PEP Episode 051 — Cash Card or ChatGPT Receipt Hack? Behind the Scenes of Payment Processing ft Allen Kopelman

Introduction

Two payments industry veteran experts talk about electronic payments in a way you have never heard before.  Join Christopher Dryden, Esq., and special guest Allen Kopelman, Nationwide Payment Systems, Inc., for this in-depth, fascinating discussion.

The payments industry is undergoing a significant transformation as processor consolidation and software integration change the competitive landscape for ISOs and merchants alike. Innovative approaches to payment processing like dual pricing and surcharging have emerged as 35% of merchants now pass fees to customers, while regulatory frameworks struggle to keep pace.

• Global Payments acquiring WorldPay represents significant industry consolidation
• Software companies becoming the new ISOs with integrated payment processing
• Approximately 35% of merchants now passing credit card fees to customers
• Visa implementing 3% surcharge cap while MasterCard maintains 4% limit
• State-specific regulations emerging for dual pricing in NY, NJ, CA, and CO
• Digital signage may become necessary for retail merchants to display dual pricing
• Reports of “secret shoppers” enforcing surcharging compliance with potential fines
• Cash remaining resilient despite digital payment growth
• Some agents engaging in questionable practices with surcharge programming
• Potential need for industry-wide agent database to track problematic behavior
• NPS One platform launching to offer integrated payments solution competing with Stripe

Check out Allen’s new NPS One platform coming soon, offering merchants a comprehensive business tool with rapid approval, virtual terminal capabilities, invoicing, links to accounting, embedded finance options, and more.
The payments landscape is transforming rapidly through consolidation, technology integration, and changing fee structures, leaving merchants and payment professionals scrambling to adapt. Major processor mergers like Global Payments acquiring WorldPay have reduced competition while software companies increasingly control payment relationships, disrupting traditional ISO business models.

Software has become the central battleground in payments. When every business operation connects to software platforms, those platforms increasingly dictate payment processing choices. “ISO software is the new ISO,” as one expert noted, with many businesses finding their payment options restricted by their essential software providers. Private equity-backed companies are purchasing previously “agnostic” platforms and redirecting merchant payment streams, creating significant challenges for payment professionals who built businesses on residual income.

Dual pricing (formerly cash discounting) and surcharging have emerged as critical merchant strategies, with approximately 35% now passing processing fees to customers. This shift occurs amid complex regulatory challenges – Visa capping surcharges at 3% while MasterCard maintains 4%, alongside state-specific regulations in New York, New Jersey, California, and Colorado. Merchants face practical implementation hurdles, especially in retail environments where displaying dual pricing on physical merchandise creates logistical nightmares.

Despite digital acceleration, cash maintains surprising resilience. Many workers receiving pay cards immediately withdraw cash, while certain business segments (contractors, repair services, salons) continue offering cash incentives. One payments expert reported dispensing over a million dollars monthly from a small ATM fleet, demonstrating cash’s enduring role in specific economic sectors.

The industry faces critical ethical challenges too. Some agents program terminals to display higher surcharges than merchants actually pay, creating hidden profit centers. Others establish questionable referral relationships that potentially violate card brand rules or trigger money transmitter regulations. Without industry-wide agent tracking or standardized licensing, these problematic practices continue unchecked.

What does this mean for your business? Understanding these shifting dynamics helps you make informed decisions about payment processing, software integration, and fee structures. Whether you’re considering implementing dual pricing, evaluating integrated software options, or simply trying to minimize processing costs, staying informed about industry trends provides crucial competitive advantage in an increasingly complex payments ecosystem.

Transcript

Allen Kopelman (00:00):

Chris, what do you think about this merger?

Christopher Dryden (00:03):

What merger?

Allen Kopelman (00:05):

Global Payments buying Worldpay.

Christopher Dryden (00:08):

Really? When was that announced?

Allen Kopelman (00:10):

Yeah.

Christopher Dryden (00:13):

I didn’t think Global Payments have that much money.

Allen Kopelman (00:17):

Well, somebody’s, they’re paying a bunch of money for it.

