Fintech stepping in where traditional banks have stepped out
In early 2023, the CEO of a thriving CBD company in Colorado opened their laptop to a gut punch: their bank had shut down the company’s account. No warning. No appeals. Just a dead end—and a scramble to meet payroll, pay vendors, and stay afloat.
This isn’t some fringe example. Across the U.S., thousands of legal businesses wear the “high-risk” label and are quietly excluded from basic financial services—not because of any wrongdoing, but simply the industries they operate in: cannabis, firearms, crypto, adult content. And few face steeper barriers than cannabis businesses. Even with state-level legalization and proper licensing, most are relegated to bare-bones banking. The full financial stack—lending, investing, credit cards—remains out of reach due to federal prohibition and institutional risk aversion.
The result? A $100 billion bottleneck—anchored in cannabis but rippling across crypto, firearms, and adult content. It’s a structural failure rooted in unresolved legal contradictions—perpetuating stigma, entrenching guilt by association, undermining public safety, and blocking financial inclusion. The current administration can right the system—limiting illicit behavior, bringing more activity into the open, and unlocking the economic potential trapped in regulatory purgatory.
Legal but Locked Out
These businesses aren’t operating in the shadows. They’re licensed, regulated, taxed, and often major employers. But legal status doesn’t guarantee financial access. In fact, for many of them, it comes with a penalty.
Cannabis is the clearest example. Legal in 38 states but still federally prohibited, the industry operates in a legal no man’s land. “We don’t bank marijuana companies because there’s no federal law around it. If there’s a federal law, we probably would,” said JPMorgan Chase CEO Jamie Dimon in early 2025—a rare moment of candor that makes the hesitation clear: it’s not moral; it’s legal. Credit card networks like Visa and Mastercard still won’t touch cannabis, forcing dispensaries into cash-heavy operations or “cashless ATM” workarounds—coded transactions that mimic ATM withdrawals, a tactic now drawing increased regulatory scrutiny.
But the obstacles go far beyond payment friction. Because cannabis remains a Schedule 1 substance, the IRS bars businesses from deducting ordinary expenses like rent, payroll, or marketing—leaving many taxed on gross receipts instead of profit, with effective rates soaring past 70%. “The core obstacle to providing traditional banking services to cannabis businesses is the unresolved conflict between state and federal law,” said Joe Silvia, partner at Duane Morris LLP. “Over the past decade, many of these businesses have become legitimate enterprises serving diverse customers. Yet institutions that choose to serve this industry must do so amid regulatory uncertainty, heightened scrutiny, and elevated risk expectations.”
Shut out of traditional loans and SBA programs, cannabis businesses are often forced to rely on costly private financing—bearing double-digit interest rates, revenue-based advances, or restrictive terms. Even basic banking, when available, comes with inflated fees and strict compliance requirements. Most accounts are limited to in-state operations, cutting businesses off from national scalability and taking advantage of price differences across states. Cash-reliant operations escalate insurance premiums and raise the risk of robberies targeting operators and storefronts. Routine tasks like payroll and vendor payments become logistical minefields—slow, error-prone, and fragile. At any moment, a regulatory hammer could fall. They do everything by the book, yet still live on the edge—banked today, shut out tomorrow.
These constraints aren’t abstract. They shape real business outcomes. “We’ve done everything by the book, and it’s still a struggle to find basic banking,” said Obie Chambers, a cannabis industry consultant and investor with companies in Oklahoma, North Carolina, and Washington, D.C. “It took over five years for one of our medical marijuana clients to secure a stable banking partner. And even our federally legal hemp venture—fully compliant under the 2018 Farm Bill—has faced inexplicable roadblocks.”
This isn’t just a cannabis problem—it’s a $100 billion economic inefficiency hiding in plain sight. Legal businesses are forced to function with primitive financial tools and denied access to the systems every other compliant industry takes for granted. “The state-regulated cannabis industry has matured into a legitimate, tax-paying, job-creating sector across the United States, but it’s still treated as a criminal enterprise under federal law,” said Khurshid Khoja, founder of cannabis law boutique Greenbridge Corporate Counsel, P.C. “The SAFER Banking Act isn’t just about access to basic financial services—it’s about ending a decade-long disconnect between federal policy and the reality created by voters and legislatures in a majority of U.S. states.”
The Optics Penalty
Reputational risk has quietly emerged as a powerful form of financial censorship.
Firearms merchants face similar exclusion from the financial system. Despite being a constitutionally protected industry, they’re routinely rejected by banks and payment processors due to so-called “reputational risk.” Legitimate sellers of accessories or ammunition often find themselves debanked as well. Adult content creators—on widely used platforms like OnlyFans or Patreon—have also faced silent bans, deplatformed not by the platforms themselves but by the financial gatekeepers behind them. In 2021, OnlyFans said it would ban explicit content entirely due to financial pressure from credit card processors—before reversing course after public backlash.
Yet, exclusion from the financial system isn’t just inconvenient—it’s destabilizing. They’re not breaking the law—just caught on the wrong side of perception. Locked out of the system, they’re left scrambling for workarounds: mostly cash operations, high-fee processors, and endless compliance headaches. The result isn’t just inefficiency—it’s a quiet form of financial exile.
