PEP Episode 018 — Flex Payment Solutions: Pioneering in Electronic Payments & CBD Market with Rob Zeitler
- December 18, 2023
Welcome to the Payments Experts Podcast, a podcast of global legal law firm. We’re really excited today. We have in studio Rob Zeitler with Flex Payment Solutions, LLC. Rob, thank you so much for joining us, as well as James Huber, managing partner of Global Legal Law Firm, a payments experts podcast, regular gentlemen, welcome.
All right. Good morning, Rob. Good morning for me. Lunchtime for you.
It is. It is. Yeah. 1203. Where
Are you guys based out of? Tell all our viewers.
We are based out of St. Louis, Missouri. Actually’s, a little suburb called Fenton, but if I say Fenton, people don’t know where I’m at. So St. Louis.
Yep. Perfect. And Flex is a family owned business, is that right?
That is correct With me as the captain,
You as the captain, and how many other family members are at the helm?
I had my father and my two brothers. More of a silent partnership there.
Sounds like a potential nightmare, but it’s one of the reasons that I liked this industry so much when we came into it, we saw back in the days of the heavy selling ISOs is they would hire all of their friends, childhood friends and family, and they were making so much money, they’d just overpay and it was cool to see. And then we would come in and they’d call us and be like, oh my gosh, we have this ag. They’re saying shut it down. And I actually loved it because I was like, oh, we’re actually protecting this little community of your childhood friends and your family. And it was one of the reasons that we got into the business and IT and love working with guys like you because how fun is that? You get to hang out. Well, maybe fun, maybe not to hang out with your father and brothers all day.
Welcome to the Payments Experts podcast, a podcast of global legal law firm ISOs, FinTech, pay fax agents, merchants, processors, acquiring banks and card brands. If these terms mean something to you, this podcast is for you. If these terms aren’t so familiar, this podcast is even more for you. We hope you enjoy this episode of pep, the Payments Experts podcast.
Speaker 4 (02:34):
Tell us, what does Flex do?
So Flex is a direct payment processor. We did our stuff a little backwards. We actually started out with check processing first and a CH was second and we actually had card payments. Third, we’re kind of a mini payment FinTech platform. We do also instant funding through Visa Direct, have an IVR pay by tech system. So yeah, that’s what we do and we cater to very specific niche markets.
What are those niche markets?
So my background, I have 23 years in consumer finance. I handled all the payments for that, so I was very, very in tuned with that space, saw a niche in that. So we probably about a good portion of flex’s revenues generated from that for money movement for lenders of dispersing and collecting their loan payments. And then by, I don’t know if it’s accident, but then we got into the CBD hemp market. I was cursing square, it was a hard thing for me to work on and then they launched a month before me, but it actually has been a blessing in disguise. I don’t talk bad about people, but Square has not been kind to some of those merchant types. But no, we specialize in those two markets specifically.
And no one will have a problem with you talking bad about Square. On this podcast. We do a lot of match work and Square is one of the big culprits. So you’ll have Bryce, I don’t know if you’ve worked with him at all from our office, but he is got a grudge. He’s got their logo on his wall with punches it every day. So you said you kind of accidentally fell into the CBD market. How did that happen? You’re walking down the street and people are like, take my payment processing.
Yeah, no, that’s not it. And that would be great if it did, but what was it? It was such a hot market with the 2018 federal piece that passed. So
It was fresh in the market with, what is it, Elon or a US bank? That group they got in, it put a lot of merchants on it as, and then what was it, six months, eight months later and then Kosh, everybody’s kicked off. So it was a hot topic and I think everybody can agree to that. And we were working on it with our bank at the time, and so we were just about done and I had no customers and I think it was my father said, oh, I know this guy who knows, it’s one of those things out of Kansas City. And I actually flew to his office with my bank, it’s first time I’ve ever done that. So I had flown to there. We walked the headquarters of their manufacturing and he’s like, okay, if we’re going to do anything, we’re going to do this. And so it was just happened to be a friend of a friend of my father’s and they’re still a client today. In fact, we, it’s a franchisor and we’re going to be now getting into their franchisees. So it’s been a good partnership.
Yeah, that’s great. I mean it’s definitely a market that had problems and is underserved. I mean, legal marijuana is still, they’re basically still making those businesses criminals because they can’t process their payment. And CBD has kind of had the same stigma, but it was interesting going, this is not illegal. And I guess stuff slips through and stuff like that, but I’m curious. I remember when Elon went live, it literally blew up and I was thinking, I was like, oh, this was just a money grab. They’re going to pop it, but I wonder what happened behind the scenes. And I was reading without getting into it, but I was reading some emails in a matter and it looked like that they got ratted out basically. They were just trying to do it and they didn’t really check with Visa.
