The Payments Experts Podcast
Expert payments attorneys discuss the electronic payments industry from a legal perspective.
The Payments Experts Podcast
Cash Card or ChatGPT Receipt Hack? Behind the Scenes of Payment Processing w Allen Kopelman | PEP051
Two payments industry veteran experts talk about electronic payments in a way you have never heard before. Join Christopher Dryden, Esq., and special guest Allen Kopelman, Nationwide Payment Systems, Inc., for this in-depth, fascinating discussion.
Check out Allen’s new NPS One platform coming soon, offering merchants a comprehensive business tool with rapid approval, virtual terminal capabilities, invoicing, links to accounting, embedded finance options, and more.
The payments landscape is transforming rapidly through consolidation, technology integration, and changing fee structures, leaving merchants and payment professionals scrambling to adapt. Major processor mergers like Global Payments acquiring WorldPay have reduced competition while software companies increasingly control payment relationships, disrupting traditional ISO business models.
Software has become the central battleground in payments. When every business operation connects to software platforms, those platforms increasingly dictate payment processing choices. "ISO software is the new ISO," as one expert noted, with many businesses finding their payment options restricted by their essential software providers. Private equity-backed companies are purchasing previously "agnostic" platforms and redirecting merchant payment streams, creating significant challenges for payment professionals who built businesses on residual income.
Dual pricing (formerly cash discounting) and surcharging have emerged as critical merchant strategies, with approximately 35% now passing processing fees to customers. This shift occurs amid complex regulatory challenges – Visa capping surcharges at 3% while MasterCard maintains 4%, alongside state-specific regulations in New York, New Jersey, California, and Colorado. Merchants face practical implementation hurdles, especially in retail environments where displaying dual pricing on physical merchandise creates logistical nightmares.
Despite digital acceleration, cash maintains surprising resilience. Many workers receiving pay cards immediately withdraw cash, while certain business segments (contractors, repair services, salons) continue offering cash incentives. One payments expert reported dispensing over a million dollars monthly from a small ATM fleet, demonstrating cash's enduring role in specific economic sectors.
The industry faces critical ethical challenges too. Some agents program terminals to display higher surcharges than merchants actually pay, creating hidden profit centers. Others establish questionable referral relationships that potentially violate card brand rules or trigger money transmitter regulations. Without industry-wide agent tracking or standardized licensing, these problematic practices continue unchecked.
What does this mean for your business? Understanding these shifting dynamics helps you make informed decisions about payment processing, software integration, and fee structures. Whether you're considering implementing dual pricing, evaluating integrated software options, or simply trying to minimize processing costs, staying informed about industry trends provides crucial competitive advantage in an increasingly complex payments ecosystem.
**Matters discussed are all opinions and do not constitute legal advice. All events or likeness to real people and events is a coincidence.**
Go say hello to our guest Allen Kopelman over at https://nationwidepaymentsystems.com/
Visit Global Legal Law Firm today: https://www.globallegallawfirm.com/
A payments podcast of Global Legal Law Firm
So, Chris, what do you think about this merger?
Speaker 2:What merger?
Speaker 1:Global Payments buying WorldPay.
Speaker 2:Really, when was that announced? Yeah, I didn't think Global Payments had that much money.
Speaker 1:Well, somebody's got some. They're paying a bunch of money for it.
Speaker 2:Wow, so that leaves us with what? Two processors now? Yeah, that basically it. I mean, who are the smaller guys in town? Not much, I don't like.
Speaker 1:I don't like that. I don't like that merger at all, because that eliminates another processor.
Speaker 2:I know processing and I think the processors are now like competing against the ISO in a lot of respects.
Speaker 1:Well, they're competing against us. That's what I've been talking about for two years. Iso software is the new ISO, and all these software companies are taking over our business. Look what James Shepard is creating with his full stack payment.
Speaker 2:I haven't seen that. What's he doing?
Speaker 1:He's making this company where he's got a bunch of ISVs and then he's letting people sell the software and then paying them residual for bringing in leads, but only 50%.
Speaker 2:Wow.
Speaker 1:Yeah, you got companies like world pay and other companies and they're just all. The sales are just internal, no reps.
Speaker 2:Yeah, I mean the software aspect of this. You know I I didn't see it transitioning like that, but that's where we are now and I don't really know what me and james talked about it on the.
Speaker 1:I did a podcast with james and that's what me and him were talking about how the shift in the business and now you know these, especially these agnostic companies, get bought up by PE money. And then the next thing you know they're not agnostic and we're losing merchants off our residual.
Speaker 2:Yeah, I mean it's crazy because the from the ISV channel side, every, every business is tied to a piece of software, now Everything. So you know what? Yeah, you know what do you? How do you get around that? I don't know how that even occurs.
Speaker 1:And they're getting around it. They want to control the payments yep then james gave the example. Like you guys use law firm software, yeah, and that's all control.
Speaker 2:we asked them hey, we're in this business, can we go ahead and bring in somebody that we already use? You know, we'll build out and code out to an API. And they said no. And this is actually fairly flexible software, the new one we're using.
