PEP Episode 020 — Navigating the Maze of Dual Pricing Payment Systems ft. James Shepherd

Podcast Description:

Ever wondered how the perplexing world of payment systems impacts your wallet and your business?

Join me as I sit down with James Shepard from CC Sales Pro and legal expert James Huber, Global Legal’s very own, to dissect the conundrum of dual pricing and the tussle between merchant rights and credit card company regulations. We’re not just talking numbers; it’s a battle of free speech and legalities, with personal journeys from lawn care sales to payment processing wizardry thrown into the mix for an unexpectedly delightful twist.

Tune in for a narrative that weaves from the evolution of door-to-door sales post Do Not Call legislation to the present-day quandary of differential pricing—where surcharges and cash discounts become hot potatoes in the hands of merchants and payment networks. This episode isn’t just an exploration; it’s an expedition through the complexities of sales strategies, the creation of educational resources, and the potential pitfalls of navigating Visa and Mastercard’s intricate policies. It’s a story of innovation, adaptation, and the occasional legal scuffle that could redefine the way we think about transactions. Looking toward the horizon, we speculate on the future of payments in an era where niche experts could rule the roost.

We’re dissecting legislation like the Credit Card Competition Act and considering whether a shake-up is really what’s needed in a market brimming with emerging technologies. Whether you’re a seasoned pro or new to the game, this episode is your crystal ball into the next two decades of payments, where verticalization might just be the golden ticket to success in a specialized world.

Visit our friend and special guest James Shepherd of CC Sales Pro:

Podcast Transcription

James Shepherd (00:00):

No, we’re not a label printing company. I mean, I think about there are some people out there, I mean Michael Nty and others who have great systems that actually really do label printing and they can do dual pricing in that way. And I applaud them for that. I think that’s fantastic and they’ve worked closely with Visa on those efforts. But the truth of the matter is there’s just a lot of merchants out there that are not going to reprint all their labels. They’re not going to reprint their menus. And at the end of the day, the courts have seemed to side, whenever it does come up in court, it does seem to be like, Hey, these are free speech rights. So if Visa’s okay with me printing two different prices on a label, why are they not okay with me having two different prices at the register? It’s just something that is intuitively, it’s not intuitive. It is kind of confusing, I guess is my point.

Jeremy (00:42):

We hope you enjoy this episode of pep, the Payments Experts podcast. Today we have with us, we’re very excited to have James Shepherd from CC SalesPro. We also have James Huber, managing partner of global legal law firm in studio. Gentlemen. Welcome.

James Shepherd (01:07):

Yeah, good to be here.

James Huber (01:08):

Alright, well, James, the tables have turned. You’re on my I podcast now.

James Shepherd (01:13):

I know. I don’t know what to think. I’ve interviewed you so many times now. I’m like, wait a second. All right. I got to be the one interviewed, so here we go.

James Huber (01:19):

Well, it’s interesting. Your podcast is great. I listen to it all the time and we’ll put a plug for where people should be listening to that. Not that they necessarily need it because you have so many people listening to it, but I remember the first time getting on it, I was very nervous. What do I do

James Shepherd (01:37):


James Huber (01:37):

My hands? And you’ve got Patty there who’s fabulous grilling me too. Actually, I remember one time we turned the podcast off like you’re just confusing us, James, we’re going to have to start this over.

James Shepherd (01:50):

Yeah, you right. That’s funny. You know what? You might be the only one that we’ve ever done that before. I remember that. That’s funny.

James Huber (01:56):

That’s my claim to fame. I ruined the podcast.

James Shepherd (02:02):

That’s funny. Yeah. But yeah, the Merchant sales podcast, so they can look that one up anywhere they want and I need the platforms they listen to, but appreciate the plug,

James Huber (02:11):

And I think we deleted that one. But anyways, so look, I’d like to start, you’ve been in this industry for a while. I’d say you’re certainly a force. I think everybody knows your name in the industry, and if they don’t, they certainly should. But tell me a little, how’d you get in? How’d you get into this industry?

