorry, Gayle Force Grow Lights. Your account is being shutdown down.”
These are chilling, but easily explainable events. And while it may be tempting to tuck them neatly into a dystopian ‘Big Brother is Watching You’ framework, what’s happening here is more Kafkaesque bureaucracy than Orwellian totalitarianism.
So what happened? Gayle Force Grow Lights has been marketing its grow lights to the people of Maine for 25 years. Gayle, the owner, saw cannabis legalization sweeping the nation, and thought, “Here is a new market for my grow lights.”
She updates her digital storefront accordingly, which is to say, she added a new marketing bullet: Ideal for cannabis cultivators.
To us, the word ‘cannabis,’ is an industry term. In Gayle Force Grow Lights’ case, it is marketing jargon. However, to the processors and banks employing dummy algorithms to crawl their clients’ sites, that word is a red flag. When that red flag is tripped, Gayle’s processing is suspended. When that red flag is tripped, Gayle’s business bank account is shut down.
Gayle Force Grow Lights, in the eyes of the PSP it’s been using to accept credit cards, and in the eyes of the financial institution it’s been using to bank, has, suddenly, transitioned from a reliably safe client to a potentially risky client.
Risky clients need to be watched more closely. Risky clients require more due diligence and KYC measures. And since it is not cost-effective for a PSP with 24 million accounts — or a bank with 70 million clients — to police Gayle Force Grow Lights, which processes $100,000 in transactions per-month, and has an average cash balance of $2 million, they show Gayle, and her small business, the door.
The good news? Gayle Force Grow Lights is fictitious. I made it up.
The bad news? Gayle Force Grow Lights is a composite. This is happening to businesses in the cannabis space every day.
What Does the Future Hold?
Right now, merchant accounts are only an option for sellers of hemp and hemp derivatives. But the day will come, with national legalization, when every cannabis-related retailer will have the legal option of accepting credit cards.
As with CBD, it is inevitable that there will be numerous challenges to merchants when this occurs. It is inevitable that cannabis sales will be deemed ‘high risk’ by the card associations. It is inevitable, also, that only a handful of Acquiring Banks will elect to throw their hats into the ring.
The good news is that it is just as inevitable that the companies providing merchant accounts for CBD businesses today will be the ones providing merchant accounts to businesses selling THC in excess of .3%, tomorrow. As always, the most dependable among them will be those that have direct relationships with the Acquiring Banks. This will ensure that account acquisition and maintenance for all cannabis-related businesses is as smooth and as easy as it can be.
MobiusPay, Inc. is a US-based global financial services organization that is committed to empowering individuals and businesses. For more than a dozen years, MobiusPay has leveraged state-of-the-art secure billing technology, long-standing relationships with financial institutions and award-winning customer support to provide merchant processing and payment solutions to brick-and-mortar and digital businesses around the world.
Todd Glider has been an e-Commerce leader since the start of the Internet age. He has an MFA in Creative Writing from the University of Miami, and has served as CEO for small and medium-sized technology companies in Spain, Austria and the United States. As our Chief Business Development Officer, Todd introduces MobiusPay’s suite of award-winning financial services to new industries, and implements the development strategies and key partnerships needed to bring value to new customers.