For this week’s Power Player interview we caught up with Tyler Beuerlein, Chief Revenue Officer at regulatory-tech and fin-tech company Hypur. In a wide ranging conversation we discussed Hypur’s regulatory offerings, its expanding payments business and why the cannabis industry needs better leadership.
This interview has been edited for length and clarity.
WeedWeek: Can you tell us a little bit about Hypur and what you do?
Tyler Beuerlein: We are a regtech company at our core. Our technology was built to give banks and credit unions the ability to bank highly-regulated industries in an efficient and compliant manner. We launched the regtech side of Hypur about six and a half years ago. A very large percentage of the banks and credit unions in the U.S. that bank the cannabis industry now use us to do so.
WW: What do you offer them?
TB: We’re the technology backbone of many of the institutions that are banking this space. Everything they do with their interactions with clients in high risk verticals, Hypur powers that interaction. We help them through automating their underwriting processes. We help them with all of their regulatory compliance reporting. Our technology also helps them monitor accounts in a proactive, not reactive, manner in their ongoing relationships with merchants. We help them give a level of transparency to regulatory bodies that makes them feel comfortable with banking this space.
WW: To be clear, your clients are typically smaller state banks and credit unions?
TB: Our clients are a range, from nationally-chartered banks to very small banks and credit unions that serve a limited market within their legal state. Every regulatory body now has institutions that they examine that bank this space, and that includes nationally-chartered banks.
On the payments side of the cannabis industry, our founders understood early on that this was not a payment problem. It was a banking problem. Transactions originate and settle through banks, and if you can’t solve the regulatory compliance side of this, the payment mechanism would never survive.
We’ve seen that play out in the cannabis space for years and so the fintech arm of Hypur was built specifically for the cannabis space and designed in a way that enables transparent, compliant, digital transactions in a industry that really hasn’t had access to that.
“Sustainable payments into perpetuity”
WW: Tell us about your presence in that space. Who are your clients?
TB: We’ve got clients throughout the country on the fintech side. Some of our big clients are Caliva, Harvest, Columbia Care among others. The payment side of Hypur just went nationwide about 14 months ago so we’re still ramping up in the marketplace.
WW: Those all, including Caliva, are dispensary clients. What do you enable dispensaries to do that they can’t go to somebody else for?
TB: The branded card networks are opposed to any cannabis-related transactions occurring on those networks until federal legality. Anybody offering credit cards or reverse to cash or ATMs, or all of these workarounds either get shut down, they put the operators in legal jeopardy, or potentially even worse.
Hypur enables a permissible and sustainable digital commerce that does not use the branded card rails. If I launch HypurPay, my consumers are going to see a consistent, reliable, sustainable method of payments into perpetuity. And I don’t have to worry about looking over my shoulder to see who’s going to come get me or what’s going to happen to my payment product and how that is going to affect my client base and my business.
WW: Walk me through the consumer experience at one of these stores using your service.
TB: I’ll use Caliva as an example for both in-store and delivery. Right now, a consumer can go on to the Apple or Google Play store. You can download the Hypur app. During that process, you enter some very quick information, you click on the logo of the bank you’re banking with, very much like the sign up for a Venmo. You enter your log-in credentials.
WW: Your mainstream bank?
TB: Correct. That can be any bank on our platform and there are thousands. They can edit their log-in credentials, and then they choose a four digit code to be entered at the point of interaction. Once they’ve done that once, as a consumer, let’s say I’m ordering a delivery, I can go on to gocaliva.com, choose my product, choose Hypur as the form of payment.
When the driver shows up to my door, I receive a secure link via text message. I click on that link, I enter my four-digit code on my device so there’s no touching of the driver’s device, and that finalizes the transaction. Our banks move the money from the consumer’s bank account directly into the merchants for that transaction.
The in-store experience is very much the same. I enter my four-digit code, either on a number pad or they can send me a secure text message in store as well to enter my four-digit code. That finalizes the transaction. Ultra simplistic.
A Leadership Vacuum
WW: You recently wrote an article in Forbes that the cannabis industry needs better leaders. Can you summarize your argument?
TB: It’s a byproduct of where we sit in the ecosystem. We’ve been fortunate to see everything in a very unique way and that includes a very keen understanding of operators, leadership, regulatory regimes in each state. We’ve gotten to see this industry from a different dynamic and the leadership that took the industry to the level where it’s at. In many cases, even some of the most “well-respected” from the outside, I can’t say that many of these leaders really truly understood the industry in a way that was going to set the operations up for success.
WW: What kind of people are you talking about specifically?
TB: I’m talking about C suite executives that either-
WW: Who came from the illegal market or came from the mainstream economy?
TB: Both. I think what happened was at the beginning is as the market launched, money was flowing and these companies were going public and they were taking that monopoly money, so to speak, from the public markets. They were going hog-wild without a real clear one understanding of each individual market, which is key. Additionally, I think that they maybe fell in love the limelight a little bit and lost track of really where they should be focusing.
My concern going forward for the industry is as some of these operations fail, venture capital firms and private equity firms are coming in to take over these assets because they see the opportunity. The problem is they default to bringing in either consumer-packaged goods execs or they default to retail experience. The problem with that is this industry is nothing like any other industry in the United States, even highly-regulated industries.
Unless somebody coming in truly understands the dynamic in each individual state market, by the time they truly understand the industry well enough to make a coherent decision on behalf of the company, it’s going to be too late.
WW: What are you see as the consequences of this leadership vacuum so far?
TB: Well, they played out in the public markets. You’ve seen massive losses and continue to. I think the valuations were obviously overblown, especially for some of the Canadian pup cos. At the end of the day, the U.S. market is the one that matters and those are going to be the ones left standing in the end. But again, I think these things have played out very clearly for the industry, especially over the last two years.
WW: What do you see as the solution?
TB: I think that you’re going to see the well-run operators continue to take hold. I think you may see some of them even merge to really create a footprint in the U.S. that’s dominant. For the PE firms coming into this space, they need to find seasoned, experienced executives from the cannabis world that understand it innately to come into leadership roles. If they don’t, they’re going to learn that lesson the hard way.
WW: What can a seasoned cannabis executive do that somebody coming in from the mainstream can’t?
TB: Navigate the landmines in each market, whether that be understanding which market has the biggest upside and opportunity, which markets to stay out of. If you go into a specific market, which targets within that market you want to go after. They need to have a keen understanding of the limited license markets. They need to understand where the legislation is going in each state and what players have influence over that legislation. I mean, there are endless amounts of data points that they need to have a keen understanding of. Otherwise it’s going to be a long painful road because that learning curve is steep.
WW: Is there anything you’d like to add?
TB: I want to convey to operators, yes, we’re in the cannabis space, but we’re in the compliance business now. Operators that are not viewing things through that lens are making shortsighted decisions that put everybody in jeopardy. Payments are a perfect example of that. I would just encourage people to reach out to reliable resources, get as much information as you possibly can before making a decision and just understand that if you make a shortsighted decision, there are consequences and those can be really damaging, especially for the public companies.
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