Comprehensive Cannabis Banking Guide: Navigating Banking Needs for Your Cannabis Business

Cannabis discussion, use, and sale has become an open and welcomed subject for many Americans in the past couple of years. An apparent societal shift has evolved in which the possession of cannabis, once considered to be a shunned and ostracized enterprise by society, has now become an accepted practice with over 23 states, three U.S territories, and D.C legalizing the use of recreational or adult-use cannabis, and another 8 states decriminalizing its use as of 2023. With more states looking to legalize and decriminalize the use of cannabis, the outlook of the industry is positive. The industry has a current U.S. cannabis market valued at USD 13.2 billion and is expected to grow to a compound annual growth rate (CAGR) of 14.2% from 2023 to 2030.

This high level of growth and potential has influenced the creation of many cannabis startups and businesses catering to cannabis users. However, with the creation of tens of thousands of cannabis ventures in the past few years, these companies have struggled with key in-depth banking problems, federal regulations, cash management issues, and a lack of access to traditional baking services. These problems can become major obstacles in the operation of a cannabis-focused business, as cannabis business banking can often make or break the company.

Legal Obstacles

Even with over 23 states legalizing cannabis and many more in the process of legalization or decriminalization, the cannabis industry is still miles away from a federally legalized market, often placing traditional banks in a state of limbo, evaluating if they are able to continue to provide financial services to cannabis companies based on the state and federal regulations imposed by the government. Laws such as the Controlled Substances Act, the Bank Secrecy Act, and the SAFE Banking Act can have significant impacts on the cannabis business. Because cannabis is still illegal at the federal level, businesses involved in the cannabis industry, including growers, dispensaries, and related services, continue to operate in a legal gray area even if the state they operate in has legalized and decriminalized cannabis. Due to the federal prohibition of cannabis and the reluctance of traditional banks to provide financial services to cannabis businesses, it has become industry standard for cannabis banking to operate with cash-only systems, which can create safety concerns and make it difficult to track financial transactions, two extremely negative aspects for the field.

Cannabis Banking Solutions

While prevalent cannabis laws can have the potential to damage the operations and reputation of the cannabis industry, due to the progressive nature of legalization, cannabis banking solutions have begun to be developed that are favorable to cannabis-focused companies. National banks that operate on a federal level may decide to avoid working with cannabis businesses due to federal laws; however, local and regional banks can be more open to working with cannabis ventures, especially in the states where cannabis is legalized and decriminalized. These banks have a better understanding of the local regulations defined by state law and are more willing to work with cannabis companies to navigate the legal complexities associated with the industry.

The same applies to credit unions. Credit unions are often local and are also more receptive to providing financial services to cannabis businesses. Because these money lenders are more community-oriented, they understand the local demographic in the area and are familiar with the likes and dislikes of their clientele. This can help cannabis companies better cater to their local and state customers by providing a local financial solution.

Other cannabis-specific financial institutions and private lenders also exist that specialize in serving the cannabis industry. These institutions are specifically designed to cater to the unique needs and challenges of cannabis businesses, including offering banking services, payment processing, and other financial tools. Often these banks have online tools and API plugins that can turn transactions from a cash-oriented environment into a cashless encrypted payment solution that can benefit the business by promoting online transactional activity rather than a cash system.

Bottom Line

With the exponential growth seen in the cannabis industry, the outlook for startups and companies operating in the space is very bright. As more states continue to legalize and decriminalize cannabis, more cannabis banking solutions arise as national and local state banks look to be more open to providing financial services to the growing niche. While the cannabis industry still faces significant hurdles, the progressive nature of legalization and the emergence of innovative and specialized cannabis banking institutions will provide much-needed relief in the space as the industry continues to evolve. Paybotic Financial is a company that is current with the times. Through the maturity and regulatory framework advancement, Paybotic Financial expects to develop and perfect more comprehensive cannabis banking solutions  to address the unique financial needs of the cannabis industry and ultimately support its growth and sustainability. Through innovation and thought-leadership, Paybotic Financial is leading the way for providers of financial solutions for cannabis-related businesses and their customers, as it enters the new era of financial services for an ever-changing cannabis market.

Our goal is to build a future where operators and consumers across the U.S. can access safe and reliable digital banking, payments and cash management solutions. We do this by creating secure and complaint financial services that let you take control of your business with cannabis-friendly solutions. Visit Paybotic Financial to learn more