Editors’ Note: This is the transcript version of the podcast. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below if you need any clarification. We hope you enjoy!
This week we are joined by Daniel Muller, Founder & CEO of AeroPay to discuss:
- Payment Processing in Cannabis
- Safe Banking
- Disrupting Visa, Mastercard & Amex
About Dan Muller
As CEO, Daniel Muller founded Aeropay in 2017 to create a better, faster and more affordable way to help people move money. Formerly Head of Product and Software Engineering at GPShopper and an Investor with New Colossus Ventures, Dan now leads one of the most advanced payment platforms in FinTech.
Prior to founding Aeropay, Dan acquired over a decade of digital retail, eCommerce, and product experience at Fortune 500 companies. His past clients include Best Buy, Foot Locker, Adidas, Express, Alliance Data and Synchrony. Dan’s expertise has been integral to building Aeropay’s open architecture solutions and offering consumers best-in-class functionality in each layer of the tech stack, including integrated e-commerce, POS, and digital payments solutions.
A Native New Yorker and First Generation Latin American of Uruguayan and Argentine descent, Dan is a member of the Latinx Incubator Program and has been named a Rising Star in Chicago Tech by Crains and to MJ Venture’s 40 Under 40 List. He studied Political Science and Economics at Franklin & Marshall College and is an avid chess player.
Learn more about Dan and Aeropay at www.aeropay.com.
#Cannabis #Cannabistechnology #Cannabiscommunity
At Eighth Revolution (8th Rev) we provide services from capital to cannabinoid and everything in between in the cannabinoid industry.
8th Revolution Cannabinoid Playbook is an Industry-leading report covering the entire cannabis supply chain
The Dime is a top 50 Cannabis Podcast
Contact us directly at [email protected] Bryan Fields: @bryanfields24 Kellan Finney: @Kellan_Finney
[00:00:00]Bryan Fields: What’s up guys. Welcome back to the episode of the dime I’m Brian Fields. And with me as always his ke fit in this week, we’ve got a very special guest, Daniel Mueller, CEO, and founder of arrow pay. Dan, thanks for taking the time, how you
[00:00:12]Dan Muller: doing today. Doing great, awesome view with you guys. Look forward to Chad and
[00:00:18]Bryan Fields: yeah.
[00:00:18] Excited to dive in. Ke how are you doing?
[00:00:20]Kellan Finney: I’m doing really well. Looking forward to talking to Dan about, uh, how money gets transferred
[00:00:24]Bryan Fields: in cannabis. Yeah. I mean that’s, how are you, Brian? I’m excited. And I’m really excited to talk to another east coaster, um, and another Nick fan, because listen, it’s not enough of us out there and we need to be loud and proud.
[00:00:36] So Dan proud listeners, the UN about you, can you give a little background about yourself?
[00:00:41]Dan Muller: Sure. I’m a mixed fan in Chicago. That’s pretty tough. No, I . It’s just, uh, um, well, so quick background on me, um, you know, from New York moved to Chicago about 10 years ago, uh, worked in technology. Uh, pretty much since I graduated, uh, built large, uh, you know, digital solutions for large [00:01:00] enterprises, like Adidas, best buy foot locker, and many others.
[00:01:04] Um, eventually a company I was working for sold to a big bank, uh, synchrony financial, and got, got full exposure to everything. FinTech and financial services saw how broken things were behind the scenes in payments. And that really inspired the idea for a pay, um, and a pace kind of simple bank transfer based payment method.
[00:01:26] And we specialize lately in, uh, providing services for emerging industries like cannabis. So is
[00:01:33]Bryan Fields: a pay in different industries. Can you kind of give us a little background about the value provides and then how kind of you got into the cannabis industry?
[00:01:40]Dan Muller: Yeah, so a pay is industry agnostic, but we’re, we’re highly specialized in state by state, uh, regulated industry industries like cannabis.
[00:01:52] Uh, what’s special about what we built and this is really from day one is we’re leveraging an account to account bank transfer. To make money, move [00:02:00] faster, more securely, and much more affordably. Uh, we know that there’s a million players in payments and it’s a really noisy space, but what happens in, you know, highly regulated spaces is that the traditional service providers like credit cards, um, and the card networks don’t widely serve those industries.
[00:02:19] So it makes it for a great area for. A company like ours to provide our new, you know, money movement method, uh, to an industry like cannabis, uh, cuz there’s not as much noise and we can prove the innovation that we’re doing and hopefully it works out to, to other industries, but that’s sort of what inspired the go to marketing cannabis.
[00:02:40]Kellan Finney: So, uh, arrow pay operates in gaming, crypto cannabis and some other retail, uh, very highly regulated spaces. Which one do you think is the most regulated from your guys’ experience?
[00:02:50]Dan Muller: I’d say the most underserved is for sure cannabis and then probably the highest, highest regulated is gaming. And the most unknown right now, uh, for future is, is for [00:03:00] sure.
[00:03:00] Crypto, just, just given, uh, the different angles and perceptions there, but cannabis is by far the most underserved and it creates. You know, really complicated environment. I think a lot of really smart people have entered the ancillary tech space in cannabis lately because they like to solve really hard problems.
[00:03:18] And I can’t think of another harder one than money moving when it’s, you know, federally illegal to even solve the product. So you have to. Layer on a ton of compliance and collaboration with regulators, you know, at the state and federal level and bank partners to do this correctly and transparently, which is what we bet on.
