The Payments Experts Podcast
Expert payments attorneys discuss the electronic payments industry from a legal perspective.
The Payments Experts Podcast
Banking on Innovation: The Evolution of Payments with Tom Lineen of WestTown Payments | PEP044
Tom Lineen brings 25 years of payments industry wisdom to the table as he unpacks how WestTown Payments (https://www.WestTownpayments.com/) is transforming merchant services through banking integration. Having started at AuthorizeNet in 2000 as the 29th employee, Tom has witnessed firsthand the evolution from clearly defined industry roles to today's interconnected ecosystem.
The conversation explores how Tom recognized an opportunity to partner with community banks that possessed direct card brand memberships but lacked the expertise to maximize their potential. This vision materialized in March 2020 when, despite pandemic uncertainty, WestTown Bank and Trust embraced his joint venture proposal. Unlike traditional sponsor relationships where banks and ISOs operate at arm's length, WestTown Payments became fully integrated with the bank, ensuring complete alignment on compliance and customer service priorities.
Tom reveals how this structure proved particularly valuable when WestTown Bank was acquired by DART Bank in 2023. Through careful planning, they achieved a seamless transition where merchants experienced zero disruption—continuing to receive deposits and process transactions without interruption. This customer-first approach exemplifies the community banking philosophy that distinguishes their service model from national banks.
The podcast delves into specialized verticals, particularly hemp and CBD processing, where WestTown's integrated bank model provides compliant solutions that national institutions won't touch. Looking forward, Tom shares his vision for DART 360, a comprehensive platform offering merchants access to checking accounts, loans, working capital, and other banking services alongside payment processing. This evolution represents the future for ISOs competing against Square and Toast—bundling financial services to transform thin-margin payment relationships into robust, multi-faceted partnerships.
Industry professionals will appreciate Tom's insights on the upcoming Visa VAMP program changes scheduled for October 2023, which threaten to reshape the acquiring landscape, particularly for high-risk merchants. Connect with Tom on LinkedIn to learn more about how WestTown Payments can help payment professionals navigate today's evolving marketplace.
**Matters discussed are all opinions and do not constitute legal advice. All events or likeness to real people and events is a coincidence.**
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A payments podcast of Global Legal Law Firm
you know there's so many different names that I've seen out there, so there used to be called cash discounting and then I think that's now gone out of favor to now dual pricing.
Speaker 2:Totally yeah. They don't even want to say cash discount anymore.
Speaker 1:I know yeah, no. When you say oh no, no, it's dual pricing, I'm like what's the difference?
Speaker 2:There isn't, there isn't. But the accepted terminology at the the en vogue moment is, uh, dual pricing yeah, dual pricing welcome to the payments experts podcast, a podcast of global legal law firm.
Speaker 3:We hope you enjoy this episode very excited today in studio joining us founding and managing partner of the law firm, christopher Dryden, who's regularly with us, as well as our special guest who's joining us remotely, tom Leneen of West Town Payments. Tom, we're really excited to have you on the podcast. Welcome.
Speaker 1:Hey, thanks guys. Appreciate you having me on.
Speaker 2:All right, tom. So Tom and actually uh, got to talk before the podcast, which is not my norm. Uh, we, it was more to catch up. I've known tom for it's got to be coming on 15 years or close, close to um. When we got on the phone it was interesting.
Speaker 2:I was trying to kind of do a little bit of catch-up because I haven't talked to him recently and the interesting thing about Tom, I was telling him I did a training session for the staff yesterday.
Speaker 2:In the training session for the staff and trying to teach him payments and do it in an encapsulated one-hour session and give him some background.
Speaker 2:I tried to do it in a way where or I usually try to do it in a way where I'm talking about the evolution of payments because when I got in it the idea of independent sales, organization, processor, sponsor, bank there were very distinct lines and very, very much fewer opportunities in the middle layer of what you could do and really technology and then like human innovation in the space and what, and kind of pushing the boundary of what's possible is what's really moved payments to be kind of the center of the universe, and tom is emblematic of that in his career because it's somewhat been nomadic to those new opportunities where you see entrepreneurially, something that's in front of you and you're like, oh, hold on, that door just opened and Tom's been one of the people that are like you know sees the crack in the door and kicks the door open, and that's actually kind of the evolution to Tom at Westtown Payments.
Speaker 2:But I actually thought it would be a really good opportunity to give a little bit of background to Westtown Payments, to give a little bit of background to Tom Lanine and who he is, because when you're dealing with Westtown Payments you're dealing with Tom. So, tom, tell us a little bit about yourself.
Speaker 1:Sure man, thank you. Well, as you mentioned, I have had and worn many hats in the industry in my 25 years that I've been in the space and, to your point, I have looked at payments as this very entrepreneurial vehicle for some of the things that I have seen and attempted to achieve in my career and you know started off like, for example, I started off at AuthorizeNet in 2000. I was the 29th employee. Authorizenet was at that point was a little company in Provo, utah, and now it's owned by Visa and is driving, you know, really worldwide e-commerce using, you know, visa as the vehicle and so.
Speaker 1:But back then, you know, the internet was the Wild West, honestly, and when you looked at it there was a lot of people making money in a lot of different ways, but a lot of them weren't sustainable. And I looked at e-commerce and what AuthorizeNet was doing and said, boy, you could sit on your couch and, you know, and buy something that will show up on your doorstep in a couple of days. And that was exciting and that opened up so many different avenues that I said I got to be there. I got to do that and, as you mentioned, chris, like the industry used to have very defined lines. We used to have very defined lines.
