Running a business without a bank account is no easy feat. Most in the cannabis industry do it every day because banks can’t take on the revenue from federally illegal product. MTrac, a new payment system company, is hoping to offer cannabis-related business a banking solution.
San Diego-based Mtrac, launched in June, is a subsidiary of Global Payout that uses blockchain technology to transfer keys that digitally represent real world currency from customer to merchant. Initially introduced as a mobile app and in-store kiosk that allowed customers to add funds to an “e-wallet” by adding money onto a reloadable Mtrac card before transferring money to the merchant’s e-wallet, the technology has since morphed into iPad and pin pad checkout stations.
Stormy Simon, MTrac strategy officer, said businesses can also use the system to cut digital checks for things like payroll or rent and generate statements for audits and revenue reporting.
“MTrac itself is an alternative banking and checking account,” said Simon. “You can work right in that wallet and satisfy every need.”
Simon said MTrac can alleviate some of the risks and costs associated with cash-based businesses. For example, such business can be burglary targets because money is stored onsite. Cannabis shops are required to have 24/7 armed security, cameras and keep 90-days’ worth of CCTV footage.
Lila Mirrashidi, deputy commissioner of policy at the California Department of Business Oversight, said she’s heard of MTrac and seen other businesses trying to offer similar products. Credit unions (which can fall under state oversight, rather than national oversight) are interested in cannabis banking, too, and Mirrashidi often fields their queries.
“We tell them if they are considering cannabis as a client, they need to treat it as a high-risk client,” said Mirrashidi.
Since cannabis is a Schedule I drug, financial institutions risk violating the Bank Secrecy Act and USA Patriot Act if they bank it. These laws prohibit banks from handling funds stemming from criminal activity.
The Healing Center San Diego (THCSD) and Mankind Collective are two of the San Diego dispensaries currently using Mtrac (the technology is also being used in the Las Vegas area). Scott Miyazaki, THCSD’s operations manager, looked into other payment systems such as HeroPay and First Data, but decided to implement MTrac in August. He thought there were benefits to working with MTrac as they were a local company, willing to work on feature requests and already had a local client (Mankind, which started in June).
THCSD didn’t get the kiosk offered by Mtrac, so customers need to download the MTrac app in order to make a credit card payment. The kiosk and mobile app have already been replaced by businesses using Mtrac’s iPad and pin pad checkout station features.
Miyazaki noticed customers buy more items when using MTrac and liked that the company covers chargebacks. One noticeable complaint from consumers is that the MTrac transaction will appear as “Cashless ATM” on a statement, which can cause confusion.
But improvements are imminent. The THCSD team said MTrac has kept them in the loop about potential updates to the system.
Still, THCSD co-owner Ray Taylor hopes for a real bank account one day so that his business can eliminate third parties and risk.
“There's billions of dollars to be made so it's going to change,” said Taylor. “Greed is a great motivator for businesses and government.”