 This is Think Tech Hawaii, Community Matters Here. And Meli Kalikimaka. And instead of today talking about this cannabis, this dear old beautiful plant that we have talked about for the last year and a half, the plant that's a 10,000 year that we know of anyway. Today we are going to talk about one of those things that an industry like cannabis needs to exist or to exist better. We have a new best friend, and you know I only talk to best friends, and this is Michael Sang. Hi. Pleasure. Nice to meet you. He is the CEO of Super Processor and for all of you that are working in the cannabis industry, this is the man you need to know. They are the first company to provide credit card processing for cannabis services in Hawaii. That is so necessary in a cash business. So tell us about Michael. I'm 5'10". Well, I'm short, so. I've been in payment processing for about 18 years, so the payment processing space has seen a lot of changes from 18 years ago when we were still phasing out of just imprinting credit cards and mailing them in for payment, which is pretty crazy when you think about it today because everything is so in the digital virtual cloud world. And I've been really passionate about solving problems in the payment processing world for years. And 10 years ago, the cannabis industry crossed paths with myself, and I had a regional sales person come to me and say, hey, these customers of ours out in Oakland, they want to meet you because they have a problem and they think that you can solve it because you're kind of out of the box kind of guy. And I said, sure, what do they do? I said, they're in the cannabis industry. I said, what's cannabis? So that was the pivotal moment that I said that marked the milestone of the point of no return because they showed me their dispensary out in Oakland. They said they have this problem that they see just 10 years ago. So now today, fast forward today, it's been a 10-year-old problem. So they said we have a problem that we see that's coming upon us that it's going to become all cash. And back 10 years ago, there was still gray area credit card processing. Dispensary is still getting credit cards, but without being shut down officially. And so then we spent time figuring it out. And it was quite a journey. We can talk about many different twists and turns. So you do all those things that make it happen that we just slide the card in and something happens, right? There's a lot that happens behind the scenes. Yes, so you're the CEO of the company that does all of that that we don't see. So when you swipe your credit card, it touches our servers. It touches the card association that work with Abuse and Masked Card Marketing Express. And then it goes to your bank that issues their credit card. And this is full circle that happens. And many companies are involved in that one split second transaction, right? And all these employees, so many people behind the scenes because of that one transaction. One transaction, yes. Now, so this is cannabis is a, because of the feds, this is a cash business. So can you explain to our audience what it is that the feds are objecting to that you can't use a credit card or a bank account or insurance or whatever? Well, first of all, cannabis is on a schedule one. Which is ridiculous, but okay. Which is ridiculous, absolutely. So, but it's there. You can't do anything about it at this point until it gets overturned. And the states have its own individual rules about whether what the position on cannabis is. There's always been a state versus federal. And the same goes with banking. The issue, the challenge that the banks and the credit units have had is that who ensures the banks? FDIC, which is federal. A federal. And then you have the NCUA, which is federal. And then so the touches upon this very sticky area of federal versus state of what's actually allowed. Then it's really to sum it up, it's really the financial institution that has to take the risk really to say, I'm going to get behind this. I know I might get a slap in the wrist or maybe more. But because the state level is allowing this. Me as a financial institution in that state. Should be able to should be okay. So it's not a very black and white message from the federal government on what will happen to the local financial. It is black and white. This will punish you if you do this. But there's not really an official action. Okay, because of the state's rights, it pains me to say that. But anyway, the state's right. So the state made it legal to have medical cannabis. So everything that's involved with that is within the guidelines of the state laws. So that the dispensaries can only service people that have the medical card. Right. And so they can only grow certain things that these people need. And all of these things that happen to make that industry move is within the state. So they don't cross state lines. They don't do. That's right. No cross-border. No. Because you'll be it'll be considered money laundering. And all this craziness. Yeah. No, no, that's really crazy. So then you come along and you say, well, we can assist you. We can build out a, what do you call it, a platform for them that is generic or indigenous to