Speaker 1:Yeah, well, most companies, that's what they do. There's no options for that. Well, that's why Look at the company Lightspeed. That's why they bought all these POSs and then they put everybody now on Stripe.
Speaker 2:Well, that's why you find them, where they're actually violating surcharge rules, and go fucking sue them all. Oh, you guys want to be in the payments game? Huh, they're on Stripe. What are you going to do? Yeah, but that's not who you're dealing with, the person that's actually taking your money. It doesn't matter, let them go fight with Stripe, right?
Speaker 1:I don't think Visa and MasterCard give a shit what Stripe and what Stripe or Square does. I mean they own stock in Square.
Speaker 2:Yeah, I know there's so many conflicts of interest Fucking ridiculous.
Speaker 1:I mean Visa owns Cybers, whatever Cybersource and Authorizenet.
Speaker 2:Yeah, no, no, no. I mean, if it's not a monopoly, at this point I don't know what a monopoly is.
Speaker 1:I mean, you know, you have everybody selling payment processing Swipe, simple NMI, authorizenet Clover. Everybody offers merchant services.
Speaker 2:Yep, but they also offer a very shitty product. So the ISO may never go away just because there's enough people out there that don't want a shitty product.
Speaker 1:Well, that's why you have companies like the guys I work with GED. They just finished building out their whole platform, and not only that, they built out their building, they're adding equipment onto it and they're at. They're also adding a mobile reader like swipe simple. So they can get rid of these companies because they're you know, because they're going to poach our business.
Speaker 2:Well, that's another that's the other nice part is is that you get somebody who's got a very merchant-centric platform and you give them a bunch of information and you show them how to use it. A lot of times they're trying to hide. That's the one thing. Is that they're trying to hide. I mean, either this is truly a commodity and we are at a race to the bottom and the people sitting at the bottom are going to be the card brands. I don't know.
Speaker 1:I don't know either. I don't know. I mean the same thing with dual pricing, right? You know, I saw a survey that said 35% of merchants are passing a fee one way or another.
Speaker 2:Yeah, that doesn't surprise me. I mean shit out here they were passing a fee for you walking in the restaurant. Yeah, you know what's this? This is the walk-in fee. You entered our property. You owe 4%.
Speaker 1:Yeah, there was a restaurant out there that got in trouble. They were charging a security fee.
Speaker 2:Whatever they want to call it Totally, it's crazy.
Speaker 3:Alan, wasn't it you on LinkedIn you were actually posting pictures of receipts that you've actually experienced. Isn't that right Of?
Speaker 1:some of those fees, some of those junk fees.
Speaker 3:I posted a few a while ago. Yeah.
Speaker 2:Yeah, those are truly junk fees. Right, Want to know what's crazy.
Speaker 1:You could take a receipt today, upload it to chat GBT and change it, and that's effed up, bro, it's really scary. Okay, all right, every bank, so the bank of America, chase whoever right, doesn't matter what bank it is. Every bank has their own font. Okay, every machine that prints out a receipt Deja Vu, pax, verifone, an ATM machine, heosong is different than GenMega, different than Triton. When they print receipts out of those machines, that font is unique to that piece of equipment. But now you can scan a receipt, put it in chat GBT and change it.
Speaker 2:And change the font. No, change what's on the receipt and keep the same font no, change what's on the receipt and keep the same font. Yeah, how do you print it?
Speaker 1:Print it out from chat GBT. Turn it into a JPEG and print it. In other words, you can fraudulently say hey, I've got this receipt for X number.
Speaker 3:That's wild, I've seen an opportunity. You can dockerently say hey, I've got this receipt for X number. That's wild, I've seen an opportunity.
Speaker 1:They were talking about doctoring it up and turning it in for your expense report.
Speaker 2:Yeah, it's crazy.
Speaker 1:Chris goes out to dinner, spends $100. Instead he changes it to $300. And turns it in. And turns it in.
Speaker 2:Yeah, but you know, when you use ChatGBT to do something like that, it would still trace back to you, wouldn't it Trace back to who Wait, don't you have to?
Speaker 3:create a user account. No, you don't, chris, you can go incognito.
Speaker 1:Probably. To do that, you need a user account.
Speaker 2:I would think to do something like that you would need a user account.
Speaker 1:Yeah, because you need the imaging software.
Speaker 2:Yeah, yeah, like you'd have to disclose who you are, so what?
Speaker 1:How does your employer know if you're on? You know Jeremy goes and changes the receipt.
Speaker 2:Say oh, I put this on my personal card. Here's the receipt. I don't reimburse anything to Jeremy. I'd never reimburse anything. Fucking kidding me. He says he's coming down here to.
Speaker 3:Boca, he's going to take me to New York Yankee Steakhouse. Chris. Alan, I've tried, with the crayon you know, for Chris to reimburse my receipts.
Speaker 2:He said it's not good enough. That's right, man. I stopped writing in crayon last year.
