Agnostic vs Antagonistic With Dale Laszig (Webinar)

All right, so let's, let's get started. We got a pretty good crowd so far. And so welcome. My name is Allen Kopelman, and today joining me on the podcast— we're not doing a podcast, but I do host a podcast called B2B Vault. You can see the neon behind me. I'm the CEO and co-founder of Nationwide Payment Systems. I write a column in the Green Sheet called Street Smarts. This column's been written by many people in our, in our industry. So over the years, so I'm honored to do that. And I did this similar, this same presentation at the SEAA. And afterwards, many people at the SEAA said, oh, more people need to hear about this. You should do a webinar. And record this. So I got with The Greensheet and Dale got lent to me today, who I've known for many years, and, uh, and we're gonna discuss this subject matter. Dale, do you want to introduce yourself?

Hi everybody, it's great to be back. I've known Allen Kopelman for many years and it's a pleasure for me to participate. My current role at The Greensheet is content strategy. A very broad area, to be sure. Uh, happy to chat with anyone who wants more details, but, um, at the moment I'm very interested in diving into this topic. Thanks for having me, Allen.

Thank you, Dale. I appreciate it. So agnostic versus antagonistic— this was a subject that I've dove into quite a few times. In the green sheet. So if you're reading the green sheet, great. If you haven't read the green sheet, get in there. There'll be a link at the end. You can scan with your phone a QR code and we'll get into it. So what's going on with agnostic software today and what's the antagonistic part? So let's talk about that. The agnostic— everybody, I go into the Facebook groups and used to be in the green sheet forums and everybody's talking about Oh, I need an agnostic solution for a restaurant. I need agnostic solution for this. I need agnostic solution for that. But these agnostic companies, they have now become antagonistic. And what do I mean by that? What I mean by that is, is they're all now becoming our competitors. And in some cases, these companies have been acquired. And because they've been acquired, They're— they then control the credit card processing and they take our customers that we worked hard to sell credit card processing to away from us. So what is the trend? The trend is, and the question is, is software the new ISO? And I know that, and it's software is becoming more and more prevalent in our industry in that at the SEAA, there was 100 1,337 booths and over almost 60% of them were either selling software, SaaS software, or POS systems. Now, how many of those companies are going to be around next year? How many of them were completely agnostic? There is probably maybe a dozen that are not agnostic. The rest were pretty much agnostic. Will they be around next year? Will they get bought by an ISO? Will they get bought by private equity? Private equity is the biggest antagonist in our business right now. And, you know, we need to become aware of how mergers and acquisitions are affecting our business. A good example of a merger would be when Lightspeed decided to They scooped up about a dozen companies a few years ago. And then when their last round of private equity came through, the immediate first move was that they partnered with Stripe. And then personally, I saw about a dozen merchants disappear, totaling probably $3,000 or $4,000 a month, maybe a little bit more than that. And, you know, That they're gone. Those merchants are gone. And we've seen other companies go happen the same route. Once an agnostic point of sale company, we have the merchants around for years and then all of a sudden, poof, one day they're gone and we go, what's going on? And oh, well, the company now does their own credit card processing. So we're going to talk about that a little bit and we're going to talk about, are you selling processing today or are you selling a product? Now, personally, we have made the switch at our company to become more focused on technology and product and less focused on processing. Because when you think about it, and we could take a poll, everybody can leave a comment in the Q&A section, okay, about this. Do you, you know, are— is Toast selling processing? Is Square selling processing? Is Stripe selling processing? Does the website clover.com— are they selling processing or are they actually selling a product? Now I know what I think. Let's see what everybody else thinks. Leave some, leave some comments in the poll if you want to comment on that, in the, in the Q&A. Okay, and but I believe that these companies first and foremost, foremost sell a product, and credit card processing is just a byproduct of that, of that. So let's see what some of the people are, are answering.

So far the feedback coming in is product, product, product.

Yeah.

It's fairly unanimous.

