By Brad Weissberg/Oct. 22, 2017
Cannabis in any form is still classified a Schedule 1 controlled substance by the federal government, regardless of being legal in a handful of states, making banking and using credit cards and other financial institutions a challenge at best, impossible at worst.
PayQwick was created to solve this problem; it’s a compliance-based payment hub that enables legal-cannabis states to transact throughout the entire supply chain.
“The reliance of the industry on cash has been a huge problem for a long time,” said Kenneth Berke, co-founder and president, PayQwick. “It’s incredibly inconvenient for people to run all-cash businesses paying their employees or their vendors. That brings all kinds of issues. Whether it’s tracing issues for regulators to collect their taxes; safety issues in terms of people getting robbed or being targets for violent crime.”
“Without a bank account, cannabis business can not get a payroll processor,” he added. “And when you do your withholding and your excise taxes you can’t pay that in cash.”
PayQwick’s co-founders Kenneth Berke, president and Keith Marks, CEO.
Berke described clients who formerly had to drive “six or seven hours across the state with $225,000 in cash to deliver to taxing authorities.”
PayQwick’s electronic payment hub was designed to eliminate all the issues faced by the banking-prohibition of cannabis businesses. It’s regulated, just like a bank, and they file all required forms such as suspicious activity reports, currency transaction reports and the “know your customer due diligence under the bank secrecy act” to make sure business are operating under state law.
Berke and Keith Marks formed the company seven years ago. The company took off in 2015 when the state of Washington voted to legalize cannabis for adult-use. “We realized we could take the seed-to-sale system, reverse it, and comply with the Cole memo and FinCEN guidance,” he explained.
PayQwick is currently operational in Washington and Colorado and licensed in Oregon and Arizona, with plans to roll into Alaska, California and Nevada. “Ultimately we will be every state that that has legal, medical, or recreational cannabis,” he said.
“We are a compliance company with a sophisticated e-wallet,” he explained. “With the seed-to-sale system there is barcode that is attached to every sale; we use that barcode and tie in to the manifest and the amount of money that’s being paid from that sale is recorded and is from a legal sale.”
Berke likens PayQwick to PayPal on the business-to-business portal. “If you have a PayQwick account you link it to your bank account and use it for transactions,” he said. “The money is transferred from your Payqwick account to the seller account.”
Through their payroll processor, Kruse, Payqwick clients can pay their employees. “The employee gets a check or a direct deposit just like any other employer does,” he shared.
PayQwick charges a percentage-based fee on each transaction, whoever is receiving the money pays the fee.
Chart showing how PayQwick’s electronic payment hub eliminates cash from cannabis transactions.
Clients can deposit money through a check or PayQwick will come pick up cash, using armored cars. “The money is credited to the clients PayQwick account,” said Berke, who pointed out that the service is being used by landlords and other cannabis-related ancillary business. “You can pay your rent, taxes, anything you want to pay.”
Currently, PayQwick has 200 accounts in Washington and a handful in Colorado. They have almost 20 employees. Their headquarters is in Calabasas, Calif.
Vince Nguyen, Green Haven, Darrington, Wash, is a producer and processor who has been using PayQwick services for the last year-and-a-half. “It’s a great service,” said Nguyen. “It’s good to not have to deal with cash.” Green Hands generates up to $300,000 a month is sales. “PayQwick is easy to use. We mostly deposit checks into the system; it goes right on my account. Before I had to get paid in cash. It was a hassle and not safe. PayQwick has been a big help to us and our growth.”
Signing up with PayQwick is simple and can be done on their website. After that’s completed, PayQwick inspects submitted documents and a then does a physical location assessment. “We’re a second set of eyeballs buttressing the bank’s policies for ‘know your customers,’” said Berke. The process normally takes between 30-60 days.
Berke spoke about the difficulties with having clients who want to get legacy cash into the system. “We do not deal with legacy cash, “ he said. “We make sure that every dollar that gets deposited comes from the state-legal sale of marijuana. That’s the key and that’s why the banks are comfortable with us.”
Payqwick also has a consumer component. “The best analogy is the Starbucks app,” said Berke. “People can load up their Payqwick account and then use the platform to pay at a dispensary or anywhere else that accepts PayQwick.”
There are currently approximately 1300 consumer accounts on PayQwick. “Right now our focus is getting business onboard, “ said Berke. “We’re revving up the consumer side up shortly,” he said. “We’re adding in the ability for consumers to use their credit cards, which we think will really make the consumer side friendlier.”
All the credit cards transactions are be processed with valid codes, he said. “We are a hundred percent above board; we do not want to miscode transactions,” he said. “We are businessmen, we’re not interested in cutting corner or doing anything underhanded.”