Speaker 3:Welcome to the Payments Experts Podcast, a podcast of Global Legal Law Firm. We hope you enjoy this episode. Welcome to the Payments Experts Podcast, a podcast of Global Legal Law Firm. Today we have joining us in studio founding and managing partner of Global Legal Law Firm, christopher Dryden, as well as joining us remotely from Florida, alan. It's great having you on the show. Alan Kopelman, from Nationwide Payment Systems, you've been on our podcast before and we appreciate all your flexibility. We've tried this podcast now a couple of times and we think it's going to work.
Speaker 2:Take two. Yeah, we started the other day. Thank you for your patience, alan. I really appreciate it. From one podcaster to another, alan has his own podcast everybody. It's the B2B Vault Biz2Biz Podcast. Alan is a long-term industry vet who loves to talk and knows a ton, so if you sit around long enough, you're going to glean some really good information and we're hoping today is going to do that. Alan, how are you doing and what's going on with Nationwide Payments? What's new.
Speaker 1:Listen. We're getting ready to launch our new thing called NPS One. It's a really cool platform. It's going to pretty much rival what Stripe is able to do, yeah, well tell us a little bit about it, or are we too premature?
Speaker 2:We can't let the cat out of the bag just yet.
Speaker 1:It's pretty much ready. We're just putting a couple of finishing touches on it, but basically, right now we can send you a link with a specific pricing structure. You can click on it. You would click on the link. Put in your email address. Put in a password, start filling out the application. Put in all your information. You can be approved within 15 minutes Awesome, Unless we need your information. You can be approved within 15 minutes Awesome, Unless we need additional information. Then, from there, that same login is where you go in and you can access the virtual terminal credit cards, ACH, send out payment links, get voicing, create product, post it on Facebook and sell it, hooked up to Google Pay and Apple Pay and everything.
Speaker 2:So you're just doing like an AI scrub through the application process and vetting it through third parties to make sure everybody's who they say they are.
Speaker 1:Yeah, I mean, if we can't get your driver's license verified, the software you'll get an email saying, oh, upload your driver's license verified. It'll the software will. You'll get an email saying, oh, upload your driver's license or void a check, the average ticket is too high or the processing volume is over a certain amount.
Speaker 2:It'll trigger to ask for, you know, merchant statements or the void a check, things like that's one of the places that I've been fascinated by the kind of the behind the scenes where you've got AI working in the background to do through the application process of vetting of information. You know I like the speed in which things can be verified and, you know, through the data collection houses and what's out there. I mean I just find it really fascinating. That's one of the cooler aspects of technology is the ease of access. I mean I've also seen on the other side where ease of access three weeks into processing meets underwriting, and it doesn't always equate to a good thing necessarily. It seems like there's a competition in there. I got access but the risk analysis is only like so good. So you know there's some uh, there's some downsides.
Speaker 1:Actually look at the, look at the account. But now the guy, the underwriter, doesn't have to sit there and go. Let's look this guy up on google and here and there it already. The software pulls up their business on Google, finds it on Google maps, looks for a picture of it, looks for websites, social media, everything. The credit is pulled, they can see everything and then it's scored.
Speaker 2:Yeah, the KY, the KYB stuff, for sure. Like I was just thinking more along the lines of once they start processing the risk analysis, it begins again. So you know it's a.
Speaker 1:Not so much because I think pretty much we're doing. We've been using this for like over a year, maybe two years now, so it's pretty much down to not it'll catch the bad guys on the way in.
Speaker 2:Yeah for sure. No, no, no. I mean, that's the thing, that's the beauty of technology, and then the mastery of humanity is that somebody is going to try to figure out how to break that stuff too.
Speaker 1:So today, Then when you log into the system, you're going to have everything there. You can see your deposits authorizations. You're going to have a terminal being linked up to it soon, Real time Be able to do everything. Woocommerce plugin.
Speaker 2:Real time.
Speaker 1:Also QuickBooks.
Speaker 2:Huh, real time, real time, real time. Awesome man, that sounds really exciting, really cool.
Speaker 1:Sounds really exciting. That's going to be really cool, sounds really exciting.
Speaker 2:I mean, look, I think these are the types of technology platforms that are really in need. You know, I talk to merchants on the daily and having access to educate merchants, I think the technology in itself educates the merchant to understand cash flow, what they need. You know, I'm going to go ahead and tell you, like a plug-in to uh financing, where you've got real-time processing data, is probably another one that you want to throw in there if you haven't.
Speaker 1:But uh, it sounds, uh, sounds pretty awesome and there's also going to be embedded finance that'll let you know like you could get a loan or a credit card, things like that. That's awesome.
Speaker 2:That's the stuff we're pretty excited about it. Well, I think that, from an underwriting standpoint, when you're looking to underwrite a business, I mean, it's one thing to rely on the personal guarantor, but if you can really see the financial activity of the business because everything's housed in one place and it's not segmented out and you know you can take data and feed it through some sort of authorization for an underwriting process to embedded finance, I think that's pretty awesome yeah, it's going to be.