James Shepherd (02:31):

Yeah, I think most people I got in by accident, so I moved out, I was in Chicago, I was working with ServiceMaster and funny story, I actually, I started working when I was about 19 years old with the TruGreen Lawn Care division per bug sprays and fertilizer and all that. And when I was 19, the do not Call law came out, so I’m dating myself a little bit here, but their entire business model was built on telemarketing and all of a sudden they couldn’t call 60 70% of the households that they were calling before. And so their whole business model was just in turmoil. And so I’ll never forget, the branch manager came to me at that time, I think maybe I was 20, and he’s like, Hey, the company wants us to try door to door sales for lawn care. It’s a horrible idea.

James Shepherd (03:18):

I think it’s going to be terrible, but if you want to lead that for our branch, you can. I was like, oh, that sounds great. I was like, yeah, let’s do it. About two years later, we had 30 or 40 salespeople out going door to door. It was fantastic. So I got very lucky in the timing with all that because the success of that effort allowed me to go to different branches and train people and kind of be an evangelist for this new model in the company. So that was my background. And then I got married. My wife was from out here in Pennsylvania where I’m at now. And so I loved it out here, decided, Hey, let’s make a move. So I moved out looking for a job recruiter reached out about payment processing, and I thought, well, until I get a real job, I’ll do that.

James Shepherd (03:59):

And so here I am, 13 years later, I still haven’t found a real job, so I get into it selling payment processing, had a local iso, then I started building some W2 salespeople, that type of a team locally. Then about a year or so in, I kind of realized, man, there’s nothing out there. There’s no good YouTube videos, there’s no good online content. This is really hard to learn this very complicated industry. So I thought, well, I guess I’ll start a YouTube channel. And it really just took off from there. Everybody turns out everybody like me was searching, and so was able to build that brand. And then from there started CC SalesPro, the blog, the website. I built two different national ISOs. So we had two companies that were retail ISOs basically that were, the last one I sold has been about 200 deals a month. And then I sold that back to tsys. That would’ve been about seven years ago. And then I went into software and consulting and basically now serving more of the ISOs and payment processors out there.

James Huber (04:59):

Nice. I like it. Yeah, I mean, we do trainings with new people. We bring in and we actually point them to, I think one of your earlier videos where you’re just explaining who the players are, because I’ll do one where we will put up the whiteboard and we’ll say, here’s Visa, here’s first data, here’s the sponsor bank, the acquiring bank. And then by the end of it, it’s just a garbled, the mess with lines all over it. And when I do that in the courtroom for a judge, I’ve had multiple judges thank me for that. I’ll usually do that in an opening statement. It’s just like, Hey, so everybody knows this is how it works, and it’s super complicated. I’m going to explain it really simple in about eight minutes, and they’ll say thank you because I say it to our staff all the time, is, Hey, you going through this training, you now know more about payments than probably 9.99, nine 9% of the world, and everybody is using electronic payments unless you are in a third world country probably at this point,

James Shepherd (06:07):

Right? It’s insane. Our industry is, it’s an amazing opportunity because of the complexity. I think in a lot of ways, whenever you see a lot of complexity, there’s usually an opportunity to simplify. That’s what we saw Square do. That’s what we saw Stripe do. And I think we’re continuing to see that, but it’s that trend of simplification and taking an industry that’s unnecessarily complex and simplifying it. And so yeah, it’s an amazing industry. I’ve fallen in love with it. I mean, it is weird looking back and like, wow, I’ve been doing this for so long. But yeah, I just love the industry because I love change. I’m a person that really embraces that. I love innovation. And so this is an industry that always has an open door for change and innovation.

James Huber (06:48):

And for smart people like yourself, I mean, you coined it right there. You have to have your head on a swivel in this industry. And one thing you and I have been talking about for years, and we’re talking about quite a bit now, is the cash discounting surcharging change. And what that is high level is it’s passing on those fees to the consumer. So this has been done for years. If you go into a hotel and they’re saying 3% service charge or whatever they’re calling it, whatever, and Visa hates this, why?

James Shepherd (07:29):

So I’ve come to really call this differential pricing, right? Because there’s so many of these different variations now we’ve got surcharging and cash discounting and non-cash adjustment and service fee, whatever. At the end of the day, I think Visa hates this sort of as they should because we have a different price point for their form of payment, their method of payment versus other methods of payment. And so any way you slice it in some way, shape or form, it’s a penalty for their customers to use their network. And I think in the US market, I feel like it’s accentuated a bit because for those that maybe aren’t as familiar with our industry, the vast majority of the cost structure centers around interchange, which is what the issuing bank charges that issues these cards. And in the US market, our average interchange is somewhere around 2%.