Speaker 1:There was a gateway, which is a technology provider. You have your processors, like your T-SYSs, worldpays of the world, and then you have your sponsor banks and, of course, the car brands. And now there is this melding occurring and as you look at the world we live in, I've just have continued to say, okay, you know, somebody's doing that, somebody's already, you know, dominating that space. What's not being done? What's not being done? Well, what's not being done with a, you know, customer-centric view and you know that's where I find myself today is, you know, partnering with and now actually being part of a community bank that you know both has a bank charter and has direct membership of the card brands, but maybe didn't have the internal resources to be able to spin up and support a direct acquiring model spin up and support a direct acquiring model.
Speaker 2:Yeah, I think that's really important because, as Tom and I were talking, you know we're both talkers and I think you know it's the sales side of me, but also like the sales side of Tom, and we were talking about banks that have basically like full on delegated their merchant acquiring program at times and they're the ones that are all responsible, which is craziness to me, like I mean I've seen situations where the bank didn't even have a BSA policy in place or the bank was using a dual employee, where the ISO that was really running the merchant acquiring program was had a dual employee of the bank but they really worked for the ISO and there's been like some really sketchy bank, you know, bank penetration into the acquiring space but not knowing what they're doing. I think the genesis of you going to Westtown which I think you should tell us what Westtown does but the genesis of Westtown, since you've been there, I think is exactly what you're talking about.
Speaker 1:Well, thanks, it's funny, so your point is so well taken. So there are, as I looked at, the landscape of the sponsor bank environment, and then the ISOs and how they work. They weren't really aligned as partners. It was like a vendor relationship. Sometimes it wasn't a very good relationship and there was a handful of banks that you could go to and work with.
Speaker 1:And so this is back in 2018, when I first looked at this and said, gosh, if I could get in front of a community bank that obviously is a chartered bank, either state or federally, in the US, which those are the only entities that can be members of Visa, mastercard in the US.
Speaker 1:Now other countries, it's a different deal, but let's just talk about the US. And so I looked at it and said, okay, if I can find the right bank, we can bring the talent, the technology and bring them a whole new revenue stream. Especially today, as you think about community banks and this narrative has actually died down a little bit, but it's still absolutely real is that community banks are dying and if they can't grow and they can't find new revenue streams, they're going to be out or they sell and they're done. And so, to your point. So the Westtown Bank. So so, after talking to let's call it a half dozen or a dozen banks and hearing a lot of no's or maybe's or all kinds of things in between, I was introduced to the ceo of west town bank and trust, and her name is melissa marcel is she still with is?
Speaker 1:she still working with you guys, so so technically and there's a whole story there too but Westtown Bank has been acquired by another bank. She went with the team and that happened in October of 2024. She went with the team to the new bank. She was the COO and actually ended up being the CEO of Westtown Bank and Trust. And so Westtown was a one branch Illinois state chartered bank that had their bank corp in Raleigh, north Carolina. And so when I met her, the first thing she mentioned was hey, we really are interested in this space, but we've talked to all the ISOs who have bank sponsorship programs and we didn't like any of them. We don't think that we're concerned about sharing our customers with these groups. And so I said, ok, that's interesting, because I don't want to be an ISO, I don't want to be a third party, I want to be part of the bank. And we ended up agreeing on a joint venture structure because that's what they wanted. They want someone to come in, start it and run it as part of the team, not as a third party or a dual employee, which I don't even know what that could be, especially in this environment. But the funny thing is, chris and I don't know if I mentioned this story to you is that we had these conversations through like Q1, you know, february of 2020. So the pandemic hadn't actually started.
Speaker 1:My first meeting, pitch meeting with her, the CEO, chief legal officer, all the C-levels was on March 17, 2020, four days after the world shut down, literally, and I thought this would be the shortest meeting ever because all the uncertainty of just what was going on.
Speaker 1:There's no way these folks are going to A commit to this, b, invest in it and then see it out when there's really no chance we're going to get together physically anytime soon. So we get on the call About 30 minutes in, the CEO stops the call and I'm like, all right, well, that was fun. And he says, okay, let's do this. I said, excuse me, he's like no, this is what we want to do. You're the guys, let's go. And I said okay. So, literally, from that moment, we took off, you know, had to, you know, basically file some stuff with the bank, the state of Illinois, and we went live July 1st 2020. And we had our bin actually for nothing, literally nothing to getting our bin live November 15th of 2020. So a little over four, over four months well, that's the funny thing is.
Speaker 2:I remember it really well because I don't know if you recall, but I had met melissa right around the same time that we're talking about and we they were doing deposit accounts for cannabis-based businesses some being CBD only, others being actual where recreational cannabis had been approved and so she had come to us for just opinions about the marketplace related to that and about the bank.
Speaker 2:And then she's oh, we've got a payments branch too. And then up you popped and it was like oh, tom, I know, tom is perfect, right, you know, and we did a little bit of work for you guys back then and you know it was interesting to watch what was going on. So it was actually kind of cool to watch you in the space. And the JV structure, I thought was really interesting too, because there was really an investment by the bank into the payments branch, where there was a melding of hey, you know, we're aligned in what we're trying to do here, and I think that that is a differentiator and I think for our you know, especially the agents out there that are looking for people to partner with explain the significance and importance of that, because I think it's really important.
Speaker 1:Well, it's everything you know, no matter technology, team, all that stuff, which are all important but if we didn't have alignment with the bank, especially around an incredibly high compliance marketplace like the hemp and CBD space, which is where we focused because we knew the bank could play in that space from a depository lending perspective? But the merchant services for the marijuana space for the recreational or even medical is still federally illegal, so we couldn't offer a Visa, MasterCard, Amex, Discover to those businesses, to the dispensaries or any plant-touching business. But on the hemp side, which is still cannabis, but it's 0.3% or lower THC which is covered under the Farm Act. That first one came out in 2014. And then the 2018 updated Farm Act had much more guidelines. It's not a perfect document by any means, but it has much better guidance on what is and isn't allowed and it gave us a pathway to be able to support it from a merchant services perspective. But there's a tremendous amount of compliance and it's state by state that it's regulated.
