Honoring Ken Musante – 2025 MWAA Industry Achievement Award Recipient

Welcome to the Biz to Biz Podcast, your number one source for all business news. Hey everybody, welcome to a special edition of B2B Vault, the Biz to Biz Podcast sponsored by Nationwide Payment Systems. Today's episode is also sponsored by The Green Sheet, and I'm the writer of Street Smarts in The Green Sheet. So if you haven't checked it out, uh, greensheet.com, look up Street Smarts. It's a column that comes out every 2 weeks. Today we're My special guest is Ken Musante, and Ken is the owner of Napa— oh, now I'm going to mess it all up—

Napa Payments and Consulting. It's a Napa Payments and Consulting practice, a consult.

Okay. And Ken, this reason for Ken being a guest on the show today is because Ken's getting honored at the NWAA Midwest Acquirers Association show. As the Payments Person of the Year for them. And that's a big honor. They honor somebody every year. And Ken's been in the business for 30 years. I'm in for 25. Ken's been in a lot longer than me. So had a super long career and started a payments company a really long time ago. And we're going to get into all that with Ken. So tell us, like, how you got started in the business.

Well, so you made me sound old, and although I am, I'm not that much. I don't think I'm that much older than you. And you only gave me 30 years and I've got over 3 and a half decades. Okay. So I got in like nobody else in the history of payments. I got into payments right out of college. My first job out of UC Davis was working at the issuing center for Wells Fargo Bank in Concord, California. Back when issuing centers could still be in the state of California. And I had the perfect, perfect first job out of college. I was a trainee and I got to sit in on all of and do actual stints within all of the functional areas on the issuing side. So, so think about plastics, like the card production was in the center in Concord. Collections, fraud disputes, the, you know, the after-hours customer service. I got to see marketing. I got to see all of it. So it was a great foundational build for my, for my career.

And then, and then you started your first payments company. So you did you work in payments first or did you just go out and start Humboldt Merchant Services?

Well, so I was at Wells Fargo for nearly 5 years and towards the end of my time at Wells Fargo, I went to the acquiring side and I went to work supervising a technical support desk. And so we were helping folks that had lease lines that, you know, back in the day, that's, you know, that was the way to get really fast transactions. You were on a dedicated lease line. And so think of big grocery stores or folks that had software to run their business.

They were new to the payments business. We actually used hardwired telephone lines back in the day before there was internet and Wi-Fi for the youngsters.

So yes, so again, 3 and a half decades. So, um, from there I went to work for a small bank in Northern California called Humble Bank. And so I started the merchant services division for Humble Bank and ran that for 10 years, and it grew over time from, you know, a tiny seed to 100,000 merchants. We were doing both direct merchant business as well as sponsored business from other ISOs that we were working with and sponsoring. At the end of that 10 years, the founding CEO, Ted Mason, stepped down. A new CEO came in and said, hey, we got this really valuable asset, but the investors— we were a publicly traded company— the investors in the bank don't really understand how it fits within a community bank. So to unlock the value, he sold my division to a privately owned bank. It was owned by the Lamb family. I got to meet the Lamb family through my time at Pacific Coast Banking School, um, in, in Seattle, Washington. And then And through that, I went to work for their bank holding company, and we took Humboldt Merchant Services, the division, and made it a separate company within the bank holding company and continued to run that for 5 years. Unfortunately, in 2008, the Great Recession hit, and the bank was heavily invested in mortgages. Bank failed, and, uh, my company got taken over by the FDIC. And so that in itself was a sobering and just, just surreal experience working for the FDIC.

I'm sure that was not fun.

No, no. I mean, obviously Silicon Valley Bank has just gone through that. I know what they went through. It was— it's extremely difficult. You know, the FDIC was, was an honorable organization. However, they had no idea how a merchant services organization is run.

Of course not, it's the government.

Fortunately, I got to know the, the officer in charge, and he continued to support the work that I was doing because he saw, look, I was just trying to help facilitate the sale of the entity. We were going through a sale before the bank collapsed, and he allowed that sale to continue. And, and the buyer was Monera Solutions, the U.S. division of Monera Solutions. And so, um, Humboldt Merchant Services was then sold to Monera Solutions. The name and some of the high-risk assets after the sale to Monera were then sold to a company owned by Mark Gardner. And Mark continues to own and run that, that company today. So I'm very pleased the name and many of the employees went with the company and the name continues to live on. And then I helped integrate the Humboldt business into Monera Solutions. I was commuting back and forth between Humboldt County and Schaumburg, and that was a, a difficult commute to say the least. And it was difficult for me personally just because the company that I helped build was, was being dismantled. And so I was working as best I could to integrate it. And Greg Cohen was my boss. He was, he was very fair. But the, the just seeing the company being changed to such an extent, which just was difficult on me personally. So I left in 2010. And started a direct-to-merchant ISO with two longtime friends of mine, Steve Kimberling and Scott Bartlett. And we started Eureka Payments.

