The Green Sheet Street Smarts Edition | B2B Vault w/ James Huber

Welcome to the Biz to Biz Podcast, your number one source for all business news. Hey everybody, welcome to B2B Vault, the Green Sheet Street Smarts Edition. And today I have one of my favorite guests that I like to talk to, James Huber from Global Legal Law Firm in California. Welcome to the podcast, James.

Thank you. My pleasure. And the feeling is mutual. We always have a good deal of fun on these things.

Yeah, so today we're going to talk about an article that I recently wrote that appeared in the Green Sheet called POS Partners and Tag Agnostics versus Antagonistic. So the basis of the article was talking about how the landscape of point of sale has changed, and the, the landscape has changed because a lot of these point of sale companies The actual software has— Rocky has something to say about that— has been acquired. And, you know, and the first thing these PE companies, private equity, do is they come in and they want to grab the payments revenue. So we're here to talk to James about is there a way to protect yourself? There's probably, you know, Is there a way to protect yourself? Kind of, I can tell my story a little bit, you know, about my, you know, what's happened to me and other people that I know in the business. And let's dive into it.

Yeah, I mean, this topic, when you hit me up, is very near and dear to me because it's a humongous pain point for us because we went through the same thing with our law firm software, our case management software, how we keep our time and all of that. They— I don't know if they got purchased or whatever, but they partnered with somebody and they said, if you're, you know, to run— you keep using QuickBooks to integrate with your trust accounting, which is somewhat important to attorneys, you know, it's basically the only thing that will get us disbarred is messing with our trust accounts. If you're going to do that, you have to use our payment processing software. And It is awful. It's expensive. It's Stacks, which is a huge company, and they're awful. I'll give you an example.

Yeah, you know, Stacks recently, I think, was acquired by Priority.

Perfect. Good company, both awful. So just kidding, I like everybody except for Stacks. So we, for example, we wanted to surcharge. Okay, we know a thing or two about surcharging. We go, great, we're gonna do a 3%, you know, we're not doing debit cards. That's the easiest way for us because for us to dual price, you know, we'd have to probably dual price every single entry. It would just look like a mess anyway. So we're going, we're gonna do 3%, and they go, okay, we can't do that, it's gonna come out to roughly 3.38 to 3.56%. And I don't know, Jeremy, Jeremy's on here too. He's handling our mics and stuff, but he was dealing with it. We're going, you can't do that. That's not compliant. And you're Stacks. You're one of the big boys and you're saying you can't do it. So here we are, we're stuck in this situation that from, you know, your audience's perspective, they get the pain points, but I'm a merchant here going, I'm getting screwed because you guys decided to partner with a really bad company.

Well, usually the way it works, just so you know, is we'll put 3.5% like into the machine or into what you're charging, but then on the back end you take out a little less so that it balances. So that it kind of— it's for some reason that's how it balances out.

Yeah, I don't know what they're doing, but, uh, yeah, I know from your, your perspective, I was interested, you kind of went into, into the article, but I want to hear the dirty. I want to hear the dirt.

I mean, the dirty part is, so the first, um, incidents for us was Mercury came on the scene. Mercury came on the scene, and with the help of Datacap, they partnered with every single ISV restaurant software, retail software, and then they basically start, you know, the, the dealers all started making money. Off credit card processing, we started to see accounts disappear. I personally made a move to selling a lot more B2B and a lot more internet at that point. But, you know, we had a big portfolio of restaurants. The next thing that came along was EMV in 2015 when these point-of-sale companies had to put EMV into their point of sale. The first thing they did is make it so that all the EMV— the only way you could get EMV as the merchant was either A, a side machine, or B, use the provider they're telling you that they chose.

Right.

Then we saw a whole nother group of merchants disappear. And then you have Shift 4 goes out and purchases a long list of point of sale. PosiTouch, I think, Focus or Future, Restaurant Manager, a whole bunch of other ones. They just recently purchased Givex. I heard here Lightspeed is on their radar right now, who basically they got acquired by a PE company and they switched all the credit card processing to Stripe. And we lost a bunch of merchants to that too. So then, you know, and, and when Shift4 bought all those POSs, we We just started seeing our customers do, do, do. Now we went on the offensive. Okay. At that point we made it, we partnered with, um, i3 Vertical. Um, we went through, we had, we became a reseller of their product that they offer over there, which is called OnePOS. And we started going after all our restaurants and saying, hey, why don't you get OnePOS? Because now we have a product, we have the point of sale, and we have the processor together.