the state of Hawaii and the cannabis. So the solution we have is not just for Hawaii. It's actually for multiple states across the country. And we had to find a few components. We actually found the first component a few years back in Hawaii, which is a sponsor bank, a bank that's willing to clear the transactions for the cannabis industry. What we didn't know is that we had to own the switches, the data center, because when we went out to the processors that are in the market, they said, go find a bin sponsor and we'll let you then process using our technology. And we found out that that wasn't the case. We came back and said, look, here's our bin sponsor. Let us now help the industry. And they said, absolutely not. You can't use it. And we were like, why? They said because we were just not allowing you to do it. And that became the case for every processor we came across during that time. And we had lost that bin sponsor through years ago. And fast forward to today, we found another bin sponsor. And now we own that other piece with the technology. What do you mean, bin sponsor? So in order for a credit card transaction to be funded, it has to have a, almost like a clearing house where a bank has to, a bank or a financial institution has to clear those credit card transactions to fund it. So when you swipe your credit card, there is a bridge, so to speak, that is the processor and the financial institution that sponsors that transaction. Every day, they have to reconcile all the transactions and pay everyone. And it's a pretty crazy system when you think about it because of the amount of transactions that happen all day long. Because I use a debit card and I can pay for something here, walk over to the bank and it's gone. Yep, that's right. That's fast. You know, walk across the street and the money's gone. And it's only going to get faster because there's real time payments coming into the very near future that's already here where instant transfers are going to happen and payments even to merchants are going to happen faster and they'll have better cash flow because funds will be transferred right away instead of waiting. But going back to the BIN sponsor, the BIN sponsor is very important because it was very hard to come by. It took us many, many years to find someone that would entertain it and then sign it and then get behind it and then put the proper compliance behind it because now whoever is regulating that financial institution has to be able to say, okay, these guys can do it because we're comfortable with them handling it based on federal regulations. Right, and pass, perform. Exactly. Yeah, pass, perform. We came across that in 2008 when the market crashed. We actually formed a bank just to try to solve this problem and then the market crashed. And then we tried to buy a bank and we saw these really horrible balance sheets on banks and we couldn't find a good bank at the time to buy it. What could you create a home, not a bank, but savings and loan or something, credit union? We've explored and tried various models including an industrial bank. Many people don't know what an industrial bank is, but it has a sole purpose for a certain business. An industrial bank was the extent of what we thought could be close to being coming or checking and sponsoring the credit card transactions. But we realized at that point is that it was better for us to go and find the bank and convince them and help them get to that point with, because they just needed help. Most banks or credit unions that were willing to do this didn't have the infrastructure or the resources to handle the compliance, because it was so heavy, the amount of work that they had to do, they didn't have the staff to really comply. So they were afraid of that. Oh yeah, of course. Now, could you create a hometown bank or give it a different name, wouldn't call it a bank? Like credit unions are devoted to certain people only. So there was an effort in that, and it failed because they were focusing on a credit union that was all cannabis, and back in 2008 when we were forming what's called the Novel Bank, New Bank, we talked to all the regulators that we were immediately regulating the area that we were at, and we said, hey, which model would you support if we did an all-cannabis bank, we did a business bank that was friendly to cannabis or various versions of that, and they said it has to be diversified. It can't just be a cannabis bank, because it would... Oh, that makes sense. Yeah, just for risk reasons, for getting your bank charter, you're getting a federal charter. Right. So it's hard to say, I'm going to... Well, now that they have passed this hemp thing, farm bill, with hemp, you can come back and try again. Yes, yes, absolutely. It's quite an endeavor to start a new financial institution. It is, I'm sure. And we went down that route, and fortunately we're at a stage where we have the ingredients that we need to launch the solution to help the industry. But I think starting a financial institution again is probably out of our wheelhouse. No, the thought of that is just... I was just thinking what could be done because the amount of cash that is turned over every day in this industry, and