What is going on at PayPal, Stripe, and Square? | FinTech | B2B Vault | Episode 167

Yo, what's up everybody? It's Justin live from B2B Vault, the payment technology podcast sponsored by Nationwide Payment Systems, hosted by this guy, the Andre Agassi of payment processing himself. Allen Kopelman, and we'll be providing you educational information about fintech, small business payment processing, and the technology businesses are using in the world today. And in today's podcast, we're gonna, uh, figure out what the fuck is going on at PayPal, Stripe, and Square. A whole bunch of new, uh, updates or revisions to their policies, etc. You know, uh, in the world of payment processing, it's an ever-changing landscape Um, one day it's this way, the next day it's another way. Um, but yeah, other than that, it's been raining a lot. It's South Florida. Welcome to, um, hurricane season. I just spilled tea all over myself, so my leg is on fire, but I am going to be okay. Um, other than that, yeah, when it's hurricane season, drink tea.

One thing you should make sure of If you are a business owner, check your insurance. Well, you know, make sure your insurance and everything is up to date. The other thing during hurricane season, hurricane supplies: batteries, flashlights, generator if you have one, uh, plenty of water, canned food. You need enough for like 3 to 5 days. It's a propane some propane, you know, whatever, charcoal first for your—

or charcoal, or, you know, get yourself a cooler, freeze all your, you know, those, those packs, those freezer packs, freeze that because you're not going to find ice, you know.

You're not going to find ice. You got to get ready before, yeah, the hurricane season starts. So right now is the time to get all—

you should have been supplied up already, right? But or resupplied or checked your supplies to see what's bad, what you need to replace.

Yeah, and just get ready and make sure, like, you know, a hurricane is coming, you know, what do you need to secure in your office or your business? Unplug electronics because you don't want anything to blow up. Yeah, when the power goes on and off and stuff like that. But that's just during the rainy season, period. You need to be mindful. Yeah, things being plugged in.

Put a rain jacket in your car too, man.

Yeah, we had an incident in the office. The power was going on and off. Oh, it came in and there was lights on in the office that were turned off.

Yeah, the studio lights were all on by their own accord.

So it's kind of weird, you know, some things that do that, make sure you keep them unplugged. Anything that's— could be suspect.

Yeah. MTV Unplugged. How you doing personally?

Personally, everything's good. Gonna— about to go into dinner with my brother and my mom.

Nice.

And then Sunday we start with the Southeastern Acquirers Convention, so we got a learning opportunity.

Next week is a busy week.

I'm excited for Justin to attend his first payments convention.

And, uh, yeah, I've been getting a lot of emails from a lot of people A lot of, um, LinkedIn requests.

135 vendors are going to be attending the show.

That's a lot.

And then that's with booths, and then there's probably another 5 to 10 that don't have a booth, roaming vendors. And whatever, there's educational opportunities that we're going to be able to go listen to speakers, and it's going to be interesting.

Yeah, so I'm kind of looking— I'm not kind of— I'm looking forward to that. It's this weekend. Yeah, so it's not too far away, right? We're not driving all the way to Miami. Yeah, that's a good thing.

Hollywood for 2 days, and it's going to be a lot of meetings and information, which is good. And then we can come back on the show and provide good information back to our listeners. So, you know, there's been a big buzz, and what's going on with you?

He actually remembered.

Yeah, look at this. What's going on with you? The buzz is—

the buzz is me.

What's going on with Justin?

Yeah, no, I'm, uh, I'm buzzing around. I'm hanging out, uh, nothing much, uh, plugging away. Finally got Nationwide Payment Systems website, the home page. I'm happy with it on all the desktop, mobile, and you know, content, iPad, you know, the tablet, updating the, the, the site, updating content. Yeah, that's my life, you know. Um, but on my personal life, I'm doing okay. I am glad to be here, grateful for, uh, another day on this green earth.

All right, awesome.

Yes.

So the buzz— there's a buzz been running around. Like, we were at a convention, we talked to quite a few people. Oh, we use PayPal, we use Square, we use Stripe.

They're not exactly— I mean, they're not exactly happy with it, you know.

And then we were like, well, why don't you use a merchant account? They don't— they didn't really know that they could get a merchant account. A few people, most—

yeah, they don't even—

they don't even realize, like, there's companies—

well, they don't know what that is, right?