[00:03:36] You know, as soon as we went to marketing cannabis, I think a lot of the operators been B burned in the past with providers that didn’t do that. And so, you know, trying to wave the compliance flag early was important for us and, you know, has won us a lot of business as a result. So I think that’s what we’re sticking with and, and what people want to.
[00:03:55]Kellan Finney: So you said that, uh, I mean, transferring money in a, in a federally [00:04:00] illegal market is challenging. So walk us through some of the conversations that your team has with these financial institutes that you build partnerships with and you guys clearly have trust with.
[00:04:10]Dan Muller: Yeah. So it really starts with federal regulation, according to, um, you know, either the Cole memo or Sen guidance that came out in 2014, that effectively said, if you’re going to provide financial services to the space, this.
[00:04:24] How you do it so that you don’t get in trouble. Um, and some really smart bankers, um, at partner, Colorado safe Harbor, Sandy Siegfried actually wrote a book on this created sort of the playbook by which you could provide financial services to the industry. And this is sort of widely accepted among hundreds of, of banks now.
[00:04:44] And they’ve extended that to other things like payroll processing or payment processing, because obviously folks that are employed by the industry need to get paid. Tax revenue needs to flow to the state and all the basics that happen when, you know, it is [00:05:00] a state legal, um, industry. And so we built, you know, effectively a, a compliance layer on top of what we were told by, you know, our bank partners.
[00:05:10] And we make sure that our operators follow those rules. And so our technology, um, is pretty much the same across those verticals. But the type of things you need to ask and the due diligence you need to do can vary. Um, and so that’s really how we do what we do differently than, you know, let’s say, um, you know, cashless ATM or other things that might abstract the nature of the actual transaction away.
[00:05:34] From, you know, the bank statement, we’re very clear it’s cannabis dispensary on the bank statement. Um, and then all the rules flow down to, to the financial institution who has to file the suspicious activity reports with ENT. So a lot of really technical financial terms there, but ultimately banks tell us what’s due and we file their rules.
[00:05:54]Bryan Fields: I gotta wonder transparency’s probably king, but as you are probably pivoting your business or moving part of your business [00:06:00] to the cannabis space, how, how challenging is that to say we’re taking our technology and we’re moving into the cannabis space, understanding all of the implications and challenges layered on top, like from a timeframe perspective, what does that look like?
[00:06:12]Dan Muller: Yeah. So the cannabis industry suffered from, you know, primarily being like an in store only experience pre COVID and then post COVID deemed, you know, being deemed essential business. Moving dramatically into kind of buy online pickup in store or delivery. First, there was a shift to omnichannel faster than any other retail industry in history, right?
[00:06:36] It was, it was like almost instant and regulators need to get on board and the operators and the ancillary tech providers, and that really presented an opportu. To be kind of a default online payment method where there never was one before. Cause even the cash CTM model, you need the terminals and you need to be in the store, things like that.
[00:06:56] Um, cash, we know that, you know, the problem there. Um, [00:07:00] so when all of that shift started happening, we had the online sort of module built out, you know, similar to like a, a PayPal like experience and started talking to all the providers in the. Building integrations. So then when the operators were looking for solutions, we could be a flip of the switch.
[00:07:18] Um, once the, the compliance is approved and I, and I think that’s a transformation that you’re only seeing grow in cannabis is that move to, you know, Be able to pay and buy where the customer is and wants to be. And not purely just kind of an in-store payment
[00:07:33]Bryan Fields: compliance. Can’t be a small fee though, especially with all the state to state challenges.
[00:07:36] So that is one where compliance is just one path forward that you follow or does everything have to be tailored to each state?
[00:07:43]Dan Muller: There’s definitely nuances in each state. And I, and I think that’s in everything that you do in cannabis, right? Whether it’s seed to sale tracking point of sale eCommerce payments.
[00:07:52] Um, but we always start with the financial regulators because ultimately they’re the, you know, the, the folks looking really closely at our [00:08:00] model and the idea of money transmission is, is very sensitive. And one that you have to clear before you do anything else in payments. And then when we’re presenting to financial regulators, we also, we show them how we do it for cannabis.
[00:08:14] Um, and then I think that extends to cannabis regulators and those rules can vary dramatically by state. Um, so for example, Washington transaction has to happen under, you know, the, a licensed entity. That’s under camera. Um, and so how do you do a prepayment when that’s the case? Well, so we, we have this thing called preauthorization that really understands whether a payment can be made, but no money is moved until it’s fulfilled in the dispensary.
[00:08:39] And those just one example of a nuance that you have to make sure you clear, um, on a state by state level. So with all these
[00:08:46]Bryan Fields: nuances in
[00:08:47]Kellan Finney: each state, um, working with, uh, credit unions and bakes that are only operating in each indivi individual state, how do you guys provide your technology to them? So that it’s a seamless integration for.[00:09:00]
[00:09:00] Each institution, that’s probably got a different size team and different requirements and a different business model.
[00:09:07]Dan Muller: Yeah. So that’s a great question because we actually have to get approval from the receiving banks, um, in every state that we operate in. Right. So it, it, we have a processing bank, we have our own bank, but then the what’s known as the R D F I, which is the receiving institution of, of the deposit.
[00:09:23] Needs to prove or effectively prove to us that they do have a cannabis compliant program. Um, and that’s really done by region or by state that those, that those folks are operating in. And we’ve pretty much, you know, we need that letter once per, per bank. And we have that for many, many hundreds of banks, but it’s a piece of the process, um, of the compliance process.