Speaker 1:So there's some things that we had to do and build, and so you have to do all this stuff with the bank. I can't do it in a vacuum and I can't say well, I'll figure it out and I'll come back to you. Because it's their charter. You know they have to sit in front of the regulator, in this case FDIC and the state of Illinois and so we did it together and so, when they sat down for their exam, could actually speak intelligently about how we're managing our KYC, KYB, underwriting compliance.
Speaker 1:It's all there, and so you know, I have a lot of people tell me well, that's illegal, you can't do that. No, no, it's not illegal, it's just difficult. And that's usually where I find opportunities, especially in payments. Payments is so saturated and so competitive, but in certain niches and certain areas it takes more work, and so the B of A's, the Wells Fargo's of the world, just kind of go we don't need to deal with that, and they don't. But a community bank that's looking for new revenues, new marketplaces, this is the kind of thing they need, but they don't have, maybe, the resources internally to be able to grow it, manage it and actually explain it.
Speaker 2:Yeah, look, I think it's super important for your bank partner to understand what it is that you're out in the marketplace doing and probably know more than you do to educate the people that are out. I mean, I sat on a panel and, like you said, the complexity of what you're talking about. Sure, that's great, we've got the farm bill 2018 gave us some some clarity, right, but still state law controls even under that. So you got to be compliant with your state law. There's a federal cap, but then you, you know, it was interesting because we started when I, when I and I I want to say it was the mat conference that I did a talk and this was like 2021, 2022, and it was about the state laws, which, when I went and started researching, I was kind of blown away. Like a state like hawaii, you, you can smoke it, you can't eat it, right? I mean like and so totally like, and so there's there's levels of OK, well, is it an ingestible product? Is it controlled by the FDA? I mean, you get into alphabet soup with what the oversight agencies really talk about and everybody's just thinking, oh well, I'm going to go get a CBD product. Well, cbd products not all the same and the places aren't all the same, and I thought that that was really interesting. And I mean this is a perfect example of when Elevant opened up CBD slash. You know, I don't know if marijuana was ever going to be allowed at that point in time, but they opened up a whole channel and it was basically shut down within a month because they had no idea what they were doing. Us banks said, no way, like you're, all this stuff's coming through. That shouldn't be coming through, because, and they had done one, one charter, like one test, with one, I want to say one iso partner who will remain nameless on here, but, like they, they actually did it and said, oh, okay, well, we feel like we understand what's going on, and they had absolutely no clue. And that is the thing about the complexity. And I say this because I've had a lot of situations which I think is important. What you're talking about right now, and I think it would be good to get into the verticals that Westtown Payments and am I allowed to say your banking partner? Oh, absolutely, oh yeah.
Speaker 2:And Darbank and what they're doing, because, um, you know, I've watched a lot where and this happens with, like stripe and paypal, and I don't know if it's by design, but you've got people doing underwriting and risk on the front end, but I don't know how well they do it. They onboard a merchant, they take three to four weeks of transactions and then they've got some sort of re-underwriting process going on in the background as they're actually looking at the transactions and nothing has changed. And all of a sudden, oh well, you approved me here, but now you're not, you're, you're telling me I'm suspended and I can't do anything. And then their money sits in limbo and I don't. And again, I don't know if it's by design, I don't know if it's just left hand, not talking to the right hand of a large organization. But this is a and you know, it's nice to have a banking partner who can like alleviate that problem for a problematic subject matter.
Speaker 1:You know it's interesting and you did ask me a question earlier which I don't think I answered fully, so I'll swing it around because I think it actually is very germane to what you're just pointing out, in that because we are part of the bank and you know, I certainly and my team comes from the ISO world and I intentionally hired folks who weren't necessarily bankers but knew underwriting, risk management, client services, all the things that a full-service ISO has to do. We do that as the bank, and so what we did in this program was to go out and talk to the agent ISOs that I wasn't discovered or in any way talked about. We're the opposite. We're saying, hey, no, let's talk about all the things you're doing. What are you selling? Your Delta H, your Delta Nines, all these things that are fairly controversial right now. They still in our minds and the interpretation that we've received from legal and other compliance companies is that those are fully legal and compliant within the Farm Act and so we support them. And then that's our guide, that's what we use. But we go to these ISOs and agents and say you're dealing with the bank, you're not dealing with the third party. We act as if we're an ISO, because we think like ISOs, because we come from that world, but we carry bank business cards and so I'm an employee of the bank they all are and so with that, there is a tremendous clarity on what they can and cannot do, so they don't waste their time running around trying to board stuff you know, whether it be dispensaries in some kind of scheme that you know tries to circumvent the legality of what they sell, which, of course, always ends up poorly. But we give these guys comfort so they can go out and market, invest in their business and know that we're here and we've been at this. So we started in 2020.
Speaker 1:As I mentioned, we partnered with Westtown Bank and Trust. Westtown Bank and Trust ended up going through a sale process and the bank that was buying them I knew from my previous endeavors and I knew they were not aligned with a direct acquiring model, which is what Westtown Payments does, and so we actually were able to package that up and go through a process, interview potential acquiring banks that wanted to buy us, and we met the folks from DART, really enjoyed their focus on culture, on alignment, on commitment. So the moment they wrote that check, they were saying, hey, we're committed to you. We're going to do what we need to get done to keep moving this business forward, which I knew is what we needed. We were not yet a success story. We were still really a neophyte at that point. We didn't have a great revenue story. We didn't have a great revenue story. We didn't have a great hey, we're boarding thousands of merchants at a time we were still growing and they saw it and they said let's go.