They don't understand what it is.

And people, they don't unders— they don't know that they're a merchant, right?

They don't know that they're a merchant.

Which is ridiculous.

Yeah.

And that's why Allen's here and I'm here to help educate you business owners, to let you know that your merchants, just like back in the day, you know, the merchant— what was it, the merchant, uh, Marine? No, Merchant. Anyway, you know, they were all merchants, traveling nomads, you know, the salesmen. Yeah, yeah, everybody merchandising. Yeah, no matter what you were doing.

So you were a merchant. And, you know, it's important to know people didn't realize, like, oh, if you're processing with one of these companies that we refer to as a payment facilitator or a PayFac, which is the PayPal, Stripe, Square, Shopify, you are not the merchant. Those companies are the merchant, and they are allowing you to use their services to process transactions, but ultimately they have all the control. And they have all your data also.

Yeah, it's super confusing, right?

It's confusing. So there's been a buzz around, like there's been a few news stories. I've seen a couple of reels. I saw one guy make a video while he was sitting in a big giant recliner, and then I saw another guy make a video, and some of the information in the videos that I saw was true and some of it was false. So let's just miss, you know, get the information correct, right? So basically, all three of these companies over the last, I think, about a year— because they didn't all do it in lockstep, right? But they all operate the same way, and any company who's a payment facilitator works like this. So Their new policy is that— and because their policy is processing fees will no longer be refunded when you issue a full or partial refund to your customers. So that's their policy.

So basically they're saying what that means is someone goes to your website, they buy something, for whatever reason, for whatever reason, you know, what's— so what's the 2%.

No, 2.9%.

2.9%. So you're gonna— whatever the fee is through PayPal. So I bought— I went to Allen's website, I bought a t-shirt, it was $100. I paid for it. Allen goes to check his inventory, realizes he forgot to update his website, has to refund my order. Now I get my money back, no problem, but he's out of his $3.

I already paid the $3, the $2.90 and $0.30. Let's just call it $3.

Let's just say it's $3, the $3 fee to PayPal. He's already paid that. As soon as I sent that money, they took it out of that $100 out of his money, and I'm supposed to get my stuff.

Yeah, now I gotta refund Justin $100. So now I'm refunding him $100, and then it's another transaction fee, $0.30. So I'm at the $100 and the 30 cents on the first one, and now I'm at another 30 cents.

So I'm in the $3. So you're down to $3.

Well, I'm at the $3. Yeah, but I don't pay a fee on the refund, right?

But I'm just saying, so your total, you're out of what, $3.60, right? About $3.60 on top of the fact— so you're— you didn't make a sale, so now you're negative $3.60 on a transaction that wasn't, you know, Well, that sucks that you didn't update your inventory. I'm sorry you didn't do that.

Well, it could be for any reason, right? Paid you the invoice and they decided to cancel the order, right? It could be a larger order, let's say for $1,000. If it was $1,000, then you're out $30.

Exactly.

So the whole thing is this, is that, you know, so I heard like, you know, whatever, a few people talking and they were like, oh, it's not the industry standard to do that. So as far as like PayFacts go, that is the industry.

I was going to say, yes, that's just industry standard.

It's the industry standard because when you're processing through a PayFact, right, these companies will refer to as the PayFact companies, right? When you're processing on those type of systems, what's happening is, is that transaction is authorized and settled.

Yes. Okay.

Now what's the difference when you're using a regular merchant merchant account. In a regular merchant account, you're all day long, you're authorizing transactions. And then once at the end of the day, there's a settlement.

Right.

Whatever time you pick, right? Let's say you have a retail store and you close at 8 o'clock at night. You can, you know, you either manually run your batch at 8:15 or you have it set to automatically run, or you have a website and once a day you have it set set for whatever, 6, 7, 8, 9, 10 o'clock at night depending on how your business runs, and it goes and it batches out. So the standard on a regular merchant account is, let's say the same thing happened, $100 or the $1,000 happened. Now the transaction is authorized. As the merchant, now I can log into my account, my gateway, let's say, whatever And there's a gazillion gateways, right? So Authorize.net, NMI, there's a whole slew of them, right? You can log into the gateway, find that transaction, hit the void button. You don't have to do a refund, you don't have to send the money back, you just void it out. That way the transaction's voided, it's like it never occurred. Now you did absorb a transaction fee, but you didn't get hit with the major Right, part of the portion. So that's the advantage of using a merchant account versus—

but the transaction fee is going to be way smaller, right?