Speaker 1:I'm like very excited about how this is going to grow sales over the next couple of years. Yeah, well, we're talking today.
Speaker 2:Well, but it's a business tool, right? I mean, to me the things that's the stickiest is going in and educating a business owner about his, about his or her business and how to have a better handle on business and provide them tools to do more business and make things easier, and that's what this sounds like yeah, it's going to be a complete business tool for businesses.
Speaker 1:It's not credit card processing anymore, it's a full-blown fintech business tool product that's going to also link up to your accounting software and it's going to make business businesses, going to help them grow their business well, let's call it what it is it's middle, it's middleware, right, I mean it's it's getting in between all of these different things to find a hub and, you know, connect it all.
Speaker 2:So I think that I'd look, man, I, it sounds so good, I. There's some days I may want to quit this job and just come sell for you, bro, let's see all right, but that's not why we're here today. Um, I love self-promotion as much as the next person, but today we're going to take Alan's expertise and we're going to talk about surcharging, cash discounting which is now more commonly referred to as dual pricing and other items related to the subject matter, both from the card brand rules perspective, as well as applicable law that might be out there, and kind of how it looks from the good, bad and the ugly of what's going on in the marketplace. What do you think, alan?
Speaker 1:Well, I think that I saw a recent survey that I was telling you about earlier. I saw a recent survey that I was telling you about earlier 35% of merchants so that means more than one in three, one out of three, maybe a little bit more than that are passing a fee of some sort to the customer at this point.
Speaker 2:Let me ask you something about that, because I was surprised by that number. I'm actually surprised it's that low. My question would be why do you think more merchants out there aren't passing it through? What do you think the barriers are to the merchants? And it could be anything from a lack of knowledge to a potential penalty.
Speaker 1:What do you think? I think that larger businesses are afraid to do it, although I can tell you, we have some very large companies that do surcharging, compliance surcharging, and they're not afraid to do it. I'm talking about people doing millions of dollars a month. Okay, but what do you do in compliance?
Speaker 2:but if you had to like, buck it out, you know a few, a few reasons why you think people are staying away from it and I and I understand, like the big box stuff, you know, like larger merchants, they don't want to push it brand. You know they, they truly have brand and they don't want to be, you know, targeted with. Yeah, come to walmart, we're so awesome, but here we're going to tack on whatever our expenses are. Are you truly getting the savings? That part I get, but in your position and what you see and who you talk to, what are some of the other things that you think?
Speaker 1:I think that competition is a big thing. So I think if you're in a competitive business type that it's harder to pass the fee than it is somebody who's like you're renting out some jet skis and you're on vacation and the guy says oh, it's 300 bucks plus another 4%. You're not going to sit there in front of your wife and kids and go. I'm not paying this extra 12 bucks.
Speaker 2:You know, I that one, that one, I understand. But you know, but, but, but, but. But hear this out, like if it's between Chili's and Applebee's is the decision. I don't need either one of those places, but yeah, I wanted to find two establishments I thought were kind of similar or shenanigans.
Speaker 1:No, I think it comes down to this. I think Visa should just let merchants do whatever they want. They should write a rule for dual pricing. Stop dancing around the whole surcharge thing. Let the consumers decide if they're going to pay these fees or not. Let the consumers decide. The consumer wants to pay the fee. They're going to patronize that business. If they don't want to pay the fee, then they'll go somewhere else.
Speaker 2:Well, you know our history with Visa and, look, I've been saying this for a really long time and you know where it probably stuck out to me the most was. You know, 15 years ago I started looking at the chargeback process because I saw how much money one of our clients made off of chargebacks. And I was sitting there looking at it and I'm thinking to myself, how can this be? And then I actually learned the process and I started to see that winning a chargeback was really difficult, so much so that businesses, like a whole business, you know group, came about to do chargeback mitigation and representment right. Like I mean, those businesses didn't exist. But the thing that stood out to me most was this you know, conflict of interest between the card brands, from issuing to acquiring, and you know who they really favored and why. And I kind of started to see trends related to that.
Speaker 2:And I don't think this is any different. I mean, when we've talked to people at the card brand level to talk about why that Visa instituted a cap, it really comes down to cardholder complaints. I mean, that's what drove it. And I don't even think it was like rampant or anything like that, it was just hey, this is going to be a problem. Here's a way that we could potentially take advantage against our, our most direct competitor. You know, let's cap this out without any thought process of like unintended consequences, abridgment of contract terms, of people building a business off of finding the spread between interchange and the surcharge amount to do an alternative payment application. But what do you think is driving MasterCard's cap? I think is reasonable. What do you think the drive for Visa was to come up with the cap? I got another question after this, but I'd really like to get your opinion on that.
Speaker 1:I mean, I think it's confusing to the merchants to say, oh, visa's got a cap of 3%, mastercard's sticking with the 4% from the Durbin Amendment, and I think that's confusing the merchants, plus all these states coming up with their own rules new york, new jersey?