Speaker 1:And so we literally and this is the important part, chris the day we moved, we moved literally. We sold on June 30, we sold on June 30th 2023, and we became employees of the bank on July 1st 2023. Our merchants never missed a deposit, never missed an authorization. Everything ran the same on the 30th as it did on the 1st, and so they didn't even know we got acquired effectively, and that's a testament to the team. They did an amazing job of just staying the course and, of course, the bank. And so, literally, we didn't lose a customer, we didn't lose a dollar and we just kept moving. So we made that change and nobody knew. And why I say that is that we continue to board accounts the next day. Support the industry. Where you mentioned other banks. Have you know, middle of the night just shut it off and went out and merchants are like, no, they'd never do this. Well, they did it. And we're saying, hey, we've been at this for five years straight, even though we did change sponsor banks and actually ownership.
Speaker 2:I don't think most people would understand what you're talking about. We bank with a small bank here and it's actually been acquired by another kind of small bank. But when we joined it it had maybe like five branches and then it grew to nine branchesches. The reason I went to the bank was because I happened to know the coo and she would tell me kind of what happens when the bank acquisition happens and then the assimilation of the old bank into the new bank environment and I mean the barriers to that.
Speaker 2:It's not a simple process at all. I mean you have to take people and flip a switch and onboard them and the banking environment that they could have been in is entirely different. I think that is something that's very important to show continuity. I think it has to. I also think it's fairly emblematic of the fact that the bank was very intent on making sure that it was fluid and seamless, which I don't necessarily know if that's the case with acquiring banks, because customer service doesn't always seem to be the thing that's at the forefront of what they're looking for.
Speaker 1:That's so true. And the good news is that I went from one community bank to another community bank and community banks truly pride themselves on service customers because those are their neighbors. Right, they see them. You know, a national bank or even a regional bank, it's, it's it. There's a disconnect and uh, you know, hey, look, you know, we need them both. They, they both serve a purpose in our, our economy, our society.
Speaker 1:But, to your point, I also knew if I didn't have full buy-in from the CEO, the chairman of the board down, we would not be successful and CBD space, and we're really proud of that. But we also support all their customers. So their Main Street businesses, the coffee shop, the deli, the country club, whatever. And that comes from the commercial bankers who some of them, have been there 30, 40 years and they're looking at us, going how do I trust my customers? And they think of it that way. These are their customers, these are their friends with you guys.
Speaker 1:We don't know, so we had to, you know, step in and show that we think like that, that the customer comes first. It's service, service, service. And everyone says that. But really it has to be, because we knew if we don't one, they wouldn't open up their collective community to us and we wouldn't succeed at the level we know we need to. And two, I think we would. You know we'd fail differently because we'd lose customers that we already had, that we brought over, and we'd lose that confidence from the executive team in our abilities. And, by the way, the payment industry gutter is littered with failed acquisitions. You and I probably can go down a list of hey, they bought a perfectly good company and it wasn't a good culture fit and it turned into just a dumpster fire.
Speaker 2:Oh yeah, look, I mean Van of Mercury. I thought that that was such a great acquisition by Van of and culturally they were so different they never combined the operations. So you know, that's interesting. This is actually a good segue because I was looking at the Westtown website and you know you talk about the importance, or on the website it talks about the importance of combined solutions. What does that mean to Westtown Payment? Like what is that?
Speaker 1:combined solution?
Speaker 1:Sure, so like and again, you know, for the folks who are listening who are in the payment industry, this will sound fairly redundant, but folks who aren't this will be a little bit surprising, in that the ISO space is dominated by one product, really, and it's a merchant account and sometimes terminals and other things that they'll make some revenue on, but they don't offer any real banking services.
Speaker 1:Or actual banking services, I should say, and we looked at it and said, okay, if we're part of a bank and they have a charter and they provide these services to the same customers that we provide merchant services to, why aren't we offering deposit services, DDAs, we call them savings or checking accounts, loans, working capital, I mean, I guess you can go down the line of mortgage small business owners because they own houses, and so we're talking to the owners of these businesses why aren't we offering these services?
Speaker 1:And the reality is we do, but it's a manual process, it's not digital, and so our entire focus now is, now that we've settled in, we're a year into it is to take all the products the bank offers and put them in. All the products the bank offers and put them in, whether it be a hub and spoke model, or really a daisy chain where we say, hey, here's all the products and services you can consume. Do you want to open a bank account? Great, let's do that. Do you need a credit card? Great, let's do that. A loan again, merchant services is a given, and so we're doing that. But we want to now offer that and open that up to our agent base and our ISO base, so that now they can go into that same small business that they sold a merchant account to and provide them a full suite of financial services.
Speaker 2:Yeah, I mean, that's one of the things that I've seen repeatedly is, you know, people have asked me like why don't ISO sell this, why don't ISO sell that? And I was like ISOs are one trick ponies man, like they like, and it's no bag on them. Selling merchant services is hard enough, but then you try to introduce another product into it and it's something that you're unfamiliar with, just in general. I mean, cash advance was the one that I saw. Equipment's a little bit easier, like you said, and it's an easier revenue revenue stream. But then you start to get into, like actual finance products or you know, deposit accounts I could see too, but that's got its own layer of regulation and administration associated with most of the people are consumers. It's not necessary, I mean, or you, you kind of like, go from business to consumer and that transition adds a whole layer of of oversight and regulation. That is maybe prohibitive at times, if you want to put it that way, but I think that having those services, not only as something, that's an add-on. After the fact, I know in some spaces because I'll tell you we are with this bank it's the Commercial Bank of California and I will tell everybody on this podcast and anybody that can hear this. If you want really good customer service, these people are awesome.