Yeah, that's—

you know, those accounts are not going to disappear. Okay. And we made that move, and, you know, and that pretty much saved a lot of business, and we stole some business. And also because we're like, if you're raiding us, we're raiding you, right? You know, but we lose— we lost a lot of business. I mean, I don't want to get into it, but tens of thousands of dollars. I have one friend of mine, he had— he lost had so many accounts, he had bought a big, uh, boat, like a mini yacht. He had to sell it because that's how much residual he lost. I have another friend of mine who told me that he lost over $80,000 a month. Oh, to the— because the— when a sale got sold, the dealer got acquired also by Shift4. They switched all the merchants. I mean, I've heard 3 or 4 stories from agents, like, to the point where they either got out of the business because they lost so much residual income. There's nothing— I don't— there's nothing you can do because ultimately they either had a deal with the dealer on a handshake or a written agreement to pay them some residual. And that company, those companies got acquired, the software, the dealers, they get acquired. And then obviously the companies making the big investment want those payment dollars.

Yeah, I've seen it. I've seen it going on for years with CardConnect. I know that CardConnect was the home for a lot of the ISVs, the independent software vendors. For whatever reason, they captured CardConnect, and no one's really been able to explain to me why, you know, they're so great for the ISVs. But I've seen a bunch of— so I've got my client, a CardConnect ISV, and then another CardConnect ISV kind of conglomerate come in and buy all of that, you know, like dog, dog software, you know, kennel software, and they'll flip it to their own CardConnect. So it goes from CardConnect to CardConnect, and I'm looking at the agreements and it's going, look, I'm supposed to get residuals for all of the merchants I bring to you that are on CardConnect. And so our argument with it, with these, and it's hot, it happened a handful of times was they're still on CardConnect and they're like, well, it's a different CardConnect. And I'm going, hey, the agreement's the agreement. And we've actually, we actually got some decent results on that. But part of the thing too is, you know, we'll get into of what the software acquired or they just took the customers. The software was acquired. They bought the software company. So we'll get into it because there's two sides to this for, you know, the Shift 4s, you know, it's kind of a different thing, but these people that are buying up software companies saying, I'm going to buy the processing, you've got to be careful because it's two ways. You know, the, the ISO, you know, the guys like you and most of our clients are the ones getting screwed over by this. But if you're buying this and you don't know, you don't, you might not be able to get that software. And we'll get into what I think people should do to prevent this from happening. I actually just had somebody contact me this morning. We were on a call about something else and they brought up and they said, Hey, you know what I'd like? I'd like an agreement where if one of our software partners gets into the business of payments, they can't steal our customers. And I'm like, it's so funny you should bring that up because in about an hour, I'm going to go talk to Allen, and they knew who you were too, huge fans.

Okay.

They said, they're like, yeah, what do we do? And we're going, yeah, you're getting into an agreement with any software company that you use that's referring you so you can't steal steal my business. And if you sell, I'm still getting a piece of that. I'm still plugged in or I get a piece of the action. So, when you're doing the due diligence and you're buying these companies up, I'd watch out for anybody that's touched Global Legal because it's going to get a little hairy.

Yeah, it's a matter of if you're going to do a deal with like an ISV as an agent or you're ISO and you are going to get into an agreement with an ISV, there's definitely got to be some language in there to protect to you so that if that company does sell, the payments that you're running are still going to stay there and you're still going to pay them no matter who the owner is. But they can't switch those clients. And I think that's super, super important. And we're actually working on a couple of projects like that. And that's in my notes. I'm like, yeah, we're going to have to look at the— we're going to have to have a discussion, like, because it's a three-way agreement between the ISV Nationwide Payment Systems and the processor. And we're going to have to look at that agreement and make sure that there's a provision in there to prevent that from happening.

And you're going to want it in your processor or, you know, even if you're a sub-ISO or something, you're going to want that in your agreement that, you know, if these are getting bought, you know, now, okay, so Priority, you know, owns, you know, a huge portion of this. If they get bought and they stay on Priority, I'm still getting a piece of that action. And, you know, we were talking briefly before we started. We're going, well, someone's going to buy these up and they're not going to honor that. Well, they might not, but if you've got a good claim for a huge, you know, ISV line, probably worth suing it or suing them over it if they're just going to—

well, that's what I'm saying. I think you just have to look at the protections that you can put in the original agreement to say, okay, well, we're going to have in the agreement that all the merch, you know, as long as we pay you, you can't move the merchants. You know, even if you get acquired, you agree that this is staying in place. I think that's the only thing that can protect you. But as far as like if you're using something agnostic, right? ABC Agnostic Restaurant Software, right? And that company gets bought up. By somebody, you as the agent who's been selling this stuff, even though you have an agreement with the ISV, unless there's something in that agreement that says they're going to leave your merchants alone, there's nothing you can do.

There's nothing you can do. They're going to take them. I mean, you know, aside from maybe trying to, you know, create a backdoor and sabotage their software because, you know, you're integrated at some point.

A lot of them do that. They'll change the version. And that's what, that's what Jared did at Shift 4. They, oh, we, you're going to get the newest version of the software. Oops, only works with the Shift 4 gateway.