James Shepherd (08:13):

In the us, most of the rest of the developed world, it’s like 0.5% or less. So because of that, in order for us to be able to have a differential that offsets the cost of accepting a card in this country, well, the differential is pretty high. It’s three 4% in order to offset and make a profit. So I think Visa, it’s not that I fault them for being upset about it, I totally understand that. I don’t even fault them for fighting back. But I think the problem is that at this point, I think that it, it’s a little too far gone. There’s too many business owners that are doing it. They love it. Consumer behavior’s already adapted to it. So I think there’s good things they could do to regulate this. And I think there’s bad things in my mind. The things that they’ve done have been all the bad things. It’s like they just haven’t done the good things that they should do at this point, is my opinion.

James Huber (09:01):

I agree. I mean, we were going back and forth about the fines that ISOs are getting. I think somebody got fined a million bucks, and we have other ISOs getting small fines all over, but Visa, we did a panel, I think up on another podcast. They’re going, they’re like, well, these fees, we don’t want regulation. We don’t want the people to start complaining about this. And then we’re going, well, they’re your fees. You set the fees. But then Visa goes, well, it all goes to the issuing bank. And we’re going, sure. A lot of it goes to the issuing bank, but a percentage of that goes to you, all of it. And there is multiple issuing banks, so good one, you guys could lower your fees, but you guys, you’re working together, you’re in cohorts with an issuing bank,

James Shepherd (09:56):

Right? Yeah. And I mean, I can play devil’s advocate for a minute, and even taking B Society look at the credit card competition act that’s coming out, which in my opinion is one of the worst pieces of legislation I’ve ever seen. And in terms of being so misguided and a lack of understanding about what they’re trying to do. And so I think there definitely is a sense of Washington wants to do something about this. Look at the Biden administration. They’re focused on junk fees, which came very close to specifically mentioning these types of fees. So I think there’s a lot out there, but again, my issue isn’t necessarily with Visa having a problem with it or taking action, I just think they’re taking the wrong action. I don’t understand what they’re trying to accomplish here, because at the end of the day, this is a practice that business owners want to implement.

James Shepherd (10:43):

And I think Visa’s been very, they haven’t been as transparent about really what they’re going to do from a compliance perspective and enforcement perspective. So I can’t tell you how many large mean, huge companies that you would think would get this right, where they’ll say, oh, we’re not doing these programs anymore. And then they’ll say, well, okay, Visa’s not actually doing anything. We’ll start doing ’em again. And Oh, wait, we got to find, we’ll stop doing it. And Oh wait, now it’s just too much. It is been crazy. And the result of that is now they’ve waited so long, businesses all over the country are doing these programs. They will continue to do these programs. So the question isn’t how do we get rid of them? The question is what do we do with them now that they’re here?

James Huber (11:18):

Right. Yeah. I mean, I think the problem since the get go has been, it’s been unclear. We had, before our presentation, I think it was last month, we came forward and we worked on the slides that we’re going to present. And then last minute, the Visa guy changed them around and we’re going, well, wait, we went over these and talked about these. You’re literally changed the rules in a three week time. And he backed up on his position, and I’m not quoting him, but he backed up on his position because for a while they were saying, look, dual pricing is really the only way to do it, or at least that’s the gold standard. And his new argument was like, no, just increase all your prices. Just put your prices higher, and the consumer won’t care if Costco suddenly raises the price on their hot dog. Nobody’s cares. I mean, from my understanding on the internet, that would cause a riot.

James Shepherd (12:15):

My biggest issue with those programs, and I have good friends that do that. I mean, I think about a lot of companies that have what I would consider a legitimate cash discount program where they go in and help the merchant do a price increase and then do a discount at the register, which Visa is fine with because the Durban Amendment makes them be fine with it. But the issue there is it’s just inconvenient because it’s not practical. If I have a bunch of prices at $19 and 95 cents, am I really going to change the sticker price to $20 and 40 cents? It just doesn’t make sense. So if I’m a restaurant, I got to reprint my menu. These are things that are just impractical for most businesses, and it’s also impractical for the ISOs and agents to go out there and do this. And I think my biggest issue, if I had put my finger on the number one issue I have with all this is why on earth how do we look at the iso?

