In the last few years, few other industries have reported growth and profit margins as cannabis-based businesses have. Business has been really good with federal and state laws relaxing certain stringent legalization procedures. This in addition to consumers feeling comfortable about recreational as well as medicinal use.
However, what has been most surprising in this domain has been the relatively less participation of formal financial and banking institutions.
Cannabis-based businesses, just like any other business need support from the banking and financial partners for a ton of needs. From loans to insurance and the opening of salary accounts, banks have been unwilling to extend their services to a completely ‘legal business’.
Why Financial Institutions are unwilling to work with Cannabis Businesses?
It would be wrong to say that a small change has not taken place in the attitude of small banks and financial credit unions towards cannabis businesses. However, what should be pointed out is that the bigger names in the industry still want to maintain an arm’s length.
Some of the probable reasons for the same are the following-
- Many are fearful of the fact that the rules of the Controlled Substances Act and think that there is just too much risk in the business, even if it is completely legal.
- The presence of still come cartels, who have shifted or opened up legal businesses in cannabis and their past grey is something banks are unwilling to compromise with.
- Even if a financial entity chooses to work with a cannabis business, the charges for maintaining the same are ridiculously high. The percentages charged, the security the business has to provide is very unfair and high.
- There are a number of compliances related issues when it comes to dealing with cannabis businesses. Banks are just unwilling to do the extra paperwork and represent such businesses.
Digital Payments to the Rescue of Cannabis-Based Businesses in 2021
In the last few months, digital payments have eased the financial methods of functioning for cannabis businesses.
You will be surprised to know that entities like Visa and Mastercard still do not work with or provide payment gateways to cannabis businesses.
The cash-only model of dealing attracts anti-social elements and makes payments like taxes, rents, and salaries in cash an extremely difficult process.
However, there are now some credible financial entities that are helping such businesses with Cannabis Merchants Accounts. This account allows cannabis businesses to accept credit card and debit card payments from their customers who buy at their stores in physical locations or on online platforms.
Digital payments offered by some great new stakeholders are coming to the rescue of cannabis businesses that previously had to depend on cash transactions primarily.
How does the Financial Future of Cannabis Businesses look like in 2021?
According to leading market and business experts, 2021 is going to be the year where this industry experiences its greatest growth ever. With more than 31 states having already legalized the use of recreational and medical cannabis, the year promises even more states jumping on the bandwagon.
The bourgeoning CBD market with its oils and products is also contributing positively to the information and education about the impact of cannabis. The industry is expected to see a golden year in 2021, backed by digital payment solutions and increasing legalization.
Auxiliary industries associated with cannabis can also turn out to be a very profitable venture. Whether you are directly or indirectly related to any cannabis-based business, you can expect to see solid demand and numbers going into the second half of 2021.
The cannabis-based business industry is a relative newcomer. Just like crypto-based businesses. You will be surprised to know that many cannabis businesses accept cryptocurrencies as payments. With digital payments pushing the boundaries of what is possible and feasible, it is only a matter of time before bigger entities like Visa and Mastercard join this very lucrative and profitable ecosystem.