Speaker 1:um, I think california has a rule of colorado's got one that's actually pretty right, but yeah, like some some of them cap it no, but I think, when you look at all of this, I think it's time that either the, that visa and mastercard need to make a rule about this. You know one thing that I've always seen in credit card processing merchant services, like you talked about all of a sudden, chargeback mitigation companies were born Actually one of the biggest ones. A merchant started it that had a bunch of chargebacks.
Speaker 2:Was that Chargebacks?
Speaker 1:911? Yeah, I think 911 and Gur's was both started by merchants.
Speaker 2:Yeah, we represented Chargebacks, even as a guy just beautifier.
Speaker 1:He started and he was a merchant.
Speaker 2:Yeah, no, no, no, trust me. We represented Chargeback Guru's for a process that was for a long time. You had 14 days, but by the time the ISO sent you the snail mail notice, you were probably beyond your period of time to even contest it. So it was always interesting. So you know, it was always interesting. Earlier, you were talking about coming up with a rule for dual pricing. I want you to unpack that and give us your thoughts about that of what you think a best practice would look like.
Speaker 1:Well, I mean, right now, I mean, merchants are, so let's just kind of backtrack a little bit Sure.
Speaker 2:Give some background.
Speaker 1:Okay.
Speaker 1:So when everybody first started passing the fee, it was just cash discount. There was just this non-cash adjustment appearing on the bill. Of course Visa decides, ooh, this is not so good. And there's been comments made by somebody from Visa on a recorded YouTube video saying they didn't like it. That people that ISO community, agent community was making a lot of profit. So that was said it can't get taken back. It's on YouTube, a video with James Huber. Oh, I remember.
Speaker 1:So the thing is this. So they come and they say, oh, non-cash adjustment, you can't do that. Okay, we're all smart, we're business people, we're entrepreneurs. What do we do? Okay, now we're going to come up with dual pricing. We're going to tell the merchants to put the higher price on the shelf, the higher price on the menu. Then the receipt prints out and it says okay, your dinner's $104, but if you want to pay cash it's only $100. And that's basically what everybody's doing right now, and probably Visa doesn't like that either. I would guess that they don't. The car brands don't like dual pricing. I know they don't like surcharging. They're not in love with it.
Speaker 2:You know, one of the interesting things was, as I was talking to one of our clients who is a POS designer, and they had come up with a display that at checkout, it would do it for you. It would, you know, actually give you cash credit, cash credit, cash credit, so that it was real time in front of you and totally visible right Now. And Visa came back and said, yeah, but that's not at the display, like, you got to do it at the point of display of the product, right, I mean, they were finding every way to say this isn't okay. Even though the font was like gigantic, like the screen, it looked like one of those at the roulette table where they're showing you the previous numbers, right, I mean, the thing was huge. It was, you know, as far as disclosure goes, goes. There's no way people couldn't see it.
Speaker 1:And still, visa found fault with that too, in new york now I've seen friends of mine send me menus because I asked them hey, would you go eat out to eat? Send me a menu from a restaurant and you'll see on menus now oh, pepperoni pizza I'm just giving an example $20, and then it's $18.50 for cash and they have to display both prices.
Speaker 2:I think we're going to move into a world of digital signage, right? I mean, that's the only way that you're really going to be able to keep up with all this stuff.
Speaker 1:I mean at some point. I don't know if merchants can afford digital signage to be on every item in their store yeah, I saw something.
Speaker 2:I saw something recently where a software system through wi-fi, through geolocation, could do pricing updates from a terminal like a computer terminal to us to to where a geolocation of a skew to actually display it. Now I don't know how good it was, I don't know how cost like prohibitive that might be, but yeah, anybody that's a retail store, that's good. I mean, I don't know how you're going to operate outside of it. I mean, what do you do? What do you do if I go into nordstrom's and I go and I look at the tag right, is it like how do I deal with a cash price versus a credit price? You know, like, is there any ability for some types of stores to even do this based on how they display their goods?
Speaker 1:I don't know well, that remains to be seen, but I I still think that the card brands need to address this, because it just needs to be addressed at this point. It's like the elephant in the room and they're just hiding it. You know, merchants get these thousand dollar fine letters and then they just go change all the prices and they send it into the, send it into Visa, and Visa goes away. You know, for a for a moment depending visa goes away. You know for a for a moment, depending on the merchant.
Speaker 2:I mean there's a lot of people I mean I've also seen that they've got a different um. Thank you, jeremy. They've got a different uh um penalty scale for secret chopper versus uh customer complaints, where it goes from like000 to 5,000 on the secret shopper and even with compliance, and the second violation is five On the customer complaints. It goes from one to 25.
Speaker 1:Yeah well, that's kind of crazy. I mean, I don't like that whole secret shopper thing. There's some app called Presto Shop or something and all these locations are in there of merchants that are passing the fee, and then they're asking secret shoppers to go in there and get receipts.