You're talking about— you're talking— you're at, let's say you're at 30 cents, maybe, maybe. But yeah, because maybe you have a 10-cent authorization fee and a 10-cent gateway fee, and then you do the void. So basically you're at 20 cents, just saying, like on average, that's That's a big difference from $3, right? $3.30, $3.60, $3.60, right?

So instead of on $100, right?

So instead of $3.60, now you're only out 20 cents. So there's a, you know, that's one of the many advantages of having a merchant account. Sure, when you have a merchant account, there's more hoops to jump through as far as filling out paperwork and signing an application and Yeah, you know, all of those things. But it becomes worth it to do that because when you're growing your business, you don't want to have to deal with all of these different things. And it's— and people don't realize, like, the same thing. Like, you walk into— if you have a store and you're using this, like, the Stripe register, the Square register, or one, you know, machine from one of these companies, and you do a transaction, there's no void button. They can't void anything. Those, those companies, there's no voiding in that. There's no voiding. So you have to do a refund. So that's crazy way to do it. Yeah, because it's all—

because they're not— so yeah, I get it.

Yeah, you don't have a merchant number, you're not a merchant, so you can't void the transaction. And what are you gonna do? You're gonna call PayPal on the phone? Go, hey, I need you to go— good luck, void that. They're— that's not going to happen. There's no void button. You've used PayPal.

Yeah, good luck.

Is there a void button? No. So that's what people—

you send somebody some money or somebody sends you some money, that's it.

Yeah, it's gone. That's the way, that's the way those services—

I mean, you can refund, I guess, later, but I'm just saying. So you can't say like, no, I just want to void this. You're just avoiding—

only works when it's in the same batch for the same day. So if somebody transacted, let's say, on Monday and then they called you on Wednesday, Tuesday or Wednesday to cancel, you do have to do a refund. You don't—

well, right, it's same-day void, right?

You don't get your fees back. But in most cases, the same-day void is the most common thing that happens. And then that way you're able to refund your customer. It's like they never even had the transaction. They'll see the authorization on their credit card, in a day or two it drops off, right? And then basically you don't have to send send them back the money. People get confused about that all the time. I explain to them, no, just go in and void it. Oh, but they want the money back. Yeah, well, they're never— you never got the money, so you don't need to give it to them back. Just hit the void button and you're done. Simple, simple, easy. Boom, done.

So what should I do if I'm a merchant and I have PayPal?

Well, you should evaluate. I mean, if you're doing at least let's say $15,000 a month, it's probably time to step up and get a merchant account. You know, these companies are good for, you know, they're original.

And Allen's saying that at $15,000, like, because, you know, for his personal, right?

No, it's because there's monthly fees, right? So you have to weigh it out. Like, you're gonna have some monthly fees when you have a merchant account, right? Yeah, because I mean, at $10K a month Yeah, $10K, it's probably worth it too.

I would say it's worth it in my, you know, in my experience, like, it'd be worth it to get off of PayPal, Stripe, Square, etc., because then that way you're cutting out the middleman. You're starting to understand you might be able to get a partnership with a company like Nationwide Payment Systems, which will help increase revenue, drive sales, etc., etc.

Yeah, you have more control over everything when you're trying to grow your business. Sometimes, let's say you 5 years from now, you go to get a loan, right? When you go to the bank, they don't always want to look at PayPal because, oh, they're going to laugh your ass out of the bank statements, you know what I mean?

I mean, unless you got $100,000 sitting in your PayPal account, that's one thing. But yeah, those—

don't leave your money. That's the other buzz that's been going on.

We're jumping the gun, but just finish up.

No, I would say you show unless you go able to go and show all your sales through PayPal. But people don't know when they go— when, when the bank looks at it, the bank looks at that and go, well, what is that money? Is those— are those business transactions? Are they personal transactions? It's hard for the bank to know exactly what you're doing.

The PayPal is— I mean, the bank's not looking at your PayPal account, and they will I've gone in there with, you know, I have experience with that, but it's not, it's nothing like having an actual merchant account because it's just more organized. It looks more professional. Um, and I'm not calling people who operate business with these platforms unprofessional, but it's like having a Gmail and not having a URL for your website as your email account. You know what I'm saying?