[00:09:45]Bryan Fields: When you talk about financial institutions, are you talking about like the JP Morgans? Are you talking about the O other like smaller.
[00:09:50]Dan Muller: Yeah, it’s gonna be smaller banks almost in most cases, uh, like state regulated credit unions. There’s some regional, uh, banks that are, are entering the space that are [00:10:00] multi-billion dollar regional banks on both coasts.
[00:10:03] Uh, which is cool to see, frankly, because like before, you know, there might have been a small credit union here or there. Um, now there’s hundreds of credit unions doing it. And then there’s some really big banks, um, you know, entering the space, getting comfortable with it, providing FinTech services where you’ve never seen before.
[00:10:20] Um, so that’s, that’s a nice transformation. In some cases, we’re doing the educating to the banks that want to get into it. Um, which is another cool thing to see is, you know, small FinTech being able to tell the large fi you know, you want to enter a new industry. Here’s how to. Are there a
[00:10:35]Bryan Fields: lot of back and forth conversations where people poking holes with some of the transactions saying, Hey, this kind of looks, let’s say a little more suspicious.
[00:10:43] Like how, how do ones point out certain transactions and say, Hey, this one is flat.
[00:10:49]Dan Muller: Yeah. So we’ve built an entire monitoring, um, and kind of risk, uh, suite of tools into our platform. Right. So [00:11:00] we can see if there’s potential fraud. We can see if. Potential payment might decline. We’ve even added a layer of machine learning, which can get predictive around transactions and say, you know, based on these many attributes, we’re feeding the data into this decisioning algorithm.
[00:11:18] That’s gonna say. You know, this looks risky based on what we’re seeing. So just keep an eye on it. And then we have a dedicated risk team that manually observes what’s happening on our platform. And that risk team, you know, has, uh, certified anti-money laundering certifications. Um, they’re certified by the NACHA, uh, organization, which is what manages ACH, which is how we move money through a bank to bank transfer.
[00:11:42] Um, so it’s a combination of manual tools, um, that the team will use as well as software, uh, that oversees everything on our platform.
[00:11:52]Bryan Fields: I think one of the things that fascinates me most about this topic is the fact that your team has to kind of grow as the industry evolves. And simultaneously to that [00:12:00] new partners are probably popping up like all the time.
[00:12:02] And I think open architecture, which is one of the core principles about your company is probably it’s integral in the growth of your company. Can you kind of shed more
[00:12:09]Dan Muller: on. Yeah. So that’s, that’s a key piece of, uh, the cannabis industry lately, you know, having lots of providers that are domain experts in what they do, giving the operator choice to work with who they want, and then making sure the integrations between those companies are topnotch.
[00:12:27] Um, and so when you look at a multi-state operator that’s growing into, you know, let’s say 15 to 20 states and each one, you know, there’s rules in each state that are D. You may not be able to use the same provider in each state, just due to the fact that they’re built according to certain, you know, states set up.
[00:12:45] Um, and in that case you want providers that can be agile and work with many others, um, in good partnership and good integrations. So that’s something that I think the cannabis, you know, industry’s learning, uh, maybe a bit in, in the hard [00:13:00] way, but it is where things are evolving too, which is kind of what we believe.
[00:13:03] And we’re excited. How do
[00:13:05]Bryan Fields: you guys balance
[00:13:06]Kellan Finney: security with that kind of open arch?
[00:13:09]Dan Muller: So everybody’s got their sort of domain and a bit of that domain’s like black box to the other partner. Right? Okay. So you might have like an API and that API has, you know, account credential, secrets and keys, and can only access a certain amount of data.
[00:13:23] And then the operator gets to choose what data flows between the two kind of platforms. And then obviously there’s agreements between those two that are protecting both entities. It’s a great question though. Cause I think when you think. Integrations many at once. You’re like, oh shoot, there’s so much data flowing everywhere.
[00:13:39] Like who has the ultimate eyes on those things? And you know, there’s a lot of protections in place to make sure a, the data doesn’t slip out of the chain. And then, you know, you only see what you need to see based on, on the nature of the integration. So I
[00:13:54]Bryan Fields: got a question for you. One of the first times I purchased, I mean, of course, one of the first times I purchased cannabis in a [00:14:00] legal dispensary, I paid with a credit.
[00:14:03] They provided me with the products I bought and they handed me back $8 and 13 cents. And I was confused if we’re gonna be honest. Right. I looked at Kean and I said, something seems off, they handed me products and gave me money back. What am I missing? And he’s like, welcome to cannabis.
[00:14:19]Dan Muller: Yeah, yeah. What has happened in that transaction?
[00:14:23] Yeah. So, uh, that is, uh, widely, widely known as, uh, you know, Cashless ATM, reverse, ATM. Uh, where, you know, behind the scenes what’s happening is it’s mimicking an ATM withdrawal. Um, and that’s what you’ll see on your bank statement. And, you know, that’s what everyone behind the scenes sees, but what you see, I, as a consumer is a, is a card swipe.
[00:14:47] And, and you don’t really feel a huge difference other than you have to pay the ATM fee, which, you know, that’s kind of always a, a hiccup, but, um, is there, and then you have the Roundup with the cash back because [00:15:00] ultimately it has to be a round number that again, represents an ATM withdrawal. It’s a creative workaround.