Right, right, right, right. Yeah. And they closed off your access. Yeah, exactly.

Yeah. Or they say, sorry, if you don't use processing with us, we can't support your point of sale anymore. Which merchants get those letters?

But if you're a software company, you'd be an idiot to agree to it. Because this is a trip, though, one of the big value adds of what you would ultimately sell it for.

Well, they want the software revenue, so— well, right, take it one way or another. Oh, we upgraded the software. Oops, it only works on the Shift 4 Gateway. Doesn't work on T-Systems, doesn't work on Worldpay, doesn't work on First Date anymore. Sorry, you have to connect to the Shift 4 Gateway.

Yeah, best we can do. Yeah, that's true. Yeah, I guess if they did that, but you could— I mean, you could sue them over that because that's total BS.

Yeah, but probably not a lot you can do as an agent. That's my point, right? As the ISO, ISOs need to get good, make sure they have good tight agreements so that their agents are not selling stuff that could get ripped out from under them. But as an agent, if you're selling agnostic software, let's say you're selling, you find some guy and he's got a service pro software for air conditioning guys. And the guy, you start selling it, a bunch of agents start selling it, everybody's on Facebook talking about how great it is. And all of a sudden this guy sells a couple of thousand softwares, right? He's not getting any payment revenue. You know, James Huber PE company comes along, right? Whatever, says, okay, we'll buy your company for $20 million, blah, blah, blah, blah, blah. First thing we got to do, integrate to Stripe. Let's go.

Bam.

You're done. Another thing they tell the merchants, oh, we upgraded your software. Click here to reconnect to payments.

Yeah. Another thing to do, another protection that I just thought of is put something in the merchant agreement too that gives the merchant some recourse because like my experience, of I'm stuck with Stacks because I'm on Rocket Matter. You could put something in your merchant agreement that ties in the software vendor. You know, the software vendor is not going to sign off on it, but you've got something in there of, you know, hey, I get to use this with the software vendor. That might create liability for you though. Yeah.

No, I think what they do to get around it is simply we upgraded the software. Yeah, we had somebody the other day that had an old version of NCR Counterpoint. So we said to them, well, we can take you on as a client, we'll upgrade you. You're about 8 versions behind than you are now. You're not going to be able to keep your processor because you're going to get new software, you're going to need new equipment, you have to link up to the right, you know, gateway. You're, you know, so you're gonna have to change credit card processing. Whether it's with us or not with us. If you do it with us, the support contract is X amount for a year. If you do it one other thing, it's another $1,000. So why are you going to spend another thou—

there's a—

that's how it goes, right? You know, and, and whoever their dealer is currently doesn't want to— is not offering them a free upgrade to the, you know, hasn't upgraded their version over the years, and there are 8 versions back.

Right.

Which might not even be PCI compliant. I didn't go check, but—

Yeah, you didn't check.

And that's where you get into stuff with these softwares is, oh, that version is too old. Now you need a new version.

Right. Yeah, because I've had, I mean, you know, no surprise to you, all of our clients ask us, hey, can we get your processing? Because, yeah, everyone wants our vault. Jeremy says we've had one chargeback ever. 2 now?

Yeah, in 16 years.

We're gonna get matched any minute. He wants our volume because we're, you know, it's just a decent volume.

Like, law firms, they're good.

Yeah, law firms are great, except maybe family law firms. But anyways, even they probably don't get that many chargebacks. Anyways, everybody's going, can I get your processing? And I'm going, I would love to give you my processing. Figure it out. And nobody's been able to get into the back, back end of this. They're like, well, you could run it, just run it side by side, you know, too much work.

It's just like, okay, has the same thing. Like, the LawPay, we have a couple of really large law firms happen to have their own billing engine that they, right, that they made themselves. So we just API'd into their billing engine. We created a a login. People have to log in, create an account on the Gateway. When they make the payment, they put in their account number, and then it's got a webhook and it goes back into their software and marks it paid.

Yeah, right. I mean, we, we started doing that, but there's too much of a hassle. So, um, but that— my question is, how many agnostic software providers are there out there?

They're disappearing.

They're disappearing.

There's a few.

There's a few, but they can't be that good, otherwise they would have gotten bought up and out.

Well, a lot of them are new because people come out with a new thing and then, then, you know, if they get enough merchants and somebody's going to be interested in buying it. Look at OnePOS. They got bought by i3. Now i3 got acquired by PayRock.

Yeah, but what's like, what's left for the— like that you've got the newest dentist Scheduling software, like you made it better. I mean, I don't even know. People are always coming up with law firm software, but they're horrible.

Well, that's what I mean. But until they gain traction, right? But all these new software companies, the first stop they make, Stripe, boom. But then they figure out later, oh, Stripe's not really paying us much money.