James Shepherd (13:05):

And we’re like, okay, iso, you’re responsible for how the merchant prices things? No, we’re not a label printing company. I mean, I think about there are some people out there, I mean Michael Nty and others who have great systems that actually really do label printing, and they can do dual pricing in that way. And I applaud them for that. I think that’s fantastic, and they work closely with Visa on those efforts. But the truth of the matter is there’s just a lot of merchants out there that are not going to reprint all their labels. They’re not going to reprint their menus. And at the end of the day, the courts have seemed to side, whenever it does come up in court, it does seem to be like, Hey, these are free speech rights. So if Visa’s okay with me printing two different prices on a label, why are they not okay with me having two different prices at the register? It’s just something that is intuitively, it’s not intuitive. It is kind of confusing, I guess is my point.

James Huber (13:54):

Yeah, I mean, the issue, so this has been litigated at the state level. When the states have their surcharge caps and everybody is one on saying, this is a free speech issue. I have the right to advertise my prices. The problem with Visa is they’re not a government entity, so those causes of action don’t work as well. But Visa is probably more powerful than any state because it runs the whole world. I think we found in one state they spent 7 million in lobbying in one single state. So who know, nowadays you can’t track where lobbying efforts go, but I would guess Visa’s lobbying is in the billions.

James Shepherd (14:43):

Yeah. Well, what I would say is, it’s interesting to me. I go back and forth on it, honestly, I don’t have a big issue with Visa in this particular area. I think it’s more of ineptitude of they’re not connected to the people that are dealing with this. I think Visa has gotten to a level where all they deal with is issuing banks and sponsor banks and big acquirers, and it’s like they don’t understand the reality, I feel like, of what’s actually happening with small ISOs and agents and small merchants. And these programs are just, they’re here to stay. Whether Visa likes it or not, they’re here to stay. And the question is how do we deal with it? And in my mind, I just feel like Visa in their own interest, they have enough PR issues without let’s anger hundreds of thousands of small business owners. I just don’t see the point at this time. It’s a waste of time. It’s a waste of resources. It’s a waste of everybody’s resources in the industry. Why can’t we all get together, figure out what’s reasonable, and just run with that? And that’s what I would love to see.

James Huber (15:39):

I would too. And this industry started thriving. I mean, going ballistic once this caught on, mean cash discounting has been around since 2009 or so, and when it first came out, it didn’t pick up. Nobody liked it because you’re going in to buy your coffee and it was like a 25 cents fee on debit or whatever. And there was complaints and we were advertising people, it’s not worth it a lot of times for small ticket items. But then I think Covid really lit it up. Everybody’s going, oh, this is actually a convenience. I get it. I mean, we saw it in the courtroom when I would walk in and start explaining payments to the judge, and a judge would be like, I know something about this. I spent two years at home having to, looking at my cash, sitting on my desk, and judges obviously have tons of cash just lying around.

James Huber (16:34):

But it really started taking off my impression based on what’s Visa’s doing is they’re trying to kill it. They want to hide their fees, they want to keep it high. And the Visa guy set it in a room of 600 ISO agents all with pitchforks in their hand, and he’s going, we want to avoid regulation. And the ISOs are going, we would actually love regulation, give us the guidelines on where to operate so we know what to do, and we’re not getting fined and we’re not having to change our business model every four months. I mean, what are your thoughts on that? I mean, we’re in legal, so we love regulation. We like deregulation too. But when there’s regulation, I can really advise my clients for a while here on the cash discounting. I’m going, yeah, somewhere in here. I understand you can’t be the gas station with the lights, but try this, maybe it’ll work.

James Shepherd (17:31):

Right? I mean, I think it’s interesting to define the regulation as far as it would be. What Visa has tried to do basically is to say there’s compliance, true cash discounting, and then everything else is off limits. And so we’re not going to say anything about it other than it’s off limits.

