Cannabis banking in Canada faces the same access barriers to banking and payment processing that have long troubled cannabis companies in the US.
Although cannabis has been legal in Canada since 2018, retailers, licensed producers, and ancillary businesses have found it challenging, if not impossible. Getting equal access to banking services north of the 49th parallel has proven difficult.
Solutions exist for cannabis retailers who have been shut out of the major banks. However, if you’ve found yourself in this situation, there are solutions if you think outside the big bank box.
Canada’s Big Banks Still Block Legal Cannabis Retailers
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.
Cannabis retailers who do find a willing bank often face high fees and invasive monitoring, as Ryan Roch, owner of Lake City Cannabis, told Leafly in 2022. 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.”
Banking problems affect 60 percent of cannabis companies, according to John Karroll, CEO of Trichome Consulting Services Inc., speaking to Stratcann in 2023.
Canada’s major banks have denied entry to everyone, including extractors, cultivators, retailers, and non-cannabis-touching businesses like digital marketers.
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.
Cannabis Retailers Launch Class Action Against Major Banks
Cannabis retailers across Canada share this experience of being rejected by major banks.
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
Bélanger argues that Canadian banks have harmed the cannabis economy by treating legal businesses as if they were still illegal, as he stated 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.”
The lawsuit includes cannabis retailers and all businesses that have faced difficulties with the named Canadian banks. 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.”
Cannabis Banking Options Available to Canadian Retailers
Cannabis retailers shut out of major banks have alternatives to explore while the lawsuit — still a few years from any conclusion — progresses. Where else can cannabis retailers go for cannabis banking?
Cannabis businesses in Canada have a handful of banking options, with varying costs and service levels.
BMO Serves Cannabis Businesses for $5,000 a Year
Technically speaking, the lawsuit Bélanger filed names BMO, yet BMO does 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). BMO also reserves the right to refuse on a case-by-case basis.
Most business bank accounts cost a few hundred dollars a year, making BMO’s fee too steep for many smaller retailers.
Credit Unions Offer Cannabis Retailers a Practical Alternative
Many retailers have been able to access banking through their local credit unions. This is because 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.
Credit unions often charge less than major banks, though their depth of service may be more limited. Plus, working with your local branch is a much more personal experience.
Alterna Provides Digital Banking for Cannabis Companies
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 Requires Federal Action
Cannabis retailers operate under strict regulation, so operators must clear more hurdles and face more oversight than businesses in other industries. Yet, despite all this oversight, licensing, and regulation, Canada’s big banks still see too much risk.
Cannabis Banking Barriers Have Existed for Years
Cannabis banking options in this country have been scarce for years. 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.
Canada’s federal government and the US government leave cannabis companies with few options until one of them acts. But options do exist.
If you need banking, try exploring the services at your local credit union, Alterna, or even with BMO.
TechPOS Helps Cannabis Retailers Stay Compliant
TechPOS helps cannabis retailers stay compliant, even if it can’t solve Canada’s banking challenges.
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.