Yeah, I don’t know. I think it’s a combo of things. I read an article also where you had the same merchants that get car processing walking into US bank trying to get a bank account, and it was such a flood and they weren’t prepared. I heard that was an issue as well. The locations just weren’t prepped on how to manage that. Who knows if that’s true or not, but I have to think that there’s some truth to it.
Too much business. You got to love that problem,
Yeah, yeah. No. And banks, anything new I can see a bank having trouble adapting to, I mean, even though we see it a lot and when the banks are getting into payment processing, they’re like, oh, I want to be an acquirer. And they’re basically turn the keys over to the ISO because the ISO will just tell ’em, the FSP will say, I’ll do it all for you. Don’t worry about it guys. And then it turns out maybe that FSP is not doing everything they need to or they’re acting a little self-interested and it can blow up in the bank’s face, which is a bummer because I feel like that’s the situation where it’s like you’re ruining it for everybody. When you see the big banks start shutting off, like evolve, cut everybody off or really trimmed it down who they were going to let and other banks cutting people off. I’m kind of going, Hey, you guys, it’s a responsibility to the industry as a whole to not just gorge yourself on this bank and take advantage of it. Do you ever see anything like that with your banking relationship? Obviously you guys run a pristine shop, but do you ever feel like you have issues with them related to that
In regards to just any merchant or just the product or We have our challenges.
Yeah, I mean everybody has their challenges. I mean, what are some of the challenges generally that, I don’t want to blow up your spot with your bank, of course, not that they’re probably listening to this, but what are some of the challenges that you run into with your bank?
We have two banking relationships. One is our primary one. When I approached them, we were their first ISO or their card ISO specifically. They were already doing payments in a CH and check with companies like us. And I worked with them on the card side. But I think the biggest issue with this is that we have with them, and it’s not, this particular piece isn’t their fault. It’s when those merchants are selling multiple products and then they add it and then you’re making sure that it’s in compliance. So you’re trying to continually monitor making sure we’re not getting in trouble, that they’re not getting in trouble. You know what I mean? And that also they have good fulfillment at the same time. I mean we’ve had as little as a handful of products all the way up to hundreds, which I have no idea how anybody can manage that, but it’s that continual monitoring process and it’s always going to be there. And so we have quite a few people on our compliance side always looking at that, but sometimes my bank beats me to it and they don’t slap the hand. They’re just saying, Hey, look into this. We need that COA or this is beyond, this is a high risk brand, so we’re going to have to add such and such on to their, if they need to pay more or whatever it is, we’re going to have to register them. So it’s continually monitoring the existing is probably more of what I have a challenge with.
Do you find yourself acting as an advocate for the merchant in some instances where the bank is going, no, shut this down, this shouldn’t be like this. And you’re actually having to go, no, actually this is okay because this, that or the other.
We’re an advocate. Definitely. They never, unless something’s really bad, they’re always making sure their job, I truly believe this, they say that our job’s not to kick people off, but we’re definitely going to be monitoring them to make sure they’re running a good business. And so that’s a good relationship I have. And it’s a smaller community bank that’s an acquiring bank, which is nice. Hardly we ever have those conversations where it’s just like, okay, they need to be kicked off. So they do try to work with us, which is great when you’re trying to find that banking partner.
Absolutely. I mean by a lot of people’s standards, you’ve got the golden ticket, you’ve got a small community bank getting a sponsor bank. It’s difficult work finding a new one. And that’s kind of why I brought up when you get a bank and people are like, I’m just going to blow this up and run it hot with not thinking of what’s the long-term effects. And we’ll see that with some of the bigger ISOs where they’re able to blow up evolve for everybody because they’re just pushing too hard. And so I think the way that you guys have done it is the responsible way and it’s the way that helps the industry grow. Because if your community bank’s doing it, when all of these bankers get together in their dungeon in Transylvania and they start planning their next move, they’re saying, Hey, we’re making some good money on this, and all we do is look over Rob’s shoulder and make sure his merchants aren’t selling weeded.
Right? Yeah, definitely.
So I want to transition to, I just drew a total blank, Jeremy.
Well, I was curious. I mean is match much of an issue? I’m kind of curious, Rob, I haven’t heard you mention it is with your merchants, it sounds like you’re not dealing with high risk much, but do you have thoughts on match and how that intersects with your business model?