No. Yeah, it's not working out.

You know, and then, and then they think about moving, but people don't understand that they can move from Stripe. Merchants can move from Stripe. ISVs can move from Stripe. Stripe has a thing on there. They have a— there's actually a page on their website that explains how you can initiate moving all your data. So it's not impossible to move from Stripe.

Right. Well, I mean, that's the big part with a lot of these ISVs, well, all these software providers is all the data is in there. You know, I can keep charging my customer. I've got all their this, that, and the other thing. But to your point, it's all pretty movable once it's in there.

And if you've got it tokenized, you know, they do what they do, what they do, an FTP. So they're not going to give it to me, but they give it to the gateway, you know, the processor, or, you know, Gateway, Authorize.net, NMI, or the ISO's gateway. And they do an FTP transfer, take it over, and then the, you know, and then the process, you know, whoever on the other side you know, reformats the data to fit into their gateway.

Right.

Because they want the business.

Well, it's interesting because, yeah, you're going to put that— so you're going to meet this young software, you know, Jeremy's software company. You're going to put in there, hey, all my customers are my customers. You can't take the payments. They're going to have a harder time selling.

Well, that's why you're going to give them a piece of the— like we came up with a way, like we went to a software vendor. We're like, okay, well, if you sell, you get X amount of percent. If we sell it, we get X amount of percent, but you still get some residual.

Okay.

So it's a win-win situation for them because they're picking up my whole sales force.

Right, right, right. Doing that.

So my sales guys are now going to be able to sell XYZ software.

Okay. Yeah. So they're getting—

hopefully this deal is about to get done. We might be coming back to you for an agreement.

Right.

So the, the, um, but if I'm a software company— oh, I see what you're saying. Okay, so they still get a little incentive, incentive.

But a lot of these, if you look at a lot of these ISVs that go sign up with the newer ones and they go sign up with Tilt or Stripe or whatever, a lot of them don't get traction and make sales because they think, oh, I'll just put it online Everybody's going to find me.

Yeah.

Now I have a marketing budget behind you. How are you going to sell this stuff? And then how are you going to sell to the— into the SMB market? You need feet on the street or you need other people to, you know, telemarketing or whatever to get the word out there. But the whole thing is we changed our view on software. So my whole view on software now is we have a retail software. I mean, I don't care. I'll say the name of the company. Shout out to NRS. I don't care. You know, they do smoke shops, convenience stores, and liquor stores. That's pretty much it. Some other small retail.

3 places I plan on stopping on the way home.

You know, we sell it, we, we land the merchant, we sell them, we sell them, we contract, get the contract signed. Once the contract is signed, they take over. I don't have to take phone calls. I don't have to learn the software. I don't have to do the onboarding. They handle everything. Okay. The merchant has a problem, we have them call their help desk. They know the software, let them do it. And we did the same— we did the same thing with OnePOS. They handle everything. Sure, I make a little less money, but I'm not dealing with, oh, my printer broke on Saturday night and I need a new printer and I got to get in my car. I got to stock printers in my office or stock POS screens. I don't want to deal with any of that.

Yeah, well, that's a good—

you have to weigh it out, right?

Right.

What would I— what do I want more? I want residual.

Okay.

Yeah.

I don't care about that, that other part. And I don't want to learn the software and I can sell more. I can sell more other software products because I don't have to learn them and put them in the same business model. Yeah.

Yeah. So you're going to have more. Yeah, I guess negotiating power if you can go out and sell it because you're right. You know, we've been hired twice to consult on people that were building law firm software. And I was like, great, and customize it for us. And they're like, and you can help us sell it because, you know, you're going to all the lawyer conferences and this, that, the other thing. And I got, well, we don't go to the lawyer conferences because why would I go to a lawyer conference? But anyways, they could partner with me, we'll sell it for them, right? Exactly.

A Salesforce to go out and sell it, right?

And you're not getting people to change. Like, look at me, I'm going, I hate my law firm software, right? But it was just too hard to change. Getting people to change from their existing software is tough unless you have some value-add, like, I'm going to save you a whole bunch of money on your processing fees also. So yeah, no, I totally agree. I think that that's a big leverage point.

Is the other thing that we're doing is, is we're going to introduce in 2025 this, uh, a new offering called ISV Toolbox. So for anyone who has an ISV They can link up to payroll, a payroll company, a PEO company, a buy now pay later company, a loan company that will do loans like real loans, not merchant cash advance, and business insurance. And we went out, we found all these different companies that, that we partner with, and we're going to be offering that stuff, those products out to our merchants. We already started in a soft launch. And we're going to offer that to ISVs so they can do add-ons. Because when you look at the bigger ISVs like Stripe, Square, PayPal, QuickBooks, Shopify, they're all offering these type of products to their customers. So if you're not offering that, you know, you need stickiness with customers.

