PP 76 | Digital Currency


More and more businesses are working on running cash-free in this digital age, especially in the cannabis industry, where it has a banking problem. In this episode, Tony Frischknecht sits down with Dan Stofka, the CTO of KIND Financial, to talk about the digital currency that will make your store and customers safe. He talks about the hurdles many faces when it comes to banking and finding partners and shares the benefits of going cashless. Follow Tony and Dan in this conversation as they teach you how to take cash out of the equation and make everyone’s life easier.

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This Digital Currency Will Make Your Store And Customers Safe With Dan Stofka

How To Take Cash Out Of The Equation And Make Everyone’s Life Easier

Thanks so much for joining me. There are a lot of seminar events happening online. Some big ones like MJBizCon, which is one of the bigger ones in the industry. Every year I’ve gone and I’ve gone to this event at least a few times now. They started back in 2010. They’re one of the larger cannabis event shows I put on. I’m going to be checking that out. It never fails. In the industry, we’re looking for payment processing, new ideas and things that can help us run our business cash-free and stay within the regulations. That’s one of the toughest things.

I have been in the ups and downs of having a bank account shut down on me every month for over a year. I’ve been stuck with paying my employee straight-up cash. We did that for almost a year. That was an insane time. Anytime I see some new stuff coming out that’s interesting to me, I try to share what’s new in the field of cash management and banking. My guest is the CTO of KIND Financial. He’s been in the technology, manufacturing and retail world for many years. He is a founder and principal of several ventures. He’s also known for his extensive tech hardware and software knowledge. Dan Stofka, welcome to the show. How are you doing?

Thanks for having me. It’s good to see you again.

You’ve got some new stuff that you’re working on. I’m excited to understand what’s happening with you. The app and form you created is called KindPay, cash-free touchless payments. Dan, let’s go back a little bit before we get into this. What is your background in the cannabis world?

We’ve been working together since nearly the beginning of the inception of the industry in Colorado. Before that, I had an extensive tech background. I helped Office Depot develop their tech repair program that they deployed at all of their stores. I’ve managed Best Buys. I’ve done the retail circuit as well. Essentially when the market came about, I saw a gap with the technology piece predominantly in the security piece. I started a company with some friends doing that. When regulations were about to take effect, we worked with the regulators in Colorado. Because at the time, going back to that, a lot of people wouldn’t service the industry. You had dozens of spots that were opening up that all needed security and no one would help them.

We asked the MED if they would allow us to give these guys a contract. If they had our contracts to know that they’re on our list and we’re going to get to them. We’re going to take care of that security that they would give them a pass. They agreed to that. I started off with 12 or 14 contracts at the time and started working. One a month is what we could do. It was about a year of work. At some point in all of that, Agrisoft was a software company in the space. They were looking for help. They were looking for an industry insider that knew the ins and outs and could get their program off the ground.

We also had this tie in with all the security stuff. The initial thought there was that we were going to tie in all the cameras, all the door access, and you would have one portal for all that. Agrisoft had its day and was purchased by KIND Financial. That was about a few years ago. For the last few years, we’ve been working on regulatory processing. We control the cannabis market in Rhode Island right now. We work extensively on their home grow program. It’s the only one of its kind still where we’re tracking essentially all of the home grows. It’s a big point of diversion in a lot of states that have a home grow rule.

We’ve capitalized on that for the state and giving them a source of revenue to work on regulations and to work to control that market. We also work on their commercial aspects as well. From a government regulatory standpoint, we’re still proving out our model there. That’s the only state that we have. In the middle of that, the reason why KindPay was formed was to help people with banking and to figure out the banking problem. The last few years we’ve been spending a lot of time trying to figure this problem out. We’re now finding the right partners and getting it off the ground.

For those that are not familiar with the problems with banking, I would say the majority of society knows that cannabis has a problem with banking. We know that. There’s not a lot of other discussions on why it’s so challenging. You’ve spent six years working on this. What are the hurdles that you’ve had to overcome to get to this point to launch this thing?

What you come to is a place where you have a partner bank, a bank that’s willing to go down this path with you. They need to be a large enough bank that they’re a chartered bank federally. They have to understand this industry as well. There are not many people banking in this industry. The last time I looked, it was around 550 banks that are banking. If I’m not mistaken, we’re around 7,000 to 8,000 entities in the space. That doesn’t leave a lot of choices especially when you consider regional, cash pickup and all of the extra due diligence that banks have to do on these types of businesses. The largest part of the problem was finding the right partner. We’ve done that with Herring Bank.

Why do banks shy away from this? What’s is the majority of reasons where we’re not seeing very many banks still not adapting to the cannabis industry?