Christopher Dryden (00:21):

Wow. So that leaves us with what, two processors now?

Allen Kopelman (00:27):

Yeah.

Christopher Dryden (00:29):

Is that basically it? I mean, who are the smaller guys in town? Not much.

Allen Kopelman (00:35):

I don’t like that. I don’t like that merger at all because that eliminates another processor processing claims

Christopher Dryden (00:45):

Scheme. Well, and I think the processors are now competing against the ISO in a lot of respects.

Allen Kopelman (00:52):

Well, they’re competing against us. That’s hence what I’ve been talking about for two years. ISA software is the new ISO and all these software companies are taking over our business. Look what James Shepherd is creating with his full stack payment.

Christopher Dryden (01:12):

I haven’t seen that. What’s he doing?

Allen Kopelman (01:15):

He is making this company where he is got a bunch of ISVs and then he’s letting people sell the software and then paying them residual for bringing in leads, but only 50%.

Christopher Dryden (01:30):

Wow.

Allen Kopelman (01:32):

Or you’ve got companies like Worldpay and other companies and they’re just, all the sales are just internal. No reps.

Christopher Dryden (01:41):

Yeah. I mean the software aspect of this, I didn’t see it transitioning like that, but that’s where we are now and don’t really know

Allen Kopelman (01:51):

What Yeah, me and James talked about it on, I did a podcast with James and that’s what me and him were talking about, how the shift in the business and now all these, especially these agnostic companies get bought up by PE money and then the next thing you know they’re not agnostic and we’re losing merchants off our residual.

Christopher Dryden (02:14):

Yeah. It’s crazy because from the ISV channel side, every business is tied to a piece of software. Now, everything. How do you get around that? I don’t know how that even occurs anymore.

Allen Kopelman (02:30):

No. Getting around it. They want to control the payments.

Christopher Dryden (02:33):

Yep.

Allen Kopelman (02:34):

Then James gave the example, like you guys use law firm software and that’s all control.

Christopher Dryden (02:42):

We asked them, Hey, we’re in this business. Can we go ahead and bring in somebody that we already use? We will build out and code out to an API and they said no, and this is actually fairly flexible software, the new one we’re using.

Allen Kopelman (03:00):

Yeah. Well, most companies, that’s what they do. There’s no options for that.

Christopher Dryden (03:10):

Well, that’s why

Allen Kopelman (03:11):

Look at the company Lightspeed.

Christopher Dryden (03:13):

They

Allen Kopelman (03:13):

Bought all these pos and then they put everybody now on Stripe.

Christopher Dryden (03:19):

That’s why you find them where they’re actually violating surcharge rules and go fucking sue ’em all. Oh, you guys want to be in the payments game, huh?

Allen Kopelman (03:27):

They’re on Stripe. What are you going to do?

Christopher Dryden (03:30):

Yeah, but that’s not who you’re dealing with. The person that’s actually taking your money. It doesn’t matter that let them go fight with Stripe. Right.

Allen Kopelman (03:40):

I don’t think Visa and MasterCard give a shit what Stripe and what Stripe or Square does. I mean they own stock in Square.

Christopher Dryden (03:50):

Yeah, I know. There’s so many conflicts of interest. Fucking ridiculous.

Allen Kopelman (03:54):

I mean, visa owns cyber whatever, CyberSource and authorized.net.

Christopher Dryden (04:00):

Yeah. No, no, no. I mean if it’s not a monopoly at this point, I don’t know what a monopoly is.

Allen Kopelman (04:07):

You have everybody selling payment processing, swipe simple and MI authorized.net clover. Everybody offers merchant services,

Christopher Dryden (04:19):

But they also offer a very shitty product, so the ISO may never go away just because there’s enough people out there that don’t want a shitty product.

Allen Kopelman (04:29):

Well, that’s why you have companies like the guys I work with, GET, they just finish building out their whole platform. Then not only that, they built out, they’re adding equipment onto it and they’re also adding a mobile reader like swipe simple so they can get rid of these companies. They’re going to poach our business.