Right.

And ran that for 9 years.

You know, it's difficult. A lot of, you know, like we've seen, like in the last, you know, since that time when you're talking about Humboldt going to Moneris and getting taken over, like split in half. Right. You know, today we're seeing this like almost every month. You know, payment companies being acquired. You mentioned Greg Cohen works at Fortis. I mean, they've acquired, I mean, a number of companies and other ISOs are doing the same thing, acquire, acquire, you know, buying out and, you know, thinning out the, you know, thinning, thinning out like where you can send merchant accounts today. You know, it's gotten to be a much smaller business.

Yeah, but, but you've probably seen this your entire career as well as when I first got into the business. The, you know, one of the buzzwords was consolidation, right? It's still, it's still a buzzword, right? There's continuing to be consolidation, but now what we're seeing more of as well is specialization. And so although consolidation continues to take place, there's also the rise of the specialized solution and there is, there remains to be ample opportunity for specialized or niche entities. And I think one of the, one of the changes that has occurred over the course of time is it is more expensive to start up a full-service payments organization because of the required security and additional required technology that the entity would take. And so in part because of that, entities have, you know, by necessity said, look, we're not going to start a full payments company. We're going to specialize in this slice. And it still allowed for the evolution of new innovations and the continued consolidation.

Yeah, one thing I wrote an article in the Green Sheet recently. It's a turn— it's a little bit of a series ongoing. I keep going back to it, but I wrote an article called Agnostic Versus Antagonistic, and another one called Is Software the New ISO? And when you talk about specialization, that's exactly where that comes from, is that now you have these software companies like Toast, right? They're— it's essentially an ISO, whether you want to whatever it is. And that we're seeing more and more of those type of companies. And I even tell people in the payments business, like, hey, we need, we need to look at this from a standpoint of, are you selling just processing to people, or are you going to shift like the rest of these companies are doing and become more of a product person and sell a product? Because that's who we're is our competition. Competition is not just other processors, but products themselves. And I think that's where the enorm— that's where the growth is coming from right now, is companies who can have— who are coming out with products, like you said, specific for certain types of businesses or to do a certain type of function.

I, I think in your article you also referenced, hey, some of these people, some of these entities could be really good partners. And they could really help in your sales effort. You just got to recognize which ones are your partners and which ones are competition. And, you know, to be honest, there are folks out there that are cooperators, right? In some instances, you're going to cooperate with them. In some instances, you're going to compete with them.

Right. But, you know, what I said in the article specifically was you should partner with companies who own their own technology. And the importance of that is when the ISO and the technology is all owned by the same entity, you might make a little less money because of that, because they need to, you know, software companies cannot exist on SaaS fees alone. I mean, we can look at my famous lesson I tell everybody is look at Lightspeed. They gobbled up Vend and ShopKeep. They got PE money. The first thing that PE company did was monetize payments. Tons of ISOs and sales reps were selling those 3 products, right? And those companies were just making SaaS, and they went in and they monetized payments. And that's why it's important to pick your partners and partner with companies who own software, who own POS systems, who own process, you know, own platforms. Now they might not pay, you know, the kind of residual you want to make. You might have to take a little bit less, maybe 10% less or 15% less so that they can make some money, but they're also going to support that product. You know, whereas before somebody calls me, you know, let's say I sold the merchant a point, a point, a software, and then the ISO, and then you're calling both places. Hey, where is it messed up? Now at least you have one unified place that's taking care of everything. And I think that, you know, people in our business need to recognize that. The agents need to recognize that from who to partner with, and the ISOs need to figure out how can they either— well, I think building, you might be a little bit late to the game right now, but buying some of these tech companies up so that you have products to sell.

Absolutely. Yeah, there's, there's a huge need, right? Because there's, there's so many different, um, solutions set out there. You need to have a variety of solutions, right?

And it's, you know, I think that's the future of our business. What do you think?

Oh, it's continuing to go that way. Absolutely. I mean, the other thing I would say is the future of our business is the— if you think about where we've come from You know, again, started out with just payments, you know, stamp, you know, and then moved to standalone devices, EDC or electronic data capture devices. Then it moved to fully integrated solutions, and then all of the breaches started occurring. So then we moved to the semi-integrated solutions and then the rise of the software company. But now I see the integration of, you know, embedded payments with banking and payments or or banking as a service is where I see it going now, offered both by banks that are integrating with a fintech or fintech that's integrating with a bank.

