U.S. Bank Subsidiary Backs Out of Handling CBD Payment Processing
The CBD industry has been moving full steam ahead in 2019, bolstered by the 2018 Farm Bill and advancements on the federal level to ensure cannabis banking services, but that progress hasn’t been enough for some financial services institutions to continue working with the industry.
On March 14, 2019, Elavon, a payment processing subsidiary of U.S. Bank, notified its hemp and CBD clients that it had recategorized hemp and cannabidiol-based merchants as a prohibited business type and that accounts for such merchants would be closed within 45 days.
“After several months supporting this merchant segment, it has become clear that the pace of an evolving Federal and State regulatory framework makes it extremely difficult to validate the qualifications required to operate within this industry,” said Elavon in an email to its hemp and CBD clients.
As an Elavon partner, FINCANN, a cannabis banking financial network, received Elavon’s notice and began sourcing solutions for its clients at once.
“We immediately reviewed remaining available options and within 24 hours had viable USA-based excellent alternatives available,” said Nathaniel Gurien, founder and CEO of FINCANN. “Since Elavon is not terminating their existing portfolio of CBD merchants until May 15, some merchants opted to immediately apply to one of our alternatives, others decided to wait and see until at least mid-April.”
Elavon isn’t the only merchant services provider rethinking its hemp and CBD clients. On March 19, Cannovia, a maker of CBD-infused products, was notified by Stripe that its account would be terminated. Having just launched its online storefront on March 14, Cannovia attempted to appeal Stripe’s decision but was denied.
“Prior to the notification of the merchant services cancellation, we were not fully aware of the limitations of the banking industry to support the needs of the CBD industry,” said Brian Baum, the CEO of Cannovia.
With both Stripe and Elavon out of the picture, Cannovia soon learned that finding a merchant services provider on its own wouldn’t be easy.
According to Baum, “What became clear was that the options were limited and any banks willing to consider supporting the industry were beginning to utilize the services of intermediaries such as FINCANN to assist them in managing the sheer volume of entities looking for merchant services solutions.”
Linking up with FINCANN to secure a new merchant services provider allowed Cannovia to remain operational and avoid any major interruptions.
Meanwhile, both financial institutions and industry stakeholders continue to keep an eye on the SAFE Banking Act, which would provide certain protections for depository institutions that work with cannabis-related businesses as well as the businesses themselves. The House Committee on Financial Services is currently drafting a report on the act to present to the House of Representatives. If the full House approves the bill, the Senate will vote on it.
“If the SAFE Banking Act overcomes its estimated 40% likelihood of passing the Senate, it will only encourage banks currently contemplating ‘dipping their feet into the water’ to ‘take the plunge,’” Gurien said. Once financial institutions take the plunge, legal cannabis-related businesses will be able to bank just like any other legal business.