Christopher Dryden (05:00):

That’s the other nice part is that you get somebody who’s got a very merchant centric platform and you give ’em a bunch of information and you show ’em how to use it. A lot of times they’re trying to hide. That’s the one thing is that they’re trying to hide. I mean, either this is truly a commodity and we are at a race to the bottom and the people sitting at the bottom are going to be the card brands. I don’t know.

Allen Kopelman (05:26):

I don’t know the answer to that. I mean the same thing with dual pricing, right? I saw a survey. It said 35% of merchants are passing a fee one way or another.

Christopher Dryden (05:42):

Yeah. That doesn’t surprise me. I mean, shit out here, they were passing a fee for you walking in the restaurant. Yeah. This is the walk-in fee. You entered our property, you owe 4%.

Allen Kopelman (05:57):

There was a restaurant out there that got in trouble. They were charging a security fee,

Christopher Dryden (06:02):

Whatever they want to call it. Totally. It’s crazy.

Jeremy Stock (06:05):

Alan, wasn’t it you on LinkedIn? You were actually posting pictures of receipts that you’ve actually experienced. Isn’t that right? Of some of those fees? Some of those junk

Allen Kopelman (06:15):

Fees a while ago. Yeah.

Christopher Dryden (06:19):

Yeah. Those are truly junk fees. Right?

Allen Kopelman (06:22):

Want to know what’s crazy? You could take a receipt today, upload it to chat EBT and change it, and that’s FD up, bro. It’s really scary. Okay.

Christopher Dryden (06:35):

All right.

Allen Kopelman (06:37):

Every bank, so the Bank of America, chase, whoever, doesn’t matter what bank it’s every bank has their own font. Every machine that prints out a receipt, deja vu packs, bare phone, an ATM machine. He song is different than Gen Mega different than Triton. When they print receipts out of those machines, that font is unique to that piece of equipment, but now you could scan a receipt, put it in chat GBT and change it

Christopher Dryden (07:20):

And change the font.

Allen Kopelman (07:23):

No change what’s on the receipt

Christopher Dryden (07:26):

And keep the same font.

Allen Kopelman (07:28):

Yeah.

Christopher Dryden (07:30):

How do you print it?

Allen Kopelman (07:32):

Print it out from chat GBT,

Jeremy Stock (07:37):

Turn

Allen Kopelman (07:37):

It into a JPEG and print it.

Jeremy Stock (07:39):

In other words, you can

Allen Kopelman (07:40):

Take a picture of it with your phone for

Jeremy Stock (07:41):

That. You can fraudulently say, Hey, I’ve got this receipt for X number. That’s wild.

Christopher Dryden (07:46):

I’ve seen an opportunity. Yeah, you could doctor

Allen Kopelman (07:48):

Up a receipt. They were talking about doctoring it up and turning it into your, turning it in for your expense report.

Christopher Dryden (07:57):

Yeah. It’s crazy.

Allen Kopelman (07:58):

Chris goes out to dinner, spends a hundred bucks, and instead he changes it to 300 and chat GBT and turns it in.

Christopher Dryden (08:07):

Yeah, but you know when you use chat GBT to do something like that, it would still trace back to you. Wouldn’t it

Allen Kopelman (08:14):

Trace back to who?

Christopher Dryden (08:16):

Wait, don’t you have to create a user account? No, you

Jeremy Stock (08:18):

Don’t. Chris, you can go incognito. No sign in.

Allen Kopelman (08:21):

Probably to do that, you need a user account.

Christopher Dryden (08:23):

I would think to do something like that, you would need a user account.

Allen Kopelman (08:28):

Yeah, because you need the imaging software.

Christopher Dryden (08:30):

Yeah. Yeah. You’d have to disclose who you are,

Allen Kopelman (08:35):

So how does your employer know? If you’re Jeremy goes and changes the receipt, say, oh, I put this on my personal card. Here’s the receipt for the

Christopher Dryden (08:45):

Restaurant. I don’t reimburse anything to Jeremy. I’d never reimburse anything. Fucking kidding me.