I'm sure that people aren't feeling safe. There's definitely a lot of liabilities. My business partner in this endeavor, he co-founded the harborside, which is one of the largest dispensaries in the world. And he told me his very first payment that he had to pay to his local tax office, he had to carry $300,000 in cash in a backpack in California. Oh, California. So he'd go to his local tax office and say, I'm here to... He called ahead of time. And he says, I'm here to pay my taxes, and they hand counted that tax payment. Three people had to hand count it for them to receive the money. Now they have bill counters, but when they first started taking it, they didn't realize what was gonna happen. Well, yeah, I did read that the state of California had to hire more people. Oh, yes. Would we have... Do we have the state of Hawaii? Will they have to hire more people to handle this? Because dispensaries have been open a year now. I don't think the volume is there yet, because California is very different compared to Hawaii. And the volume has to pick up a lot more to make that more considerable of an issue. And there are some forms of electronic payments today, so it's not completely all cash. And that helps a little bit. And once we roll out our solution, a majority of it should be electronic payments because we can deposit into a dispensary or a cannabis related business as long as they have a checking account. So that would be any of the people that are selling products that are not the dispensary, but they're selling products. Yeah, it could be ancillary. They're open to you also? Yeah, we can not just do dispensaries, but we can handle ancillary products, any type of vertically integrated area which they're in, as long as they are compliant and they have their papers and everything else in order. We have a pretty rigorous underwriting process with the PIN sponsor that we have just because they already take checking accounts. They already provide service to the industry, the one that we have in California. So they're not new to the space, but the credit card processing is new as this next step they're taking to really help the industry. Okay, we need to take a break and we'll be back in 60 seconds. And then let's talk about where we go from here. Okay, great. Thank you. This is Think Tech Hawaii, raising public awareness. It's choose to treat it with the help of a physical therapist. Physical therapists treat pain through movement and exercise. No warning labels required and you get to actively participate in your care. Choose to improve your health without the risks of opioids. Choose physical therapy. I'm Jay Fidel of Think Tech. Come around every Tuesday at 2 p.m. with John, David, Anne and me. We're talking about history, history lens, right, John? Exactly, seeing current events through the lens of the past. Absolutely. See you next time. Okay, Jay, thanks. Aloha. I'm Marcia and we are back. This is Cannabis Chronicles, a 10,000-year odyssey. So we are right here today in this new world, digital world, in that 10,000-year process. And we are talking to my new best friend. And Michael has a company, he's the CEO of Super Processor. And they are on the cutting edge of the digital world and all of the cash that goes through the cannabis industry. Did I get that right? Yes, so it's one thing I wanted to add. I forgot to add this, but the division at Super Processor that handles the cannabis is called ViridiPay. And ViridiPay, Viridi, means green in Latin. That's how we created this division to handle solely cannabis. Wonderful. So yes, I didn't have that. ViridiPay? ViridiPay, V-I-R-I-V-I-P-A-Y. Viridi. ViridiPay. GreenPay. Okay. GreenPay. GreenPay. Wonderful. So does this take a lot of rooms and computers and all the kinds of... Sure. It needs a lot of servers and data centers. We use data centers that process transactions and it needs a lot of technology. Software is a huge component to our platform. It requires a high-velocity payment processing platform that can process many, many, many transactions at a time. Okay. Do we have the students in Hawaii that are learning to go to work for you that are training in those skills? Are we training people for that? We do. There are several initiatives that I'm aware of. There's something called Dev League that the founders of Dev League, it's a school that trains... It's a boot camp that trains anyone who's interested in becoming a programmer in 12 weeks. Pretty cool school and we would source from there. There's also the universities that we went to HPU a couple of weeks ago. We attended one of their competitions and fairs and blown away by the tech talent that existed there. I was like, wow, these students are just at a different age than when I was in school. Oh, yes. Unbelievable. And we came across someone who actually had a product that we were blown away by the way that he was thinking. And we have a professional services division and we have a CTO that is our programming genius and he was blown away by a student and that said a lot to me. I was like, wow, it's pretty impressive that he's blown away by the student there. So we have students now in high school and that are using all kind of