SPONSORED: For banks, the cannabis industry presents both a challenge and an opportunity

As voters and lawmakers in all 50 states ramp up cases of medical and recreational marijuana use, regulations are constantly evolving to keep pace. For lenders and creditors, this presents a growing field of potential customers in the form of producers, processors and dispensaries. However, a fast-paced industry also comes with its fair share of risk. Chris Pratt, vice president and head of customer experience at The Middlefield Banking Company, spoke with Crain’s about the pros and cons of continuing banking relationships with the nascent cannabis industry.

Q: How did Middlefield first become involved in this developing industry?

A: “When medical marijuana was voted on and ultimately approved, we listened to our current customers and businesses in our markets as they asked about the business opportunities that legalizing medical marijuana could create. As they got interested in (investing) and they came to us and said “would you be able to bank us”, that’s when we We did our due diligence and invested a lot of time and resources to work with banks that already had (cannabis) to design a program similar to Middlefield. With this level of expert opinion, we knew we had designed a solid program from the start. We just stayed close to those partners throughout the maturation of the program and really, that’s business development 101: Listen to the needs of your communities and your customers and always look for solutions to those needs.

Q: How does Middlefield stay informed about this industry and grow its knowledge base?

A: “Self-education; read and stay abreast of current legislation as well as emerging challenges in the industry. The potential for money laundering is a big concern for banks so we need to make sure we stay up to date on the rules and requirements that are in place with all payment processors and card issuers. We attend payments conferences that keep us informed of these requirements and keep us abreast of emerging solutions. We also attend more specific cannabis conferences that help us understand the long-term trajectory of the market. Everyone we work with in space is truly at the forefront of this industry. That’s really where our expertise comes from: just staying educated, attending seminars, aligning ourselves with reputable partners and consultants who have come to help banks and cannabis businesses ensure they can continue to grow by being efficient while remaining a safe and sound business enterprise.

Q: What do you see as the biggest challenges and opportunities in the cannabis industry from the perspective of Ohio banking entities?

A: “Access to credit is a challenge at the moment. Most (banks) only manage the company’s deposit account, but not the credit. However, one positive that I see is that you see vendors coming into the space who have experience in providing these solutions. These vendors get really good at making sure they tick the boxes on everything they need to make sure their solution is solid and compliant with all market regulatory requirements. As a bank, we also need to review these providers before onboarding a marijuana business to ensure that we are comfortable with their solution as well. So it’s nice to know that we are dealing with suppliers who have been consistent and with whom we are comfortable with our customers. I really feel a sense of synergy developing at all levels of the industry, which is reassuring.

Q: No one can see the future, but it looks like the cannabis industry is going nowhere and will likely continue to grow in the future. How can a banking institution stand out in this rapidly changing industry?

A: “From the bank’s perspective, I think that’s how we think right now; is to take a long-term view of the industry. It’s going to be more competitive in the market, but what we hope we can do that other banks can’t is talk about our longevity in the market and how we’ve supported and advised our customers from the moment they entered. in the market by providing them with the deposit relationship and then the lending options for them to achieve their ultimate growth goals. We understand that the competition may start to normalize the cost of doing business, but we want to take the long view so we can say “our program has passed regulatory reviews in which we received high marks”. There is no risk in doing business with Middlefield because you know we have a strong program. When looking for a banking partner in this space, you need to do your due diligence, see what the options are, and find a bank that’s willing to understand your business model and provide you with tools so you can move forward. growing up.”

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