Right.

And then plug that all into the software.

Yeah, plug it all into the software and then we will manage all of those like vendors and make sure you get paid. So we'll manage it all for you. So you don't— we'll handle the heavy lifting side. Yeah, but you know, you have to protect your residuals. And the only way to, I believe, unless you have some other new, new thing you're going to make people sign, I think you got to find an ISO. Like even Mike Nardi, EPI, right? He has his own point of sale system, his own gateway. Right? If you're selling that, you know, okay, I'm selling the software, I'm selling this, and the processing is all owned by the same company. Right? So if you're selling stuff like that, you know, your merchant's not going to get ripped out from under you. I mean, even Clover, if you're selling Clover through a First Data ISO, people can't switch, but other people can sell them new Clover equipment and get rid of you. And, you know, and Clover has their own website and they're selling direct now. So I kind of call them in it. They're part of the antagonistic group.

Yeah.

You know, even look at SwipeSimple, they're selling that, they let us sell it, but they also sell direct. Yeah.

When you were saying you've got to protect your residual and unless I have a new— and you said agreement, I thought you were going to say baseball bat.

No, unless there's some new agreement or some new verbiage that you can come up with where, you know, go sell it to the agents and go, hey agents, come to James Huber. When you go, going to do business with an ISV, I got this ironclad 3-page agreement they sign and you're not going to, they're not going to be able to rip your residuals out from under you. Yeah.

Well, no, you could, you could. And that's actually what we've done in the past is when you're partnering with somebody, you just have them sign off. And to your point, You know, they're going, we're going to build it up and sell it. And they're not necessarily thinking that, oh, well, the reason people are going to want to buy me is because they're going to want my payment processing. They're going, they're going to want to buy this because I wrote the best software ever. You know, all those sleepless nights writing code, my mom's basement are worth it.

Oh, I get it.

Because when I look back at this business, right, I look back to 2001, 2000 when I first started, right? People came out, you know, there were software vendors like PosiTouch. They built software to sell hardware because that's what they did. So you, these big computer screens, right? And all these printers and cash drawers and all this stuff, right? And they sold it for lots of money and put people in huge leases for $80,000 to equip a huge restaurant or whatever it was, you know, $10,000, $20,000, $30,000. And they made all this money upfront. Then they put you in a monthly service contract. That was their business model. Yeah, you're in this, you know, and that's how they went along. And then, you know, and now you come fast forward to 2020, 20, you know, 2020, around that time, boom, what do people do? They build software for payments. They're not building software to sell SaaS revenue. They build software to sell payments. And if you look at Toast, I tell everybody Toast is not a payments company. They're They make money from payments, but they are ultimately a software company with a business that's basically hardware and software as a service. One POS takes a— I hand it to them. They have the guts to do it. They have the capital to do it. So they do, you know, hardware as a service, software as a service, and payment processing. That's their business model. It's the same business model as Toast. You look at Shift 4, give it to them too. They got hardware as a service. You pay your money for that and you have your SaaS software payment that you have to make. And then they get the payment processing. Same business model. Yeah, it's basically toast. I don't know who copied who, who was first, but whatever. That's the new business model. Hardware as a service, software as a service. If you're buying enough hardware, even the guys at NRS, they sell the point of sale system for $99 if you do dual pricing, cash discount, 0%. Whatever you want to call it, surcharging, whatever it is. Right. They sell it for $99 and $20 a month. Why? Because they want the payment revenue. It's all about the payments revenue. Yeah.

Yeah. I mean, those— because the software cost— what's our software a month? Something ridiculous too on top of it.

It is. I think we're paying $2,600 a month or something like that. It's out of control.

$2,600 a month.

That's because it's like each user. Yeah, but at this point I'm a addicted to it. It's like crack. Like, I hate it, but I can't stop.

Yeah, crack.

He talks about how much he hates it.

Pay your bill, please.

We've had this software for what, 5 or 6 years at least, James?

Hated it since day one.

I know you guys had that for a long time. I've gotten a lot— I've paid a few invoices. No, but that's what's happening today. And every time I go on Facebook into the agent groups, I need a lawyer. You know, I always put James Huber, contact James Huber, call Jeremy, call Legal Law.

It's just a pain in the ass when you pay their bill because their software sucks so badly.

Yeah, no, but I'm just saying it's the same, you know, everybody, you know, I'm just saying like, and then, and then my stomach turns every time I say, oh, I need a restaurant software that's agnostic. I need this and it has to be agnostic. I need that and it needs to be agnostic. I'm like, do you guys realize how much money everybody's been in this group collectively has lost probably millions of dollars. Millions of dollars to this happening. Millions.

The big, the big boys, and for them it's— doesn't even matter, just another ivory back scratcher.