James Shepherd (17:52):

And I think that’s the biggest mistake because the truth of the matter is, as far as physical location merchants go, I would say at least 80 to 90% of the ones who have some kind of what I call differential pricing, different price points for different payment methods, they are not doing compliance and they’re not doing true cash discounting. So the question is, what’s the objective here? Is Visa saying we are going to get all of those merchants to stop doing this? No, you’re not. That’s not going to happen. We’re going to get all the ISOs and agents to stop selling it. No, you’re not. So I think what would be good is why don’t we actually make some common sense rules for that? You know what I mean? And actually have some clarity there, because right now none of that exists. Now as far as Visa not wanting regulation, I don’t really want regulation per se, because regulation can be a slippery slope.

James Shepherd (18:42):

Look at the mortgage industry and things of that nature where if the federal government starts to regulate interchange, which would be the natural next step, and what Beast is most concerned about, well, what else are they going to regulate? Are they going to regulate how we can price a merchant? We’ve seen that in other countries as well. So I’m not a huge fan of that. I do think that regulation can be a slippery slope, but it would be great to have some clarity. And the other thing that would be interesting is, again, I’ve said this so many times, and I know you guys are always working on these things too. It’s like if these issues ever actually went to court, I don’t think we would have a big problem because Visa would lose, the courts would, I mean, unless something drastic has changed. And what I’ve seen that the Supreme Court, I can’t imagine that anything has changed here, is that there’s definitely this idea of protecting the free speech, right?

James Shepherd (19:26):

Of the merchant and this common sense approach to say, if we’re letting the merchant offer a cash discount, there has to be some clarity for sure of there has to be clear posted signs. But as long as there’s a clarity and there’s not a deception going on, visa is a private company. You’re not allowed to tell people how they can price their products. So that’s been at least the spirit of the, and I’m not an attorney, but that’s the spirit of the things I’ve read from majority opinions, going back to expressions, hair design, et cetera. And so I don’t really see that changing at this point.

James Huber (19:57):

Well, you heard it here first, I’ll quote James, that Visa will lose. So we’re excited about that. The other thing I wanted to ask you is you said that you’re worried about regulation, but you started this podcast saying that with the advent of the TCPA, your business started booming. So come on. Which is it?

James Shepherd (20:20):

Well, yeah. You got to remember though, back then my only business was the consulting side. Now I actually own the ISVs and we’re building out integrated payments and doing all these other things. So I have other interests now. My interests have shifted a little bit. Yeah, I

James Huber (20:32):

Think you’ve leveled up.

James Shepherd (20:34):

Yeah, right now you’ve

James Huber (20:35):

Switched sides on the table. Well, we could go all day on cash discounting, but the one thing that you touched on is the credit card Competition Act and you saying it’s a horrible piece. Legislation. I think we all agree because I think we can all agree that Durban was really bad too. It was a great idea. We needed something when we bring people in and we’re training, or I’m arguing in court or doing something, and I’ll go, this industry is entirely regulated. All we have is this one piece of legislation. Otherwise it’s Visa and MasterCard largely putting out the rules, changing them whenever and enforcing them how they see fit, and mostly not enforcing them, but what’s going, why are these pieces of legislation missing the mark so hard? I mean, what’s your thought on that?

James Shepherd (21:32):

The answer to that question is, I don’t know. I have my theories of course, but I would love to have been in the room when they were discussed because I can’t imagine that anyone who understood payments was in the room when they were discussed, or even anyone that understands just even basic technical concepts of networking, et cetera. So the idea that we have point to point encryption where a transaction starts on one end, goes somewhere else and comes back, and we are going to federally regulate that this will now have to go to multiple networks. What does that even mean from a security perspective? It’s an absolute nightmare. And so this is where I’m like a thousand percent on Visa side in that if you look at Visa, MasterCard, what have they done? Well, I do not remember the last time that they had a significant outage where my card didn’t work.

James Shepherd (22:24):

That’s pretty crazy. That’s incredible when you think about the volume of transactions. So I think from a perspective of a security, a dependability and uptime, they have done an unbelievably good job at this. And the idea of they need more competition, really. I mean, we got Crypto, Venmo, cash app, DoorDash, Uber Eats. Do we really? They need more. I don’t know. I just feel like this is dangerous to say we’re going to enforce innovation and we’re going to regulate and mandate that there must be innovation and we’re going to break up the way that Visa has done things. And MasterCard have done things forever, literally from a technical side. I’m just totally against that. I think it’s ridiculous. I think it’s the notion’s ridiculous. Look at the Durban Amendment and the Durban, the dod franking financial format and the Durban Amendment. I mean, they’re still today trying to figure out what it means with debit.