Allen Kopelman (08:49):

He says he’s coming down here to Boca. He’s going to take me to

Jeremy Stock (08:52):

New York.

Allen Kopelman (08:53):

Yankee Steakhouse.

Jeremy Stock (08:54):

Chris, Alan, I’ve tried with the crayon for Chris to reimburse my receipts. He said it’s not good enough. That’s right.

Christopher Dryden (09:00):

I stopped writing in crayon last year.

Jeremy Stock (09:04):

Welcome to the Payments Experts podcast, a podcast of global legal law firm. We hope you enjoy this episode. Welcome to the Payments Experts podcast, a podcast of global legal law firm. Today we have joining us in studio founding and managing partner of global legal law firm, Christopher Dryden, as well as joining us remotely from Florida. Alan, it’s great having you on the show. Alan Kopelman from Nationwide Payment Systems. You’ve been on our podcast before and we appreciate all your flexibility. We’ve tried this podcast now a couple of times and we

Christopher Dryden (09:44):

Think it’s going to work. I going to say take two. Yeah. Yeah, we started the other day. Thank you for your patience, Alan. I really appreciate it. From one podcaster to another, Alan has his own podcast, everybody. It’s the B2B Vault Biz to Biz podcast. Alan is a long-term industry vet who loves to talk and knows a ton, so if you sit around long enough, you’re going to glean some really good information and we’re hoping today’s going to do that. Alan, how are you doing and what’s going on with Nationwide Payments? What’s new?

Allen Kopelman (10:19):

Listen, we’re getting ready to launch our new thing called NPS one. It’s a really cool platform going to pretty much rival what Stripe is able to do.

Christopher Dryden (10:32):

Yeah, a little bit more. Tell us a little bit about it or are we too premature? We can’t let the cat out of the bag just yet.

Allen Kopelman (10:39):

It’s pretty much ready. We’re just putting a couple of finishing touches on it, but basically right now we can send you a link with a specific pricing structure. You can click on it. You would click on the link, put in your email address, put in a password, start filling out the application, put in all your information. You can be approved within 15 minutes.

Christopher Dryden (11:04):

Awesome.

Allen Kopelman (11:05):

Unless we need additional information. Then from there, that same login is where you go in and you can access the virtual terminal credit cards, a CH, send out payment links, voicing, create product posted on Facebook and sell it hooked up to Google Pay and Apple Pay and everything.

Christopher Dryden (11:29):

So you’re just doing like an AI scrub through the application process and vetting it through third parties to make sure everybody’s who they say they are.

Allen Kopelman (11:37):

Yeah. I mean, if we can’t get your driver’s license verified, the software, you’ll get an email saying, oh, upload your driver’s license void a check. The average ticket is too high, or the processing volume is over a certain amount. It’ll trigger to ask for merchant statements for an avoided check, things like

Christopher Dryden (12:00):

That. That’s one of the places that I’ve been fascinated by the behind the scenes where you’ve got AI working in the background to do through the application process of vetting of information, the speed in which things can be verified and through the data collection houses and what’s out there. Man, I just find it really fascinating. That’s one of the cooler aspects of technology is the ease of access. I mean, I’ve also seen on the other side where ease of access three weeks into processing meets underwriting, and it doesn’t always equate to a good thing necessarily. It seems like there’s a competition in there for I got access, but the risk analysis is only so good, so there’s some downsides.

Allen Kopelman (12:51):

No, the underwriters actually look at the account, but now the underwriter doesn’t have to sit there and go, let’s look this guy up on Google and here and there. It already, the software pulls up their business on Google, finds it on Google Maps, looks for a picture of it, looks for websites, social media, everything. The credit is pulled. They can see everything, and then it’s scored.

Christopher Dryden (13:21):

Yeah, the KYB stuff, for sure. I was just thinking more along the lines of once they start processing the risk analysis, it begins again. So it’s

Allen Kopelman (13:31):

Not so much because I think pretty much we’re, we’ve been using this for over a year, maybe two years now, so it’s pretty much down to It’ll catch the bad guys on the way in.