I mean, you look at Worldpay, right? Worldpay, that's where Mercury was, right? But as soon as those companies got bought up, all that business on Worldpay's books from Mercury, it all went Yeah, gone. Yeah, because they all left and they all went to Shift 4. They all went to other places because they didn't need to put data cap in there anymore. There was other ways with semi-integrated solutions, you know.

Yeah. And it's a bigger problem. I know we're having fun and joking about it, but it's a bigger problem because it's not a lot of joke because people, people are not paying attention.

This is a subject matter that the agents are not paying attention to.

They're not paying attention because there's very few industries where they even should not consider using a software. Because yeah, I know that a bunch of stores I go into and I see their dumb reader and I'm going, how are you not using some kind of software that's managing your, you know, HR, your scheduling, your inventory, all of that?

I can tell you why. Because they like cash.

I'm just thinking, like, the only store I go into is like a gas station.

No, but you believe it or not, you, you know, there's a lot of businesses out there. I mean, they don't want to have a point of sale system because they just want to— they want to pocket the cash, right? And that's the main reason for not using a point of sale system. I mean, yeah, when I talked to— I signed some guy up recently, like 8 smoke shops. I'm like, 8 smoke shops, you don't want point of sale. I'm like, are you kidding me? Like, what?

No, no, because I'm selling kratom, actually.

So, well, we don't care what they sell in the stores as long as they're not selling it online. You can sell whatever you want. Go— you ever go into a gas station and see what they sell in gas stations? I mean, I've walked in again.

I like the bath salts.

No, I mean, I went to a gas station the other day. They were selling, um, whatever. Herbal Viagra pills. They got kratom, they got kava, they got— I don't even know— all kinds of CBD products in there. And it's a gas station. Yeah, bongs, water pipes, hookahs.

What's the address?

Huh?

What's the address? We're heading over. So they're everywhere.

Just any non-brand. I mean, don't go— they don't have that at Wawa, but I mean, that your non-branded, you know, locally owned gas stations are full of this stuff.

I don't— we don't see a ton of that in Southern California, do you?

No, it's— I think it's all the California laws.

Yeah, yeah, probably.

Believe me, Allen, we've looked.

Listen, you guys have dispensary on every corner.

I mean, yeah, I think you do. Yeah, but I think that— I think the smoke— well, I know because we represent the clients that do it. The smoke shops are— they're selling all sorts of— they're selling kratom and everything. But you're right, yeah, they're not using POS, they're running it on cash. They probably prefer to have a knucklebuster in there just so there's no record.

A lot of them take credit card, they just put a credit card. The one— it benefits smoke shops if you're using, uh, if you're selling cigarettes and you're selling like the Juul vape and the Altria stuff that comes from RJ Reynolds, it's worth it to have a point of sale system because the point of sale we sell has tobacco reporting in it. So it collects all your inventory, it passes the coupons, and then it reimburses the merchant for the discounts that they give the customers.

Right.

So if you're— but if you're not selling a ton of cigarettes, you don't need it. Yeah, but, you know, stores that sell lots of cigarettes need tobacco reporting.

I don't even see people smoking ever in California.

I don't know.

Everybody vapes, but you could still— it could still be a nicotine product.

You follow?

I still have all the reporting. Yeah. And you still required to have all the reporting and that software does it for you. Otherwise you got to do it all by hand.

I don't even think you're allowed to smoke on the sidewalks here, are you? Ever see—

they let people sleep on the sidewalk.

You can sleep and go to the bathroom all you want, right?

But don't smoke a cigarette.

Exactly. You can't smoke here, but you can poop, pee, and sleep.

But don't have an open beer in your hand.

Yeah, that's crazy.

I don't think they care about open beers around here, do they?

You think?

Ah, if you're walking down the street, I don't know. I got gray hair and I'm a white man.

Exactly. Yeah.

So, all right.

No, so it's, it's just a—

it's—

I find that this whole topic to be like, you know, if I, you know, if I told a— I tell agents this all the time and they go, you're crazy. And I go, I'm crazy? I said, okay, well I lost enough money.

Yeah. No, and I think it is, you know, the race to zero was a big problem and then the software was kind of the fix for it. But now that's going away. So, yeah, you got to get nimble. I mean, the stuff that you're doing is, you know, I think the only way out. I mean, all of our clients, we used to say we represented sales organizations.

Right.

Everybody's a fintech company.

Yeah, everybody's a— you're a fintech. Or I call myself a consultant, financial consultant. Yeah, payments, payments consultant. Here's another thing that really, when you talk about the race to zero, I had an article about that too. What do you think about agents who pay merchants part of their processing revenue or ISOs that are paying agents, paying, paying the merchant back like they're on cash discount for 4%? And they go, okay, we'll cut you back 25% of the money.