The size of the bank is going to warrant how much risk they can take on. Click To Tweet

First and foremost, it’s still federally illegal. It equates to a lot of paperwork. You have SARs reporting that the banks have to do very consistently with any MRB or a cash-intensive business. They’re going to have to continually flag the feds and let them know what’s going on with how much money is coming in and how much they’re processing. The other major thing is the due diligence. They have to make sure that any business that they bank is following the rule of the law, particularly if it’s an MRB and they’re working on a market that is federally illegal.

They have to do yearly check that’s invasive on any business like this, where they’re checking the security protocols, the camera systems, everything in accounting, what systems you have in place to do a point of sale. It’s an intrinsic look at everything that the business is doing to understand if they’re skirting in any spot. That’s why fewer banks want to do it. You’re also taking on a risk profile. You’re increasing your level of risk. The size of the bank is going to warrant how much risk they can take on. If they’re a smaller bank, they may not have the ability to safely bank that many cash-intensive businesses. You also have a lot of that.

Is Herring Bank a credit union?

Not that I’m aware. I’m pretty sure they’re a federally charted bank institution.

Most of the ones I know here in Colorado that are banking are all credit unions. What I’ve noticed is the big banks are a lot less willing to take any of those risks, but the credit unions seemed to be the ones that are like, “We’ll try to put this together.”

I can say that’s true. The majority of the institutions that are banking are more at that level rather than the Chase level. Herring is fairly large though and the program that we’ve developed with them is not a new invention by any means. It’s a very standard wheel that we’re putting on a new vehicle.

There are hundreds of companies that say they have the answer. What do you see is the answer to make it simple for the customer and the retailer?

I hope that at least we’ve covered those bases. First and foremost, the consumer app will be on the Google Play Store and on the Apple Store for download. You’re not going to have to go to some weird obscure place to get the file or the program essentially. Ease of use in terms of downloading and getting that setup. We have spent a lot of time on the user experience as well. It’s similar to say a Starbucks card. When you go in, you can initially load the account. You download the app on your phone and you register. You’re going to give them your phone number, your name and your email, some basic things. They’re going to verify your phone number by sending a code and then you have a KindPay account. At that junction, you’re able to load that account.

What I think of about is kind of the examples, Venmo. You have your bank account that’s tied to your Venmo account, then you load or you can make payments out of your account through Venmo. Is that very similar to this?

It is. We’re using a QR code to facilitate the transaction. You would go into the shop. You’d have your account loaded and you’d be making a purchase. The merchant would key in the amount of the purchase. You would present your QR code that’s on your screen. You click pay in-store and it shows a code. They scan that code. You confirm the amount and the transactions done. Because it’s a closed-loop system, that’s a transfer from one bank account to another bank account in the same financial institution. That’s what is setting us aside because we can guarantee you those funds immediately. They’re in your account the same day. They’re available to the merchant the next day. The reporting is real-time.

PP 76 | Digital Currency

Digital Currency: A smaller bank may not have the ability to safely bank that many cash-intensive businesses.


You’re not waiting days or weeks for a settlement and for funds to hit your account. They’re immediately available to you. That solves a huge problem for a lot of businesses in this space. We’re taking cash out of the transaction, out of the equation. By doing that, you have less cash transaction fees, less cash processing, less cash pickups. On top of that, the account levels that Herring has set up in terms of managing those accounts are more than competitive with what else is out there. As a standard bank account from apples to apples, they’re doing a lot. They already have around 500 cash-intensive businesses in cannabis and likewise, CBD that they already bank. They’re familiar with this market.

This seems too easy. I’m looking at this. I’ve seen the programs that people have put together over the last several years. Everything from all we accept cash in there, and then we get a printout and then the bank truck comes by, picks up all that cash. We issue you credits. What is going on with the rest of the payment world right now when you’re looking at something like this?

It completely boils down to not having a partner. If you have an ACH transfer system, which is a common model out there. There are even some apps out there that allow that. You’re processing ACH. You have delays in the time it takes to get those funds from A to B. You could have canceled checks in the process of that where you have something that’s flagged while it’s on the air and that can cause issues. It’s going to take longer for that to work. It’s a little clunkier because you’re a third party in that scenario dealing with two different financial institutions in most cases. Whereas we are the financial institution, everything starts and stops in this ecosystem. It’s filling a gap that’s been there for a very long time that no major financial institution has decided to take on. We found the partner to do so.

With this partner, somebody’s got to get paid for transactions. In running as a retail store, I’m used to paying a percentage of each transaction to the merchant company that the credit cards are running through. How does KindPay make money? How does that work for you guys?