technology. So do they move into this or do they learn these tech skills in high school or do they have to go to separate schools? They have to go to separate... Well, yes and no because there are a lot of really, really great programmers who don't go to school at all who just are self-taught. Really? I know two handfuls of really great programmers that never went to school for but just they learn it out of their own fascination and they just trial and error. Okay, what I want, and I say this all the time, I want this cannabis and the hemp, especially hemp industry as an industry, not just a dispensary but a whole industry so that our children can learn all of these engineers, architects, all of this so they can stay home. My sons all went off to college and they're still gone. So yes, I'm very selfish about wanting, that's why I'm asking you about these kids growing into this industry. Well, first of all, we're building out the operations, our call centers, our support centers on the west side of Hawaii in 2019 to keep the jobs in Hawaii. And that's something different because the opportunities are somewhat limited for someone who's a programmer or a development and we're going to have more opportunities for developers to keep them at home. We have a hard time like everyone else sourcing tech staff here and retaining them here because they do go off to other cities unfortunately. Yes. But I think we're one of the companies that are going to try to help with that and keep the jobs here because we have real initiatives to hire them because it's not just about coming up with solutions and jobs for them to service Hawaii but outside of Hawaii too because we have customers all over the country, it's not just in Hawaii. And by that opportunity it allows them to have more opportunities in their jobs and be able to hire more people in the tech space. Like I said, that's been my whole thing is that we need to take this and make it into something that our kids can grow into. Sure. Agreed. So where are you located? We're in Kapolei, on the west side, in Las Vegas. So we're in two areas, Las Vegas and Kapolei are two home bases. Vegas is booming, yeah. Yep, it's the 9th island. Yes, everybody's from Hawaii. The food, everything, yeah. Our data center is out in Las Vegas and we co-locate here on the west side. And then the call center is where you call in for customer service will be based on the west side here in Hawaii as well. Oh, I am really thrilled. The schools understand that this is where they can go. We actually are working with some high schools to help them with some of their entrepreneurial programs and like Campbell High School is a good example. Oh, they're close to you. They're very close, they're in Kapolei, they're close to Kapolei. And I've been sharing some time to help them with their students with some of their programs. So we're trying to think to the future because I think it starts at the root in the schools when the kids are young, to help them on a path to a career that they can stay at home or do something because they don't have to travel out. A lot of people think that they have to leave Hawaii for the opportunities. There are a lot of opportunities here that they can keep them here. Well, that's like I said, that's especially with the hemp industry which can grow into who knows what. Yeah, especially in Hawaii. Yeah. So you have even more transactions once they get going. Exactly. Or were they just descheduled? They were descheduled. My understanding is descheduled. Well, it's allowed to, you're allowed to do everything you wanted to do as a business person in hemp now. There's a restriction on how much you can build. I'm not that familiar with what the restriction is of how much. But it's not, we can process credit cards for it now if we wanted to because it's not, the CBD is also, there's also places that the CBD at certain levels. We would also process for CBD transactions. Now with CBD, can you open a account at the bank? Yes and no. So the problem with, even though if you have a legal CBD business with the federal legal limits and you open an online store and sell CBD, a lot of banks because they lack of education, they just cluster CBD with all cannabis. You know, they flag your account for CBD. They say, hey, this is a cannabis business. We have to shut it down. So the CBD industry has had a lot of the same pains that the cannabis industry has had with banking, unfortunately. And that's true for a lot of the banking solutions for larger banks. For all the banks a little more, I think easier because you can have a conversation with the risk person directly. Or the risk person. Because there's a risk person that they have these complaints from. I haven't thought about the banks having a risk person. So they have to make an assessment of what's a lot and not because then they have to answer to their regulators, their bank regulator, otherwise they'll lose their charter. Oh my, yeah. So what do you, how do you educate the bank? Or like you said, at least with the small banks, you can get to meet people. We used to do that ourselves. It was more about compliance. So the banks didn't have a compliance program for cannabis or cannabis related