Yeah, and this, and this is it. This is a huge change. And today, if you're not selling a product, you know, you're, you're, you're going to be behind. I saw a quote from, uh, Michael Nardi. Many people probably know him, and he said, if you haven't started building a, a product yet, you're probably too late. So what can we do as agents? So a lot of people on this on here are agents, and they're, um, they're, they're agents, and they're, um, they're agents, and some people might work at an ISO. And today, you know, we're going to dive into that. So how— we're going to talk about how to protect your residual stream with what's happening in, in business today. So again, we're talking about this, the future of payments. And the future of payments is to get more into, um, products and get away from— get away, get away from payments. Someone mentioned Stripe sells convenience. Well, the same thing. We need to offer, offer convenience also. You know, and that's one of the things— that's one of the things that, that, that you need to do is you need to pick your, pick your partners. So this is what the future of credit card processing is starting to look like: more software, less credit card machines, more point-of-sale, more SaaS software. Obviously credit card machines are still going to be around because these, all these softwares need a device. So let's see from everybody can drop in the Q&A, like, how long have you been in the payments business? So probably people have been in payments for 20 years or more, like myself. I started 2001, my company, and, um, so 24 years in the payment space. And probably people who are less in pain, less spend less time in payments, less than 5 years, haven't seen the agnostic solutions rip away their, their, their merchants when they're their merchants, um, you know, when they just, when they disappear. So let's see what people are talking about in the Q&A here. Less than 5 years, 20+ years, 14 years. 4 years. Oh, 4, so that must be for 20 years. Okay, so there's a mixture of people in here, and probably people have been in the game a lot longer, have seen when an agnostic company gets acquired what's going on. And now what's going— what's happening is, is we're seeing that software is redefining the traditional ISO model, and the traditional model for how agents or MLS merchant-level salespeople do sales. And I wanted to do, do this presentation as this is educational. I'm sharing my experience over the last 20+ years of what's happening. So traditional sales model is shifting from terminals to software and point of sale. So in the beginning of time, we're all dependent on agnostic softwares, whatever they be. It could be an agnostic gateway. And today we look at the two biggest agnostic gateways that we probably all have sold, Authorize.net and NMI, and they're pretty much openly selling credit card processing right now. Even SwipeSimple is openly selling credit card processing. Clover.com. Um, my company personally, if we dig back, we probably lost it at least, if not more than, $50,000 a month in residual income when the software companies have been acquired by private equity and they do what I call the software takeover. And we can't think anymore about we're going to switch people from Stripe, Square, Toast We need to go out and sell products to people and not just out there going, oh, we can get you the best rate. Oh, we can save you money. Oh, we can do this. Oh, we can do that. We can put you on cash discount. We can do 0%. So we can't think about like that's the way to sell anymore. We need to think about how are we gonna, how are we gonna combat the product companies by ourselves selling a product. And how can we do that? So we're gonna— and I'm not going to recommend any companies. Don't ask me to recommend companies, as this is not a sales presentation. This is education. There are companies out there, there are ISOs out there that are either developing their own gateway, own their own gateway, And they're developing their own point of sale systems. They're developing SaaS software. They're buying companies. We're going to see a very active 24 months of software providers being acquired. Okay. And who is going to acquire these companies? Hopefully ISOs and not letting them partner with Stripe or Square. So the companies that we built up, are now competing against us. They're selling against us, you know, and ISVs and SaaS companies offering integrated payment solutions. This is the future of our business. There's companies popping up all the time doing everything from service businesses or any kind of anything, property management, restaurant software. There's new companies constantly entering the market. But these companies that start off agnostic, you're just, you're, we're just, it's dangerous because if they get acquired, all of a sudden your products, they're going to say, oh, we were acquired, sorry. That's what Lightspeed told me. Sorry, we got bought, we're, we got purchased. So, but sorry, you're not keeping your merchants. And that was pretty much the end of the discussion. So, you know, if you have any questions about that, pop them in the Q&A, and I'll answer any questions about companies getting acquired if anybody wants to have a little more information about that right now. But this is, this is what's going on. So who's going to acquire these companies, and who are you going to work with in the future? And the shift in Revenue dynamics is also interesting because residuals— we're losing our residuals, and that's where we're losing it. And you have to ask yourself this question again: processing or products? And then how do we— how are we going to respond to this? Now, ISOs obviously are who we sell for. People ask me all the time, oh, switch to my ISO, send me business. And my answer back to them is, what technology do you have that I can sell? Because we need to become— we need to sell technology. We can't just sell XYZ point of sale system because it's agnostic, because one day it's going to disappear. And the focus needs to be for sales reps. This is my opinion, okay? Because I'm tired of losing money. And we made a switch about 3 years ago, and we've partnered with 3 companies that own the POS, own the processing, and that's it. There's no agnostic anything. When people say, who does the processing? We say, we do. That's it. There's no, no agnostic solution available on that, on the products that we offer, and Well, if merchant doesn't like it and they want an agnostic product, they're going to have to go shopping somewhere else. But we're, we're going to sell them on the product first and sell it the way Toast does. Oh, you want Toast? You get Toast, and then processing comes with it. I mean, we can all agree on one thing. The 2.79% and 10 cents a transaction they charge is not a bargain. So You know, they're not giving, they're not giving anybody a bargain. And here's a little case study about Approach, new ISO partners that own software. Now, for us, the result was less work, better support, and preserve our reserve. We preserved our residual income. So the reason we're saying that we're preserve where we were doing less work is that now we're making a little bit less money on residual. We're not making any money really off of the hardware and software, but we're also getting much better support. So we're not the ones answering the phone at 2 o'clock in the morning, my POS isn't working. Oh, somebody, Ryan, raised his hand. Type a question in the Q&A, Ryan. And okay, didn't type a question yet, but I'm not seeing it yet.