Speaker 2:And then when the government was offering really favorable loans through COVID, that's who we used. We went to them. They had outreach. We went to them. They had outreach like the customer service of the community bank, like I would never bank at B of A or Wells Fargo or any major bank, and no offense to them, but they don't value the customer. I mean, just look at Wells Fargo and all of the the government settlements that they've entered into for bilking their customers, and that should tell you what they think about customer service. Now they may be more advanced in technology and this and that and it may be an easier process for a customer, but go ahead and call them and see how good the customer service is, whereas, like, if I need to open an account at our bank, they drive to our office so that they can get wet signatures to open our bank accounts and they do whatever they can to make it easy for us.
Speaker 1:It's a difference and you know I mean I am not today, but I have been through my career, a small business owner these administrative tasks, which are very valuable and important, you may not have time for, but if they can make that time or make it easier meet you where you are, whether that be physically or digitally, it's hugely important. And that's the other thing too. I mean, one of the things that's key to this is that this whole thing that we're building and we're calling it Dart 360, and it's built I shouldn't say building, it's built and we're launching it is digital. So from one application, we'll be able to do all the KYC, kyb work which is super important, especially in this day and age and then we'll also be able to do the underwriting and, based on that approval, now we open up a green field of products and services that they can consume. Now the other thing too and your point is the ISO. What we're saying is hey, look, you don't have to know these products, you don't have to learn them, you just have to basically lead these customers to us, we will start the process, we'll get them approved for a relationship and then the services are right there and they can decide what they want to consume and when.
Speaker 1:And, for example, a great point you just made was like, on the DDA side, merchant banking. Well, a lot of businesses come to us I don't say every, but almost all of them with a bank account, and especially the hemp and CBD space. But a lot of them come to us with bank accounts from like B of A, wells and Chase, and I keep picking on these big guys. All three of them have a absolutely no hemp CBD policy, but somehow or another these guys get bank accounts and we'll pick that out and say hey guys, I know you have a bank account, you might have a really long term relationship, but I can tell you that you run a prohibited business in their eyes and if their compliance team is able to pick up on that, they'll just close your account and send you a cashier's check.
Speaker 2:Oh no, they'll hold your money. No no, no, no, no, they'll hold your money and maybe not give it back. No, we're dealing with multiple lawsuits.
Speaker 1:That's true, You're actually a great point. I've seen that too, and they're like can you help me? I'm like I know a good lawyer and I'm talking to him, so, but no, you know, we can't. We can't help with anyone else's bank account. But we can certainly facilitate one for them and we've definitely saved some folks a lot of pain when they say, hey, I got my bank account shut down. I'm like, well, you got a DDA here, go ahead and use it.
Speaker 2:So what you know as far as Westtown payments on the processing side right now, in the, in the merchant acquisition, what are you seeing as you the processing side right now and the merchant acquisition, what are you seeing as you know? And this is more of a general industry question, but what are you seeing firsthand in your environment as far as challenges and opportunities? I mean, you can take them in whatever order that you want, but in today's environment, 2025, how are you seeing opportunities and challenges that you're experiencing on the operational level?
Speaker 1:Okay, sure, I'll tell you. It's interesting, and I was joking with someone the other day. I said the man that sits in that chair in that big White House in DC really does affect our industry, and I think everyone has their opinions on the current administration and the previous administration. From my perspective, things have become easier. On one level, they're opening up new markets, and you can look at just some of the things that they've become much more friendly to in the past two months than the previous four years, one being digital assets, for example, and so that's a positive, especially for a bank like ours who's willing to take the time to invest in a market like that, invest in compliance resources, which is incredibly expensive. You wouldn't even believe how much money we've invested just to get to the point where we can actually support industries like digital assets, hemp and CBD. Now, on the flip side I'll tell you this, and you've seen it too there's a new visa program on the chargeback side called VAMP, and it's a new name for a program they already had. They've cleaned it up, they made some improvements, but they've also made a couple of announcements over the past two weeks bulletin updates which have made a lot of people nervous Now luckily we're not too deep into that high. Well, we're not deep in the high-risk side of the industry high chargebacks and things of that nature and there's some products that the car brands supported that it looks like they're not going to support in this next turn.
Speaker 1:Now, by the way, it was supposed to come out April 1st. I've got an official word that they've now punted that down to October 1st because a series of folks like myself and others have said, hey, we're not ready for this. There's a lot of changes we have to make. This is a big rule change. This one rule change and I'll bet you a dollar is going to change the entire landscape of acquiring, especially for small community banks that are in the acquiring space and there are a pretty good number of us Because the way it's set up, the ratios that we have to hit as a bank for fraud chargeback ratios, which is super important because obviously we want to limit as much fraud, friendly fraud and merchant fraud as possible.
Speaker 1:But that one thing, chris, is going to change a lot of businesses and I think they've all kind of taken a breath of relief because it's not coming in a couple of days. It's still coming and you know we're all looking at that, going OK, we got to make some. We got to make some analytical decisions on what we do and don't want to support, because there will be a reckoning come October 1st and it may not be immediate and Swift, but it will. The wheels will start turning at that point yeah, I mean, I see people.
Speaker 2:This has been happening for a long time and you know it's less related to what you just said. Um, more related it. I don't know where the ratios are going, but the existing thresholds. You know, people buying low risk books to manage and offset high risk, you know, I mean it's and now I'm watching people buying organizations and not just books, right, where there's an actual acquiring apparatus for low risk, where people have been primarily focused on high risk, and I agree with you, I think that that's. I think that's something I don't know. It's interesting. It's sort of like when legislatures make laws.