Well, you said the magic words. Every single state has a kickback statute that makes that illegal, per se. Visa and MasterCard both say you cannot do that. But there's an easy way to do it. You just make the merchant an agent, right? I mean, that's— but you better have that agent agreement. If you know, I don't think anybody, you know, the DOJ is not going to come kick down your door for doing a kickback. But how do you know who the kickback's going to? What if the kickback's just going to the CFO and the CEO finds out? Then you might have a problem on your hand.

And we know it's going to the manager of the restaurant and not the owner.

Right, exactly. It's going to—

when they ask me for that, I go, I just lower your rate. You don't want to do 3.75? We'll do 3.5% or we'll do 3.4%.

Right. And save them money. And the only reason people would want the kickback is so that it can be not reported to somebody.

Well, I make sure anybody who's getting residual— we've had people ask, I've had agents ask me, oh, just, uh, sell me the money. I'm like, no, you have to sign the agreement. You got to give us a W-9 form, a driver's license, and a voided check. And we're going to verify your federal tax ID, or you're giving me your Social. Otherwise, I'm not paying you.

Just leave a briefcase of money by under the bridge.

Yeah, no, but I've had people ask for residual in cash. I have a guy, I have a guy recently, he sent us a deal, we did the deal, and then I'm like, you got to sign the agreement. Goes, no, sell me my money. Like, there's no selling you money. You fill out the paperwork. Yeah, that I said, you want to fight? He got a lawyer. I told the lawyer, here's the paperwork, have your guy sign.

I'm not laundering money for you.

You can get paid. I said, What do you think? I'm just going to send the guy Zelle, or he wants me to send him Venmo, Cash App, this, that. Like, we're not doing that. We're not in that kind of business. Like, guy wants to get paid, fill out the paperwork and we'll pay you. Otherwise, you know, see you. Yeah, but I don't like this whole thing, this movement of, of places. Oh yeah, we'll just sign the merchant up as an agent and that, that, that, that, that, that, that. I think it's like I think the ISOs need to put their foot down with this thing and go, hey man, this is not good for business. I picked up an account because the merchant stopped getting paid and then stopped getting his kickback. Yeah, he stopped getting his kickback, so I took over the account, lowered the fees, blah blah blah, and the guy's all happy. He's happy. He's like, yeah, he goes, that was BS, the person stopped paying me. You know, and I said, well, you know, whatever. It's just crazy when merchants ask for money like that. And then they try— I had one guy try to explain to me, goes, well, you're charging 3.75%, so I want 1%. And I'm like, wait a minute, 1%? Like, you don't even understand how it works. It's not like we keep the whole 3.75%. He's in there, everything, huh?

That means he gets everything.

Yeah, but I'm just saying, like, Visa and MasterCard got to collect on the interchange. The processor's making money, the bank, everybody's got their hands in there. You know, hands in there on the transaction, you know.

Now, every time someone brings that up, I say exactly that. I was going, there's kickback statutes in every single state. And Visa, MasterCard, find out, they'll shut you down. You can make them an agent, but that's stupid. It's lower the rates. And they're like, well, they want the money. And I go, great. Well, then you're going to get in trouble because the guy in charge isn't getting that money. And when he finds out, You know, Jeremy's pocketing all the cash.

Jeremy, he's—

Allen, we need to shut down that kickback. Let's kill that, Allen.

I don't work at Stacks. I don't know what you're talking about.

Uh, all right.

No, but it's crazy, you know. But I mean, do you have any— I mean, besides, like, like I'm saying, like, partner with companies who own the IP, they own the software. And they do the processing, I think agents have to start embracing that.

Yep.

Unless there's some other magic trick you think legally agents can do.

I mean, I would try and get a little agreement out there with everybody that you partner with just to protect you. I mean, that's usually our thing. I know these are all done on handshakes, but, you know, get a little piece of paper in front of them and I'm signing off.

Yeah, I think— I mean, I don't know, it's a— I think it's just a crazy subject of guys who have been in the business for a long time have probably seen more financial impact than people who have only been in it for a short time.

Yeah, yep, yeah. And if you're just coming in, you don't know how hard it can get because, yeah, this is— this is happening. It's unavoidable. So Protect yourself.

No, and I think in the future, like, the software, like, agnostic software, I don't think it's going to take over our industry like in the next year or something magically, like, that's going to be, that's going to be the thing of verticalized software. But I do think probably in, in 10 years from now, that's going to be like a really big thing. What do you, what do you think about that?

Yeah, I mean, it's just hard because every— all these software companies, they want to sell. But I think being agnostic, you know, I think, you know, even the law firm software, if lawyers knew the amount of money they're losing on this and that they could go negotiate and go team up with Allen Kopelman and get way better rates and service. We had a client, we had some client, our client for 3 years payment was held up for 2 weeks.