James Shepherd (23:23):

I mean, literally this is over a decade, and they’re still like, we don’t know what they mean. And then they’ll sue and say, we don’t want to do this. And then finally it’s like you have to do it. And Visa’s like, what do we have to do? Well, you have to reroute, debit. What does that mean? It’s insane. And so the idea that we’re going to disrupt embedded, secure point-to-point, encrypted technology, and somehow we’re going to have a third party that nobody knows about is going to come in here and steal part of the transaction. This is insane. I mean, this is totally going the wrong direction with it. And I feel like best case scenario is what they’re successful at, slightly lowering the dues and assessments that the card brands charge for this third party, who cares? So yeah, I’m definitely not a fan at all of that one.

James Huber (24:07):

Right. I mean, I think you hit the point is there’s nobody in the room because Visa’s argument, it is a valid one that a majority of the interchange goes to the issuing bank, but we all know that Congress isn’t going to touch their beloved banks because if they did, the whole system topples over on itself. So I agree that it’s misguided, but I would like to see some competition out there, but it completely misses the mark. I have to assume that Senator Durbin understands payments. I wonder if he could draw the chart that you and I draw of how everything works. I would maybe say, maybe not,

James Shepherd (24:55):

Maybe not. I don’t know. But I think either way it strikes me as more of a political, some bills I look at and I’m like, okay, I agree, or I disagree. But there was an intention to really accomplish something with Durbin. A lot of the stuff he does in the payments arena, I kind of feel like he seems like he has it out for the card brands and maybe disproportionately, and he’s just kind of making this almost hateful legislation against them. And I don’t know. It seems almost inappropriate to me a little bit of, I don’t understand why this is just you woke up one day and decided there’s a couple companies out there and I want to disrupt them. Okay, why? I don’t really get it. And again, the idea that they need more competition, it’s like, yes, they’ve cornered this market, but I mean the idea that they don’t have competition.

James Shepherd (25:40):

I mean, there’s so much external competition and innovation going on in the payments industry that they’re acquiring companies as fast as they can to stop the external competition. So I would look at it more as an antitrust type of situation, or, Hey, there’s collusion happening between Visa and MasterCard and the issuing banks. Those are viable arguments that the government could make and that they could take action on. But the idea of somehow inserting a new competitor that’s going to have literally, we’re going to give them access to secure transaction data. This is insane. I don’t even know what they’re talking about. When I read the legislation the first time, I’m like, I’m a payments expert. I have my lead developer who’s also a payments expert and an amazing developer read it, and both of us were like, I have no idea what they’re talking about. I can’t even imagine what they mean. So I don’t know. Like I said, it’s one of the most ridiculous things I’ve ever read.

James Huber (26:31):

Well, I mean, I don’t think it will go anywhere because I think the track record Durbin’s intent completely backfired. I personally, when I hear challenge Visa and MasterCard, I think my Vermonter comes out where I’m like, yeah, fight the power, fight back, take it down. But to your point, we can complain about Visa and MasterCard all day, but one of the reasons I love payments, I try and get people around me excited about it. What I do for a living is it’s amazing what we can do. I’m walking up to a register and just tapping this phone and saying, see you later. I’m almost positive in the next year or two, if you’re still driving a gas car, you don’t have to get out of your car to pay. I mean, I guess you’ll still have to put the gas pump in maybe, but maybe I think Mercedes came out. They’re saying, no contactless payment. You’re going to drive up to the pump and it’s going to be ready to go, and you’re not going to have to say no to punching in your Ralph’s cart and car wash and all. No, no, no. Sold. If it sold Skittles out of there, we’d say, yes, give me that option. But they’d have to dual price it there too. So

James Shepherd (27:47):

Difficult. Now they’re coming out, I mean, all the car companies, I talked to a guy that only does payments with car companies, and that’s his specialty consulting side. And I mean, they have a lot of stuff going on. I mean, they want you to be able to pull up to Starbucks and already have your order from your car ready for pickup. When you pull up to the window, the payment happens and they hand you your Starbucks coffee. So yeah, there’s a lot going on there on the payment side for sure.