But while we're waiting for Ryan, I did have something come in by email. I recently lost merchants due to an acquisition. Is there any way to get them back?

An acquisition of what? Acquisition by an ISO?

Software? Yeah, the, uh, an ISO bought the software.

Yeah, there's not— once there's a new owner, that's it. The game, the game is over. If, if my company went out and I'd say I bought a, a software that was, um, agnostic, and let's just say it was a property management software, we're going to go— we purchased the software. We're going to go out, reach out to every one of those merchants, and we're going to say you have to switch to our credit card processing. Now, if they like the product, that's what they're going to do. And, and, and there's no way you're going to get those merchants back because somebody invested hundreds of thousands or millions of dollars. And, um, how about a company that's doing a dealer option? Yeah, that's nice though. So the The— unless you have a deal, unless that ISO has some kind of deal where if that POS company sells, right, and just because you're a dealer, um, I don't want to get into— and well, I guess I don't care, you know, Shift 4 bought a whole bunch of POS companies and then they bought all the dealers out and then they switched all the merchants. I mean, we had a ton of merchants on PosiTouch they bought Posi-Touch, and we saw every one of our clients— we bought— we partnered with somebody. Um, well, I don't—

I—

Ryan, I don't— I— yeah, they might not want to be involved in paying. Brian's asking, the ISO agent does Tier 1 support, the company says they don't want to be involved in payments. Yeah, and then when they sell the company, it's not them you have to worry about, it's somebody who buys that company, who buys that company. That's the problem right now. These companies get acquired. So you have to go out and develop new types of partnerships where the ISO owns the point-of-sale system, they own the IP, the IT, whatever you want to call it, right? They own it, and they own the, and they own the merchant accounts too. That's the only way your residual is safe, because A company says today, uh, I can't remember, ShopKeep. Oh yeah, it's all agnostic. They got bought by, um, Lightspeed. Lightspeed got bought by private equity, and poof, we had merchants on ShopKeep all gone, done, out of there. We didn't, you know, they said, I say, oh, we have a contract. Well, we don't care what your contract says. We bought the company. That's it. That's what happens. And I've seen it happen to the Like I said, I've seen it happen. We've had dozens. We just lost two huge accounts this year that were building supply companies doing over $1 million a month. And both of them, both the merchants gone because the software company got bought out and then the company went, instead of being agnostic, they went to Worldpay. And they switched the merchant account. The merchant said, sorry, there's nothing we can do.

But I think that Ryan brings up a great point. The ISO and the agent doing Tier 1 support is working with your garden variety agnostic software provider because when they say they don't want to be involved in payments, they're being honest. They don't want to be involved. You're doing all of the support. And then down the road, if they get acquired, there's nothing more to support. Your merchants are gone. And to Allen's point, if you work with a company that totally owns their tech stack, you don't have the tier 1 support, and maybe you make a little bit less residual, but at least you know that your residual streams are safe.