Speaker 2:Sometimes I think the card brands make rules but they don't necessarily see the unintended consequences that they could potentially have in the marketplace. I think that the rules are based on a good intent but with a lack of foreseeability of its overall impact. You know, that's something that I think it's always going to be there when you have such a large. I mean, this is what I tried to explain to everybody when I was doing my training session is that you all participate in this credit system every day oh, totally Right, and you're unaware of everything that goes on it, and you're definitely unaware of the that goes on it. And you're definitely unaware of the card brands role. Right, I mean, there was, we don't even touch issuing. I mean, you probably have way more knowledge about issuing than I do, just being in the space as long as you have and working at a bank level. But I don't, because most banks do issuing on some level and it's a totally different animal. I've dipped my toe into it and seen it. It's very, very different. But you've got these rule makers and look, the card brands are basically our oversight. Yeah, I mean they, they are the ones that are running this regime and they've come up with it and the government has said, look, you guys seem to be doing an acceptable job here and and we're going to let you kind of run. There's no, no direct statutory framework on a federal level at least. We bump into some things.
Speaker 2:But overall, I see what you're talking about and I know that somehow in the marketplace the participants will do something to address a correction, uh, whether it's through acquisition or something else. But I also see that it it has really unintended consequences. I mean one this is totally off brand and off subject for what our conversation is, but you know the thing that we get called most about is surcharging. Today I I had somebody from a large entity contact us about surcharging. They found me through app, formerly Mac and when I was emailing with them I said, yeah, we get a lot of people on this and there isn't a federal standardization of that.
Speaker 2:There is the card brand rules, but then there's all these state laws that obviously are going to impact that. But for the merchant, if they don't have a partner that's selling, a merchant processing, that's giving them the education that they need, and somehow somebody complains because a consumer can complain to Visa or complain to their issuing bank it's $1,000 for the first fine. And then you have to show compliance and that isn't really that difficult. The $1,000, even for the small merchant can be a lot, but if you miss the compliance date it's immediately a twenty five thousand dollar fine. And for a small business, oh yeah, totally, and for a small business. And there's there's no forgiveness.
Speaker 2:That what I'm seeing with the card brand finds at least, and I understand why they're doing it. But again, I don't like when you start to meld all merchants as one merchant to create kind of like a standard. It doesn't. Most merchants are small, low risk merchant. That really is the world and those people. They're on tight margins and having to like shoulder, something like that and I don't think it's the card brand's intent to put people out of business. I think it's their intent to create a safe credit and debit regime that people can trust and that it's being accurate and fair to both sides. But I see the way that the card brands are administering and then enforcing these rules violations and it's not always. It doesn't seem equal to me. So I don't know if you guys see any of that on your level, but that that's one of those things where I feel like it's a hotbed right now.
Speaker 1:Yeah, listen, I think you. Just that is definitely one of the bigger ones and, mind you, it has come in. You know there's so many different names that I've seen out there. So there used to be called cash discounting and then I think that's now gone out of favor to now dual pricing totally yeah.
Speaker 2:They don't even want to say cash discount anymore I know yeah, no.
Speaker 1:When you say oh, no, no, it's dual pricing, I'm like what's the difference?
Speaker 2:there isn't. There isn't, but, but the accepted terminology at the at the the in vogue moment, is dual pricing.
Speaker 1:Yeah, dual pricing. So you know and you see all these and you're right, and so you know there are some and not. You know. It's funny. I used to be very, very active, as I said, on a board of a company that did this for government and schools, and that was, you know, one of the mandates for most governments in their bylaws is that it can't take less than 100% of the amount of whatever fee they're collecting, so like property taxes, parking tickets, all that stuff. So to take a credit card, they'd say hey, mr Consumer, you want to pay me with your Amex? You got to pay three or three and a half percent more because that's your preference and it's $100. Fine, you can pay me the cash or that. Okay, you know what? Cool.
Speaker 2:But they're exempted. Those, those state actors were exempted. I, yeah, like I that was news until cause I know who you're talking about and until I saw that that was news to me that the state actors they don't. They don't have the same rules. No, they're and they're totally exempt.
Speaker 1:They don't have the same rules, no, and they're totally exempt. And then even some schools, depending on how they're set up, there's some schools are created differently, but some schools were exempt too. But I think again, one of the things about our industry which I know you know all too well, and I say why I think you have such a thriving practice, is because the folks in our industry are very creative, they're entrepreneurial, they literally will find ways. I joke like the ISOs are going to you know them and the cockroaches will survive a nuclear war because they just are so amazing at just, you know, finding new. And then I hear all these and I'm sure you do too all these models. I'm like, is that even legal? Yeah, of course they do. Oh, totally.
Speaker 2:No, no, no, Look, trust me, man, I mean, there's all sorts of stuff where they're pushing the envelope and the you know it's, you know, is this money transmission? You know? I mean, you know, trust me, we see it all the time and I hate to be a naysayer to people that are trying to be entrepreneurial and find an opportunity and look, I just think that's the ISO. I agree with you. I said this and I've met him a couple of times and he probably wouldn't know me if he saw me. But Jared Eisenman has been in this business for a really long time and Jared I've had more interaction with his general counsel, but he was actually a nice guy too. Jared to me has always seemed like a really nice guy.