Christopher Dryden (13:48):

Yeah, for sure. No, no, no. I mean, that’s the thing. That’s the beauty of technology and then the mastery of humanity is that somebody’s going to try to figure out how to break that stuff too. So today,

Allen Kopelman (14:02):

But then when you log into the system, you’re going to have everything there. You can see your deposits, authorizations, you’re going to have a terminal being linked up to it soon,

Christopher Dryden (14:12):

Real time,

Allen Kopelman (14:13):

Be able to do everything. WooCommerce, plugin,

Christopher Dryden (14:16):

Real

Allen Kopelman (14:16):

Time and also QuickBooks. Huh?

Christopher Dryden (14:18):

Real time.

Allen Kopelman (14:20):

Real time.

Christopher Dryden (14:21):

Real time. Awesome, man. That sounds really,

Allen Kopelman (14:23):

That’s going to be really cool.

Christopher Dryden (14:24):

Sounds really exciting. I mean, look, I think these are the types of technology platforms that are really in need. I talked to merchants on the daily and having access to educate merchants. I think the technology in itself educates the merchant to understand cashflow what they need. I’m going to go ahead and tell you a plugin to financing where you’ve got real time processing data is probably another one that you want to throw in there if you haven’t, but it sounds pretty awesome,

Allen Kopelman (14:59):

And there’s also going to be embedded finance that’ll let you know you could get a loan or a credit card, things like that.

Christopher Dryden (15:07):

That’s awesome. That’s the stuff

Allen Kopelman (15:09):

We’re pretty excited about it.

Christopher Dryden (15:10):

Well, I think that from an underwriting standpoint, when you’re looking to underwrite a business, I mean, it’s one thing to rely on the personal guarantor, but if you can really see the financial activity of the business because everything’s housed in one place and it’s not segmented out, and you can take data and feed it through some sort of authorization for an underwriting process to embedded finance, I think that’s pretty awesome.

Allen Kopelman (15:35):

Yeah. I’m very excited about how this is going to grow sales over the next couple of years.

Christopher Dryden (15:40):

Yeah, we’re

Allen Kopelman (15:41):

Talking today.

Christopher Dryden (15:43):

Well, but it’s a business tool. I mean, to me, the things that’s the stickiest is going in and educating a business owner about his or her business and how to have a better handle on business and provide them tools to do more business and make things easier, and that’s what this sounds like.

Allen Kopelman (16:01):

Yeah. It’s going to be a complete business tool for businesses. It’s not credit card processing anymore. It’s a full-blown FinTech business tool product that’s going to also link up to your accounting software and it’s going to make businesses. It’s going to help them grow their business.

Christopher Dryden (16:22):

Well, it’s call what it is. It’s middleware, right? I mean, it’s getting in between all of these different things to find a hub and connect it all. So I think that, look, man, it sounds so good. There’s some days I may want to quit this job and just come sell for you, bro. All right. But that’s not why we’re here today. I love self-promotion as much as the next person, but today we’re going to take Alan’s expertise and we’re going to talk about surcharging cash discounting, which is now more commonly referred to as dual pricing and other items related to the subject matter, both from the card brand rules perspective as well as applicable law that might be out there, and how it looks from the good, bad and the ugly of what’s going on in the marketplace. What do you think, Alan?

Allen Kopelman (17:19):

Well, I think that I saw a recent survey that I was telling you about earlier, 35% of merchants, so that means more than one in three, one out of three, maybe a little bit more than that are passing a fee of some sort to the customer at this point.

Christopher Dryden (17:39):

Let me ask you something about that. I was surprised by that number. I’m actually surprised it’s that low. My question would be why do you think more merchants out there aren’t passing it through? What do you think the barriers are to the merchants? And it could be anything from a lack of knowledge to a potential penalty. What do you think?

Allen Kopelman (18:02):

I think that larger businesses are afraid to do it, although I can tell you we have some very large companies that do surcharging compliance search, and they’re not afraid to do it. I’m talking about people doing millions of dollars a month and they’re doing compliance.