[00:15:05] Um, you know, and, and it’s out there widely. The challenge there is, you know, what might happen if that goes away and who gets penalized. And, um, who’s at the front of the line, if there’s a crackdown on that. Um, and what we’ve heard from operators historically is, you know, when those, when those folks get shut down, you know, the, the operators and dispensaries are left holding the bag or dealing with, you know, a tangle in their operat.
[00:15:33] And that really doesn’t happen when you’re transparent about it. And you go through the right approvals, cuz you’re built for long term scale. You’re gonna scale with them. Uh, you’re integrated into their solutions. Um, and everybody knows what’s what’s going on without there being a cap on how much you can spend as a consumer, right?
[00:15:49] Because you can only take so much money out of the ATM. Um, and so there’s more revenue. For the dispensary when, when you can spend freely out of your account, according to state legal [00:16:00] limits. Um, so that’s the other frustrating part for consumers is the fee, the cash back, and they can’t spend what they.
[00:16:06]Kellan Finney: So arrow pay serves both consumers and, uh, businesses as well. Was that a simultaneous kind of decision that you’re gonna enter both pieces of the supply chain? Or did you guys kind of choose one and then, uh, then pivot into the other one?
[00:16:22]Dan Muller: Yeah. Consumers are bread and butter, but I think, you know, when you build something that can move money easier, you know, faster and more secure, naturally folks are gonna ask, how can I use this?
[00:16:33] And then I think a lot. The B2B use cases were born out of, you know, consumers using it or dispensaries offering it, um, you know, behind, behind them to the rest of the supply chain or other marketplaces saying, Hey, you know, could we integrate this into, into our model? And so therefore, you know, one thing leads to another and B2B is an ex exciting use case for us because, you know, ultimately you’re just [00:17:00] moving money from one.
[00:17:01] Bank account to another business bank account, which isn’t all that different than a consumer account to a business account. Uh, you know, the main difference for us is the level of risk on the nature of the transaction on consumer side’s a little higher. And so that’s why we’ve poured a ton of resources in that.
[00:17:16] And then obviously commercially there’s a big difference on B2B. Um, but it’s exciting to see how the use cases grow with a, with a simple payment method
[00:17:25]Bryan Fields: is one of those use case cases, potentially eCommerce like a Stripe competitor.
[00:17:31]Dan Muller: So, yeah, so we definitely do eCommerce. Um, you know, it’s, it’s a really strong, uh, you know, use case for us when it comes to integrated prepayments, um, Stripe, primarily doing car processing.
[00:17:44] We’re pretty much gonna stay bank transfer. Right? So Stripe has a new ACH product called Stripe ACH, and they’re also. You know, created their own semi-integrated bank connection tool called financial connections. We’re gonna be directly [00:18:00] comparable to that, except we’re gonna own the entire customer journey from bank transfer all the way to bank connection ourselves rather than partner with other providers to do those things.
[00:18:11] But to your point, yes, we could do e-commerce payments in any industry like Stripe, uh, for ACH bank transfer. I
[00:18:20]Bryan Fields: think that’s the, one of the things that surprises people most in the cannabis or outside cannabis industry is that when they look to kind of get in, they assume all these tools are just available for them.
[00:18:28] And then once they get started, they recognize I can’t use Stripe. I can’t use a normal bank account, get separate insurance, I think delicious kind of piles up. And I think, I think it shocks people. Is that the experience that you found also.
[00:18:39]Dan Muller: Yeah. And so one of the big things we’re trying to do, especially, uh, for new license holders is to prepackage, you know, all the entire suite, whether it’s banking, payments, POS, eCommerce, and make sure you have a turnkey suite.
[00:18:54] For folks that just got, you know, license approval. Uh, so there isn’t, you [00:19:00] know, all these question marks around now, what do I do and, and who do I go to, to for, for services or, or tech, um, or tech options. And we’re also partnering with states right directly with the, say, regulators to say, you know, If you effectively approve these certain solutions for the cannabis industry, because they’re doing things the right way, then it’s really easy for the license holders that you want to succeed.
[00:19:25] Because ultimately that means good tax revenue for you as the state, you know, that’s, that would work in your benefit to, to make those recommendations So those conversations are ongoing all the time, and we’re doing a few, um, networking events in the near future, like in coordination with the state and other providers, um, and banks as well that wanna provide banking services to new license holders.
[00:19:48]Bryan Fields: So you guys’ team is privy
[00:19:49]Kellan Finney: to a ton of consumer, uh, purchasing data and could probably do some really cool things with that. How do you guys balance like the state regulations and, and all of [00:20:00] that? Um, highly regular in markets and being able to U utilize that data and potentially monetize
[00:20:07] it.
[00:20:08]Dan Muller: Yeah. So, so we don’t is the, is the short answer we, we don’t monetize, uh, consumer data and, you know, we’ve we follow, you know, the CCPA rules, um, pretty strictly it’s California based rules.
[00:20:21] And what we’ve realized is that, you know, our, our monetizations gonna come from providing a really good service to the. And should always be free to the consumer, right? So when you swipe a card or in a standard coffee shop, things like that, you’re not really getting charged. The experience is pretty smooth.
[00:20:38] Like the consumer should, it should be a breeze. The client then pays a small amount on that nature of that transaction for moving money safely and securely. And we guarantee money movement to the operator, which is like dramatically different than most of the payment providers in, in the entire industry, right.
[00:20:56] Where we’re taking the risk on the nature of the transaction. So that’s a service we’re [00:21:00] providing to the client. That’s how we. Um, consumer data, you could monetize it in certain ways, but you know, with the type of risks associated to, to privacy or breaching any of those, we’re just really staying away from any of that.