Speaker 2:When I've encountered him it just just ran, you know, just comes out of a space and I in my training I explained to everybody I'm all look like there used to be just this thing called the retail iso and I think one of the guys that really championed wholesale iso and really found stickiness I mean, remember the harbor touch pos system I mean he like created it and basically gave it away. But then you know, once you give something free to somebody, even though you might have to charge them a little bit more for the processing. You just, he just created the stickiness and that was one of those entrepreneurial moves that I watched him do. That created, you know, the ability to ramp to what shift four has now become, as it rebranded, and I think that ISO, like you said, they're going to find the space where money can be made, and that's actually helped my education in this business immensely, because I'm watching people do things in the granular which we weren't really exposed to early on and as I've had to understand our clients and what they're trying to do, to give them good advice, to give them some boundaries where it's required, or to say, look, here's where bright lines are. The rest of this is all gray and here's the potential outcomes associated with it. It's been beneficial for us to actually learn payments in a way that I didn't initially learn when we came into the space.
Speaker 2:But that to me that raises another question, because I don't sit inside your organization or any of our clients' organizations. I have at times I've audited, I've seen what they look like, I know enough to be dangerous, but I don't know if I could be. Know enough to be dangerous, but I don't know if I could be, you know, kind of an oracle to see where things are going I get. You know I'm a great emulator. That's my as an attorney. I've always said, look, I don't have to be the one that comes up with the great legal theory, I just have to identify it and then reuse it.
Speaker 2:Where do you see kind of the industry evolving? Where do you see kind of the industry evolving Like what is the next thing? That is, it may be visible up on the horizon, or maybe it's right here right now, I don't know. I always like I went to NEAA last week and somebody asked me how it was and I'm all it's an acquiring conference. You know, like they're kind of very similar to one another, and then you know what did you get out of it? I said I get an opportunity to talk to people that I either represent or I may represent and find out in a space where I'm not in my office doing work with the demands of my business, to talk to them about their business, and I don't get that opportunity a lot. I like these podcasts for that reason, because this is a time period that I've allotted to just say, hey, tell me what's going on? What do you see as the thing that's on the horizon, that you feel like there's either going to be a challenge or an opportunity out of it?
Speaker 1:Okay, I'll go back to this VAMP program If this goes the way that it appears to be going. A lot of high-risk merchants, high chargeback merchants, the kind of easy come, easy sale, I'll use your Facebook sale. You're like, oh, those sneakers look cool and you buy them. And they show up on your door. You may not want them. You bought them at midnight, you don't remember buying them, who knows, right.
Speaker 1:So the idea that, ok, I can buy it easily and I can return it or, frankly, charge it back easily, that will fuel the next iteration of the ISO industry, because they can't live off of high risk merchants and load balancing their book with, you know, low risk business. High risk isn't going to net them out the 60 basis points they're trying to get to, or whatever the number is. And so that's one of the reasons why we created what we did with DART 360 is to say to them hey, look, go out and get the main street business that you look at is not very profitable, not very interesting, and then offer them, you know, two, three, four, five services. So you went from making let's call it 10 basis points on the merchant account to making 50, 60, maybe 100 basis points on all these products that they are consuming somewhere else. And that's it. It's bundling, it's hearing embedded finance. I'd like to even take it a step further and call it embedded banking and say to them hey look, they're in that dashboard every day checking on their merchant deposit. Talk to them about a line of credit, an actual loan, not a cash advances. Those are very challenging to pay back. Do you need a credit card? You just need your money faster.
Speaker 1:And these are products that they're out there, but they're disparate, and so you got to put it in one place so that the consumer, the business and, as I said to you before, meet them where they are. They're there on that dashboard looking at their business, saying, gosh, how am I going to make payroll next week or next month? Or I want to expand my business. I'm doing well, and the place next door just went up for lease. I need money. Like this is what I think is happening and going to happen and, by the way, chris, other people are doing it. So I wouldn't say like, oh, I've created an entire market. I did what you just said. I saw what was happening and I said, ok, how can I do this in the world I live in with the tools and the resources we have as a bank.
Speaker 1:And that story really flushed itself out pretty quickly to say, well, we're the bank and we are, you know, we still are A community bank, is still the respected financial institution that we, you know, as kids, we used to go in with our little passbook and, you know, put our, put our, our newspaper money deposited in, and it still is that way. But it's now online, it's now digital, and so that's what we're trying to do, and again as a bank. So they get it. You know, they get a DDA, which is FDIC insured, unlike what happened with Snaps, where they thought they had a bank account but it wasn't a bank account. Now that money is somewhere in the ether because the FDIC is saying, hey, that's not us. The sponsor bank is saying, hey, we did our job, and Snaps is bankrupt. They shut the doors and turn the power off and there's $100 million of people's money still floating out there that they can't exactly say whose is what, and that's not fair, that's awful.
Speaker 2:You triggered something in my mind too. It's interesting today because one of the things that I've heard is at the processor level, because it changes the dynamic of the architecture of what you're talking about by almost being bank direct and having an opportunity to work directly with the bank, even if you're doing it through Westtown Payments. You know, ultimately a processor is always going to be needed. But the fact is is that the processor has been the competitor of the ISO for a long time. They just weren't the competitor in the processing portion, and now what you're talking about, people can't even get contracts with Fiserv or TESA or WorldPay, and it's much more difficult to be a registered ISO today than in any different time, because I think the processors are now seeing them as competition.
Speaker 2:Different time, because I think the processors are now seeing them as competition and so the terms have become somewhat onerous in those agreements, because they want to lock you down and kind of control you for a long period of time, whereas that way you can't go take care of the or you can't take advantage of the opportunities that are coming into the marketplace like this, because that's not something that they're going to offer you.
Speaker 2:They're actually going to shield you away and you're not going to be able to dip your toe into ancillary services that are bundled up that your end merchant might need. In fact, whatever opportunity may be there, they're probably going to try to cut you out, and so I didn't even think about it from that perspective until I heard you talking, but I think that that's actually one of those things that might be a disruptor or differentiator for kind of the DART 360 platform that you're talking about as a loss leader maybe, of acquiring agents and building an agent base where they would have traditionally gone, maybe, and tried to register. It might be a lot easier with Westtown Payment and you might have a much more kind of commutative, less you know like. The relationship will be less adversarial, because it does feel adversarial with the way that the terms get dictated down a lot of times and they're not usually in favor of the ISO.