Yeah, yeah, not a small amount of money either.

That wouldn't happen. Well, I was— we're like, we had to tell them. They're like, hey, you guys want to know what you're doing here? Because I think we know here. And they were like, oh, it turns out you're right. How'd you guys know?

So that's one thing that, that's— that, you know, I always make sure when we're running— like, when we're dealing with companies, we have some law firms that have— we have one that have a client, his retainer is $250,000 a month. And the process— the first time it went through, the processor called me. They go, uh, was that a mistake? And I called the law firm up. They go, no, this client wants to pay on his card. And they sent over who the guy was. He wants the miles.

Yeah, he wants the miles.

Yeah, he wants the miles. He's a big traveling guy and he wants— he wants the miles and he wants $200 He puts $250,000 on a recurring credit card every month.

Well, everybody tries to do that to us too. So that's why we had to start surcharging them.

Then everyone— it's, you know, I don't want to get it. We could do a whole nother podcast and talk about, you know, Visa and the whole 0% thing. That could be a whole nother podcast that could last for 3 hours.

Yeah. Let's get you on the Payments Expert podcast, Allen.

Anytime you guys want to come on your podcast, we can talk about it. We can talk about whatever. James knows we, we delved into FedNow together. Yeah, conspiracy. That was a great one.

It is a conspiracy.

We talked about that. We've talked about other stuff, you know, heard much more about FedNow.

Yeah.

You want to go away?

I don't think it went away. I just think they, they don't know what to do. I think, you know, the banks are slow to adopt it. That's all.

They want us to forget.

Yeah.

And then all of a sudden, yeah, your money starts expiring.

Yeah. I mean, believe me, I would love to do a podcast all about that hearing they did in Washington on Visa, you know, and then they had this payments expert guy, he testified and he goes, well, I don't know why you're giving Visa a hard time about this $1 trillion in debt. You should be talking to the banks. They're not in control of that. Yeah. You know, I can fix the whole Visa, MasterCard problem for Congress. Just tell Visa to do two things. These are the two things Visa should do. Well, three. One, allow merchants to pass the fee. Yes. Just forget about, you know, they can just forget about all this secret shopping. Yeah, right. Just forget about it. Figure out, just say whatever it's going to be, 3.5%. You don't like 4%. Whatever it is, to say everybody can do it and leave it alone. That number one. Number two, the assessment fees are way too high. They need to get rid of that. They need to lower those. They're like 14 basis points now. That needs to be lowered. They go back to 8 or 10 or something. That needs to be dialed back. The next thing is small ticket interchange. Bring that back. Like up to $30, $25 or $30 small ticket interchange. They did away with that when they did the Durbin Amendment, and they need to bring it back because that, that would help small businesses right there. Just those, those few things right there would help the average business save money on credit card processing and make everybody happy.

Yep.

Except Robert Johnson.

Yeah, exactly.

And the secret shopper people.

Yeah, they'll be out of jobs. I mean, New York—

I got to wrap it up. No, New York now, you go into a restaurant, every menu item has two prices. Yeah, every menu item. You know, customers, they don't care. They'll pay the fee.

You know, I don't care.

You pay the fee.

Yeah.

Bring on this pizza. All right, I got to run.

Okay, so agnostic versus antagonistic. I guess agents need to think about What we talked about today, pick your partners carefully. Consult with James Huber if you're going to get in bed with an agnostic partner and make sure you've got some kind of agreement. And I would suggest giving them some residual so that they're— you're just not taking up all the residual. And maybe you would be able to get an agreement with them. Maybe you make a little less money, maybe they handle some of the You don't have to do all of the tech support, you know, and you got to consider this because otherwise you can lose all your— you can lose your residual. And I'm a person who's lost tens of thousands of dollars a month because if I had it all back, my residual would be double what I'm making today.

And educate the software seller. To your point, agnostic software, it's not for the low-dollar, you know, 'PE firms are going to buy this up.' Well, buy it up. You will be worth more if you say you can use this with whomever, or I got somebody who's fabulous who, you know, will buy this up, and it's just a different type of buyer.

So, yeah, maybe you're not getting all the payment revenue, but you have— you're gaining a sales force at the same time of people selling. So that's the lesson. That's our advice. Words from the wise, the legal, and the person who's lost enough money that they're not happy about it.

All right.

I appreciate you guys coming on the podcast. Thank you, James. Thank you, Jeremy. We know, even though we didn't get them on camera.

Yeah, no problem. You're better off that way, Allen.

You guys can go have a great day. Happy holidays. Merry Christmas. Happy Hanukkah. Happy Kwanzaa, Happy New Year, all that. And I'm sure I'll see you guys at a payments conference soon. Hope so.

All right, thanks, Allen.

Carpe diem. B2B Vault bringing you the Street Smarts edition.