It was around four years ago when former NCUA chairman Rodney Hood told credit unions that there is great opportunity to be found serving cannabis businesses and that prompted a tsunami of credit union interest and an avalanche of articles and podcasts that focused on the opportunities for credit unions with marijuana related businesses.
And then what?
Crickets.
Today is that day because it turns out a thriving, if small, group of credit unions are serving the country’s legal marijuana businesses—an industry pegged at about $40 billion in sales annually.
Yes, marijuana remains illegal in federal law but it is legal for medical uses in 39 states and for personal use in 24. And banking the legal marijuana businesses in those states is legal, a point stressed by Chairman Hood That creates opportunity for credit unions, both to increase revenues and also to serve their communities.
There is one significant complication: Visa and Mastercard will not serve marijuana businesses because of the federal illegality. Until the law changes, Visa and Mastercard are sitting on the sidelines and that means, for the most part—at least at the retail level—marijuana is a cash and carry business. That of course creates mountains of cash and getting safe handling for that is a key issue in banking—more on how to do it later. Just know this is a problem with solutions.
How many credit unions now serve marijuana related businesses? Kevin Hart, CEO of Green Check Verified, a fintech that serves marijuana-related businesses (MRBs) estimates the number today is around 120. That’s down from over 200 a few years ago, as some entrants quit because, frankly, there are complications involved in banking MRBs (more than are involved with most businesses).
But the surviving credit unions say this is working for them.
Proof of this is Wright-Patt Credit Union, the nation’s 38th biggest with assets around $9 billion and it is Ohio’s biggest credit union—and it also serves marijuana businesses in the state. Megan Bennett, manager of MRB compliance at Wright-Patt Credit Union, related how the institution got involved in banking marijuana businesses.
“The state came to us and asked if we would be interested in banking marijuana businesses,” related Bennett. Medical use of marijuana was legalized in 2016 and that was followed in late 2023 by legalization for personal use.
Wright-Patt CU started with a lot of internal discussions, said Bennett. “We met with legal counsel. We created committees. We talked about all the options and all the risks. After probably a year and a half of that, we decided we would bank cannabis businesses.”
Why?
“Our main goal and biggest driver for us was that we are a credit union and we are here to serve our community. If marijuana is legal in Ohio, it’s part of our community. And it’s safer for our community if there’s not a bunch of cash out on the streets, there’s less risk if the cash is banked.”
Understand: Wright-Patt does not bank the cash directly. “The way we do it, and I’m assuming many institutions do it, is we partner with armored car services. They pick up the cash at the cannabis business and deliver it to the Federal Reserve. It never touches our branches,” said Bennett.
What services does Wright-Patt CU offer MRBs?
“We offer deposit accounts, saving accounts, money markets. We also offer lending.” Bennett estimates that Wright-Patt Credit Union has about a 45% share of the Ohio financial services market for MRBs.
As for Green Check Verified, it knows its bank and credit union customers are not necessarily expert in cannabis regulations, but Green Check Verified is, said Hart. He added: “How does Wright-Patt know the cannabis business [seeking services] is licensed, how do they know on an ongoing basis that they are maintaining their compliance posture—what are they selling, to whom are they selling, where does that money come from?“
Green Check Verified’s expertise is in knowing the answers to those questions.
Added Hart: “Some people say we’re a fintech. Some say we’re a regtech. Some say we’re a data compliance company. We’re kind of all of the above because when you look at a high risk industry you have to be able to wear all those hats and then make [this information] usable to the end client, which is the financial institution.”
He continued: “A lot of [credit union] folks worry about reputational risk. They feel they will lose members if they facilitate this. I understand that. But I think that when they approach [cannabis banking] with an open mind and they see they can do it safely and in compliance then they decide, you know, is this something we want to do.”
For some credit unions, obviously, the answer is no thanks. But at Wright-Patt Credit Union there’s satisfaction that by serving cannabis businesses the institution is serving its community and that is the credit union mission.
