Today we have Eric Kaufman, Chief Revenue Officer at Dama Financial, to talk about the emergence of legitimate businesses from what was previously considered a black market industry. We are of course talking about banking and cannabis. Welcome Eric, thank you for being here!
Eric: Thank you so much for having me.
Jessica: Eric, as Chief Revenue Officer, what is your role at Dama Financial?
Eric: I’m in charge of spearheading sales and driving revenue, with a focus of managing the national sales team and identifying and securing enterprise level strategic partnerships. Many of these partnerships, like our relationship with Nugl, involve the integration of Paytender, our merchant processing and digital consumer wallet. In short, Paytender enables consumers to pay for cannabis through their phones.
Jessica: So, let me just start off by asking, what it means to emerge legitimate businesses out of the black market?
Eric: First, I don’t like to refer to it as the Black Market, as I believe that is a loaded reference filled with negative connotations. Instead, I call it the Illicit Market. I used to call it the Black Market, until I was speaking at an industry event in Los Angeles and a woman in the audience who provided consulting services to social equity applicants corrected me and rightly put me in check. Secondly, if you’re coming from the Illicit Market it means you’ve been working in cannabis for years. You’ve figured out a way to get it done. However, once legalized you became saddled with over compliance, tedious application processes, tremendous overhead and are now required to operate a cash intensive business in a highly complex and overregulated industry. And, in many cases may not have had traditional business training and work experience. Meaning, the deck is stacked against you once again.
Jessica: Who is Dama Financial, and what is Paytender?
Eric: Dama Financial provides the cannabis industry access to compliant and transparent FDIC-Insured banking and financial services. Our Premier Business Bank Account is a standard checking account. With the Premier Account a customer also gets access to armored car cash pickup and processing, access to an interest earning account, the ability to pay bills via ACH or wire, a B2B invoicing platform, Paytender as mentioned above, and a dedicated relationship manager, among other products and services. Dama Financial also views itself as a steward and good partner to the cannabis industry. We understand that historically so many CRBs have been misled, mistreated, and have had their trust violated. As such, we’ve worked hard to build our reputation and have created a suite of sustainable, transparent and compliant financial products to empower the cannabis industry to be able to operate just as if it were a non-cannabis related industry.
Paytender is a merchant processing and digital consumer wallet solution enabling dispensaries to accept electronic payments. It is important that this feature gets introduced as soon as possible because it will allow more people to purchase products, especially if a variety of electronic payments are considered. Of course, when electronic payments of any kind are incorporated into a business, the owners must make sure that they adhere to the NACHA Compliance rules and regulations, as if they don’t, they will be putting the personal information of all of their customers at risk. You can learn more here at TokenEx (https://www.tokenex.com/solutions/nacha-compliance). If this is done, it opens the way for solutions like Paytender to make an impact in the industry. When a merchant accepts Paytender it then affords the end consumer the ability to pay one of a few ways: they may link their bank account and in turn pay for their purchase with no additional fee, and all completely contactless. Alternatively, customers can use a debit card. Lastly, Paytender recently launched a new feature called Pay Ahead allowing customers to pay through a text message before delivery or pickup, making buying cannabis easier, faster and more secure than ever before. And, with the current Covid environment, it importantly enables the customer to pay with their mobile device and removes the need for hand-to-hand exchanges at checkout. All of this is federally compliant, and dispensaries never have to worry about losing their funds.
Jessica: Who was the brainchild of Dama Financial, and why did they feel the need to create Paytender?
Eric: Dama was co-founded by two payments industry veterans whose careers have focused on converting cash-based economies to digital and banked economies. When they looked at cannabis, they obviously saw a large cash-based economy, which presented an opportunity for them to iterate on something they’d done before. Namely, help legitimate cash-intensive businesses, which were often being looked at as the illicit market given the stigma of cannabis, and play a role in safely and compliantly banking them. They saw opportunity to provide the financial infrastructure necessary to assist the industry in growing, becoming more normalized and delivering legitimacy across all verticals.
To that end, Dama Financial is building out the entire critical financial ecosystem for the cannabis industry. In establishing itself as the only end-to-end financial services solution for all cannabis businesses, Dama continues to evolve its suite of products to meet the needs of its customers. Paytender was a natural product extension emanating from our traditional style banking, knowing that dispensaries needed a compliant way to accept payment other than cash. And, given our extensive experience in payments across other industries, this was an organic progression. Working with so many cannabis businesses, we’ve heard numerous horror stories of merchants having their accounts getting shut down, their money being held by merchant processors, and outright theft. Many dispensaries had fundamental operational issues with their merchant processors, such as the inability to reconcile and settle funds at the end of the day. So, we saw a problem which Paytender could solve. Additionally, dispensaries faced the urgent and timely issue of COVID and changing regulations and consumer habits, which Paytender addressed. By way of example, Paytender was integral in keeping one of our San Diego retail customers afloat as they had to deal with the new contactless requirements. From an operational perspective, the customer only had to deal with one service provider in Dama. And, from a product perspective, Paytender enabled them to make a quick and seamless pivot to electronic payments.
