Why Banking and Card Payment Provision is Challenging in the Cannabis Industry — and How We Can Overcome It

The cannabis industry in the UK has seen remarkable growth in recent years, with sectors such as industrial hemp, CBD products, and medicinal cannabis thriving. Despite this progress, a significant hurdle remains: accessing reliable banking and card payment services. But why does this issue persist, and what can the industry do to overcome it? Let’s break it down and explore some fresh, positive solutions.

Understanding the Challenges

1. Legal and Regulatory Ambiguity

While certain cannabis products are legal in the UK, the legal framework surrounding them remains complex. Products like CBD, medicinal cannabis, and licensed hemp fall under different regulations, including the Misuse of Drugs Act 1971. This legal grey area makes financial institutions cautious, fearing potential breaches of the Proceeds of Crime Act (PoCA).

Moreover, banks are tasked with ensuring that every cannabis-related transaction complies with UK law. This requires rigorous due diligence—verifying licenses, THC levels, and supply chain legitimacy—making cannabis businesses seem more high-maintenance than their counterparts in other industries.

2. Reputational Concerns

Despite growing public acceptance of cannabis, some financial institutions still fear reputational damage. They worry about potential backlash from conservative clients or negative media coverage for associating with the cannabis industry.

3. High-Risk Industry Classification

Cannabis businesses are often labelled “high risk” due to perceived potential for fraud, chargebacks, and regulatory scrutiny. As a result, banks and payment providers impose high fees, strict terms, or refuse services altogether.

4. International Banking Restrictions

Global payment networks like Visa and Mastercard operate under the constraints of US federal law, where cannabis remains illegal. Even if a business operates legally in the UK, international banking restrictions complicate transactions, leaving many businesses in a bind.

5. AML and KYC Compliance

Banks must adhere to strict Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations, which are particularly demanding in the cannabis sector. Verifying the legality of every transaction and the legitimacy of all parties involved adds layers of complexity, deterring many financial institutions.

6. Insurance and Liability Risks

Without comprehensive insurance coverage for cannabis transactions, financial institutions face increased liability. This further limits their willingness to engage with the sector.

7. Limited Financial Infrastructure

The cannabis industry’s unique challenges mean that few financial institutions specialise in serving this market. As a result, businesses often rely on niche providers, which can be costly and unreliable.

The Impact on Cannabis Businesses

  1. Increased Cash Dependency - Without reliable banking, some businesses are forced to operate in cash, which heightens risks of theft and fraud.
  2. Stunted Growth - Limited access to loans or credit hampers growth and innovation.
  3. Consumer Inconvenience - Customers expect modern payment options; without them, businesses risk losing sales.
  4. Scaling Challenges - Expanding operations, especially internationally, becomes difficult without a solid financial foundation.

Bright Solutions on the Horizon

While these challenges are significant, they are not insurmountable. With proactive strategies, we can address these barriers and foster a supportive financial environment for the cannabis sector.

1. Education and Advocacy

Industry bodies like the Cannabis Trades Association (CTA) play a crucial role in educating financial institutions about the legal and economic framework of the cannabis industry. Advocacy for clearer government guidelines can also help banks feel more confident in serving the sector.

2. Specialist Financial Services

Collaborating with niche providers like Zempler Bank or AccessCards, which specialise in high-risk sectors, can bridge the gap and provide reliable banking and payment solutions.

3. Government Intervention

The UK government could introduce cannabis-specific banking regulations, similar to the proposed SAFE Banking Act in the US. Such legislation would protect financial institutions that serve legal cannabis businesses, encouraging wider participation.

4. Industry-Led Initiatives

The cannabis sector could explore creating financial cooperatives or credit unions specifically for its members. These industry-led solutions could provide tailored banking services while fostering trust and collaboration.

5. Insurance Solutions

Partnering with insurers to develop policies tailored to the cannabis sector would reduce liability risks for financial institutions, encouraging greater participation.

The Road Ahead

By addressing these banking and payment challenges head-on, the cannabis industry can unlock its full potential. Education, advocacy, and collaboration are key to building a financial ecosystem that supports innovation, growth, and consumer trust.

As we look to the future, the cannabis sector has the opportunity to shape its own financial infrastructure—one that empowers businesses and strengthens the industry’s reputation. Together, we can turn these challenges into opportunities and create a thriving, fully supported cannabis market in the UK.

Published: 19th February 2025

The Hemp Trades Association UK Ltd t/a Cannabis Trades Association is a not-for-profit company limited by guarantee registered in England and Wales under company number 10472540 41 Wincolmlee, Hull, Yorkshire, HU2 8AG, United Kingdom.
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