Yeah, embedded payments is definitely interesting. One of the things that I see has been super successful for Stripe and Square and others is embedding in their payroll and loans. I think the banking as a service has a long ways to go because of fraud. But I think, you know, that has a ways to go, you know, before that's like a completely like viable solution because with a lot of those, you can't write a physical check and some work go physically to the bank. And, you know, a lot of people still need to do that for certain types of things. And, you know, banking hasn't got to that. I don't know, there's a gap between the bank and like technology, right?, right? That gap has to close.

So I'd push back a little bit on that. A couple of reasons. One, I think your example that you used of attaining loans and your payments, in my mind, that is embedded banking, right? You've got a loan product.

Oh, that's embedded banking for sure. But I'm talking about like the checking account and the CDs and the, you know, it's just, you know, banks have to like get, get better at being like technology savvy with that.

So, so the other thing I, I would use as an example is the, you know, the app, the banking app that I use. I use it for both my personal and business needs, and I don't need to go to the bank for any of my day-to-day stuff. You know how I can take payments with it? I can you know, transfer money to family members with it. I can transfer money between my personal and business accounts, you know, and I can pay people via ACH. In my mind, it's a wonderful solution. It would be really difficult for somebody to displace that because of all the things that I can do with it.

Oh yeah, I could do the same thing.

There's certain functions, as you point out, I can't. Right. Most of them I can't.

Right. You can do most, you can do most things. I think that it's just, I've seen some, you know, I've seen some of the solutions that are out there now and they're just, they're like pretty basic, you know? And I think that that fresh, you know, for younger people, they like it, you know, because they're not used to getting cash or, you know, the same way like we are. We're in a different, you know, zone. So, you know, but I just think that it's, it's coming at some point in time. You know, where that's going to converge. And you see banks, you know, sell— you know, even PNC Bank recently bought a point-of-sale company. So, you know, everybody, you know, everybody's trying to get in the software game.

How many checks do you write a month? I think, I think I might write like one a month or something.

Yeah, barely one a month, maybe one a quarter. Most everything I try to pay online, um, And I think, you know, that's, you know, I did a podcast with Roger McNamara from Visa, and that's what we talked about, B2B payments. And that's a huge growth area because businesses, a lot of businesses are still doing paper checks, you know, to pay for especially like large, you know, purchases, $10,000, $50,000, $100,000. And we're actually seeing more of those merchants come to us and go, hey, we need a, a credit card and an ACH solution. We actually have people want to give us a credit card for $500 grand, $1 million on B2B transactions. And, you know, listen, if they're legit B2B and virtually there's no chargebacks.

Wow. Those are some big transactions.

Yeah. But in the B2B world, you know, as long as you can vet out like who's paying and the person they're paying is legitimate, That's, you know, that's the main thing is that that's going to go— what— that's going to go well, especially like we see insurance companies wanting to pay with credit card to the vendors and more and more like that, more and more like large transactions taking place. They just want to accumulate the miles probably to pay for all their travel.

It must be, right? Otherwise, why would you not use ACH in that context?

Yeah, because they, you know, they want the— they want the miles. It's like I always, you know, one of the things everybody talks about in payments now is we always hear about alternative payments, you know, like, uh, person-to-person payments or pay by bank, cryptocurrency, stablecoins, you know, things along those lines, you know. I mean, personally, like, I, I don't know how that— I don't know, you know. And I always say, like, Starbucks is actually a bank, not a coffee company, because Forbes featured them article, I think it was either 2016 or '18, and they had like $1.8 billion in the bank that was basically prepaid coffee.

Wow. I didn't realize it was that much. I knew, I knew about their payments. I didn't realize the amount of prepayments they had.

Yeah. And what— but it— but the customer gets a benefit from that. They get their coffee faster, order on mobile. They don't have to talk to anybody and they get rewards points and get free stuff from Starbucks for letting them hold a little money because probably the average person is letting them hold $20 to $50.

That makes sense.

So it's a small amount of money, but you get something in return for that.

Yeah, I know they've developed quite a payments infrastructure.

Yeah, it's great. So what other things— what doesn't make sense in the payments business?

Wow. What doesn't make sense? There's a lot of things that don't make sense, right? We, we hear all the concerns and consternation about, about the rise in interchange, but if you look at the rate that interchange has gone up versus the fees to Visa and MasterCard, the non-interchange pass-through fees, to me that doesn't make sense. I know as a percentage the non-interchange pass-through fees are much smaller, But for example, they just instituted a 5 basis point fee on, on Level 2 and Level 3 transactions.