Speaker 2:Really, I hadn't heard of that. That's crazy.
Speaker 1:Oh yeah, there's an app, presto Shop it's called. You can sign up to be a secret shopper and then it'll show you all the places in the area around where you live of things to go secret shop and there's a whole bunch of things listed in there for visa almost sounds like entrapment.
Speaker 2:I think a bunch of people were targeted. I've heard this from I, I've heard this from, uh, a few larger players tied to one particular acquiring bank. Um, I just don't want to name names, just because I know all these people. Um, but it was almost the acquiring bank's response to it that put the scrutiny on the isos. Um, at least that's the, the where they feel like there's a common thread. I don't know the veracity of that, but I did find it to be pretty interesting. But going back to the dual pricing rule, what do you think a good dual pricing rule I mean, new York's got kind of like the leading legislation at this point that everybody kind of seems to be following, and I think if you have dual pricing, that's sort of been a flagship for how other state actors would do it. But what do you think? Do you think that's really good or do you think it needs to be a little more abridged?
Speaker 1:I mean, I think that's kind of onerous to merchants to print menus out with prices on it. I think people who buy with card don't care. They're going to spend their money, they're going to use cards, and people don't like to. And then there's a whole nother group in society that likes cash. I mean, we, you know, and that's just the way it is. There's people that walk around with cash on them all the time they pay for everything in cash. And then there's people that put around with cash on them all the time they pay for everything in cash, and then there's people that put everything on a card.
Speaker 2:Yeah.
Speaker 1:I mean, I get that.
Speaker 2:I think management-wise, and cashback and rewards, I think it makes more sense. As a cardholder, I don't see the need to have a whole bunch of cards. Just give me the best deal and I can manage all of my purchases from one place and I don't have to deal with having multiple cards. I kind of limit the use of a lot of my cards but at the same time, cash is going to go away, don't you think? I mean, I still think the utility of cash is ultimately going to go away. Even even when we were in Vegas a couple weeks ago, I mean, the way that they're doing the voucher machines and you know you can use a card to get into anything, like I. I agree with you. I think that there's a lot of benefit to cash and at the same time, I I kind of see it going away at some point, don't you?
Speaker 1:no, I don't see cash going away. I think it'll take a long time to get rid of cash. Why? Because there's so many people that get their paycheck, they just cash it, or their, or they get a pay card and the minute they get their pay they just cash it, or they get a pay card and the minute they get their pay card they hit the ATM. They get the cash. They don't. They're not using those. They don't have bank accounts. You have a lot of unbanked, underbanked people. You know using like pay cards is huge. Using pay cards is huge. How many payroll companies If you asked ADP, how many payroll cards did they issue?
Speaker 1:Those are not really bank accounts, although you can use it as a bank account. I bet you a lot of the people just go and just take the money out. We're in the ATM business. We have an ATM that's near a very large distribution center and there's two ATMs in this store. I want to tell you what on Friday, those things get emptied out because all the workers come over and take out up to 500 bucks off of their pay card Every Friday.
Speaker 2:Is the pay card and and I mean forgive me for being ignorant here is the pay card. Can it also operate as a, like a prepaid reloadable card, or does the money it's reloadable they're. They're getting their paycheck put on it every week but can they actually use it at a normal card terminal?
Speaker 1:Yeah, you can walk up to a terminal and put it in. It's got a Visa logo on it or a MasterCard.
Speaker 2:So what do you think the mindset is with that, with people still banging away and getting the money out Because they like the cash, yeah, or is it just?
Speaker 3:because the strip club doesn't like cards.
Speaker 1:Yeah, you hear me, all right, I mean, listen, you walk into a nail salon and they go there's you know no tips on the credit card. They want you to get give cash to the, the people, all the people that make let me. Let me tell you like. We have one bar that we work with one and they take no cash in that place. None, there's no, it's only credit card. Everything's on a credit card. But I got 50 other bars. They take credit cards and cash and I'll tell you right now, we dispense out of our ATM machines that we have and we have a very small fleet. We dispense about over a million dollars a month out of those machines.
Speaker 2:Yeah, my favorite bar is a tall cash, seriously like my favorite bars in the world. My favorite bar in the world is a place called the Saloon in North Beach in San Francisco. If you've never been there, they got blues playing almost every night. It is an awesome place. It's been there since 1869, 1870. It survived the earthquake. And you roll into this place and I'm telling you it hasn't been remodeled, maybe since then. But you roll in and it's all cash, baby, like there's no such thing as a cart. I don't even think there's an ATM on the premises. It's just like you got to roll in and it is what it is, you know.
Speaker 1:but I noticed that that's the whole thing is. You have a lot of businesses that are still out there, cash only. I'm done. Go get your car. You know if you have an older car and you go get it repaired and the guy's like, oh, it's 350 bucks and you go, no, how much for cash? The guy might do it for less money and you just go to the atm and bring him some cash. Yeah, I mean there's a lot of industries like that that are untapped. I mean I just had some work done. The guy might do it for less money and you just go to the ATM and bring them some cash.