Fintechs Answering The Call
In the absence of traditional banks, fintechs are stepping in—turning exclusion into opportunity.
The high-risk payment processing sector now represents a $22 billion market, growing at 24% annually—nearly triple the rate of traditional processors. Specialized firms like Durango Merchant Services, PaymentCloud, and LeisurePay use rigorous risk assessments and strict compliance protocols to serve clients others won’t. “We’ve walked in the shoes of the businesses we serve,” says Chad Elie Sr., CEO of LeisurePay. “When legitimate companies are labeled high-risk and lose access to financial services, the consequences extend beyond the bottom line—hitting morale, reputation, and survival. Our mission is to deliver stable, affordable payment solutions that support economic fairness. Today, more than 2,000 merchants rely on LeisurePay because we provide what others refuse.”
The catch? It’s expensive. Transaction fees run 5–8%—more than double the norm—and reserves are steep. But for many, it’s the only off-ramp from financial exile. A few regional banks are also leaning in. MVB Bank, Evolve Bank & Trust, and Merchants Bank of California have partnered with fintechs to build tailored compliance programs specifically for the cannabis industry. MVB Financial reported a $14.6 million increase in noninterest income in Q4 2024, partly due to revenue from its fintech subsidiary Victor Technologies.
A growing number of compliance tech firms are helping regional and local banks offer basic services to cannabis businesses—typically limited to checking accounts, payroll, and cash handling. Firms like Green Check Verified, Shield Compliance, and K2 Integrity provide infrastructure for regulatory reporting, transaction monitoring, and seed-to-sale data validation. But access still depends heavily on geography, business maturity, and bank appetite. Major national banks are still sitting on the sidelines. “It’s never easy,” Obie said. “This isn’t like walking into a bank with your ID and opening an account. Some banks won’t even talk to you without a sales history. The big ones? Still a hard no. You’re left with small, local banks—high fees, long waits, and one policy change away from getting shut out.”
Crypto Shift: Shut Out to Backbone
Once treated with suspicion and shut out of traditional banking, the crypto industry was forced to build its own infrastructure—wallets, stablecoins, exchanges, and even banking alternatives. Now, it’s helping solve the very problems it once faced. Platforms like BitPay, Flexa, and NOWPayments let merchants accept crypto and receive dollars—bypassing the traditional rails that have excluded them. For cannabis businesses, these systems processed over $3.5 billion in 2023—12% of the sector’s total volume, up from just 4% two years earlier. Still, adoption remains slow. Most cannabis customers aren’t crypto-native, and onboarding them—wallets, tokens, private keys—adds friction. Until crypto becomes more seamless for average consumers, it risks remaining a workaround rather than a real alternative.
Not all solutions come from traditional fintech. Some crypto-native platforms are carving out roles in this space. LBank, a rising player in the digital asset economy, is building infrastructure to support global crypto adoption—serving users across sectors while also providing solutions for underbanked industries. By listing memecoins that serve as cultural and financial entry points, LBank makes crypto more approachable. “We’re committed to bridging the financial divide,” said Eric He, LBank’s Community Angel Officer. “Our goal is to empower users with accessible digital assets and tools that drive inclusion and growth.”
Demand is especially rising for stablecoins like USDC. Dollar-pegged and programmable stablecoins offer the speed and compliance advantages of blockchain without the volatility of traditional crypto assets—making them a practical option for high-risk industries navigating complex compliance terrain.
Yet the stigma hasn’t fully lifted. A 2024 survey by the Alternative Investment Management Association (AIMA) found that 75% of crypto hedge funds still face banking hurdles. Even regulated players face scrutiny. Anchorage Digital—the only federally chartered crypto bank—is under investigation for alleged anti-money-laundering lapses, showing that even the most compliant firms aren’t immune.
But crypto isn’t just surviving exclusion—it’s laying new rails. And for industries boxed out of traditional finance, those rails may soon become essential infrastructure.
Signs of Change
As one regulator privately put it, “We’ve moved from asking whether these industries should be banked to figuring out how to bank them responsibly.”
The SAFER Banking Act has cleared the House seven times since 2019—most recently with a 321–101 vote—but it still faces hurdles in the Senate, where it currently has 42 co-sponsors. If enacted, the bill would protect banks from federal penalties for serving state-regulated cannabis businesses.
Meanwhile, new efforts are gaining traction. The Office of the Comptroller of the Currency (OCC) has proposed a Financial Innovation Office to evaluate products aimed at underbanked sectors. California has launched a “responsible innovation” office, and the Financial Crimes Enforcement Network (FinCEN) has endorsed the use of AI-driven tools to streamline compliance for high-risk industries.
From Bottleneck to Blueprint
This $100 billion bottleneck is the result of unresolved legal contradictions and the heavy regulatory burdens they’ve created. Federal law still criminalizes what many states have already legalized. Fintechs, crypto rails, and compliant regional banks aren’t just patching a broken system—they’re building a new one. With programmable compliance, digital-native infrastructure, and a bias toward inclusion, they’re unlocking financial access where the legacy system shut the door.
They’re not waiting for permission. They’re building what comes next—and for the millions still shut out, that future can’t arrive soon enough.
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