Jessica: Why do Cannabis businesses need Paytender?
Eric: Visa and Mastercard absolutely will not support cannabis transactions on their rails. Therefore, dispensaries are forced to work in cash, as processing credit card transactions violate the bylaws of the major card companies. Cash is dangerous, dirty, and unscalable. We knew early on that we needed to find a solution that was compliant, that allowed businesses to accept electronic payments, and that would enable customers to skip the inconvenience of the ATM and be able to purchase cannabis just like they purchase anything else. Our initial goal was helping businesses achieve scalability, move from cash into electronic payments, increase efficiencies, and help customers purchase digitally. However, when the pandemic hit, we realized safety became the most important value proposition of Paytender. Being able to pay without making contact was key, but even more so that Paytender worked wherever products were sold. Many dispensaries had to adjust operationally and pivot into delivery and offer curbside pickup. With Paytender’s flexibility and capability of accepting payment wherever retailers sell, even ahead of time, and allowing customers to pay through an app with no passing of cash, cannabis businesses saw it as extremely important for public health and safety.
Jessica: So, from a user’s perspective, how does Paytender work?
Eric: Customers have a few options to pay â€“ they can pay in-person (in-store, at delivery, or curbside) and with a linked bank account and all the merchant needs to do is scan the customer’s unique QR code within the Paytender app. Or a customer may use a debit card. They can also take advantage of PayAhead, and pay in advance of delivery through receiving a text message. Then, at time of delivery or pick up the customer does not need to do anything other than take their product. It’s literally easier than even using a card in your wallet. Think of it as Venmo meets the Starbucks app, but for cannabis.
Jessica: How secure is my money, and is Dama backed or supported by a federal bank?
Funds are FDIC-insured and completely safe with Paytender/Dama Financial. Same for businesses, and they experience next day settlement of funds with no rolling reserves. Paytender does not hold any of the funds.
Jessica: What happens to Dama Financial when banks start dealing in cannabis?
Eric: Let’s be clear, every cannabis business should have access to transparent and compliant banking. It’s why we as Dama spend so much time in Washington DC working on behalf of the SAFE Act and the States ACT and encouraging the right legislation gets pushed through. But let’s also be clear, even once something does get passed, it’s still another 12-18 months before the laws get rolled out. And, once that happens let’s not forget that cannabis is still a high risk category. By way of comparison, today only 4 major banks bank alcohol on any real scale. That’s because roughly 30% of the alcohol industry still operates in cash, making the alcohol industry a high risk category. At no point in our lifetime will cannabis be considered less high risk and have less compliance around it than alcohol.
Now let’s take a step back. First, it’s not illegal to bank cannabis today. It’s a risk based decision by the respective financial institution. Secondly, once some legislation passes clearing the way for other banks to explore the industry, it’s not as if all of the major banks are simply going to open their vaults the next day. You will have a large contingency of banks that will take a look at the industry, of that a fraction will take a deeper look, of that a fraction will seriously consider it, and of that a fraction will decide to jump in. Of those banks deciding to get involved, many will want Dama to run the program on their behalf. Not only do we already have all of the systems and controls in place, but we are so far ahead of the curve in terms of the intellectual capital we’ve cultivated from our years in the industry that it’s invaluable to a financial institution.
Jessica: Aside from standard banking, will Dama be open to lending?
Eric: Yes, in fact Dama recently launched a lending pilot program through our lending network. Today it’s focused on real estate and equipment financing, and we’re working on a pilot for supply chain financing based on inventory and receivables. To me, financing at decent and fair rates is the final piece of the puzzle to enable the industry to be able to grow and scale commensurate with non cannabis industries.
Jessica: What makes DAMA/ Paytender different from other cannabis financial institutions?
Eric: Dama Financial provides access to FDIC insured banking. Today we run this program on behalf of numerous bank partners, which means we have redundancy inherently built into our program. It also means we have virtually unlimited capacity in terms of deposit size and volume. And, while Dama is charged with running the compliance program on behalf of its bank partners, as well as it’s responsible for bringing in customers and deposits, Dama is also the fintech layer on top of its bank partners. As most would assume, banks are typically not entrepreneurial by nature. But, Dama brings that ethos to the program developing products and services specifically tailored to the uniqueness of the cannabis industry.
Jessica: Lastly, who qualifies for Paytender?
Eric: Paytender works anywhere a retailer sells, including storefront, delivery, online, curbside, and self-service kiosks. So, any cannabis merchant can integrate Paytender into its operations. On the consumer side, any consumer who buys cannabis may download the wallet from Paytender.com.
Jessica: Where can we find Paytender, and how does one apply?
Eric: Visit Paytender.com and you can download the wallet. To sign up it’s simply your first name, last name, email and phone number. It takes you less time to download the wallet than it does for you to withdraw money from the ATM. Once you’ve got the wallet, you may then either directly link your bank account like you would on Paypal or Venmo, or not. If you choose not to link your account you simply pay by debit card.
Jessica: Thank you Eric so much for your insight on this subject, and thank you so much for being here with us today.
Eric: Thank you for having me!