[00:21:14] And people are really sensitive about. Financial service data, especially connecting to their bank, right? You look at Venmo or mint or cloud money, any of these things, you connect your bank account, and there’s a natural sort of distrust, you know, like, oh shoot, what’s gonna happen to my credentials here.
[00:21:32] And so we’re working directly with those banks, large banks, and, uh, what’s known as the FDX financial data exchange to make sure there’s clarity. On how the consent flows work for consumers that are authorizing their bank account to these services. So again, really high level complicated things, but ultimately like data protection is number one.
[00:21:54] We won’t monetize it. And the client is really the service we’re providing to and, and who pays our [00:22:00] bills. Yeah. That makes
[00:22:01]Bryan Fields: sense. Go ahead. Brian. Safe banking. That has to be a scenario where your team is played out and over time is likely evolved as information slowly gets announced on anticipation. So how does your team prepare for hopefully soon safe banking?
[00:22:16]Dan Muller: Yeah. So safe banking is an interesting one, right? Because in our view, uh, safe banking somewhat already exists. Uh, you just have to know where to look and, and there’s some really, really good bankers out there, uh, that wave the flag on, say banking for cannabis. So, although it’s necessary because the bigger banks should provide these types of services and safe banking is, is probably what will do it.
[00:22:42] Um, if it passes, the big banks are gonna take their time to develop the compliance protocols to make it happen. And they’re probably gonna charge hefty fees for it. So hopefully by that time, the folks that are providing services now can reduce their fees and then not continuously burden. The cannabis industry, [00:23:00] right?
[00:23:00] We want to be a financial service provider that provides unique and beneficial services without. Charging astronomical fees to cannabis dispensaries. Like that’s the way it should happen. Uh, but my fear is that even with approval, that’s not gonna happen at the large banking level. Um, so we have to sort of pump up the folks that are doing it right for normalized fees today.
[00:23:26] And then hopefully that evolves to more banks over time. Um, we don’t at approving full credit card processing just yet. It’ll take probably full federal legalization. And then again, similarly, the card networks are gonna wanna understand the level of risk behind this industry. And that’s gonna take time and data analysis and then pricing may lift because of it where we’ll be in the market pricing, won’t go up because of that.
[00:23:52] And we guarantee the payment to the operator so exciting times because it’s unknown, but in the unknown you can. Innovation. And [00:24:00] that’s what we’re doing that hopefully extends to all industries.
[00:24:04]Kellan Finney: So if safe banking doesn’t pass over the next, say two or three years, what would you think would be the next best thing to help the industry out from a regulatory standpoint, just more states being legalized.
[00:24:15]Dan Muller: So I, I almost see there being, I don’t know if it’s a formal or informal state, like state based regulatory group. Right? So it’s a coordination of the states that are doing it the best or there’s a nonprofit. That brings everyone to the table and then says, okay, you know, we know safe Harbor does it? Well, uh, we know there’s this, there’s these new FFIS that are doing it really well.
[00:24:40] And a group of fintechs and technology solutions that are doing it well, let’s all come to the table and make sure that every state has at least five providers, right. That would already go miles beyond anything. The government could put together. And then as a result, it like trickles down to the big FIS and then they do something right.[00:25:00]
[00:25:00] If we can at least say, Hey regulator in X state, there’s Y options for. You know, every dispensary and the dis you know, they might get, you know, whether it’s a tax break or a subsidy, or, you know, some form of credit for being able to deposit those funds in a bank account in that state where there’s a direct tie to tax revenue, boom.
[00:25:24] You’ve kind of solved it, right? Like that’s what everyone wants. Um, Win for the bank, win for the dispensary, win for the state. So again, it just takes coordination, lots of discussion, but I think it might happen there, um, sooner than later. And that’s what I think, you know, should happen.
[00:25:41]Bryan Fields: It it’s kind of wild too, because like, what do the regulators think is actually happening?
[00:25:45] Right? They’re aware that money is being transferred, that these businesses that are doing large numbers and large volumes are exchanging. Large amounts of cash. So, so what do they think is actually happening? And they just kind of closing their eyes and, and saying, not
[00:25:59]Dan Muller: looking [00:26:00] at this. I think they’re opening finally.
[00:26:04] that’s what I would say. It’s like, it’s taken a lot of time, but you know, now people, you know, whether it’s. Solutions like ours getting more attention or banks coordinating with the regulators in their state and doing it safely the right way. Um, you’re starting to see state treasurers, you know, do two things, you know, pump up the legitimate players and now crack down on the legitimate ones, right?
[00:26:27] Because you can’t have a healthy, legitimate market. If you have an illegitimate one and then the tax revenue’s not flowing through. And then the prices lift and the legitimate one, cuz the legitimate one’s driving them. Right. That’s a really complicated economic dynamic. So the treasurers are trying to solve those two things at once.
[00:26:46] And depending on who you talk to, you know, within those, within those regulatory bodies, one might be more sensitive or prioritized than the other, but that’s what needs to change over time. But they’re taking notice for sure, because [00:27:00] we’re even getting, uh, we’re engaging with them directly about that.
[00:27:04] Finally.
[00:27:06]Bryan Fields: What is one aspect of the payment processing space that would surprise or shock most of the people operating in the cannabis industry?
