Thread by @sowmyarao_

So, nine months ago, our team didn't have a clue about ACH, much less fintech in the US.

As of this month? @payswifter has processed over $500k in GTV from B2C, ACH cannabis payments in the United States. How did we get here?

#ach #fintech #cannabis #yc

Storytime. 🧵 🕰

Psst - here's a picture of the @payswifter founding team.

Keep our faces in mind as you read on. Upcoming fun story of how we fumbled our first pitch, got turned down by all the API providers YOU probably use, and built stuff we get to play w now!

#ach #fintech #cannabis #yc

Wait, what/who/how is @payswifter ?

‍PaySwifter builds ACH (payment) APIs for the $25 billion and growing cannabis market in the United States. We’re Stripe for Cannabis.

Our company got into YC for a different product that crashed due to covid - and this is our pivot.

So nine months ago: we were getting ready to pitch our then MVP - interactive email combined with one-click checkout, that could increase revenue for and dramatically transform e-mail marketing.

TAM: all merchants $$
Niche we wanted to target: merchant's who couldn't do FB ads

Our first pitch was to one of California’s leading cannabis dispensaries - a lead we got from a post on YC’s internal forum.

5 mins in - we lost that pitch. We'd fumbled our research.

I'd confidently said: "We can integrate with any payment provider - we’re set up with Stripe right now, it’ll only take you 2 minutes to plug in your credentials, and try us out”.

What did we miss? Most payment providers, banks, and all card networks don’t process cannabis tx.

The merchant we were speaking with couldn’t use our product unless we integrated with an ACH provider who did support cannabis. We quickly googled, and didn't find any APIs.

Was the merchant interested in working with us? Did we like this challenge? YES.

We felt there was a real opportunity here for our tiny but mighty team of 5 people to build fintech for cannabis merchants in the US (market that produced $25b in sales in 2021).

And that’s how we began. Searching, reading, learning, building. Obsessing over the NACHA website.

You've got to understand - in India, where we build from, UPI and NEFT - the two main payment methods I use - settle very quickly.

ACH in comparison processed way more in tx volume than NEFT/UPI, but settlement and payment flows worked very differently. Steep learning curve.

And if you think we faced a challenge, imagine actually BEING a cannabis merchant.

Customers want to buy from you.

BUT. You can’t sell to them online because you have no good way of accepting online payments easily.

Your customers still pay you. But in cash. Which ...

...can get stolen.

So you need an armored car to take the cash to the bank.

And a guard. Or two.

Your average order values can’t increase because you’re limited by cash in the wallet. Delivery can be risky.

Oh, and staff need to count all this money at the end of shift.

Hard to believe, but I’m not talking about the 1980s. This happens today, in fact it's happening right now, even in San Francisco! And we want to help solve this problem.

That's why, nine months ago, we started to build ACH APIs tailored to a retail cannabis experience.

We did a lot of research to find the right API and fintech partners who were comfortable with cannabis merchants, and where we couldn’t find everything we needed...

we decided to build /fork and maintain the rest of the core infrastructure ourselves.

We’ve learnt how many banks and credit unions there are in the United States

...and become somewhat expert at the challenges faced by bank-linking third party software when customers from smaller, local banks attempt ACH authorizations.

We’ve designed a flow that allows for maximum flexibility to a dispensary to tailor when they’d like to collect the authorization, and when they’d like to charge it

...to keep them compliant with the payment on delivery rules for cannabis.

We’ve learnt what types of conditions are most likely to result in an B2C ACH return

...and we’re working on a model that will help us alleviate this risk at the least cost to the merchant.

More importantly, we wanted to verify if customers would be willing to link bank accounts, and pay online for an otherwise-cash transaction.

Now, we are confident in our answer. For a cannabis dispensary, online payments work, and they increase your average order value. Upto 2x.

In the last few months, we’ve grown in confidence and (not to jinx it) competence with respect to understanding / running robust ACH flows. This is just the beginning.

Ever so often, someone will ask us, “What will you do when cannabis is legalized? Will you still serve this market? Will it make sense for you to build for such a niche?”

We have the same answer to that question that we did nine months ago...

Cannabis isn’t going anywhere. Other regulated industries aren’t going anywhere. ACH isn’t going anywhere.

We think of ourselves as being at Day 1 of our journey.

Every day we talk to merchants, and platforms, and we understand the potential of building on top of ACH.

Our APIs work just as well for cannabis/ B2B, and we have a robust roadmap for the future.

BUT:

Right now, for a dispensary, digital payments seem confusing, expensive and out of reach. Understandably, most dispensaries end up accepting only cash payments, or use gray-area payment solutions.

By integrating with platforms, with an API-first approach, and by offering no-code solutions, our aim at Pay Swifter is to help all cannabis dispensaries leverage the power of 2x cart value.

Why write this tweet thread?
There were times on this journey when our/my imposter syndrome kicked in (including as recently as pressing the "tweet" button just now)..

Was this a milestone? Should we even write a blog post about this, or keep our heads down and keep building? What will larger fintechs who read this say? Will our competitors snigger?

Last week, we had a CTO tell us “integrating with your APIs was very easy, a really smooth experience, and everything just worked”. While we’re working on getting his testimonial on our site, hearing these words made us take a moment to just feel happy, to feel good.

As a female fintech CEO, I wanted to brush aside self-doubt, and I want to share our team’s moment of strength, and joy, with you. Hence this thread - and a similar blog post too:

payswifter.com/blog/how-a-yc-…

If you work in cannabis, or in US fintech (or fintech in general), we would love to talk to you - we are looking to learn, to find API partners, to share our learnings, and to take you along the way as we grow. Email us hello+learn at swifterhq dot com or DM me or @payswifter

From building ACH return / risk models, to increasing payment conversions, to designing accountant-friendly reconciliation dashboards - we have a lot of exciting work to do. If you would like to work with us, email us at hello+careers at swifterhq dot com

Lastly, we would love feedback and advice from US fintech fundraise veterans at [e-mail]

Thank you for reading along patiently! Hope you enjoyed this story! Sowmya