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Cannabis banking regulatory tech is ready for its moment

By July 25, 2018 No Comments
This article discusses cannabis banking from a regulatory and compliance perspective. To learn more about cannabis banking visit our banking marijuana related businesses page.

For startups developing regulation technology for financial institutions that do business with marijuana firms, there’s one clear upside to the fact that medical marijuana remains illegal under federal law.

“We don’t have the traditional pressures from the large scale tech players because they don’t come in and play,” said Adam Crabtree, founder and CEO of NCS Analytics, a platform that tracks high-risk industries for government customers. “We all got to come into this space, grow and adapt without the big traditional tech monsters. … IBM’s Watson isn’t hopping into the cannabis industry anytime soon.”

Free to bloom without fear of being overshadowed by larger competitors for the time being, several firms have sprouted, touting tools to help financial institutions bank legal marijuana-related businesses, an industry expected to yield $10 billion in retail sales, according to the 2018 Marijuana Business Factbook.

Despite federal statute, recreational and medical marijuana has been legalized in nine states and Washington, D.C. Twenty states have legalized just medical marijuana.

“As all those markets come online, they are ripe for expansion for us,” said Tyler Beuerlein, vice president of business development at Hypur, a payment and banking technology startup aimed at serving highly regulated and cash-intensive businesses.

While Hypur doesn’t touch any of the money involved in marijuana-related transactions, it can originate those transactions through the financial institutions it partners with to provide marijuana-related businesses with an electronic payments system that it calls Hypur Commerce. Hypur currently works with three credit unions and six banks, and expects that will grow to seven credit unions and 10 banks over the next four months.

Its system is built for financial institutions to offer to commercial clients that allow customers to electronically pay in store or online. These transactions are a direct bank-to-bank transfer. Retail businesses that accept Hypur Commerce typically have a flat 3% fee. Business-to-business companies will typically pay about half what retailers pay.

The regtech startup also contracts directly with financial institutions that have access to Hypur’s full suite of compliance, monitoring, document management and site-audit tools. Pricing to the financial institution varies depending on the unique needs of each institution customer, but the typical range is 10-20 basis points on account activities.

“When you go to a credit union or bank conference, you always hear we need to ways to generate more noninterest income, and we need to innovate,” Beuerlein said. “These markets are here for the taking, and we are trying to set a standard about how this can and should be done across the country.”

Hypur’s most popular solution is its transaction analysis and transaction management for both business-to-business and consumer-to-business transactions.

“They can say, ‘Hey, I wonder how our dispensary 60 miles away from us is doing today?’ They can then click on a button, log on to Hypur and watch sales happen in real time, and know who’s buying how much, where they’re buying and what they’re buying,” said Todd Fuller, executive vice president of sales at Hypur.

In May, Hypur teamed up with Blue Line Protection Group to facilitate the logistics of cash pickup and delivery, and Hypur clients can now electronically order an armored car transport to pick up or deliver cash.

More of this article can be found at it’s original posting on American Banker.