The consumer app is free. The consumer process is free. No more reverse ATM fees or anything like that that you’re applying to the consumer. This is bringing something that’s very common in other markets to this market. Your ability to load that with either a debit or credit card on your account is something that no one else has done in the space. In terms of cost, it’s all on the merchant. We’re having a sliding scale that will start at 5%. That’s your standard go at it. As you process more revenue and as you open more stores with us, that could achieve as low as 3.9%.

It’s a bit higher when you look at it from the face value of a regular merchant account.

The typical credit card processing between 2.5% and 3.5%.

At the end of the retail store, if they’re paying their 5%, what kind of savings is that for them as opposed to using a regular bank, some of the banks that are banking right now?

Determining by how much revenue they’re processing with us, the account management fees will go away or drop to the ground. You don’t have any more of your typical bank fees. A lot of banks will charge $1,000 or $2,000 a month to hold the account. You remove that. You’re also removing cash from the equation so you don’t have as many cash pickups. You’re also offering another payment mechanism. The consumer is no longer tied to, how much can I pull out of the ATM or how much cash do I have on hand? It’s what’s my limit on my bank account on my debit card or my credit card transfer. We give them a limit of up to $995 in the system. You’re extending the ability for the clients to spend more. We’ll see cart sizes increase generally because of that added functionality, that added ability. We’re hoping that not only squashes any processing fees that we would charge but also gets them above and beyond.

The only other thing that might hold you a little bit tighter is the regulations and what’s allowed in that state. Your THC levels and different stuff like that, but that’s cool. Having that issue of if you guys are out there reading and you’re like, “I’ve had this stupid ATM machine,” or you are starting a business. I have not used the app yet, but I haven’t seen anything simpler than this at this point. People are familiar with Venmo and many of these trading apps. Zelle is another one. It’s the same thing but just for cannabis.

It’s very similar. It is a closed-loop system. A lot of universities will use a model like this where you have it for your commissary or whatever even in jail as well. You have some type of closed-loop system where your family member is funding that or you’re adding funds to that. You’re using it at the shop at the university. Herring Bank has run a program like that. They’re very used to this entire ecosystem. The only differentiation right now is that we’ve built out these apps and they’ve become more of a digital wallet rather than a handheld card.

When we take cash out of the equation, we have less cash transaction fees, less cash processing, and fewer cash pickups. Click To Tweet

I‘m going to ask you a couple of questions about being a business owner. You took six years to create this. Why did you take so long?

We think it’s the end all be all. It’s the last domino to fall to make these businesses operate legitimately or feel that they’re operating legitimately. It seems like one of the bigger needs to fill. Our company has tried to go after some of those bigger ticket items. We went down the regulatory path because we saw it as a way to control the market and regulate the market. We knew that that regulation was imperative if you’re going to get banking. It all seemed to fall together for us. The long and the short of it is we see a need, fill a need.

The challenging part is talking with a new business owner and saying, “This could take 6, 10 years.” Going back before you even started the payment processing like this, did you feel that it was going to take you six years to get to this point?

We’ve had other partners in the space too that have either not been in the US. We had a partner in Canada at one point and when we were trying to work with them to get this working in the US, and it didn’t pan out. There have been a lot of conversations to get to the one person that’s willing to take those risks and go down the path with you.

Those people and companies are few and far between. I know they take some time. Patience has a lot to do with it.

We got 500 people. You have 500 bank owners and one of them said, “Yes.”

It seems that the good things in the good companies that are built, you hear these stories. We asked 499 and the guy said, “No.” We asked 500 and finally, we had somebody believe in us.

We could all write books with the troubles and the hurdles that we’ve had to get over. It’s not over yet. We’re about to release this to the Apple Store. It almost feels like the beginning again.

Sometimes it’s a tough pill to swallow. You’re like, “I thought we were almost there. Let’s take this and run.” We’re starting over again. The last question here, how do you think this is going to increase the trust in the cannabis industry?

Bringing everyday tools that are in other industries to this industry is first and foremost the way that it’s going to happen. Everyone’s used to the Venmo’s and the PayPal’s of the world. We’re trying to do that for high-end cash-intensive businesses that are in a very similar place. It’s bringing something that everyone’s used to in other places to this market. That’s what we’ll do and help legitimize and bring it to another level.

PP 76 | Digital Currency

Digital Currency: We waste so much time as owners not being able to work on our business because we worry about where the cash is sitting, how to get it to the bank, and how to make our monthly payments on our mortgage or rent.