Well, we are running the match of course, and it’s interesting how my primary bank deals with this. They like to call high risk managed risk because it truly is a managed risk category. So we’ve taken that term internally and says, okay, we do managed risk, but it’s not a problem. We have had a couple, but nothing major. We do see a lot of more, to be honest with you, of the squares of the world where they are having that payback model and they’re holding the deposits or they’re doing whatever and they can’t reach that customer service side. I think that has been over the years. Yeah, it’s easy to get on square if you’re, they have their regular program and they have their CBD program, but if you get that issue of holding that deposit, they lose their mind. I mean, what merchant wouldn’t, and they can’t get ahold of anybody. I had a guy, actually St. Louis has a square office, and I had a guy actually here call needing a merchant account and he said, square held my money, and I went downtown and he stood outside the square building until somebody walked out to talk to him. I’m like, that’s a bit much.
Awesome. But he was, yeah, he’s like, I can’t get ahold of anybody. So anyways, we’ve heard interesting stories with that, but no, it’s not been an issue.
What about when you come across a merchant that’s on match? Is it a hard No,
That’s a great question. So no, it depends. We look into it. Our bank will look at that and determine whether or not it’s something that they want to take on. So that’s a good partner. It’s not a complete no, because everybody’s got a story on how that happened. It’s just trying to siphon through, I guess, the risk there.
And Rob, how are you acquiring merchants? Are you guys doing it all direct or do you have sub-agents out there too? Because I can tell you people hearing about the relationship that you have, you might start having the US bank problem. Your phone will be ringing. I’ve got a small community bank that’ll do CBD, who doesn’t sound too risk averse and will potentially take match merchants.
So we do work with some subagents. We have employees that also, so how we do it right now is just your combo of LinkedIn outreach. We do a lot of conferences and in fact, flex is a founding board member of the Texas Hemp Coalition. So we actually sit on the board for that in Texas, and it’s great because we’re the only payment processor for that particular organization in that state. But no, we’ve just really put ourselves out there and like I said, we have some subagents that send us to us. We don’t have a huge shop of those. We’re always looking for good ones. So we’re very particular on who we take on to do that because we value our relationship with this particular bank. There’s not a lot of whole ISOs for card, especially there. And then there are top performing a CH bank. So our technology and all that is integrated in with other systems, so we have to make sure we safeguard that relationship for our other business industries that we’re in as well. So yeah, we’re just not trying to sign ’em up, but we do work with the agents.
When you’re saying you’re looking for good agents, what makes a bad agent?
We want people, and this is always hard, we will help them, but we don’t want to do a whole lot of handholding. We try to give them, here’s the stuff, this is what we require. Three-fourths of the time. We don’t get everything right. I don’t know what ISO does. It does get everything, but we don’t want, A lot of them will try to throw crap at it. We’re looking for the good quality. We’re not looking for those subscription type things, even though we could take it, but really highly selective with that. But we’re trying to look for the good merchants that somebody wants to make sure. Can I talk to the people at the bank? Can I talk to the people at the iso? Yes, you can. That’s us. And that is something that’s really important for us to bring on as an agent partner because we value that relationship with our bank and we want to invite that agent in, but we’re not going to just take anything. So we want to look at their history, how long they’ve been out in the market. We’ll do a lot of searches and things like that.
On the potential reseller. On your sub ISOs? Yeah,
On the reseller, correct. Yeah.
So for years we almost put together, and to some extent we do. We have a database because no surprise to you, we learn about all the bad actors in our industry because we’re suing them or
Never defending them. Of course, our clients are always the good ones, but we were thinking of putting a database together of here’s the guys who are pushing too hard. But I had this discussion at a recent trade show where somebody’s going up and they’re going, Hey, I was just talking to somebody over there and they told me to get away from you, James. And I’m going, well, yeah. I mean, look, in our industry, we’re at best 70 30 of people who like us and then people who do not like us. But most of the people that do not like us are because they were on the other end of a litigation action or we negotiated their pants off in a contract. So I see that in this space too, where some agents will have a bad rap because of something they did maybe years ago and they’re pushing too hard and they were associated with somebody over here, but that they’re not really bad people.
It’s one of the things that’s tough, I think for your reputation follows you around, but in this industry, ETA, probably the biggest one, or money 2020 or all of ’em, you see all the same people. So do you ever run into that where you’re going, you see somebody and you’re like, well, you used to be with so-and-so and Huber told me that he nuked you in a lawsuit. Is there any, what’s the give and take for you when you’re looking for, Hey, is this a good actor? Because I can tell you some of the guys that push really hard and get a bad rep, they’re going to be your highest performers.