Christopher Dryden (18:22):

But if you had to bucket out a few reasons why you think people are staying away from it, and I understand the big box stuff, larger merchants, they don’t want to push it. They truly have brand and they don’t want to be targeted with, come to Walmart, we’re so awesome, but here we’re going to tack on whatever our expenses are. So are you truly getting the savings? That part I get, but in your position and what you see and who you talk to, what are some of the other things that you think?

Allen Kopelman (18:59):

I think that competition is a big thing. So I think if you’re in a competitive business type that it’s harder to pass the fee than it is to somebody who’s like, you’re renting out some jet skis and you’re on vacation, and the guy says, oh, it’s 300 bucks plus another 4%. You’re not going to sit there in front of your wife and kids and go, I’m not paying this extra 12 bucks.

Christopher Dryden (19:31):

That one I understand, but no,

Allen Kopelman (19:33):

But I’m saying,

Christopher Dryden (19:35):

But hear this out. If it’s between Chili’s and Applebee’s, is the decision really the surcharge? I don’t eat either one of those places, but yeah, I wanted to find two establishments I thought were kind similar or shenanigans.

Allen Kopelman (19:53):

No, I think it comes down to this. I think Visa should just let merchants do whatever they want. They should write a rule for dual pricing, stop dancing around the whole surcharge thing, let the consumers decide if they’re going to pay these fees or not. Let the consumers decide the consumer wants to pay the fee. They’re going to patronize that business. If they don’t want to pay the fee, then they’ll go somewhere else.

Christopher Dryden (20:26):

Well, our history with Visa, and look, I’ve been saying this for a really long time and where it probably stuck out to me the most was 15 years ago. I started looking at the chargeback process because I saw how much money one of our clients made off of chargebacks, and I was sitting there looking at it. I’m thinking to myself, how can this be? And then I actually learned the process and I started to see that winning a chargeback was really difficult. So much so that businesses, a whole business group came about to do chargeback mitigation and represen resentment. I mean, those businesses didn’t exist, but the thing that stood out to me most was this conflict of interest between the card brands from issuing to acquiring and who they really favored and why. And I kind of started to see trends related to that.

Christopher Dryden (21:24):

And I don’t think this is any different. I mean, when we’ve talked to people at the card brand level to talk about why that visa instituted a cap, it really comes down to cardholder complaints. I mean, that’s what drove it, and I don’t even think it was rampant or anything like that. It was just, Hey, this is going to be a problem. Here’s a way that we could potentially take advantage against our most direct competitor. Let’s cap this out without any thought process of unintended consequences, abridgement of contract terms of people building a business off of finding the spread between interchange and the surcharge amount to do an alternative payment application. But what do you think is driving MasterCard’s cap, I think is reasonable? What do you think the drive for Visa was to come up with the cap? I got another question after this, but I’d really like to get your opinion on that.

Allen Kopelman (22:28):

I mean, I think it’s confusing to the merchants to say, oh, Visa’s got a cap of 3% MasterCard sticking with the 4% from the Durban Amendment, and I think that’s confusing. The merchants plus all these states coming up with their own rules. New York, New Jersey. I think California has a rule.

Christopher Dryden (22:49):

Colorado’s got one that’s actually pretty, yeah, some of them cap it.

Allen Kopelman (22:56):

No, but I think when you look at all of this, I think it’s time that either that Visa and MasterCard need to make a rule about this. One thing that I’ve always seen in credit card processing, merchant services, like you talked about all of a sudden charge of ACT mitigation. Companies were born. Actually one of the biggest ones, a merchant started it that had a bunch of chargebacks.

Christopher Dryden (23:22):

Was it Chargebacks? 9 1 1?

Allen Kopelman (23:25):

Yeah, I think 9 1 1. And Gurus was both started by merchant.

Christopher Dryden (23:28):

Yeah, we represented chargeback.

Allen Kopelman (23:30):

There was a guy dispute. He started and he was a merchant.

