By Jeff Klingman, theBluntness Feature Writer
Banking problems for cash-heavy businesses didn’t begin with legal cannabis.
Hypur an Arizona-based software company, was founded by bankers in 2014, to ease decades-old problems in money services industries like pawn shops, check cashers and payday lenders. But they’ve since shifted towards the new marijuana markets springing up all over the country, providing new thinking for familiar challenges.
Hypur develops software that aims to solve a wide range of banking problems, letting dispensaries more easily provide the kind of painstaking transparency that local banks and credit unions need, while also allowing consumers to skip the ATM with secure electronic payments.
Tyler Beuerlein, Hypur’s Executive Vice President of Business Development, took a curious route to becoming expert on cannabis banking and regulation. He played a few seasons of minor league baseball for the Mets and founded an energy drink company. That was all before an investment career that’s led Beuerlein to four years on the front lines the emerging U.S. cannabis market.
“We’ve been in a position to help the industry in so many different facets. I’ve set [so] many operators up with transparent banking relationships,” says Beuerlein. “It’s something that’s been very rewarding.”
We asked Beuerlein for his insights on the present and future of transparent banking for marijuana-related businesses, and how Hypur looks to grow a business by helping to grow an industry.
What is the first thing that businesses looking to get into legal cannabis market should be considering?
Tyler Beuerlein: They should try to find a transparent banking option in their state and understand that when they get it, they need to be open to any suggestions that financial institution is going to make.
When a bank or credit union looks to bank [with a business] and they make a suggestion of something they should do to change operationally, they’re doing it because the regulatory body is asking for those things. I also I would tell the industry, you do not want to do anything to hinder your relationship with your bank or credit union, because in many cases there is only one option in a state. If you ruin that relationship, good luck.
The other thing is, any [business] operating in a cash environment prior to their relationship with a bank or credit union needs to keep crystal clear books and keep third party forensic audits on the moneys coming in to their operation. Otherwise, when they get a banking relationship, that institution is not going to be able to accept that cash because they can’t prove where it came from.
Do you foresee a tipping point for legalization, whether it’s a certain number of states or a raw number of the U.S. population, for when bigger, national banking institutions can’t stay out of the cannabis industry?
I believe that even if this goes federally legal tomorrow, there are still going to be a limited number of institutions willing to serve it. They may get into the lending side of it, but as far as one of the big, top-5 institutions in this country openly banking this industry? That may never happen.
Because of the risk? Because of the stigma?
Because of the regulatory compliance burden. That’s the reason why money services businesses [pawn shops, payday lenders, etc.] who operate in cash have had challenges for years, despite their federal legality.
Working in this industry, operating heavily in cash, there are challenges for employers dealing with payroll, benefits, taxes and the like. Is that a problem Hypur software is specifically addressing?
We are. Our [banking] clients are actively pursuing growth, and as they can offer transparent banking options within the [cannabis] industry, those operators have access to all the normal banking features that a normal business would. Those feature sets are enhanced by a product we have called HypurPayments, that allows for operators to initiate business to business payments between two vendors with bank accounts, on top of HypurCommerce, which is the consumer to business application.
What’s been the most difficult thing as you grow your own business, navigating in this space?
Education. Many institutions just think they can’t bank this space. Or, they want to cut corners or operators want to cut corners. I think what everybody needs to realize is, if people do things the wrong way, if they operate in shadows, or don’t operate above board, it affects everybody in a negative way. Just trying to educate, be there and help try to set that standard and a set of best practices is vital in today’s climate.
Is that message getting through?
It’s getting through more and more. I think that the type of operator and investor who is entering the market at this point, especially in limited license markets, is very sophisticated. They understand it, and that’s why they are having so much success.