Well, as you know, I always like to run ’em by you, but I take that with, and that’s also working with our other top performing agents as well. If somebody’s been in the space a long time, like, Hey, this new group’s come along. Have you heard of ’em? You’ve been around a while. It is just taking that info and making sure, is there a common theme there? Somebody might have one opinion of another and vice versa. I truly believe everybody’s got a story behind it. If you’re a bad actor, it’s going to show if that’s truly who you are, and it’s going to be repetitive amongst the industry and other people. Sometimes we will throw up by our bank and we’ll say, Hey, we have this new person. They’re saying they can give us blah, blah, blah. Are you picking up on anything there? Just because they work with multiple ISOs, that’s always a good read on them as well because they might have something in play from somebody else and that will kind of stop it or Hey, no, we haven’t.
So we use a variety of things just not only from our legal counsel, but maybe our top providers and definitely our bank just to see if they’ve got any news or anything like that going out there. But at the end of the day, it’s a story and sometimes your gut will tell you, especially if you’re in that gray area of not knowing if it’s something you want to do. And then at the same time, if it’s something you’re going to take a chance on, just grow slow. There is no reason for hockey stick growth in this space. Absolutely not. That’s where you get in trouble. Started flex with nothing. We’ve done everything grassroots. I borrowed money from my father to started not knowing if it would take off. And because of it, we’ve made INC 5,003 times the best growing companies in the country. We’ve had triple digit growth rate. We’ve done, I think a lot of the right things. It’s perfect. It’s absolutely not perfect. And so it’s definitely, you just got to crawl with it and then walk. It’s your classic crawl, walk, run. I’m not running yet. We’re definitely taking this in stride, but we’ve been growing and our formula works
And you’re doing so responsibly. You’re advocating for the merchants, you’re valuing your banking relationships. And it sounds like I’m sure the agents that you do let through, they love you guys because they know they’re getting paid and they’re getting treated well. And yeah, I mean as far as what you guys did with integrating the technology and actually being a true FinTech provider, it’s interesting now I think since Covid, when I tell people I’m a payments attorney and we deal with electronic payments and they go to, oh wow, well, what’s going to happen in FinTech in the payment space? And it’s like, oh my gosh, finally people can maybe kind of know what I do. And so everybody, when I get asked that question, everyone’s like, they want to hear me say ai. And what do you see on the horizon being a FinTech company, an iso, an FSP and a CH provider, all of that. What do you see as the greatest opportunity and maybe the biggest potential pitfall?
Great question. Why didn’t you send me that earlier?
You got to do it off the cuff.
Greatest opportunity. We started out with one product and we got very specific. I’ve told you the story offline and I just wanted to make sure we did it really, really well. And then we grew into these other things, other services. I think the biggest opportunity is looking at the landscape of our merchants and seeing how their business model is changing because that’s how Flex grew is that we catered to a specific industry and we just didn’t stick with one product. We watched it and grew with it. We grew in covid and it was by called sheer design, accident, whatever you want to call it. I call it an accident working with a lot of online merchants and they made it right and we were a lifeline for them. But since then, it’s also looking at your retail and seeing how are they expanding that, giving them the ideas.
It’s not about price, it’s about the value add. So it’s continually looking at those businesses and learning about it. If you sell on price, you’re going to lose. You have to sell on value and that the money will come. I always tell my sales guys, just learn about the business. See where they’re at, see what they’re looking for in the future. Learn about as much as you can. Let ’em tell the story. It’s going to get repetitive, it’s going to get long, but they like to talk about themselves and it’s true, but you learn the best by letting the business owner talk about it, and then you kind of just conform to that. If it’s something we can help, great. If it’s something not, let’s look at it. Maybe it’s something that is a trend. I think that’s the biggest advantage is learning the value that you can bring to that business and that ever changing environment. And speaking of payments, I mean as well as I do, it’s always changing. Not everything you offer goes into every business. That’s why you have to learn about it. The real time payments, the whole thing. I think you and I have talked about it several times. It’s like everybody’s excited, but not everybody needs it. So it’s learning where do you stick that value add to a business that really could grow with it. So it’s kind of a loaded answer, but that’s how I look at
It. No, I mean I think it’s a great answer because you nailed it on the head. This is always changing and of what’s the greatest opportunity is. I mean, it’s another reason I love this industry is working with smart guys like you because you’ve got your head on a swivel. Something’s coming. I think this is the one industry that said, Hey, we’re recession proof now. We’ve proven it. We proved it in the 2008 and proved it again here, bring it. So I agree with you, the biggest opportunity is knowing your merchants and seeing where they’re changing and yeah, I’ve actually never thought of that. Who wouldn’t want realtime payments? Does the gas station really care? No,
Exactly. Yeah, it is not going to fit everywhere, but it will with other businesses, and it’s just capitalizing on that. But that’s kind of like the biggest thing I’m seeing is just whatever. You can’t be a master at everything. We all know that. That’s why we got very specific with these niches and just we’re hammering it hard and we’re learning about it and bringing the value that we can bring to.