Like a .com email.

Yeah, like it— at some point you're gonna have to step it up.

Yeah, you gotta step it up, spend a little money. You spend money to make money.

Yep.

And it's, you know, and it's also important, you know, that way, you know, you have all your bookkeeping lined up and all that, because comes a time where you want to either get a credit card with a bigger limit, things like that. They're going to want to go look into your bank account, and I think that that when they're looking at your bank account, your bank account, like a credit card company, think they, they kind of discount, um, the pay services because a lot of the pay services like PayPal, you know, you can send money P2P, right, peer-to-peer. And then also, you know, even with Square, they have Cash App, and you can send money peer-to-peer. And they don't look at those as like a professional business transaction, right, even though they might see it in your business bank account, right? They all sometimes discount that. They might discount it by like, say, oh well, there's $20,000 of PayPal activity for the month, maybe $10,000 of that's real business and the other $10,000 might not be. So they're not going to count that. So the other big buzz with all these companies has been the Consumer Financial Protection Bureau, right? It's a big mouthful.

CFIB.

The CFPB.

PB, I'm sorry.

Yeah, Consumer Financial Protection Bureau basically put out an announcement because you've had all these bank failures, right? Yeah. So they put out an announcement, don't leave your money on these platforms like PayPal, Square, Square, Stripe, Venmo, where they can hold some of your money. Do not do that, because recently I didn't— I read 2 or 3 stories where somebody had money on PayPal, somebody broke it, hacked their account. They had cash on there, and they took— they transferred the cash to their bank account. Guess what? No, it's not FDIC insured.

You're not getting that money back.

You're not getting the money back. PayPal's gonna say sorry. We don't know if that was you or not you. And the guy's money was gone. That one was thousands of dollars, over $10,000. The other one was small, a couple thousand bucks.

But, you know, if that was your money that you're living on, I'd be going crazy.

Yeah, you got to be kidding yourself.

I remember I got a huge invoice paid.

Yeah.

One of my first big invoices., and PayPal took 3 months to release that money.

Wow, that's crazy.

I was— it was ridiculous.

Yeah, if we get a client and I couldn't not perform the work, right?

I'm a web designer. I gotta— I got paid. I got the money's there, right? I just can't access it, right? That was the worst feeling I've ever had in my life. Like, yeah, that, that sucked.

We've had that happen with a regular merchant account. We asked the client, hey, send us over a copy of the invoice, has the customer's name on it. We give it to the risk department. The risk department will call the customer on the phone. Hey, did Justin make you a website? They're going to go, yes, he's make, you know, made the website. That's it.

Boom.

They're going to release the funds. That, that's, that's how it works. But you can't get, get that done with PayPal.

You are not getting that done. You aren't getting that done with PayPal at all. Never, not once. You're not going to even get a phone call. You're lucky if you get an email. Yeah.

And people don't, you know, not— but you have to be careful. So, you know, there's other like non-bank, like Robinhood, Betterment. There's like these neo banks, right? Those are real banks. You could have money on those banks. Because they're all FDIC-insured accounts, right? And a lot of people are taking their money, you know, spreading it out, you know, because they want— I mean, interest.

We're not financial advisors or attorneys or whatever. You could keep your money wherever you want to keep your money. Just understand the rules and the risks, right?

The rules are money that's left on payment services is not FDIC-insured. Money when you have a merchant account.

So let me explain what he— Allen is saying is when he says it's not FDIC insured, you know, like in the movies when they're like robbing the bank and the bank robber tells everybody, don't be a superhero, the bank's money— the money is insured by the federal government, right? Right. So what he's saying is at these banks, at these like these other, these platforms, PayPal, etc., if someone robs you or if someone robs PayPal, it's gone forever. You can't do anything about it. You can't call Uncle Sam and say, hey man, PayPal did me wrong, man, you know, their security, blah blah blah. You can't do that. But you know, if you be— someone robs Chase or Wells Fargo, your money's protected, right?