[00:27:17]Dan Muller: Let’s see. Um,
[00:27:24] I don’t know. That’s an interesting one because I think, I think for the last, for the last couple of years, um, you’ve seen, you know, the cashless ATM model. Kind of grow then the vs amendment came out and it kind of like rocked the industry and then ACH came up. But now, you know, folks are questioning the ACH adoption.
[00:27:44] And so like, there’s this ebb and flow consistently happening. I think what would shock the industry would be, you know, if for some reason, something like crypto took off out of the blue, that would be like completely. You know, everybody theorizes, that makes [00:28:00] sense. And, and there could be a model there, but do you wanna like overlap to kind of very regulated or newly regulated nascent markets into each other?
[00:28:09] Um, but that could take off, right. And that would rock the industry. Um, a player like us, you know, having regulatory issues I think would as well, because ACH has become sort of the predominantly compliant model. So that would definitely kind of raise red flag. And then I think, you know, an incumbent player, uh, like, uh, you know, one of the large financial services industry, folks coming into the space providing services would, would be monumental.
[00:28:38] Um, and so people are waiting to see if that will happen. What would be the biggest obstacle
[00:28:44]Kellan Finney: for crypto being used to purchase cannabis? I mean, you can use it to buy a Tesla now, right? Like.
[00:28:51]Dan Muller: Yeah. I mean,
[00:28:52]Bryan Fields: I don’t think
[00:28:53]Kellan Finney: anything. That’s not an
[00:28:54]Bryan Fields: ignorant question, right?
[00:28:56]Dan Muller: no, no, no, no, not, not at all. I, I think it’s a question that, [00:29:00] that everyone, you know, in the industry asks all the time, you know, and it’s like, there is a good fit, right.
[00:29:06] But it’s, it’s about, you know, being a service provider that can actually. Build that make it a reality, sell it to an operator while still following the strict regulatory and compliance rules. Um, and so there’s a lot of work there for maybe not the biggest payoff right away. And I think historically cannabis payments has always been like rush something in for a big payoff.
[00:29:31] And then if you survive, you know, great. Um, we’re taking the opposite look like we’re all about long term survival and scale versus a quick. And then the question is, do you do a lot of work for such an unknown potential ROI in, in the crypto world, but, but potentially, uh, I’m rooting for it one day. I mean, who, who knows maybe we’ll, we’ll dive in.
[00:29:54]Bryan Fields: I, I wonder too how that would be received. Right. I think cannabis is fighting so hard to remove like the [00:30:00] stigma and like the, the feeling around it, where I think if you went to a dispensary and said, Can’t pay with a credit card. You can buy with cash, or you can send me some Bitcoin. I think, you know, I’m just thinking of like my parents being like, what, like what type of thing is this?
[00:30:14] And I think that’s the big challenge where I think at this current stage, we need to kind of separate the two and sure you can take a creative approach and, and, you know, dang like your business with the two of them could be layered forward. But I’m curious to know what you think is like, is that something you think would hurt or help the industry?
[00:30:29] If that started becoming, let’s say a mainstream thing of we’ve combined cannabis and crypto for a
[00:30:33]Dan Muller: payment. Yeah. I mean, to your point, like, you know, I think personally, it’s, it’s an AML, you know, kind of nightmare in a way, because it’s so abstracted, but that’s sort of the benefit of it decentralization, but you know, this industry needs full transparency to be legitimized and to see, be seen as, as an enterprise level.[00:31:00]
[00:31:00] Vertical, just like any other. And there’s so much of that going on, um, that that could potentially, you know, lift a stigma, but without, you know, consistent service provider doing that, it could be tough customer
[00:31:15]Bryan Fields: support and regulations has to be such a critical component O of your business. So H how does your team prepare for all the unknowns and how do you handle those things
[00:31:24]Dan Muller: in.
[00:31:26] Yeah, so it’s, it’s one of the things that we think is a differentiator for us. So customer support at the, at the end client level, making sure there’s comfort around bank connections and payments in store and online. So that’s something that we learned early days when we were serving restaurant retail, like locally in Chicago, that you have to earn trust.
[00:31:47] You have to get a great reputation and word of mouth is gonna help you grow and create the network effect that you want. When you started
[00:31:55]Bryan Fields: your journey in the cannabis space, what did you get? Right. And most importantly, what [00:32:00] did you get?
[00:32:02]Dan Muller: We got right. Uh, building an Alliance of people that have done it before and kind of helped BA the way for us.
[00:32:09] Um, so we, you know, we talked to folks at, you know, like iHeart Jane at Blackbird at Ola, we realized that there’s a group of people that really want other entrepreneurs and smart people to be successful. And you have to follow those people and, and partner with. The obstacle is the op complete opposite of that.
[00:32:30] um, it’s the, it’s the folks that aren’t helpful that, you know, want to see your demise that are pretty antagonistic and may say they’re, you know, very pro the industry on one side, but then really wanna destabilize it on the other side for their own business interests. And I think the latter’s really dangerous because.
[00:32:52] It really takes away op optionality and competition from an industry that actually needs a lot more of it to be [00:33:00] legitimized. Um, and so if anyone’s going into it, I always warn them of that and we learn the hard way, right. We go into it wide eyed and we’re so excited to talk to everybody. And then. Half are like, yeah, we love you guys.
[00:33:14] Let’s go, let’s do stuff. And half are like, you know, pay us a ton of money to even talk to us. And I’m like, whoa, this is quite different. Um, so, so that’s what I would warn and, uh, encourage 20 years
[00:33:27]Bryan Fields: from now, we will look back and say that was Barb Barrack. I can’t believe we did that. What is that?