What do you see as the biggest potential threat either to your business or the industry as a whole?
Biggest threat? Regulation. That’s the first thing. They’re always going to have competition, but I think that if you just get too lax as either the business owner of a payments company like myself, or you should always be reinventing yourself in the payment space because it is changing. But regulation, definitely don’t ignore it, stay up on it. Get somebody like you or just, I read a lot, I don’t read everything, but you just got to pay attention to the ever-changing climate of what’s going on because ignorance isn’t an excuse. We both know that there could be something that really affects the business and it was something easy to fix, right?
Someone like me, you meant either me or Chris. Right,
But as far as regulation, I’m curious because, and I’ll give my opinion upfront so I’m not trapping you in it. Is regulations usually a good thing for the payment space? And my argument there is give us the rails. We just did a presentation with a visa on the surcharge and cash discounting, and the visa guy was on the panel. He was basically chased out of there with pitchforks because they keep changing the rules and now they’ve got these rules. And quite literally this guy stood up there and said stuff that everyone’s going, wait, what? That’s the rule. And you’ve got a room full of really smart people. And so in my opinion, I’m always going give us regulation, make it clear, Durban backfired, but at least it’s something. And visa the rules shouldn’t be coming from them only fine. They can make their guidelines, but so I see regulation being really good. If the safe banking act past that, that’s going to be a frenzy. But when you said that regulation is a threat, I’m curious, what did you mean
When I say regulation’s a threat? I’m talking specific to the actual industries that are not only CBD, but my consumer finance side, right? So you have state regs and you have federal. That threatens a lot in that space, as you know. So knowing your industry that you are in and knowing that those regulations for that industry is I think just as important as is for Visa, MasterCard and just the card brands in general. If you’re very hyper-focused within utilities or whatever it is, right? In knowing that there might be something coming down the line, I do believe regulation is good, but it also, you have to look at it as how’s it going to impact your business? And that was the other reason why also we got into CBD hemp so much is because we do have a lot of our revenue from that other side Flex does and transaction processing for the lending that we are like, okay, how do we not put all of our eggs in one basket?
What is another industry that is like this where it is not as served as much and this was it? And I definitely, cannabis is one of those things that is definitely going to be always I to people about check cashing. Hass been around for decades. We have zero check cashers, we work with lenders, but when they do pass that law for cannabis or whatever that looks like, like check cashing, you can’t walk into any bank if you’re a check casher and open a bank account. And that’s been around for decades. It depends upon the bank. The bank will only take in the industries it feels like it can work with if it has the right compliance team, when this does go and it will go on a federal level to where we can process the payments, it’s going to be regulated still. And that’s good, but it’s also like, does that bank want to take it on? I think your bank pool will open up some. It is not going to be on every corner
Though. Yeah, I agree with that. Yeah. And I love the outlook of the greatest opportunity is knowing your customer and the greatest threat is not knowing your customer and the regulations that are hitting them. Well, this has been great. I think we’ve surpassed our time limit. How should people get in touch with you?
Well, you can look us up. As cliche as it sounds online, flex payment solutions.com reach out to you. Obviously we’ve been working together for a couple of years, or I’m on LinkedIn as well. But yeah, I mean my email’s on there. Just reach out, tag me on a message on there. I’m always on LinkedIn. I’m a big LinkedIn guy.
Great. Excellent. Thank you so much, gentlemen. Rob, it’s been a real pleasure. We’ve had Rob Zeitler with Flex Payment Solutions joining us today. And as always, James Huber, managing partner of Global Legal Law Firm. This has been the Payments Experts Podcast, a podcast of global legal law firm. Thank you for listening. Thank you for listening to this episode of The Payments Experts podcast. New episodes first and third Thursdays. If you’re interested in learning more about PEP and how Global Legal Law Firm may be able to assist you, please visit us at global legal law firm.com. To schedule a free consultation, give us a call at (888) 846-8901 or email firstname.lastname@example.org. And once again, thank you for listening. 1, 2, 3.
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