Yeah, exactly. Thank you. So industry implications, you know, you have to pick your ISO partners that own— they have to actually own the software, not have deals with a dealer. I have another friend of mine, he had a deal with a local dealer in his area. He had about 50 restaurants, and that the point of sale that that dealer sold got acquired by a big private equity group. They switched all the merchants. I don't even want to tell you, the guy's life was turned upside down. It was a very large residual stream that literally he watched disappear in a week or two. All of a sudden, 50 restaurants disappeared off of his balance sheet. And ISOs, from an ISO standpoint, ISOs need to start investing. They need to invest in building or buying technology. It's as simple as that. One of the areas where I think ISOs are really, really behind on is embedded finance. Like, I'm sure agents on here hear all the time, oh, I'm with Square and there's, you know, I can see how much money they're going to give me and I can click a button and get a loan. And then you're not getting that merchant. Or I've heard it from merchants with Stripe. Oh, I have a loan from Stripe. I have a loan from whoever, whatever company they're with. And we have to do a better job. ISOs need to do this. We can't do it as an agent. That's why you have to pick your partners. Oh, do we have a partner that can do— that is working with— has a point of sale? And, and ISOs need to get up. They need to get to that next level. They need to offer embedded finance products. Um, probably the two biggest ones is are loans, and the second one is probably payroll. What do you think about embedded finance, Dale? I think it's very hot, has been for a long time, but it's being ignored by the ISOs. They're, they're not, they're not doing that. And that's some companies they can partner with. And, um, one of our partners now, I know for a fact they're building the— they're adding embedded finance, and they're looking for a payroll company. And I tell others that I work with, hey, you guys need to this. This is super, super, super important for, for the— to keep merchants around and have them locked up. Okay, and agnostic won't stay that way forever. Any company who's telling you, oh, we're going to be agnostic forever— I was talking to somebody at the SCAA that I know for many years that went to work at a point-of-sale company, and I said, well, they're agnostic for how long? And The person said, well, I have a 5-year contract, so at least for 5 years. I mean, let's not fool you, or, you know, every business has a price and they're going to sell a price. So Dale's got a question.

I do have another one that came in by email, and you're very popular by email. Yeah, well, I think some people are shy, but, you know, this one is, what What type of software is most likely to be acquired by private equity or another ISO?

I would say, I don't think it would be type. I think it would be somebody who's got probably a minimum of 500 to 1,000 customers, and it's proven that it's being sold.

Oh, I see.

I think that once somebody's got proof of concept, and they have 500 clients to 1,000 clients, they're going to be a lot more, you know, attractive to either selling their company, getting a private equity group to invest in them. And then the first thing these private equity groups have been doing over the last 10 years is monetize payments. That's the first thing they do. We have to monetize payments. This game has changed. You have to, you have to, you have to just like say, I'm not doing this, I'm not going to sell this agnostic product anymore because I'm scared. And you should be scared. And if you're going to sell your portfolio, um, I was told by a couple of different portfolio buyers, hey, we're not interested, you know, the, the, you know, they're not, they're not that— they're not like, they're not so interested right now in terminal portfolios. They'll buy them, and they're somewhat interested in that, but they're really interested in buying portfolios where the software and the processing is locked up for long term. And their multiples on something like that are going to be huge, very, very big. So, you know, we're looking at that.

That's a very important clarification.

Yeah, because they're going to pay more money You know, they're going to pay more money, or even the ISO might want to buy it from you, not let a third party buy it. But I was told by somebody, you know, those portfolios are worth— going to be worth a lot more money in the future.

So basically what you're saying is there's software companies out there that are building books of business.

