By Chris Walsh
On Tuesday, we wrote that CSSB Savings Bank in Colorado Springs is severing ties with medical marijuana dispensaries in late September. The unexpected move has sent shockwaves through the state’s MMJ community, as CSSB was the last financial institution in Colorado to actively court dispensaries.
But perhaps it shouldn’t have been surprising given that banks across the country are stepping away from the industry, which is becoming a major issue for the entire sector.
I touched on the repercussions in my last post, but now I’d like to take a closer look at what all of this means for medical marijuana dispensaries across the nation. Here are some of the effects this trend could have on dispensary owners, customers and vendors:
– Higher robbery risk: If dispensaries don’t have bank accounts, they won’t be able to easily and safely move money around. That means they’ll constantly have a bunch of cash in the store. This makes them an even bigger target for robberies. You can easily see how an MMC that does, say, $4,000 in revenue each day will become a big target for robbers. Even if a lot of that cash is constantly going out the door to pay bills, a dispensary could have a large chunk of dough sitting around at any one time.
– Fewer payment options: Banks have been cutting dispensaries off from merchant accounts, and American Express no longer accepts transactions from medical marijuana clinics. So it’s getting harder for dispensaries to accept credit cards. This represents a major inconvenience to both MMCs and customers.
– New complications: Ever tried to manage $1,000 in cash in different denominations? How about $5,000, or $10,000? This will present major complications for businesses in a variety of areas, from paying salaries to keeping track of all the money coming in.
– Deception: Some dispensary owners are opening business accounts under false pretense, either misleading or outright lying to banks about the nature of their businesses. Expect this to increase in the future, which will undermine the credibility of the industry.
– Forced consolidation: If more banks move in this direction, it will essentially put a stranglehold on the industry and force centers to go out of business. While consolidation might actually be good in states like Colorado, where competition is brutal, some strong players will likely fall as well. As I mentioned in the post earlier this week, some observers even think that this could bring about the end of the medical marijuana industry as we know it in many states.
Someone in the financial world needs to step up to the plate. And quickly.
Chris Walsh is the editor of Medical Marijuana Business Daily
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Another major impact will payment submittals to State and Federal tax authories.
Many taxing authorities will only accept payment for taxes due in electronic form either an ACH transfer or direct deposit payment.Payment by check or cash or money order may not even be an option. What’s a business owner to do in this situation?
Hi Robert. Great point. I’m not sure how this will play out re: taxes. I’ll look into it and see if I can find out anything. Given that it’s the IRS, I imagine they will certainly find a way to get that money!
This is insanity. Is there any way to create a locally funded citizens credit union?