James Huber (28:09):

Well, we unfortunately, or fortunately less, we could just go for hours probably on probably any topic on the

James Shepherd (28:16):


James Huber (28:16):

But what do you see as the payments industry greatest opportunity for payments? And I know your audience and your podcast is ISOs agents. That’s what a lot of our clients are too, but we also have some of the processors and stuff like that. But what do you see just overall as the payments? What’s the greatest opportunity? How can I become a multi-billionaire in payments?

James Shepherd (28:48):

Yeah, I mean,

James Huber (28:49):

I’m switching careers.

James Shepherd (28:50):

Yeah, I’ll tell you the BES that I’m making, so where I’m putting my money, I believe that the number one trend of the next 20 years in payments is going to be verticalization. And I think it’s still really, people are not paying nearly enough attention to it. And so lemme explain what I mean by that. There’s several trends that kind of converge on this. So let me use the example of neobank. So we look at banking as a service, so most of us are familiar with that. Look at how easy it has become to be a bank to provide banking services, I should say. Think about how easy it’s become to integrate payment processing. Think about how easy it’s become to integrate access to capital. Tons of companies out there, you can just tap into their API and you can become a reseller of their capital solution and you can put it right into your software.

James Shepherd (29:39):

And then you think about all of the vendors out there, all the wholesalers and vendors, all of them now have APIs to reorder product. Well, what’s happening is we’re seeing all of that, their solutions that can be made for specific business types that simply cannot Square is never going to compete with me as I go after self-storage property owners. One of the ISVs I own, we’re building two others, but the main one I own right now that’s really operational is we go after self-storage property owners. We have a software with integrated payments, obviously differential pricing, and we go after these people. Well, we have a site map. We have integrations with gates like physical gates that have to lock and unlock at a property location. I don’t see Square ever building that. So the idea being these large companies that have this stranglehold on the marketer, or it seems like they do unless it’s a toast where it’s like, wow, they’re going after restaurants.

James Shepherd (30:35):

But I think even for them, they run the risk of companies coming along that say, well, wait a minute, we are just for pizza shops. And we actually tie in so that when you start to run low on dough, we’re tied into your vendors. So your dough shows up the next, there’s a never ending amount of specialization and customization. Now that can be done from insurance, payroll, banking services, payment processing, along with all of the different business features. Accounting, I think we’re going to see QuickBooks. They may win long-term because of their API, but I think macro, their current model will not be the way forward. Because if I have to build an accounting software that’s just for people who have self-storage properties, my software is going to be much easier to use, much more streamlined. I don’t have to have all the bells and whistles.

James Shepherd (31:22):

I just need what people want for that. So the bet that I’m making and my mission over the next 20 years for my business, obviously I’m always trying to help the payments industry, but as far as where I’m making my money, we’re building these software companies where we’re identifying a vertical and saying, Hey, let’s dominate that vertical. And we’re looking at verticalization from everywhere, from content creation, top of the funnel. That company, for instance, we have a podcast called the Self Storage Insight, and that’s just for self storage property owners. We do free eBooks, we do social media posts, all of that all the way through the sales process, installation, support, payment processing, banking, everything. And so I just feel like that’s kind of an unbeatable model over the next 20 years because no matter what innovations come, no matter what changes happen and oh, now there’s this service and now it’s crypto, or now it’s whatever, I don’t care.

James Shepherd (32:14):

We’re going to find a way to integrate that into our solution specifically for our clients, and they’re going to have a really, really hard time leaving us. So I think verticalization, to me, that’s where it’s at. And it doesn’t have to be a necessarily specific business type per se, but just that idea of focus where I think it’s really the biggest challenge for the ISO community because historically they’ve always been, we sell a Verifone terminal to everybody. So it’s been very scatter approach. And even the 10 99 model is really built on that. There’s not much training because we’re selling simple things, cash discounting and dual pricing kind of extended that of, Hey, just go tell people you’re going to wipe out their payment processing, but that’s not going to be good enough. You’re going to have people like me. They’re like, yeah, we do dual pricing and we have a specific software just for your business. And so that’s where it’s at and that’s what I’m seeing playing out. And so that’s the big bet that I’m making.