[00:33:36]Dan Muller: Um, I would say, you know, not think that technology could help in a way that, um, you know, we’ve seen it help historically.
[00:33:47] Right. So putting so much pressure on, um, Providers that are, are looking to, to help like us. Right. So we’re trying to help to cash outta the system, [00:34:00] make it flow compliantly. And I think, you know, sometimes we’re presented with obstacles like, you know, well, I don’t pay fees on cash or, you know, or, you know, how do you consider this compliant?
[00:34:10] And like, well, we built, you know, working with banks, working with regulators, et cetera. And, you know, cash is really dangerous and, and people are getting hurt because of it. Um, So just embracing technology is a potential solution and not kind of getting stuck in some of the older school thought around, um, cash and, and new solutions like ours.
[00:34:35]Bryan Fields: What’s the future roadmap
[00:34:36]Dan Muller: look like. So we have a lot of really exciting partnerships and integrations rolling out. Uh, we’re probably gonna announce over the next few months, uh, but the future of this industry is an open, collaborative, competitive, uh, environment where, you know, there’s a freedom to choose.
[00:34:54] There’s a freedom of, of price. There’s a freedom of working with your domain expert. Um, the [00:35:00] future for us. Is continual innovation in payments specifically. And as a result, that’ll happen in cannabis. Um, the idea of a guaranteed payment, you know, is, is really rare. Um, the idea of using machine learning, uh, to estimate fraud is really rare.
[00:35:17] The idea to, to focus on money laundering and anti-money laundering efforts as a FinTech really early in your, in your life stage is also really rare. Um, so we’re excited to, to bring those concepts to, to life. Why was the
[00:35:33]Bryan Fields: guaranteed payment important part of, uh, integrating into your team?
[00:35:38]Dan Muller: So a guaranteed payment, you know, being able to make sure funds flow to the operator, no matter what, you know, if you look at major card networks, they don’t do that.
[00:35:46] And they charge back to clients, to their clients. And this has been a problem. In widespread enterprise retail for many, many years, um, going into like legal battles between, you know, Amazon [00:36:00] Walmart and a bunch of the major, you know, retailers, um, against the card networks. And so the idea is if you can guarantee the payment take on the risk you’re charging for service, that’s really valid, not just the idea of being able to process a card but actually making sure money lands safely.
[00:36:17] And that’s a service that we. believe Is worth paying for, from a payment processing fee and not the idea that it’s basically a toll on the highway. Right. You know, you want to be able to say, okay, well, if you’re gonna pay the toll, I guarantee you safe passage from point a to point B. And that’s what you’re paying for versus just being able to drive on the road.
[00:36:37] Um, and that’s an analogy that I, I think is, is relevant in. Yeah, it’s really
[00:36:42]Bryan Fields: clear since you’ve been in the cannabinoid industry, what has been the biggest misconception?
[00:36:49]Dan Muller: Uh, the biggest misconception by far is that it’s, it’s not a professional, highly advanced industry. Like it absolutely is. And you know, if the seeds [00:37:00] seat to sale world alone is so vastly complex to get that.
[00:37:06] Uh, requires some intensely, you know, focused, um, engineering, you know, chops as well as coordinate coordinating with government, you know, bureaus and being able to extend that all the way to operators that operate in every state. You know, I think in the idea that, you know, it’s just a recreational industry and there’s not sophistication behind it.
[00:37:30] Is the biggest misconception and, uh, you know, there’s some really exciting technology being built everywhere. You look,
[00:37:37]Bryan Fields: before we do predictions, we ask all of our guests, if you could sum up your experience in a main takeaway or lesson, learn to pass onto the next generation, what would it be
[00:37:48]Dan Muller: to learn from your peers and those that came before?
[00:37:51] Um, I know that’s kind of cliche and you can apply it to, I don’t know, athletics, academia. Um, [00:38:00] entrepreneurship and, and anything you do, but, you know, I would say my biggest learning personally is when I first started Arab bay, I was, I was so kind of cavalier about how I thought I could run a business and, you know, I had, you know, I’ve come from a family of entrepreneurs and my, both my parents were immigrants and I kind of had the, the right work ethic.
[00:38:21] But you know, the idea of look, I’m just gonna do it my way. And you know, I’m gonna. There’s a sounding board if I need it, but you know, I’m, I’m really gonna be my own, um, entrepreneur. And I think that’s fine. You need some of that, cuz the confidence is important. Uh, but being able to intake from those a few steps ahead, 20 steps ahead and even one step behind, right?
[00:38:44] Because the people right behind you might have a similar or different outlook and you just want a level set against where you’re. Um, versus, you know, folks either not on the journey at all, which I didn’t find that much value from because there is a certain medal, it takes [00:39:00] to do something like this. Um, so you gotta really kind of try to get the folks that, that have been on the path, uh, before, while testing left and right.
[00:39:09] But you know, in front of you and behind you, that that’s my biggest advice always to, to new entrepreneurs. All right. Prediction time.
[00:39:19]Bryan Fields: Dan can the cannabis industry lead innovation for new standards in payment processing? If so, where.
[00:39:28]Dan Muller: Strong yes. To that. absolutely. Um, so again, when, when you are so absent of, um, Stan what’s considered standard or traditional solutions, you’re forced into a mode where you either create.
[00:39:46] Um, I’ll say the, what I, what maybe the negative is impractical workarounds, right? That aren’t transparent or the opposite, which is highly innovative new solutions that might take. The [00:40:00] element you’re working on forward, which for us is, is payments and money movement. And so we get pigeonholed all the time, right?
