Despite flourishing legalization across the US, a shadow looms over the cannabis industry — cash. The federal cannabis classification as a Schedule I drug prohibits these businesses from accessing traditional banking services for cannabis payments.
It forces them to operate in a cash-only environment, creating a breeding ground for security risks.
Theft Targets
The allure of easy cash makes cannabis dispensaries prime targets for theft. Dispensaries often hold large amounts of cash on-site, making them vulnerable to robberies.
In a 2023 study, researchers found that cannabis businesses experienced a much higher rate of robberies compared to other retail stores.
Unfortunately, this vulnerability isn’t limited to the store itself. Sadly, transporting large sums of cash for deposit exposes employees to muggings and armored car services. Consequently, cannabis payment service incurs high costs.
Cash transactions pose a risk to customers as well. When leaving a dispensary with a significant amount of cash, customers become targets for robbery. Delivery services, legal in some states, further exacerbate this issue.
The surge in criminal activities targeting cannabis businesses has led to calls for federal banking reforms. These changes aim to address the cash-intensive nature of the industry. Hence, these businesses are less vulnerable to theft and criminal activities.
The exchange of money outside the secure environment of the dispensary creates a vulnerable situation for both the delivery person and the customer.
Issues on Tax Compliance
The financial risks extend beyond theft. Sadly, cannabis cash payments and cash-intensive operations are a nightmare for record-keeping and tax compliance.
Generally, large amounts of cash are difficult to track, making them susceptible to internal theft or errors. Also, reconciling daily transactions becomes a tedious and time-consuming task.
A paper trail associated with cash sales also helps governments collect taxes. Without a clear picture of cannabis sales, states struggle to assess and collect taxes accurately, a crucial revenue stream for public services.
Furthermore, cash isn’t just a security risk. It’s also a barrier to growth. Many consumers, particularly younger generations, prefer the convenience and security of cashless transactions. Thus, a significant market segment should include dispensaries that cling to cash.
What’s The Solution?
The answer lies in embracing secure, cashless cannabis payment solutions. So, here are some promising options:
Fintech Solutions
Several fintech companies are developing solutions for the cannabis industry. These companies offer cashless payment systems that comply with federal regulations and state laws.
Also, they mimic the convenience of traditional retail transactions. It not only reduces reliance on cash but also provides valuable transaction data for businesses.
Closed-Loop Systems
These innovative solutions also create a secure ecosystem for cannabis transactions. In this case, customers can pre-load funds onto a special debit card or app that functions only at licensed dispensaries.
Thus, it eliminates the risk of theft associated with carrying cash and offers a clear record of purchases for both the dispensary and the customer.
Regulatory Technology (RegTech)
The complex web of regulations surrounding cannabis payment services can overwhelm businesses. Fintech companies are developing RegTech solutions that automate compliance functions for cannabis businesses.
These platforms track transactions, flag suspicious activity, and ensure adherence to specific state and local regulations. It saves businesses time and money and reduces the risk of non-compliance penalties.
State-Sponsored Banking Systems
Some states are exploring the creation of state-sponsored banks or credit unions that would cater exclusively to the cannabis industry. It would provide a safe and legal way for cannabis businesses to manage their finances.
The federal government also has a role to play. Rescheduling cannabis would remove the banking roadblocks currently hindering the industry.
It would allow cannabis businesses to access traditional banking services, eliminating the need for cannabis cash payments and its associated security risks.
It’s a Concerted Effort to Address Issues
The transition to cashless payments isn’t without its challenges. Regulations need to be developed to ensure compliance and consumer protection.
Technology providers must ensure their systems are secure and user-friendly. However, the benefits of cashless transactions far outweigh the challenges.
By embracing secure payment solutions, the cannabis industry can move out of the shadows and into a more secure and sustainable future. It will benefit businesses, customers, and state and federal governments seeking to regulate and tax this growing industry.
In conclusion, cash-based cannabis payment is a relic of a bygone era. Right now, it’s time for the industry to embrace the security, convenience, and transparency of cashless payments.
As the industry grows and matures, a shift to cashless transactions is not just desirable. It’s essential.
Partner With Safe Harbor Financial
Safe Harbor Financial, a leading cannabis banking service provider, directly addresses the cash issue. We offer a suite of financial services specifically designed for cannabis businesses.
These services include checking and savings accounts, online banking, payment processing, and cash management solutions. It eliminates the need for cash transactions, improving security and streamlining business operations for dispensaries.
So, contact a banking representative today! Let’s improve your cannabis payments.
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Do you own a hemp, CBD, dispensary, marijuana, or cannabis business and need a business bank account? We’ve validated over $8 billion dollars in cannabis-related funds since 2015. Bank with confidence. Bank with Safe Harbor Financial today.
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