Visa’s Cure Affects All and Many Will Not Survive
by Bill Pilkington
Since the December 2nd Visa memo the industry has been waiting for Visa to take action. Most speculated that Visa would start handing out large fines and cease and desist orders to some of the larger Cashless Debit and noncompliant players and send a message to industry. Instead, Visa has chosen a more deliberative process that will ensure that 100% of noncompliant processors, provisioning centers who use them and financial institutions that bank such provisioning centers will cease doing business with Visa and Mastercard.
Nowhere to Run to, Nowhere to Hide
VISA will use the financial institution industry to achieve its compliance goals. Using their own data and that of METRC, Visa can match sales with seeming ATM withdrawals AND determine which financial institution was the depository of record. Financial institutions could weakly argue that it was a new industry, it was in transition, the sun was in their eyes but in truth the banking industry knew it was noncompliant from the beginning. Visa will now identify which of its banks is working with noncompliant processors, give the bank a list of all transactions that flowed to the bank and provide notice that these are considered noncompliant, cease doing business with them. First notice comes with a fine of $25,000, next month the second notice comes with a $50,000 fine, the third month comes with a $75,000 fine and notice the bank no longer has access to the payment system. Banks that have been through this don’t let it get to the last sanction and simply stop doing business with noncompliant operators. Thank you and Rest in Peace.
For Those that Survive, It Is Not Over
You do the right thing and get in a compliant program only to find out that your financial institution is not fully compliant because it has other PCs that are not compliant. Through no fault of your own you are left without a bank account. The financial institution industry is not going to like this… I recommend that you ask your financial institution for third party affirmation that their program is compliant. Attorney opinions, BIN Sponsor confirmations, indemnification commitments, the financial institutions should provide you with third party affirmations that your financial institution is fully compliant and will never be subject to third party shutdown. If they cannot, I suggest you move on as VISA sanction is not an if, it is a when.
I have no idea of timing for Michigan institutions, I just know the odds of them investigating your financial institution is 100% which means the odds of reviewing your account is 100%. Nathaniel Gurien, CEO of FinnCann.com is avidly anti-cashless debit. He can refer you to vetted compliant processors, primarily of the ACH download app variety. He estimates there are less than 250 financial institutions that taken together will allow VISA to review 98% of cannabis banking activity. Conclusion: VISA review is going to be sooner than later.
A Singular Solution
I am an advocate for the Solvent Solution. Solvent.io was founded by a former WorldPay executive. As a 26 year regulator I knew very well the history of the largest payment processor in North America. When they came to Michigan, I met them at the shore and they presented their plans starting with Michigan. Using their foundation in payments, they made adjustments to bank marijuana compliantly and, as it turns out, efficiently. I hesitate to be so upfront as to endorse them but Solvent has passed the test, time has become critical and this is (gulp) existential.
One of the first banks reviewed was discovered having 78 provisioning centers with noncompliant workarounds, mostly cashless debit. The bank was informed its non compliant merchant had three choices: 1) Turn off their cashless ATM ASAP & go back to cash only 2) Find a new bank to bank with or 3) deploy Solvent across the cannabis portfolio. They chose the Solvent Solution exclusively and they began underwriting them for traditional PIN debit (down to the penny)
With the BIN Sponsor bank committed to Solvent, I contacted Solvent President Adam Gifford and asked him for his take on the situation. “We enjoy our work with Michigan cannabis banks and cannabis businesses. We are currently working with our banking partners to create singular source banks that use the Solvent Solution exclusively whereby approved customers and potential customers know that they will not be shutdown due to someone ele being noncompliant. Because any bank may be chosen for review any day, we are waiving early termination fees. Our new customers will also receive our credit card program embedded in their Solvent Solution that they can easily turn on when credit card are allowed by the 4 major card brands.
You Still Own the Future
The actions I recommend are meant to protect current and future operations pursuant to a commitment I made to the Community Bankers Association and representatives from the Michigan Credit Union League. I do not charge for my services. Please make sure you are compliant, your financial institution is compliant and you understand the risks. If you need help just reach out to me at Pilkingtonllc@outlook.com while my website is being reconstructed to serve you I will do so personally.. I also welcome your calls at 734-558-7427. If VISA walks into Michigan financial institutions this morning and you have an issue, don’t panic. I will put you in a fully compliant account in ten business days. As the evolution of the industry continues, the future still belongs to you.
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