We speak with Mark Lozzi the CEO of cannabis financial solutions company Confia who tell us on their website..
Confia is a software platform that offers the cannabis industry traditional banking and cash management offerings, bill pay services, unlimited B2B payments, API-powered payment solutions that service both businesses and the consumer, and lending solutions.
But, as they say, the devil is in the detail so we posed a number of questions to Mark about the company and what it does.
First up Mark, a little bit of information about yourself and your background.
Could you provide detail about your last startup and what attracted you to the regulated cannabis industry?
I started my professional career in finance, at an investment banking firm but quickly launched my own venture capital fund. I am not risk-averse by nature, and my ambitions to be a VC quickly migrated to wanting to be a technology entrepreneur.
My last venture was also with my current co-founder Dan Adamson, and we developed and commercialized regulatory technology for the high-risk banking segment.
Our technology leveraged high-tech capabilities like AI, machine learning, and natural language processing, and supported the automation of know your client (KYC) processes for high-risk clients at some of the world’s largest banks.
Our product began to spread into new sectors, like investment banking, lending, private equity, and more fintech-suited applications.
Due to the nature of our business, we were able to walk away with expertise in financial service compliance. So when it was time to consider a new venture, we tried to identify an industry overlapping 4 key concepts; highly regulated, fintech, payments, and banking.
These are the exact pain points in cannabis, and at that point, the writing was on the wall. We wanted to disrupt the most emerging, complex market in the world – and Confia was born.
Mark Lozzi
So… could give me some details about the company, the problems you are trying to solve for clients, and the solutions you offer?
Confia’s overarching vision is to provide compliant financial innovation.
The cannabis industry suffers from inefficient, overpriced, banking and transactional services. Underlying drivers to some of these problems are the financial compliance obligations to banks.
Confia is designed to streamline and automate compliance, ultimately driving prices down for cannabis operators. And our fintech vision is creating new, automated, and easier ways to transact within the industry.
Confia has compliance baked into every corner, which allows us to offer our financial and transactional services at an industry-leading price.
Our solutions expand into ancillary financial services, like streamlining access to capital and lending, consumer payments, and escrow-based transaction services.
What, if we could ask, is a liberated ecosystem?
A liberated system is a place where trust is table stakes. Confia members can rely on the fact that other members in the network have been vetted and are operating compliantly.
A liberated ecosystem is the comfort in knowing that legitimate transactions are encouraged and supported in a free-flowing platform.
Currently, the cannabis industry is at the mercy of banks and financial service companies, operating with uncertainty as it relates to access of funds and hidden fees; that is not liberating!
Are you offering good old-fashioned banking services?
What are they?
Confia provides traditional-like banking services.
I use the phrase ‘traditional like only as a reference to the types of services and capabilities we offer, but our approach is in fact the opposite to traditional.
However, our clients can still expect traditional services like unlimited account balances, cash deposit services, ACH and wire transfers, check payments and deposits, and bill pay.
Confia also creates a bridge between lenders and borrowers. By providing a seamless way to expedite lending diligence, as well as simplifying the loan management process, the benefit is seen by both borrowers and lenders.
Are cryptocurrency services part of the solutions you offer?
Confia does not have a cryptocurrency solution at the moment.
But, I will say, cryptocurrency and digital assets cannot be ignored or dismissed. Stay tuned for more news from us!
Now for the million $ question ….Regulation.
When it comes to the SAFE banking Act and Schumer’s omnibus bill, what are your hopes for these pieces of regulation?
What are they offering you and your clients?
We obviously hope the industry can find its way to fair treatment and not be penalized by the financial service industry for their legitimate business operations.
I think the bill would give our clients further comfort and stability professionally, but in practice, things would remain status quo.
Lawmakers will need to hone in on the financial compliance for the industry and unify the regulatory requirements, monitoring, and auditing of such cannabis programs in order for the bill and its rollout to be successful.
What do you think needs to be done to improve the legislation?
A plan needs to be put in place to ensure regulatory requirements are set and adhered to by participating institutions who currently have and are looking to stand up cannabis banking programs.
Our general concern is that banking could turn into a wild west situation and actually move the industry backward, creating long-term disadvantages.
For example, if there is a significant event as a result of lacking regulatory compliance or oversight, it could compromise the industry’s position in the banking system and could result in greater regulations being put in place, which would undo the industry’s work and effort to get to the point we are today.
With the internal resistance this movement has seen, the opposition will be looking for excuses and reasons to undo what the cannabis industry has been able to accomplish.
This is why I believe the legislation has been slow-moving, erring on the side of caution with this bill.
Do you think we have a hope to see the legislation or something similar passed by the end of next year?
The end of next year is a hard-pressed timeline, but possible.
I think seeing something come out of the Senate is phase 1 on the journey to federal legalization. Before the gates open, financial regulators need to opine their thoughts on the compliance program and its management.
Are you providing services for clients operating in a transnational environment?
If so, what?
At the moment, we are focused on the US market, but we do have plans to expand into international markets in 2022!
The key to any international approach, including our US strategy, is how funds and transactions are walled off on a state by state basis, simply due to the federal legal status of cannabis.
This ensures activity is being bucketed to its legal and designated state or jurisdiction at all times.
Obviously smaller fintech solutions are more nimble than the big banks.
What other advantages do you bring to the table?
An underlying value Confia will always bring to the table and provide at scale is our automated compliance and filing.
This is a service both cannabis operators and banks can benefit and leverage over time. What is important to understand and identify is that Confia provides solutions and capabilities that can and will work alongside banks in a legal environment when banking becomes more commoditized.
Transactionally speaking, we are looking to launch an innovative autonomous escrow service, that is designed to support the obligations of the parties in a transaction while instilling trust that funds are there and will be objectively released in a timely fashion.
Our lending product is another application that differentiates us, and provides significant value to our members.
Are you offering investments as well as business solutions?
Our lending product is designed to connect industry-leading lenders to Confia members. We act as a supporting platform between all parties to originate, expedite diligence, and manage ongoing loans.
Our roadmap and vision definitely has big plans. Stay tuned for more on this!
What are your plans for the future and how do you see the industry maturing?
The operating industry will mature in two ways. First, operators will begin to value, prioritize, and acknowledge that compliance is and should be a critical function of their business. Second, as part of the industry’s maturation, I believe there will be a wave of M&A activity and consolidation, similar to other emerging markets. And with that type of activity, will likely bring a more corporate approach to business.
The banking industry will commoditize, and become widely available and hopefully at consistently lower prices! This will not happen overnight, as banks will methodically evaluate their risk tolerance and how they can best deal with the compliance requirements of the industry, but it will certainly be a progression to this state. As for Confia, we will continue to innovate and bring industry leading solutions to the forefront.
Do you see other opportunities, say in other regulated compounds sectors such as Kratom and Psychedelics, moving forward?
I certainly do. We saw that cannabis was a popular emerging arena and presented an opportunity to be a pioneer in a new market.
We set out to address high-risk, complex, and regulated industries. Cannabis happens to be all of those things, and I would put Kratom and Psychedelics in that same bucket for sure.
We hope to take this technology to other high-risk markets in the future
Do you have one piece of advice to share with new businesses in the sector and how to manage compliance?
Compliance is a crucial factor in cannabis banking and can’t be overlooked or taken for granted. New businesses in the Cannabis sector should take an active role in evaluating the compliance programs of their financial providers.
The careful consideration and effort that goes into opening and keeping a bank account as a cannabis operator will protect your business in the long run.
Thankyou Mark, for taking time to answer our questions.
