LAS VEGAS – Valley Bank, a New Jersey-based $41 billion asset institution, said its new payment platform will provide a solution to an industry-wide cash problem afflicting it. Cannabis-related businesses by allowing their customers access to a mobile wallet payment system.
The nationally chartered bank, which has branch locations across New Jersey, New York, Florida and Alabama, says Stuart Cook, chief executive of digital products at Valley Bank, currently serves five of the 10 largest multi-state operators of cannabis-related businesses. Money20/20 Conference in Las Vegas on Tuesday.
The new payment platform, called Valley Pay, is expected to be launched with a beta program in the coming months.
Cook explained that the mobile app works similarly to the Starbucks Rechargeable Wallet Gift Card.
“It’s a brand, and that provides a lot of economic benefits to the merchant, in terms of those transaction costs. It also builds a whole host of other benefits in terms of loyalty building and marketing solution as well,” he said. .
He added that customers can fund the card from their existing bank account and present the QR code at points of sale.
“The nice thing about it is that it’s being charged in real time, and it’s real-time money for the merchant. So we’re solving a number of issues with the existing payment process,” Cook said.
Cook said Valley Bank is launching the platform in partnership with a “big processor” who wants to remain anonymous.
Valley Bank has been serving the cannabis space for a year and has established a service and compliance system that includes the transfer and deposit of the large amounts of cash that dispensaries collect on a daily basis.
Despite the growing number of states that have legalized marijuana, its federal status as a Schedule I drug means that most banks and major credit card issuers will not allow accounts to be opened or transactions processed in the space.
“With the explosion of rationing across states, there are some big companies that have unique banking needs. They are underbanked, underserved, and out of cash. There is just cash everywhere,” Cook said, adding that one Cannabis customers in Valley Bank deposit more. Over a million dollars in cash every day. “Unsurprisingly, there is a huge pent-up demand across these companies for digitizing payments to get cash from companies.”
Cook said eliminating the industry’s dependence on cash isn’t just a safety issue for marijuana dispensary operators.
“It’s also about the consumer’s desire. They don’t really want to carry large amounts of cash or make these transactions in cash,” he added.
Cook said the regional bank’s size is key to its ability to innovate quickly and create products that serve niche spaces like cannabis.
“We are big enough to do something meaningful and small enough to get it done,” he said. “The wallet that we created, we will start trial with one merchant next month. And that, from concept to launch, is less than six months away. We have been able to move very quickly here to understand what kind of demand from merchants and consumers is for this.”
Valley Bank’s goal is to have Valley Pay approved by each of the major multi-state cannabis operators it currently serves.
“I think it’s a great opportunity for us to grow our banks, deposits and assets in this area,” Cook said. “I think what it also does is it shows that with the right banking partner, you can solve some of these long-standing issues in this area.”
Cook said the bank eventually hopes to resolve expansion issues that would allow the Valley to serve smaller mom-and-pop merchants in the future.
“We start with the big players first and then we’ll look to sort of expand it from there,” he said.
Cook said he believes Valley Pay will provide the bank with unique insight into the cannabis supply chain.
“So we know a lot at the transaction level, and we have a look from the start to the sale, and I think this is going to open up a lot of really interesting financial products for those companies. We’ve made some early forays to help companies fund their growth,” Cook said. More so because we understand the sector and business more.”
The bank’s decision to begin serving the cannabis sector more than a year ago stems from its current mission to target niche markets.
The bank also serves companies in the healthcare sector, commercial real estate, and homeowners’ associations.
“There are a lot of mergers in the banking market today — either being bought or sold, or acquired and growing,” Cook said. “And so the interesting proposal that we’ve been discussing is, how do we help companies in certain areas grow? We can never be a bank that caters to everyone, we really needed to think about where those areas are where we can really serve those markets. We were exploring different areas and cannabis was something very interesting for us.”