As an advocate for the cannabis industry, I sat down for a conversation with the CEO of Fulton Bank to discuss the immense potential for banks to enhance their value by engaging with this burgeoning sector. In this article, I will share my insights and shed light on how embracing banking opportunities in the cannabis industry enables banks to seize off-balance-sheet opportunities, leverage technology to manage risks and capitalize on fee income, all while complying with federal regulations. By supporting the cannabis industry, banks can tap into a vast growth area and strengthen customer relationships.
Unlocking Off-Balance-Sheet Opportunities
In my conversation with the bank CEO, I emphasized that finding off-balance-sheet ways of generating revenue is key to maximizing an organization’s value. The cannabis industry presents a unique opportunity in this regard. By utilizing advanced technology to manage risks and effectively alleviate the burden on human resources, banks can comply with the Bank Secrecy Act regulations while charging significant fees for their services. This holds true for both lending and deposit accounts, creating a substantial avenue for profitability.
Drawing from Past Experiences
Reflecting on my experiences in the 1990s, I recalled a similar scenario in the banking industry. At that time, I was involved in selling indirect automobile finance programs to banks, offering them the opportunity to finance car purchases for customers through car dealerships. Initially, many banks were hesitant, fearing the indirect relationship, potential delinquencies, and involvement with the auto industry. However, once we demonstrated the safe and profitable nature of the program, banks changed their tune. Within a month, I successfully sold the program to 20 small banks, even those who were initially resistant. The clear prospect of making money and not losing clients served as a catalyst for their swift decision.
Understanding Bankers’ Motivations
It is crucial for bankers to recognize the clear opportunities that lie ahead by embracing the cannabis industry. By serving this growing market, banks can both generate revenue and avoid alienating their clients. Turning a blind eye to the legal cannabis sector puts their customers at risk and jeopardizes their loyalty. Imagine a scenario where a high net worth customer, who happens to own a dispensary, is denied banking services. Naturally, they will take their personal and business accounts to a financial institution that is willing to cater to their needs. Banks cannot expect to retain personal accounts while rejecting business accounts; it simply won’t suffice. Serving customers where they are, even in the legal cannabis industry, is imperative for maintaining strong customer relationships.
Embracing the Future
I urge bankers to grasp the opportunities presented by the cannabis industry. By adopting a proactive approach and utilizing technology to manage risks effectively, banks can secure their position as industry leaders and foster long-term growth via cannabis banking. Serving customers in legal sectors, such as cannabis, is a logical step forward that aligns with societal shifts and demands. By embracing this direction, banks can not only thrive financially but also demonstrate their commitment to meeting customer needs. The time to act is now, and the rewards are waiting for those willing to seize this promising opportunity.
Disclaimer: This article does not constitute financial or legal advice. Please consult with appropriate professionals before making any business decisions.
