The Challenges of Payments in the Cannabis Industry

The Canadian cannabis industry experienced tremendous growth in 2019. Once stigmatized, the industry quickly became a part of one of the biggest economic booms Canada has seen in years. Multinational corporations like Constellation Brands and Altria Group taking major investment stakes in cannabis companies shifted public perception of the industry from a hype-driven frenzy into something that’s here to stay and only getting started. 

But even with the major strides the industry has made in the past year, many elements of operating a cannabis business remain more difficult than they should be. One of the most notable areas is cannabis payments, which has limited innovation despite the industry’s overall growth. 

Most banks are scared of cannabis payments

With the exception of Bank of Montreal (BMO) and a handful of credit unions, the major Canadian banks have decided to watch the cannabis industry from the sidelines and not get involved, even a year after legalization. This makes things like credit cards, investment accounts, and lines of credit — services nearly any business in Canada can access —nearly impossible for large cannabis producers to get.

It’s unclear exactly what has caused the financial institution’s hesitation to join the industry, but we have a few ideas. 

One is that cannabis is still a Schedule 1 drug in the United States (illegal at the Federal level), where the major Canadian banks do a lot of business. Even though medical cannabis is legalized throughout more than half of the country, it’s still a sensitive topic between the federal and state governments. As a result, conservative banks may see cannabis as too risky right now despite the potential upside.

Another reason is that there is still a stigma around cannabis, even in Canada, that the banks don’t want to associate with just yet. 

It could also simply be that the Canadian banks don’t believe in the long term viability of the individual cannabis Licensed Producers (LP’s), or “licence holders”. It’s hard for anyone to believe that the industry won’t grow as a whole, but banks don’t take on an entire industry as their client, they take individual businesses, each with a unique risk profile. 

All of these licence holders are in the early stages of competing with each other and lots are making aggressive acquisitions, so for the banks, it makes more sense for the dust to settle and see who comes out on top before opening up to the cannabis industry. 

Knowledge of what’s available

Another major challenge of dealing with cannabis payments is knowing what the options are. With the banks unlikely to lend you any help, your options are to work with a consultant, use your own service, use third party vendors (for example, Ample Organics has AmplePayments), or do your own research into accepting payments differently. 

Cannabis consultants tend to be very expensive and often want to help with the entire cannabis license application process, not just set up cannabis payments. 

When doing your own research, you will probably find there’s very little information available to help guide you through your options. This is simply because the cannabis industry is so new and there are very few services that are dedicated to cannabis payments. 

Understanding payments and payment processing can be confusing enough, so when you add the complexity of cannabis regulations and the resistance of financial institutions to help, it’s nearly impossible to navigate on your own. One of the main regulations that affect payments, for example, is age verification. Currently, the majority of medical cannabis in Canada is sold online, so it’s essential to have strict age-verification processes in place. Most traditional payment providers don’t support this and it’s just one of the examples of the extra complexity cannabis regulations add to payment processing. Another notable example is prescription limits, where a patient’s order must not be authorized if they try to order above their monthly prescription limit. 

If you’re finding it difficult to navigate the complex landscape of cannabis payments on your own, you can book a time with us to learn how AmplePayments can set you up for cannabis payments success.