James Huber (33:07):

Yeah, I mean, I agree with that. I saw early on some of our clients doing really well because they’re going, Hey, we’ll build you a website. And these mom and pops loved it, and once they own your website, I host it, I own it. You’re canceling. Okay, your website’s going down. And then they would add in, build a Facebook page, and they’d be like, oh my gosh, look, now my niece can see. I exist on the internet and I’ve got one mic, one friend for my niece. I’ve made it. And I saw that do really well. But then I also saw it fall apart because a lot of salespeople are good at one thing selling, and it doesn’t matter what it is as far as maintaining it. And that’s where I encourage ISOs and agents to partner with people like yourself to do these things for them. I have all the time people going, Hey, I want to get a direct agreement with Fiserv or TSIs or whatever. I’m going, why would you do that? Go to somebody who will do all the backend and you get a better get to just benefit off that. You can just do what you want to do and then put into all the different hooks that other people have thought up and benefit off of that. So Well,

James Shepherd (34:29):

I’ll tell you what, my biggest challenge strategically when I look at the next five, 10 years for me personally, is I think the big winner you mentioned. How do you become a multi-billionaire in the industry? Well, I think right now we have these two worlds. We have the ISB world, I’ll include the pay facts in that, but we have these technology companies that are taking advantage of payments, and then we have the legacy ISO agent world, and nobody has really figured out how to bring those two worlds together in a really profitable, meaningful way. Maybe it’s impossible. I don’t know. It’s a very, very difficult problem. Every time I try to solve it, I get really frustrated. I mean, it’s crazy to think about this, James. So CC Storage, which is the ISVI was mentioning earlier, right? Sell storage, property owners, fully functional. We sell lots of property owners a month.

James Shepherd (35:27):

I do not even have a reseller program, which is insane. I am connected to every ISO and agent in the industry, and I don’t let ’em sell it. It’s like that’s insane. And the reason is because every time we go to do it, we run into all these weird challenges and frustrations around how do we do compensation? How do we get our fair share of the money? Are we going to sell these people anyway? And so it’s like I’m still committed to solving that problem. And the next ISVI roll out, I’m going to make sure is one that I think has a better crossover, which you’ll see more on that coming probably in three or four months. But it’s a challenge. It is very, very difficult. But I do think there’s a huge opportunity there to bring those worlds together. But it’s not easy. It’s very challenging. No,

James Huber (36:06):

It’s not easy. I mean, people have tried to put together unions co card did this where you buy in, and I thought it was pretty cool, but it just wasn’t that much different. The idea was there of join our collective bargaining. And that’s kind of what already happens when you all go to a priority or my camp or some of the bigger players in the field, and you kind of get that. But I agree, there’s still not the ultimate solution of Yeah, how do you bring us all together?

James Shepherd (36:43):

Well, yeah, and see, those are based on the value of cost savings. But the problem is that that model is if not dead, it’s dying quickly. We have to get the value of the actual solution. On the plus side, on the revenue side, that’s where we’ve struggled. So the industry, I feel like our industry has been very good at cutting cost. Where we’re not good is at growing revenue by providing solutions. And we are good at going on the defense, but we’re not good at going on the offense. And the problem is that now the offense is so good. I mean, thousands of ISVs out there that are eating up one vertical after another. You’ve got these huge paybacks that are grabbing market share. You’ve got Stripe, you’ve got Addon, you’ve got, these are legit. I mean, this is major market forces that are just gobbling up the market.

James Shepherd (37:30):

And so we’ve got to go back on the offense, I think as an ISO community, and I think a lot of these ISOs, I mean, I hate to say it because I know a lot of ’em are going to say I’m being impractical, but a lot of them, they need to become a technology company. They got to go out and spend the $200,000 a year to hire their first lead developer. I mean, believe me, I feel the pain. I have a bunch of ’em. I get it, but it’s expensive. But at some point, you got to put a stake in the ground and say, okay, this is what I believe that where the market is going. And when I talk to ISO owners, most of them agree with

Jeremy (37:59):

Me. 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 To schedule a free consultation, give us a call at (888) 846-8901 or email us And once again, thank you for listening. 1, 2, 3. Come on.

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