[00:40:08] Your, your cannabis payments, your cannabis payments. It’s like, and we remind them no, no we’re payments. And we love cannabis because of the nature of how complex it is and what we’re doing in it. And how we’re helping the industry and all the partners we’re working with, but there’s a much bigger story about, you know, money movement, you know, safely with very low decline rates, guaranteed to the operator at a low cost.
[00:40:33] And although it sounds simple that in payments, you know, visa and mastercard at AMEX discover the greater group, PayPal, Stripe, everything, um, you know, you see elements of that that are broken in all of those types. of You know, companies or methods, and those are multi-billion dollar companies that are doing extremely well.
[00:40:55] And I, I respect immensely. Um, but imagine if you could do [00:41:00] something even better than what are you bringing to the greater industry. And so that’s, that’s what cannabis is allowing us to do. And I’m, you know, really grateful for the opportunity to serve the industry and, and work with the, the smart people.
[00:41:15] Dylan,
[00:41:16]Kellan Finney: you know, when I read this question at first, I was thinking crypto, and then listening to, to Dan talk, uh, for the last 45 minutes or so the credit card payment aspect. I didn’t realize that they didn’t guarantee the funds to retailers. And so I was like, wow, like mind blown. And, and then also I was thinking about it because it is so highly regulated.
[00:41:36] It’s almost like a blank canvas. For payment transfers, but they’re like, you can’t use pencils, you can only use paint. So I’m in complete agreeance, uh, with
[00:41:46]Bryan Fields: Dan, what do you think, Brian? Yeah, I, I agree as well. And Kelly, next time I will not send you the question at a time, cause you’re not supposed to think about it
[00:41:54]Dan Muller: after I was thinking,
[00:41:55]Bryan Fields: I, I think the, the, the thing that Dan said that’s perfect is that when you’re challenged to [00:42:00] overcome, let’s say an outside the box approach, you’re not handed, uh, a prepackaged set and say, you can just use this.
[00:42:06] You’re having to over. That are standard efforts. You no longer can use those. And I think that sort of creativity and disruption challenges the incumbents. And I think when that happens, disruption happens. And what I think you’ll find is that these bigger, these bigger players, when they do migrate over the expectation from for most consumers, is that we want these things right.
[00:42:27] When Amazon did the, the two day shipping and said, this is what’s gonna happen. If you don’t get a product now in two days, people expect it not to come anymore. And I know that’s outrageous to say out loud, but like they’ve. The path forward. And I think that cannabis in the current capacity with your team leading the helm, probably gonna disrupt a lot of these people.
[00:42:45] And if visa or MasterCard are listening, they’re probably not gonna be happy when they realize what they’ll have to change.
[00:42:51]Dan Muller: Yeah. And, and you know, that I love the Amazon analogy and, and like bringing clarity count to, to the credit card transaction. Like, [00:43:00] you know, this is the, that right there is the reason why I started arrow pay.
[00:43:04] Like, I was like, shoot, what is going on here? Like this can’t be the best way to do this. And it’s like, certainly not. It’s certainly not. And then, you know, being able to, to solve it in cannabis where I think there is a stigma where, you know, there is this desire to do more and do better at a pace that’s unlike anything else.
[00:43:26] Um, that’s, that’s the opportunity right there and, and business can come with that. And, and we’re always obviously putting that at the top of the mind, but it it’s also so fun. To do these things. And then, you know, the reward is, you know, seeing our people grow, seeing the operators, businesses grow because of it.
[00:43:45] And then, you know, safe solution for pulling cash outta the system, um, and getting it to where it needs to be safely. Yeah. I mean,
[00:43:54]Kellan Finney: super, super competitive market. Uh, hard problem means there’s not gonna be a lot of people on the hill, [00:44:00] so you guys are gonna hopefully have a good amount of time to, to build it, you know?
[00:44:04]Dan Muller: Yeah, yeah, no,
[00:44:06]Bryan Fields: go ahead. I mean, looking at the hill is scary enough, but once you take a couple steps up, I mean, a lot of people give up and they recognize this isn’t for me.
[00:44:14]Dan Muller: Yeah, it’s hard. Um, and there’s some really big players doing what we do and, and we wish them luck. Um, obviously the they’re definitely validating a bit of, of what we’ve done historically, which I definitely appreciate.
[00:44:26] Cause, uh, I, there was a long, long time where I was telling people this is worth something and they’re like, yeah, sure. It is. Uh, so, so shout out to some big competitors. Bringing us that, that nice stamp. That’s awesome.
[00:44:40]Bryan Fields: That’s the best way to do it. So Dan, for our listeners, they wanna get in touch and they wanna learn how they can integrate a pay into their business.
[00:44:46] Where can they find you?
[00:44:48]Dan Muller: Yeah, so a pay.com obviously is a great resource. Daniel arrow pay.com is my direct email, highly encourage anyone, uh, to, to reach out. And then LinkedIn is, uh, is a great tool for me [00:45:00] personally. I enjoy connecting with folks that, you know, wanna learn more about our company payments, FinTech, cannabis, any of the above.
[00:45:07] Um, so always open a chat. Awesome. We’ll link
[00:45:10]Bryan Fields: it up on the show notes. Thanks for taking the
[00:45:11] time.
[00:45:12]Dan Muller: Yeah. Thanks guys. Awesome chat.