Like we had a case recently, somebody that I know had couple thousand bucks ripped out of their checking account, right? Some fake transaction that somehow somebody got a hold of their— got a hold of their bank account number, right, through a hack probably, and they stole money out. The person went down, called the bank fraud department, went down to the bank, blah blah blah, and they got all their money back. But if someone takes the money out of your— you get money taken out of your PayPal account That's it, it's gone. PayPal's not FDIC insured like the bank. PayPal's not giving you your money back. PayPal doesn't care that you got scammed or defrauded. If you get scammed or defrauded and you use a bank or you use your Visa, MasterCard, right, to do a purchase and you get scammed and you don't get what you paid for, you can get your money back, right? So, you know, it's protected the consumer. And that's the other thing, you know, when you're a merchant, right, and you're doing business. I had some guy the other day, he's trying to sell me something. He's like, oh, send me the money through PayPal Friends and Family. It's only a couple hundred bucks. I'm not going to do that. It's a business transaction. I want a record of it. I want to use my credit card because if the guy doesn't send me the goods, right?

So tired of people with that.

No, but I'm saying if the guy doesn't send me what I ordered, exactly, then I can get my money back. And I said, no, I'm not comfortable doing that. And you got a situation with one of your kids paid for some shoes twice.

Yeah, my— I mean, well, last Christmas I did a dummy and bought something online through PayPal. Uh, I did get my money back, but that took like, what, almost 8 months?

That took a long time.

8 months or something like that. Uh, yeah, and then my daughter sent someone else some money. I think it was through Zelle. That was gone. And then my other daughter most recently sent some money through Cash App. And she never got her sneakers.

That's just wrong. And, and it's— what's bad is, is, you know, because it's not a credit card transaction, your money's gone. That's it. It's gone. It's history. You're not getting your money back.

Yeah, it's connected to your bank account. It's taking it right out of— well, whatever account you got it connected to, let's take it right out of there.

Bye-bye. And that's it. And the bad part is, is sometimes these cut— these Fraudsters are sneaky and they somehow get your, you know, your, your banking information, sort of, or you sent them the money and they have like a record of that, and then they try— they could try to get money out again, which is what happened to the person I know, my son. But he ended up getting the money back, right? Yeah, because it was at the bank, right? The bank's insured.

Real quick, so I know we, we talk about $15,000, $10,000 as a minimum. So say I got a food truck Yeah, you think I should get a merchant account right away or should I use PayPal?

No, you should get a merchant account. People want to pay with their credit card. They don't want to deal with all this stuff. And we have some exciting—

it is so annoying to go up to the, to the food truck to something that I really, really want and they're like, yeah, we know we only take cash, or you gotta— we use Cash App, or yeah, I'm like, I don't have— I disconnected my everything basically. Like, so it's like, I can't help you, I can't support you.

Yeah. And a lot of times people are walking around with their phone, that their Apple Pay or their Google Pay on their phone, they just want to tap and pay, tap and pay, tap and pay. You know, you gotta come up with stuff. Like, we're talking, we're working with this company now, hope we're gonna see a release soon, but they have like a thing for food trucks where they give them like a website, then the people can order the food on their phone.

Yeah, that's really cool.

Pay for it, boom, and then the guy's making it in the truck and they just start give you your food. Hey Justin, you're here, boom, here's your food.

Yeah, I like that.

So there's, you know, there's ways you can— there's things you can do for your food truck, for your business. Like you're going around to a farmer's market, you don't need to buy equipment anymore, you can just have an app on your phone.

Yeah, so that's what I was trying to get at. So like I know we mentioned like those big numbers or whatever, but there is solutions for like, you know, micro business.

Like smaller businesses, we have solutions for small businesses too, because one day a small business could be a large business. You could have one food truck today and 5 food trucks a year from now.

Yep.

Or you develop—

we have the solutions that will grow with your company for sure.

We help you grow your business and have you have control over your data. That's the most important thing, have control over your data.

Yeah, I mean, because you can't, you know, I mean, PayPal at the end of the day kind of has some records on the back end, but all the other ones, nothing.

Yeah, but the one thing is, it's like, also if they shut off your account, you can't get in there and get your data. No, they usually shut you down and you're done. Yeah, and even like So like, I have a client that has a website, so they have some people that— because as the guy was starting out, he did PayPal, right? So he has his merchant account on there, and then there are a few people that still want to pay with PayPal.

I mean, just because you get a merchant account, that doesn't mean that you don't— you can't accept PayPal payments, right?