Yeah, that's crazy.

In my mind, that, that doesn't make any sense. I don't—

yeah, I also don't agree with the dues and assessments because when I started in the business, I think it was around 5 or 6 basis points and now it's like 12 to 14 basis points plus all of the others, which equates to over 20.

And so I get the infrastructure necessary to run Visa and MasterCard, but there's increasing volume. And so it's a little bit like the taxation. You don't need to have both increasing volumes and increasing rates to make a better solution. Obviously, you know, since they've gone public, their shareholders have very much appreciated and, um, you know, benefited from that continual march upward of their non-interchange pass-through fees. I think, I think the other interesting change that's afoot is, is how the open banking rule is going to be applied, you know, not You know, it's certainly related to payments. And if you look at the, you know, the confluence of banking and payments, as we were just referencing, in, you know, the 1033 is a part of the 2010 Dodd-Frank Amendment. And so the implementation of that came about last year when the Consumer Financial Protection Bureau said, okay, here's our final ruling. And they said, banks, you have to provide your financial data to consumers via secure API. You have to do it for no cost. And, and so that was just, you know, the CFPB just vacated that rule, I think it was earlier this month. They said, you know what, for, for banks to have to do that for free, that's, that's nuts, and we're going to vacate our own rule even though the law is still on the book. So they have to come back and, and rewrite whatever the law surrounding that is, or the rules surrounding that law is, but they've just vacated it. Now you've seen JP Morgan step in and say, okay, we're now going to assess a fee against data aggregators. And so I think that's a significant change.

Yeah, that's kind of crazy. But, you know, and also when we see Visa and MasterCard go up, and also, you know, we had COVID and then, you know, passing the fee, like surcharging and dual pricing, cash discount, we saw that like accelerate. And I think a few months ago, or maybe there was a There's been a couple of surveys and said somewhere between 35% and 40% of merchants today, and it's probably higher than that, are passing a fee to the customer. And I think that— I don't know what your opinion is on it, but I think that Visa, that it's about time that they stop their, um, secret shopping and just put a— make a one rule and override all these states that are trying to make all their own little rules and just come out with one rule that everybody can live by.

Well, as powerful as Visa is, I still don't think they can override state laws. Okay, well, so because again, the state laws are going to exist, right, regardless of Visa rules. So tell me, tell me more about your perspective on it, because I think Visa has now clarified and said, hey, here's our rule, you can surcharge, it's 3%. And you can also cash discount. And so where does the ambiguity sit in your mind?

I just think that, you know, I think that like customers want to use plastic and businesses want to pass a fee to them. Just let it do it. MasterCard says the fee should be 4%. Visa lowered it from 4% to 3%.

Okay.

And I think they should both agree. And if American Express has something to say, let them all— and Discover— let them all just agree on one thing. And, you know, you want the higher prices on your menu and on the shelf, and then someone gets a discount for cash. I think that's kind of fair because I think when you look at the benefits of plastic, let's say you're Billy Bob and you want to buy a $200 TV, but you can't really pay for it right now. And you want to use your card, you're going to buy that TV and you don't care if you're going to pay an extra $4 or $5. But then let's say, you know, Johnny goes into the store and he's got $200 cash. Maybe he should get a discount. And I think that's fair because right now businesses, some businesses or most businesses, the people who aren't passing the fee just raise their prices and everybody's paying for card processing.

Yeah, I, I understand what you, what you're getting at. Where I think the problem lies today is the lack of information at the merchant level, and the result there is that you have merchants across the street being told different things by different processors, and then an inequity that exists with their What I would like to see Visa do is kind of a heat map as to the assessment of fees and fines by amount and geographic location, because then we can take a merchant there and say, look, here's the rules and here's why you might want to pay attention to them. And you can put that heat map out there and, you know, give them some indication of of what the liability is if they don't follow them.

Yeah, I just think like they should just put out like an announcement and go, here's the— here they have like recommended, you know, things that they say. They should just say, here, this is what we say. And MasterCard and Visa should just agree and then leave it alone because there's still like a hole where, oh, education can charge something and the government can charge something and a third party can charge something. And you could have a convenience fee. Or you can have a service charge. So there's all these like holes in the rule, you know, where you can do a workaround, you know what I mean? And that's just, you know, I think it's just at this point, it's silly. The horses run down the road, the chickens are out of the barn. Like there's no putting the, you know, you can't put it back. You can't put it back in the jar. You know what I mean?