Speaker 1:It's. The entire industry is, and it has always been changing. You talk to the old, old, old garden. I guess I'm part of that. Now they always say, oh, the good old days. The good old days you know, we used to and like, well, I don't know. I mean, I think it's all relative. Every, every every stage of my career, I've noticed some change. Some things are taken away, some opportunities are presented. One of the other things that you didn't even talk about, but I know you're aware of, is that even the card brands are now competing with the processors.
Speaker 2:Yeah, With the ISOs Totally. So now you're like you can go to Visa direct now. You totally can yeah, absolutely yeah, and and and and and.
Speaker 1:By the way I've looked at that platform like that is compelling and and and and. Frankly, uh, one of the other things we didn't talk about is when you go to become a direct iso, have your own bin and do all the things. It is really expensive, really expensive now, totally, but I feel like it's less.
Speaker 2:It's less prohibitive than it used to be in the past, because technology is there, are there are a lot of smart people that have come into this space to allow for things to be purchased. That might, I mean, think about. If you wanted to do underwriting and risk on transactions 15 years ago, right, I mean, not only did you need a qualified person, but you needed a qualified infrastructure that could handle all that, and that was not something that was widely distributed. And if you were going to invest in it, it was cost prohibitive. Like the idea to transition to wholesale ISO or FSP. It was so difficult.
Speaker 2:And today I feel like there is more opportunity for you to get your foot into that space by leveraging other people. I mean, stripe still calls itself a technology company. It doesn't call itself a payments company, so it's like technology interceded and now they're saying, hey, here's something for you to have an opportunity, have an opportunity. Have an opportunity where it may not have been available before and you know they're creating this. You know, I used to always hear, you know, iso in a box, business in a box, business in a box, but maybe that actually exists a little bit more today. All right, so I'm going to give you the last word as we take this away. What's the biggest takeaway that you want to leave us with about Westtown Payments?
Speaker 1:Boy.
Speaker 1:I would say specifically for the audience and I'd call it the ISO agent audience is that Westtown Payments is not only ISO, folks who come from ISOs who now are looking at the world from the bank's view and now bringing products and services to the ISO so they can now compete with the likes of the Squares and the Toast who are, you know, back when they came out we all looked at them and said, oh, that's not competition.
Speaker 1:They are unequivocally competition to the ISO and agent today and we're helping these folks go in and win back the business that they lost or are losing or couldn't even compete for in the current market. And that's really where we sit and what we're trying to do. And now that we're really settled with a partner, a bank that is here for the long haul we literally just celebrated our 100th anniversary and we're looking to create the next 100 years for this bank through the payment ecosystem they should definitely take a look, reach out love to show you what we're doing and, uh, you know, hopefully we can help them grow their business and, in turn, ours.
Speaker 2:All right, well, look, thanks for sharing my coffee with me this morning. Jeremy, do you want to? Jeremy? Jeremy loves to get himself here on the podcast any way he can. You know he doesn't want to be behind the scenes, he wants to be over here.
Speaker 3:So he always I got a camera right.
Speaker 2:He usually has, yeah he usually has a question going. But you know, do you want to ask anything?
Speaker 3:Jared Cause no, I, just I, tom, is there a way you want people to reach out to find you? I want to say just, you know, I feel like a listener here. I learned a lot on this podcast today and I think it was a great conversation, so I really, really appreciate it and, tom, maybe sometime down the road we'd love to have you back as well.
Speaker 1:Hey, listen, I love it. You know, certainly, my relationship with Chris has spanned a couple of decades now and we've watched not only our hair turn gray but also this industry evolve. And so, yeah, man, happy to, especially as we kind of look down the road at, like you know, at the end of the summer, like I said this, visa rules are going to come into play. It's going to change the landscape. There's a bunch of other things AI we didn't even touch on.
Speaker 2:Yeah, maybe that's the next podcast. I'd be interested to hear of a bank-centric discussion about AI and the tools that are available and how it may be leveraging that. By the way, everybody Tom lives in Park City. If anybody wants a snow report, you can always hit him up too.
Speaker 1:There you go. You can also go to Facebook and follow the Powder Buoy, who's a buddy here in town. I've never seen a more accurate predictor of when the powder is coming. If you follow the Powder Buoy, you can also follow my calendar and know when I'll be out of the office and when I'll be in the office, but I'm happy to love to talk to you guys.
Speaker 1:I'd say the easiest way to get in touch with me without any barriers is just find me on LinkedIn. I'm very active on LinkedIn. I joked to someone the other day that there's only two, maybe three, tom Lanines on LinkedIn day that there's only two, maybe three, tom Lanines on LinkedIn. The other guy is a rugby coach in Australia and the third one owns a construction company in Ireland. I'm neither of those. I'm the Tom Lanine that's in payments. That's right.
Speaker 2:I'm the Tom Lanine with the best hair.
Speaker 3:Sounds like the best winter schedule. Tom, it was a real pleasure. Thank you, tom, absolutely, gentlemen. Thank you both. This was an excellent conversation and thank you for listening to the Payments Experts Podcast, a podcast of Global Legal Law Firm. We'll see you on the next one. All right, thanks, tom.
Speaker 1:Gentlemen, take care.
Speaker 3:Thank you for listening to this episode of the Payments Experts Podcast, a podcast of Global Legal Law Firm. Visit us online today at globallegallawfirmcom.