Yeah, they're out there building books, and then when their book gets big, here's the question. If I had a software developed for a certain vertical, would you suggest to allow other agents to offer it to their merchants and use their ISO, or to only offer our ISO? I would only offer your processing and tell them, sorry, it's not agnostic. And I don't think you have to pay people 80, 90% to do that. I think you have to, you know, pay 60, 70%. You know, or say I'll pay you $60, and then if you get a certain amount of volume, I'll go up to $70. And you're the one that's going to have to support that software for that, for the merchants. You can't expect these— if you, if you get agents to sell for you, you need to provide the support and trade it off for— yeah, you're going to make less money because you're gonna— that's the new, that's the new business model. You're gonna make less money because you're not providing support. We don't expect you to take the phone calls or provide support. We will provide all the support. Sure, your merchant can call you, but you want to be able to make that money because later when you go to— you want to sell your software. This is Ryan asking this question. You want to sell that software. No one's going to want to buy it. They might buy it, but they're going to go switch all the merchants. And then all these people who you said, oh, do your own processing. They're not going to be so happy with you in the end. Believe me, I've had plenty of fights with these software companies, cursing them out and, and trying my best, even sending lawyer letters, and only to be shut down. So, um, I would definitely not, not do that. I would offer, offer your own processing. You know, future outlook, pick your Pick your partners wisely. Think about how you're gonna have that, what type of partners that you want. Don't just give business away. Listen, I'm scared. I have tons of merchants on Authorize.net. I don't think they would go and switch all my merchants, but it could happen. I mean, I don't think that size of a company would do that at this point in time, but they're definitely out there actively signing up merchants. And there's a switch going on right now from terminals to POS to software. Merchants are looking for— merchants are looking, especially the younger people. And the other thing you have to look for is, does your ISO have a way to do like onboarding where you can just send a link, you know, email or text a link to somebody to fill out a pre-app at least minimum and then collect all the data and then put it in a system and get e-signatures. These days have to stop. Let me tell you, there's some agent fraud going on right now that's incredible, where somebody told me a story where an agent switched a portfolio of merchants through like 3 or 4 ISOs, got paid a bunch of bonuses, and the merchants never signed anything. I mean, I'm just talking, you know, we just make everybody do an e-sign. You have to get with companies who are forward-thinking enough to have like, oh, I can put the merchant's name in, maybe their phone number, name of their business, maybe their address, you know, some minimal amount of information, put the pricing in, and then send them a link to fill it out. This is how Stripe's doing it, Square's doing it, PayPal's doing it, Clover.com is doing it, Toast is doing it. All these big companies are doing it. We need to get more fintechy Right, Dale? FinTech.

I agree. But, you know, to your point, Allen, you know, you're talking about partnering with software companies. Can you give our audience some other things to look for in an ideal partner in a software— in an ISO that owns their stack? I mean, what other properties are, uh, would, would make up a good partner?

Um, that they're doing, um, that they're doing a lot of the support and the heavy lifting. This is— it's super, it's super important that they're doing, uh, that they're doing, that they're doing a lot of the heavy lifting for you so that, you know, you can concentrate on doing what you do, which being doing sales, right, and not being involved in taking phone calls 24 hours a day. I mean, I read stories, I'm on all the pages on Facebook that everybody's on. People don't really go to the Green Sheet forums anymore, so most of the discussions are on Facebook or on LinkedIn, probably more on Facebook. But it's, it's important Um, to— it's, it's important to have these partners that have good product, you know. Make sure their software product is good. Test it out yourself. Get a test account. Make sure that it works. Make sure, you know, you test it with, you know, maybe a merchant that you already know, so that if the merchant has problems There's not a problem with that. Training, training is super important. Do you, you know, who's going to train the merchant? We work with one company that does a small retail system. And before the merchant, the merchants, once they're approved, they get an email. There's about 8 or 10 videos that they watch and it walks them through setting up the point of sale system. It explains everything, put in the employees, do this, the tax rate. You know, each video is a few minutes longer. And you have to think about this, you know, somebody's creating a software, how are you going to onboard those customers? You know, the worst thing you can do is somebody gets something and then they don't know what to do with it, right? And you have to have staff that's going to tell your sales reps, okay, I'm going to— you're going to sell this software, we're going to provide this all this onboarding support. We're going to provide phone support 24 hours a day. We don't expect you to do that. We want you to just bring in customers. You know, who want— I mean, listen, I'm 65. I'm not afraid to say it. I don't want my phone ringing at 2 in the morning from a restaurant anymore. I've been through that where we sold white label restaurant software and I'll never do it again. You know, I'm not going to do that. I'm not going to do that to my customers. And you have to just find a product that— and the whole thing is, you know, what is their sign-up process, implementation process, training for the merchant? What do you have, Dale?