You can still take PayPal.

Yeah, right.

You want to make sure that you give your customers the options that they want so you don't lose a sale. Like, if you can't take Apple Pay That's a problem. You need to take— be able to take Apple Pay. If you can't, if you can't tap, yeah, you want to have tap and pay.

That's a problem.

Business people want to do that. People like the tap and pay. They love it. Tap and pay is super popular. I like it.

I, I hate it when it automatically redirects you to put in your PIN because it's like you don't have your machine set up properly because it's not supposed to do that. It's supposed to go straight to credit, right?

It's supposed to go straight to credit.

Yeah, but because then at that point it's not contactless anymore, so what is the point of me tapping, right? Yeah, yeah. So merchants out there who are— don't have your credit card machine set up properly, go ahead and do us all a favor and get that done. I know you're trying to save money because the debit transaction is probably a money earner, right?

Not really. Debit and credit is now basically almost the same because they— the government ruined debit. Yeah, this Durbin Amendment thing. And they basically— we used to see when the Durbin Amendment first started, there was enormous savings to some merchants with higher tickets. Merchants with lower tickets got, got the, got the, got shafted.

Jammed.

They got shafted completely because the small ticket interchange went away, and they got shafted. And the merchants with big tickets like grocery stores and Walmart, you know, won't get into a whole thing, but debit and credit, like pin debit, it is not cheaper to process a pin debit. It costs the same, almost the same as a credit card, because now most people— I would say a lot of people have gone away from the bigger banks Yeah, over the last decade. And some— a lot, I would say, you know, more than 50% have moved to like credit unions, community banks because of the lack of service.

Yeah, I'm definitely—

and also a lot of young people don't use traditional banks. They're using something like Chime, even getting their paycheck deposited onto those kind of apps. I mean, neobanks.

Yeah, I mean, people are using PayPal for that too. Cash App.

Yeah, that's dangerous. Do not leave your money.

I could not. I would— yeah, my daughter had one of her paychecks going to her Cash App. Yeah, I flipped. I lost it.

Yeah, you can't do that. It's crazy.

Like, what are you doing? You just want to spend your money or have someone take your money, huh? Yeah, like, what the heck?

Yeah, you don't— it's not a bank account. No, you need a bank account. That's what the banks are for. Get a bank account. So let's recap: PayPal, Stripe, and Square changed this policy, so now you don't get your money back and on a refund— on the refund on the same day. Whereas if you have a merchant account, you can do a void and just pay a small transaction fee. So that's what the whole beef is about, that everybody's whatever doing reels about and stuff. And then, you know, so, you know, take advantage of getting a merchant account. We offer a free consultation and we can help you. And don't— and make sure your money is on FDIC insured. If you're going to use an app, use something like a Chime where—

I don't know, I have no experience. I don't want to say use that or not.

I don't— we don't, we don't recommend those type of companies. But just make sure wherever you—

yeah, man, set up a real bank account, right?

Make sure your money is in an FDIC—

yes, FDIC, period. That's key.

That's the key. FDIC insured.

Yeah. Um, other than that, what else? Nothing.

That's it. That's the podcast.

Good podcast, man. It's a good podcast. People need to, uh just realize what PayPal was meant for, what it was made— all those things were made for a purpose.

When they first started out, it started out as like a peer-to-peer payment thing, and then it was like, oh, way to pay the babysitter, a way to pay the lawn guy for small business, dog walker, right? But now it's grown out of control, and, and— but their policies and their, and their technology, they're not giving you this, the, the you know, the industry standard, right? That if you're a business, you need to be able to void. Yep.

Well, that's podcast. Check out b2bvault.info. There's some new, uh, website up there for you to check out. Um, it's still coming together. It's not totally, uh, finished, but it's better work in progress.

Yeah, yeah.

It's not like priority number one. Priority number one is money making. Um, and then yeah, check us out on social.

Yes, everything @B2BVault. We're on all the social medias. Check us out on all the podcast networks. And Justin's favorite, YouTube.

Hit that subscribe button, smash that little bell over there for me one time. Never miss another episode of the B2B Vault crew. Um, anything else I got? No, follow us on Instagram, Facebook, Twitter, TikTok, and LinkedIn @b2bvault. That's it, man. Have a good weekend.

Peace out. Carpe diem. How long was that?