I’m excited to come to check this out, try it and run it through the store, and see how it works because I think you’re onto something. For those owners out there that aren’t even open yet, I would take a look at this. If you go to GetKindPay.com, you can read a little bit about it. It explains everything. You can sign up. They’ve got a nice video there that you can follow through. It looks simple and easy to follow, but saving time as a business owner. I can’t stress enough how much time we wasted as owners not being able to work on our business because we were worried about where the cash was sitting, how to get it to the bank, and how to make our monthly payments on our mortgage or rent. All these things that have problems with cash, it’s amazing. I’m impressed with it.

You also have a lot of the people that are still fighting to find the bank account especially if they’re starting off. This is a legitimate way for that business to be banked normally within normal fees and a normal process. Pay your bills and pay payroll, use normal services, that’s what it’s all about. Our first beta testers are going to be Harborside and Euflora. We’re going to expand that program through December 2020.

If you guys aren’t familiar with Harborside, they’re pretty much the very first dispensary that was ever created. There’s a ton of stuff. I would Google them and check them out. They are a massive company, especially when it comes to fighting for industry, they have done huge expenses into fighting the government, IRS, the federal government on so many levels. I want to point those guys out. That’s a huge one you have there.

Starting with them and Euflora has seven stores in Colorado and California now. We see them as good multi-regional merchants that we can test this all out on. As a merchant, you get a merchant dashboard. You’re able to manage your employees, manage your users and get transactional data and everything that you need from the system through that dashboard. The tablet that we use in the store to accept the payment, all it does is just scan QR codes and make those transfers happen. The merchant app could not be simpler. The rest of it is handled from the web app. We can get a new merchant on board within about a week to two. Most of that comes down to how quickly the organization can get us all the documents that we need to vet them.

I look forward to talking to you in the next few months and see how it’s going. I have a feeling it’s going to blow up.

We’re doing two things in the next few months. We’re going to incorporate a loyalty program. The basis of that loyalty program will be that you’re able to use your points from one store at another store. Your points will become global. You’ll no longer just have points of A and points of B. The other thing is that we’ll be releasing the merchant app on Apple as well. You’ll be able to use Apple devices there. This works for delivery drivers. This works for drive-throughs. All contact lists, you show your phone and scanning and code. The other thing was the B2B stuff. A lot of people are trying to pay their bills. We’re going to work out a program on the B2B side so that you could use KindPay to pay your vendors.

I encourage you guys out there, if you’re looking at some of these different services, please check out GetKindPay.com. I call this show Plant Problems for a reason because I try and bring solutions to you out there and make it easier for you to just run your business. I get nothing from Dan. I look at some of these things and there’s a lot of crap out there. There are a lot of people that are taking advantage of the new business owner that’s trying to make it. I like to put out there like Dan mentioned in the beginning. I worked with him on several other projects. He’s always done me good.

We’ve never had any long-term situations. When you’re looking at people that are running companies like that, that’s what I look for is people that I can trust and people I can go to fix my problems when I have some. Dan, thanks for being on the show. I wish you the greatest success on this product. I hope to talk to you here in the next few months and see how things are going. We can follow up if that sounds good to you.

That would be great to recap. Thank you again for having me. It’s always fun.

Please reach out to me if you have any questions, whether it be about KindPay or any other episodes. You can catch me on PlantProblem.com.

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About Dan Stofka

PP 76 | Digital CurrencyIn the last 20 years Dan has worked in technology, manufacturing, and retail. He has been the founder or principal in several ventures. He is known for his extensive tech hardware and software knowledge, as well as his incredible people management and training skills.
Dan has worked with electronics his whole life, and has always been passionate about them. As early as age six he was fixing am/fm radio’s, and by age 12 he was wiring his parents house for voice and data connections. He was accepted and attended a computer science program in high school. Shortly after, his retail management performance at Best Buy was considered top 1% out of over 600 stores. Dan then ran his first business in home automation and high end home theater. After a few years he helped develop the tech repair program utilized at 1200+ Office Depot retail stores, and also trained hundreds of employees and managers.
He has worked with Dispensaries and Grows since their influx in 2009, and in 2011 he was I.T. Director for CO Dispensary Services with two grows, infused prod., and four retail stores. He helped develop company processes, and managed all tech initiatives. In 2013 he founded ElecTech (now Safe and Sound) with a focus on cannabis security and technology. They supply camera surveillance, security alarms, and tech services to dozens of businesses in many states.
As the CTO for Kind Financial he is responsible for planning, designing, building, and implementing commercial and government software and hardware solutions. These projects include banking and police compliance portals, commercial seed to sale, government seed to sale tracking, government licensing solutions, iot asset and people tracking, and home cultivation controls and software.

From retail to manufacturing, tech support to process management, every aspect of developing the world’s most extensive business solution has been covered thoroughly in his experience both inside and outside of the cannabis marketplace.

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