Speaker 2:Yeah, I mean, there's a lot of industries like that that are untapped. I mean, I just had some work done at my house and obviously, like, venmo and Zelle were kind of, you know, with the construction industry or or, you know, handyman home improvement, they were probably like in a middle for a little while. But now that the government got wise to anything over 600, um, but you know, they don't, they won't take card. I mean, I've asked like, yeah, we'll take it if you want to pay for the, the surcharge. Hey, like, but give me a check, I'll make my way to the bank. I don't care, you know, or I'll do remote deposit capture.
Speaker 1:All the time, like I have lawn guys, the guy who cleans my pool, the guy who does power washing for my you know comes over. They're like, oh, you want to pay the fee, we'll take a card. If not, sell us the money. Even my AC guy sell him the money or he's going to charge you a fee.
Speaker 2:Yeah, no, it's interesting and those guys it matters, right, I mean, that's the thing about the fee. I mean, look, you know, we sometimes feed it through. It depends. We try not to be like too draconian about it, but it makes a difference. That 3% makes a difference for people on margin really does, and especially like the really like tight margin businesses and retail or you know, and gas and gas stations.
Speaker 2:It's just kind of crazy that you know we've gotten to this place where you know inter interchange is so high and even with a three percent cap there's, you know it's not like there's some great reward for the merchant. They just keep it at a particular level because it's easier to manage from that perspective and it's kind of passed through equally and you don't have to reconcile anything. But yeah, I mean, that's why I asked you that one opening question, which was what do you think the barrier is for people? Because me and maybe the percentages have changed, but I think small to medium-sized businesses are easily greater than 50% of the businesses out there and I think every single one of those that interchange or whatever they're paying on a per-item transaction fee, total effective rate, you know like it makes a huge difference.
Speaker 1:I think some businesses just think my customers aren't going to like it, so they don't do it, so they'll just raise their prices. And then other businesses are like no, I'm going to do it. Other people are doing it and I don't care. And if it doesn't affect my business then I'm going to keep doing it.
Speaker 2:Do you think that this is a tool? As you talk to people and see agents out in the marketplace, do you think that this is a tool that they're using to acquire merchants, and how do you think that they're doing that, considering you're able to sell this, regardless of who you sell for?
Speaker 1:well, I think agents use it as a tool to sell. The thing I don't like is to see the agents paying the merchants back a kickback every month. I think that's not right.
Speaker 2:I thought that that was a violation of card brand rules. And then I went and looked at it, because you're not supposed to have any sort of like contract with the merchant directly related to the payment processing, and I don't think it says written contract, I think it's any contract. So I think people who are doing that are actually in danger of getting blackballed, potentially, um, but there's a lot of isos that do that.
Speaker 1:I mean, I even had an agent come to me one day and he's like I want to deploy my own Deja Vu terminals. I'm like what? I'm like we don't allow that. He's like, well, no, I said, why do you want to do that? He goes oh well, I want to charge 4% on the machine, but then we're going to set the merchant up at like 3.5%, so the merchant up at like three and a half percent, so the merchant can make money on the cash discount.
Speaker 2:Yeah, it has. No, it has no idea that what they're doing, like like you can't do that you know, like it's not, I'm like we're not.
Speaker 1:I said we're not going to allow that. I said we deploy the terminal. Right, we have the iso that we work with. They deploy the machines out and we're not going to program machines like that because that's a violation of the rules. So we're not going to do that. But I've seen people telling me that they're doing it. Hey, I talk to reps all the time and they're like oh, I have this auto repair place, can you set it up under service station sic code? Like no, not doing that.
Speaker 2:So so are they actually taking the money and then giving it back to the merchant? Some reps are, yeah, but in what you were describing with that programming on the terminal, is that doing like a split fund or is that still something that they're taking? Because, because what you just described to me no the merchants passing.
Speaker 1:The way that works is the merchants passing 4% but on the contract only getting charged 3.5. So there's a 50 points extra going to the merchant.
Speaker 2:Yeah, which is obviously also lying on your credit application there, which isn't a really good thing lying on your credit application there, which isn't a really good thing. But I, I I see it even from a different perspective of when you're grabbing money that somebody else is entitled to and then you're giving them that money and you've carved that out with them. You've just become a money transmitter, believe it or not so I mean you're paying.
Speaker 1:You can say they're signed up as a referral partner.
Speaker 2:Yeah, but yeah, yes and no, but like when the merchant is the merchant and a referral partner, I don't know how well that's going to hold up, you know.
Speaker 1:There's a lot of people doing it right now. I don't agree with it, but there's a lot of people doing it. I just tell people they're like, oh, some rep's offering me money and I'm like, okay, I said, if you want to lower the fee, you know we can analyze your statement. We try to give people a very fair fee, because we just give like a fee and then one monthly fee to cover the whole thing, which includes a terminal, and then that's it. You don't have PCI fees. We try to bundle it all together to make it all simple. So you pay $39 a month. That includes your terminal, your statement fee, your platform fee, your PCI fees, Every fee. There's no other fee on your statement.
