It’s no secret that cannabis companies have been fighting to access banking and payment processing in the US for years. But did you know cannabis banking in Canada is facing a similar circumstance?
Although cannabis has been legal in Canada since 2018, retailers, licensed producers, and ancillary businesses have found it challenging, if not impossible, to get equal access to banking services north of the 49th parallel.
The truth about cannabis banking in Canada can come as a shock for new entrants. However, if you’ve found yourself in this situation, there are solutions if you think outside the big bank box.
The Downfall of Cannabis Banking in Canada
It’s been nearly five years since the federal government legalised cannabis in this country, but as many retailers have discovered, banking in Canada doesn’t seem to reflect these new legalities.
In a 2021 CBC story, the Association of Canadian Cannabis Retailers (ACCRES) reported that 95 percent of retailers had been denied access to traditional banks for even basic services like chequing and savings accounts.
In 2022, Leafly spoke with Ryan Roch, owner of Lake City Cannabis, who said, “The big banks won’t even look at you. It’s as if you weren’t there.” In his experience, traditional banks “wanted to charge us $500 a month just to work with them, and they wanted to continuously monitor everything we did, up and down, left and right.”
In 2023, Stratcann interviewed John Karroll, CEO of Trichome Consulting Services Inc., who estimated that 60 percent of the cannabis companies he has assisted have run into banking issues.
Everyone, including extractors, cultivators, retailers, and non-cannabis-touching businesses like digital marketers, have all faced denial of entry from Canada’s major banks.
But if cannabis is legal, and all these instances mentioned above are about the licensed space, why are banks so hung up on it?
Most sources agree it’s because traditional banks operate internationally, in countries where cannabis is still illegal and facing intense stigma. Canada’s big banks are especially concerned with the risk of working within cannabis because of their business portfolio in the US.
Unfortunately, this means that until the US passes the SAFE Banking Act and/or regulates cannabis federally, Canadian banks are hedging their bets.
Class Action Lawsuit Filed Seeking Justice for Cannabis
If this story sounds all too familiar to you, you aren’t alone.
After years of rejections, at least one Canadian cannabis leader is taking banks to court. Announced in February 2023, Groupe SGF (Cannabis Legal Advisors and Consultants) launched a class action lawsuit for Mr. Gabriel Bélanger, owner and founder of Origami Extraction Inc.
The suit targets Canada’s biggest banks: Desjardins Federation, National Bank, Royal Bank, Bank of Montreal, TD Bank, and CIBC. It alleges the banks are unfairly targeting legal Canadian businesses by:
- Denying access to open new bank accounts
- Suddenly closing current bank accounts
- Denying access to financial tools like mortgages, loans, and credit lines
In a press release, Bélanger stated, “For far too long, Canadian banks have treated the cannabis industry like pariahs, as if it was still completely illegal. By doing so, they are depriving the Canadian, but especially the local economy of developing a promising market.”
While this lawsuit is in the early stages yet, the good news is that cannabis retailers have been naturally included. Group SGF has included “all individuals and businesses that, directly or indirectly, are involved in the legal cannabis industry […] that experienced any difficulties with the Canadian banks concerned.”
What are Your Options?
With the lawsuit a few years away from reaching any conclusion, what are your options as a Canadian retailer if you’ve been shut out of the major banks? Where else can canna-businesses go to do their cannabis banking?
There are a handful of banking options available to cannabis businesses in Canada, with varying costs and service levels.
Bank of Montreal (BMO):
Technically speaking, BMO is named in the lawsuit filed by Bélanger, yet they do serve some businesses operating in the cannabis arena — for an exorbitant fee. Citing the need for a dedicated account manager, BMO will serve cannabis companies for $5,000 a year (plus usual service charges). They also reserve the right to refuse on a case-by-case basis.
Considering most business bank accounts cost a few hundred dollars a year, this excessive fee isn’t always feasible for small businesses, especially for smaller retailers.
Credit Unions:
Many retailers have been able to access banking through their local credit unions. Small, regional credit unions are more worried about Canadian laws than what is happening south of the border. So if larger international banks like TD or Desjardins have turned you down, try heading to your friendly neighbourhood credit union.
While they don’t always have the same depth of service, the good news is that their service charges are often cheaper than the big banks. Plus, working with your local branch is a much more personal experience.
Alterna
Alterna is a digital bank that serves Canadian small businesses with a suite of services. Although rates are somewhat higher than what you may find at a local bank, Alterna works with Canada’s cannabis sector with options tailored to the industry’s specific needs.
Cannabis Banking in Canada: Change Needed
Cannabis is a regulated industry, so it’s no surprise that operators need to jump through a few more hoops and work under more oversight than other industries. Yet, despite all this oversight, licensing, and regulation, Canada’s big banks still see too much risk.
The lack of cannabis banking options in this country is by no means a new problem. For years, the industry has been reporting issues with banking. Growers, extractors, and retailers have all had a bank kick them to the curb or deny them services altogether.
Until Canada’s federal government steps in (or the US government improves conditions south of the border), cannabis companies are left with few options. But the important takeaway is that there are options.
If you need banking, try exploring the services at your local credit union, Alterna, or even with BMO.
TechPOS, Administrative Support for Your Cannabis Retail Business
While the TechPOS system can’t solve Canada’s banking woes, we can help you stay compliant.
Our industry-leading cannabis POS enables you to stay on top of reporting, automate business administration, and manage inventory, all through a centralised, user-friendly dashboard.
Ready to see how we alleviate your compliance reporting burden? Schedule a Demo Today.
