By Steve Gelsi
He said he knows of only about 50 banks nationwide that process transactions for cannabis companies, much fewer than people think.
“Banking is not easy to come by,” he said. “Businesses don’t have access to growth capital through traditional bank loans. That helps the illegal market.”
Cathy Iannuzzelli, co-founder and chief payments officer for KindTap, said being forced to conduct business strictly in cash adds a major expense to dispensaries.
“The dispensaries have a problem, but you can’t solve it with a product that’s fundamentally illegal,” she said. “It’s defrauding the credit card association and it has the potential to be considered money laundering.”
In one high profile case, Ruben Weigand and Hamid “Ray” Akhavan last year were sentenced to 15 months and 30 months respectively in federal prison for handling $150 million in credit card and debt card purchases for marijuana by disguising the transactions as creams and dog products and other goods, U.S. prosecutors said in June.
“People have ended up in jail because of the miscoding of point of sale terminals,” Iannuzzelli said. “It has gone from being a murky area to being outright dangerous for them to flout the rules. People will still do it. You’ll find bad actors who convince dispensaries that it’s OK. Cannabis operators will believe some of what they’re being told but they are being told lies.”
For its part, KindTap has been building its own payment network through direct relationships with merchants and consumers for its debit card and line of credit products.
KindTap either lends consumers the money for credit purchases, or it helps move money to the merchant through its network. Everybody in KindTap’s network has to have a bank account. The company moves money between the merchant’s bank and the consumer bank.
KindTap is coming out of its soft launch in Massachusetts and offering its credit and pay now products in more markets.
“You will see products such as KindTap picking up more steam as the most convenient alternative to cash as cashless ATMs are being ripped out,” she said. “You’ll see a lot more ATM transactions in dispensaries until electronic payment products such as KindTap gain enough market share.”
Also Read: Here’s how startup KindTap works around credit card ban for cannabis payments