The genie came out. Yeah, if everything was that easy, we wouldn't need consultants, Allen. And then what am I going to do?

Everybody needs consulting. So, so how do you feel about— as we're going to finish up now— like, how do you feel like being honored by the NWAA? Is that a show you went to every year? Um, yeah, so tell us about that.

Yeah, I'm, um, I'm overwhelmed, is, you know, I, I don't know all the words So when, I mean, just, I remember, you know, the call that I got and just the, you know, delight I had inside. And then just thinking about all of the prior award recipients, you know, Rod and I speak on a not, you know, irregular basis. So when he called me in the morning, I was with a client and I just said, okay, I was going to call him back at the end of the day. And just thinking it was, you know, one of the, one of the conversations that we have from time to time. And when he told me the reason for it, I was, I was speechless. So when I think about that award and all of the individuals that came before me and were recognized with that award, it makes it such a valuable and, you know, humbling experience. I don't know how else to say it. It's, you know, something that I've thought about a little bit, obviously, because Rod called me, you know, a little bit back, a little while back. And I'm doing a really poor job putting it into words because I don't know how to properly articulate my feelings— Mwato wazis. —other than I'm humbled and honored.

Well, it's always nice to be honored by your peers. And, you know, I know even though like we didn't know each other like super well, that, you know, I always knew about you in the business and went back in the day when we used to all go on the Green Sheet and the forums. You were pretty active in there and you've always, you know, written things in the Green Sheet over the years and I've read those articles and, you know, we both wrote for Street Smarts, and that's really cool. And, you know, a lot of people in the business, younger people, they don't know the struggles we went through with paper apps and Polaroid pictures and telephone lines and putting in the call waiting block, the machines, and all this crazy stuff. You know, they want a merchant account in 1 hour. We were happy if we got it in 3 or 4 days. You know, FedExing documents all over the place, right? We're dating, we're going back a long way. So, you know, it's nice when I see like, you know, the people in the business, you know, get honored in our business for their accomplishments and many contributions that they give to the business. That's one of the reasons I wanted to do Street Smarts was I wanted to take like things that I learned and put it out there and let everybody read what I'm seeing. And, you know, maybe I can have an effect on the future of the business. And I'm sure you had effect on many people's lives over the years, training them to sell merchant services, different jobs in merchant services, and, and all of that. And then to watch all those people go out into the world of merchant services and make great accomplishments.

Yeah, but I would say like you, I, I haven't accomplished anything in isolation. You reference the Green Sheet and, and how thankful I am to the Green Sheet and Kate and Laura for, for giving me the platform, because that's one of the ways that, especially as a consultant, that I'm able to get my voice out. And then everybody that I've worked with along the ways and how thankful I am to each of them and how much I've picked up from and how much I've learned from all of the folks that I've worked with and led and been led by. It's just, you know, again, a culmination of all of those experiences that's gotten me here.

Yeah, our business is like a community, you know, it's a community of people. There's people when I first started in this business in 2001, that, that I'm, that I'm still connected to today, 25 years later. Probably we talked about one, Steve Bryson, uh, Rosie Machado, and there's a whole list of people, you know, back from all the way from 2001 to today that have helped me, taught me, you know, guided me, whatever it was along the way. Even, you know, I think Kate and Laura for, you know, asking me to write Street Smarts, and Dale over at The Green Sheet also, you know, all of them super important, you know, and giving my podcast— but they post my episodes on there, and, you know, it's, it's like a great thing, you know. And I congratulate you on being honored by the Midwest Acquirer Show and wish you all You know, I hope when you go there that it's—

yeah, no, I'm not going to miss that.

You have a great time.

Every show that I get an award at, I make sure I attend. Okay.

Well, I haven't got an award yet at a show. Next year, probably, because it'll be the 25th anniversary of the SEAA, and I've been to every SEAA. So maybe I'll get an award from them.

I don't know. That's pretty awesome. Yeah, no, I think you should.

That's pretty awesome. But it's, you know, this— our business, like regional shows are super important. You know, if you're in sales and you're in the business, you should definitely make your way to one of these regional shows. The Northeast, the Southeast, Midwest, Western States, all of them. That's my advice. I want to thank Ken for being a guest on the show today. B2B Ball can be found on YouTube, Spotify, Apple, wherever you listen to podcasts. And you can watch it on YouTube. You can see our smiling faces. And thank you. Big shout out to The Green Sheet, Kate, Laura, and Dale for sponsoring today's podcast in honor of Ken, for— and also sponsor, you know, and Street Smarts. And thank you very much. And Ken, thanks for being on the show. Thank you very much. Carpe diem, everybody. Have a great day.