Speaker 2:Other than just whatever it costs to actually process the transaction.
Speaker 1:Yeah, just whatever it costs to process the cards, if you're on cost plus flat rate or you're doing dual price.
Speaker 2:So this is kind of off topic. But I had a phone call before this and you know I always tell people we do like one of a few different types of litigation cases and most of the time it's former employees, former agents poaching. And you know I start to see serial agents out there as I talk to people and you know I still don't understand. I think App formerly Mac has something where if there's some you know bad actors in the space, they keep a running list. But on the acquiring side I never really see that. I don't see it on the sales side.
Speaker 2:I feel like ISOs are willing to just take on whatever new accounts, regardless of how long they're going to stay on. But I've always said why isn't there this list out there that everybody sort of subscribes to, where if you purchase a residual from somebody and they go and recapture the merchant or you've got somebody who's working with you getting a signing bonus and then all of a sudden you know they're no longer working with you and now they're flipping the merchants out, you know? And what you just said is another instance where if you did see agents operating in a capacity that ultimately is kind of like a violation of card rules and maybe card brand rules and maybe of um of kind of industry standards that are giving an unfair advantage. I've always said why is there not this like agent database where you know people in the instances like they're somehow being reported?
Speaker 1:or recorded.
Speaker 2:I don't know, it would have to be some sort of independent group, right, you know, subscribe to it. A third party who's not in the capacity of the member is somebody who maintains it and actually verifies some of the data associated with it. But I've always thought that, like we were talking about chargebacks, right, I mean, this is something that I think would be extremely useful to agent heavy ISOs, because obviously there's plenty of them. I mean, look, the insurance industry is a really good analogy to us, except that the insurance industry requires a license, but you can be an independent insurance agent and throw your own shingle, and so I kind of look at it as the reason that you have oversight, ernie's, the same way We've got the bar associations is to make sure that everybody's kind of playing by the same set of rules, and one of the things that's always been problematic in our industry is people are trying to like, bend and break the rules left and right.
Speaker 2:I mean, my first client was a 0% qualified, 1% qualified debit credit, blah, blah, blah, never mentioned a downgrade surcharge and did a savings estimate that basically allowed them to shove like a lease in there, and I felt I didn't understand that when I first started representing them because I was new to the space. But, like, as you can see, like it's not really the greatest way to sell, like I've always just been interested in. You know, when you see stuff like this you stay away from it for yourself. But you know, what do you like? I just throw it out there whether or not there's an idea of how could you sort of combat some of these practices.
Speaker 1:I actually came up with an idea to have an association for sales reps. I showed it to James Huber, your partner. What did he say? And he thought it was a good idea. He goes, go find 20 people who want to join up. The problem is not finding the 20 people. I could find 20 people but the problem is is like licensing right.
Speaker 1:Several years ago me and another friend of mine, steve, went to go visit the Department of Business Regulation in Florida and we said why can't you license credit card sales reps the same way you license a restaurant, a realtor, insurance agent, a mortgage broker, et cetera, et cetera? We're collecting the same amount of information as those people. Why isn't there a licensing way to license? Their kind of answer was that there's not some standardized education and there's not standardized tests. If you want to be a CPA or you want to be an attorney, obviously there's standardized education and testing. So that doesn't exist. I mean you have the ETA, has the CP, but that's. I mean they're not even proud of it. Because if they were proud of the CPP program, it would be on the homepage of their website, it would be featured and more people would want to be a CPP.
Speaker 2:No, I mean that kind of makes sense to me in a certain regard, because I mean, what are they going to become rules experts? I mean, like that's not what salespeople do, so it makes sense. I mean that's not what salespeople do, so it makes sense. But the reason I brought up what I brought up was because what I've seen occur is one agent getting the personal financial information of a merchant under a relationship with an ISO who's ultimately responsible for safeguarding that information, with terms in a contract that say what you're supposed to be doing with those things that you're collecting, turning around and committing identity theft, signing the merchant up to a new processing agreement, telling them, hey, I got a new terminal for you, it's not going to cost you anything. Yada, yada, yada.
Speaker 2:Putting in the new terminal.
Speaker 2:They never sign a contract. They may not even know who's processing payments for them, depending on whether or not, like you know, the statement's white labeled and they just like float from processor or from ISO to ISO to ISO and, just, you know, screw people and a lot of times the person that's really the one that's harmed the most is the merchant, because you don't even know what kind of agreements and they're being the victim of identity theft and somebody's got their information, which includes their driver's license, voided check, tax ID number, social security number, and it's just being reused. I mean, we had a situation. We have a leasing client. We had a situation where a guy was doing this and he was actually on the DocuSign creating a business email address and he didn't realize that the business email address. When you went on there to recover it from where he was creating it, we could see where it was being sent to, and so we went to the FBI. That was like two years ago, two and a half years ago, and he's still doing it today.
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.