businesses because they just never thought about it. They weren't allowed to do it. And because of anything new, there isn't a precedent of how to handle it. And then there's a question of money. Yes. Who's going to pay for it? Who's going to pay for the new policies that the banks need to handle those accounts? And what we did was early on we helped share information. We were freely sharing information all the time with anyone who needed it behind the scenes because we were just interested in making sure that financial institutions and dispensaries would keep their bank accounts and we would say, hey, look at this court case. Here's some anti-money laundering policies that you might be able to use and use that as a foundation. And we would help that. But today what's great about today is there are several companies that specialize in these programs for financial institutions to help them so that they don't have to create and invest heavily in that division. Well, I would think the way things are moving, especially with the states that are legalizing for recreation, that at some point the bank has to come on board. Yes. Well, there are over 400 financial institutions around the country who do service cannabis related businesses. You just can't Google it and find out who does it. You have to be in a know and be introduced and then there's an underwriting process. I've seen on television that, not television, on the internet people selling shares in holding companies and different things like that. What is a holding company? Holding company is a company that holds the interest, the rights of... It's the way I've seen it. The holding company can be used for many reasons, but the way that I've seen it for the cannabis industry is for the purpose of protection because if you have a holding company you might own the rights of a dispensary and then it might hold the rights for the vertically integrated part of it where they cultivate the product. And they don't want to keep the rights at the touching flower level because if something happened then they can preserve the assets of the company. What about shielding for protection on if something happens? So could the holding company have a legitimate banking account? Sure. So what a lot of companies have done in order to have banking accounts they've created a holding company where that company doesn't touch the flower at all. Right. And it just becomes a management company to manage the finance of that company and the bank's okay with that as long as it's not touching the flower. Oh. Yeah. It's a little complicated. It's not the best way to do it because that has to be done the way it's done today because it's following the rules. Yeah. Well locally now how much is an annual income from all of the dispensaries? Do you know? I don't know that number. You have a sense of how much? It's not a public number so I don't have a real number on that so I can't give that to you. Yeah. I can probably query. No, no, no. I just wondered you know at what level does it make sense? I don't need to know their exact numbers. To make sense for what? That the bank has to say look at all of this money here, tax money, everything. We ought to have a part of that. At what point does the bank say? It's unfortunately the cannabis industry as a whole is too small compared to many other industries. So if you look at the total billions of dollars that the cannabis industry generates on revenue, there are companies that just generate billions alone. So when you compare the risk, the risk rewards is very hard for banks to make that decision based on money because they rather just deal with it and say that if something happens we stand to lose many, many billions as opposed to this. What could happen? They can lose their charter. No, I meant what could happen? You mean with the dispensary or something? Oh, you're talking about the banks, right? I was talking about the banks. Yeah. You know why they would not want to handle the business. All the local banks that, as far as I'm aware, all the local banks have taken a position to not bank cannabis because it's something called reputational risk. That's very real for them because they have that, every bank has a list of things that are risk, something risk. Reputational risk is one of those top categories and this falls along the lines of reputational risk and then the regulators have to, they play a major part in that also and right now it's not an environment where they're looking to do that yet. Hopefully they will. Okay, now, what I would like for you to do is to look right over here in this camera and tell our audience that may want to have an account with you because we have a lot of people that sell CBD and other things. So tell them how they can reach you. Sure. Right over here. If you're looking for a merchant processing account, we're launching them in 2019. You can email me at Michael at superprocessor.com. That's M-I-C-H-A-E-L at superprocessor.com. Can you spell that? Super-S-U-P-E-R-P-R-O-C-E-S-S-O-R.com. Good. Thank you. Well, thank you and you will come back. Yes, if you have me back, I will come back. Thank you so much. And Meli Kalikimaka. Aloha. We'll see you next time. Aloha.