We have a very interesting comment coming in from an anonymous attendee, and I thank you very much. If the premise is that every business has a price and software companies are looking to be acquired, It stands to reason that we should go back to selling card terminals only to better protect our portfolio. My stickiest customers are those that understand the benefits of not integrating their payments to a software or a product and have multiple ways of taking payments when one avenue fails, uh, for example, offline authorizations.

I mean, you know, listen, there's still going to be merchants that use terminals. Terminals aren't going to go away, but the companies who want integrated payments are going to get integrated payments, whether they get them from you or they get them from somebody else.

I think failover is a great thing. I think it's always good to have failover and backup because business continuity is so important. It's the It's our lifeblood. It keeps the payment flows going.

Yeah, one of the things we do when we put in point-of-sale systems is we tell the— we tell businesses to put it— when they have their router, that they need to put in a 4G, 5G card on the router, prepaid, so the internet goes off— Comcast, AT&T, Verizon, whatever they have— goes down that the 4G, 5G card picks up, and you can still authorize transactions and all that. I mean, listen, I know people in this business because I'm doing it 24 years, and they only sell people terminals and that's it. And, you know, younger business owners, they're the ones— if you— we did a study, um, a couple of years ago, and we went and looked at the age of our clientele. Okay. And we found that the 40 and over crowd likes terminals more and software less. Although I would tell you that, you know, in the age of non-card present, saw a non-card present and Gateway virtual terminal and, you know, linking up to QuickBooks and sending out invoices and payment links, um, became a huge thing, you know, during the pandemic. And that's going to be, you know, and that, and that's, uh, a big thing, you know, that became a big thing and that's not going to go away. That, that is, that is just definitely not going to go away. You're going to see, um, somebody ask, is the webinar recorded? Yes, it'll be on. You'll get information on that to see the webinar. Plus we'll put it up on our YouTube channel and probably post it on the green sheet as well. But the, the, you know, this is, this is the whole thing. It's, you know, you have to change. You can't just say, oh, I'm only going to sell terminals and I'm not going to sell anybody any software. You're still going to have customers, but when we look at the age group, the 40 and under people, they're the ones who are going to to the internet where they're going to ChatGPT and they're getting their information and they're going and clicking and signing up. They're not even calling you on the phone. And, you know, somebody said to me, oh, how do you get business if you sit in the office all day? I'm like, you got to network online— Facebook, LinkedIn. You got to have a blog. You need to have a website. I mean, even I tell agents all the time, like, Some mistakes agents make, and you know, we're getting to the end of the podcast, but I was having a conversation with a— with, um, somebody that's been an agent for a few years, and I said, listen, every agent should have a corporation, your own corp, either a, you know, single-member LLC or an S corp. Have your own corp, separate banking, have all your residuals going in there. You know, you're going to save money in the long run. Keep all your expenses separate and have your own website. So if you're going to have, you know, whether you sell for 1 company, 5 companies, 10 companies, just have a bit, even if it's a basic 1-page website today with AI, GoDaddy can probably spit you out a site in about 10 minutes with their AI product. And, you know, have your own website. I mean, I have allenkopelman.com. You know, and just has information about me on there. And if you want to follow the podcast, you can follow the podcast B2B Vault, the Biz to Biz Podcast, on YouTube, Apple, Spotify. I'll be shameless and promote my podcast. You can read my articles on The Green Sheet. Um, you can just Google Street Smarts Green Sheet and listen and, and read articles over there. I think somebody typed in another question. No? Okay. Does anybody have any, have any more questions that they want to, that they want to ask? And we can answer those questions. But I cover a lot of subject matter in the Green Sheet for agents that talked about, talks about like marketing, sales and marketing. And I do not promote my company in those articles. It is all information for sales reps, agents, ISOs to look at and to get ideas from. Dale, you have any last words?

I just— I, I want to thank everyone for attending. It's, it's been a fun conversation, and I'm sure we'll keep it going.

Okay, well, oh, if anybody doesn't have any more, uh, questions to ask, we're going to drop off, and you guys can catch the recording. And hopefully you'll follow me on The Green Sheet and follow the podcast. Thank you very much.

Thanks, everybody.

Thanks.