Christopher Dryden (23:34):

Yeah, no, no, no. Trust me. We represented chargeback gurus for a number of years before they got acquired, and it was always fascinating to me. They actually built a contingency fee model doing resentment and actually automating a process that was, for a long time you had 14 days, but by the time the ISO sent you the snail mail notice, you were probably beyond your period of time to even contest it. So it was always interesting. Earlier you were talking about coming up with a rule for dual pricing. I want you to unpack that and give us your thoughts about that, of what you think a best practice would look like.

Allen Kopelman (24:16):

Well, I mean, right now, I mean merchants, so let’s just kind of backtrack a little bit. So we go over the history,

Christopher Dryden (24:25):

History, give some background.

Allen Kopelman (24:27):

So when everybody first started passing the fee, it was just cash discount. There was just this non-cash adjustment appearing on the bill. Of course Visa is this odd, this is not so good. And there’s been comments made by somebody from Visa on a recorded YouTube video saying they didn’t like it, that people, that ISO community agent community was making a lot of profit. So that was said they can’t get taken back. It’s on YouTube, a video with James Huber.

Christopher Dryden (25:09):

Oh, I remember.

Allen Kopelman (25:11):

So the thing is this is that, so they come and they say, oh, non-cash adjustment. You can’t do that. Okay, we’re all smart. We’re business people. We’re entrepreneurs. What do we do? Okay, now we’re going to come up with dual pricing. We’re going to tell the merchants to put the higher price on the shelf, the higher price on the menu. Then the receipt prints out and it says, okay, your dinner’s $104. What if you want to pay cash? It’s only a hundred. And that’s basically what everybody’s doing right now. And probably Visa doesn’t like that either. I would guess that the card brands don’t like dual pricing. I know they don’t like surcharging. They’re not in love with it.

Christopher Dryden (25:59):

One of the interesting things was as I was talking to one of our clients who is a POS designer, and they had come up with a display that at checkout it would do it for you, it would actually give you cash credit, cash credit, cash credit, so that it was real time in front of you and totally visible. And Visa came back and said, yeah, but that’s not at the display. You got to do it at the point of display of the product. I mean, they were finding every way to say, this isn’t okay. Even though the font was gigantic, the screen, it looked like one of those at the roulette table where they’re showing you the previous numbers. I mean, the thing was huge as far disclosure goes, there’s no way people couldn’t see it. And still Visa found fault with that too

Allen Kopelman (26:49):

In New York. Now, I’ve seen friends of mine send me menus. I asked them, Hey, when you go eat out to eat, send me a menu from a restaurant. And you’ll see on menus now, oh, pepperoni pizza. I’m just giving an example, 20 bucks, and then it’s 1850 for cash, and they have to display both prices.

Christopher Dryden (27:11):

No merchants, I think we’re going to move into a world of digital signage. I mean, that’s the only way that you’re really going to be able to keep up with all this

Allen Kopelman (27:18):

Stuff at some point. I don’t know if merchants can afford digital signage to be on every item in their store problem.

Christopher Dryden (27:27):

Yeah, I saw something recently where a software system through wifi, through geolocation could do pricing updates from a terminal, like a computer terminal to where a geolocation of a skew to actually display it. Now, I don’t know how good it was. I don’t know how cost prohibitive that might be, but yeah, anybody that’s a retail store, I mean, I don’t know how you’re going to operate outside of it. I mean, what do you do? If I go into Nordstrom’s and I go and I look at the tag, how do I deal with a cash price versus a credit price? Is there any ability for some types of stores to even do this based on how they display their goods? I don’t know.

Allen Kopelman (28:18):

Well, that remains to be seen, but I still think that the card brands need to address this because it just needs to be addressed at this point. It’s like the elephant in the room and they’re just hiding. And merchants get these thousand dollars fine letters, and then they just go change all the prices and they send it into Visa, and Visa goes away

Christopher Dryden (28:45):

For a moment depending on the merchant. I mean, there’s a lot of people. I mean, I’ve also seen that they’ve got a different Thank you, Jeremy. They’ve got a different penalty scale for Secret Chopper versus customer complaints where it goes from 1000 to 5,000 on the secret chopper. And even with compliance and the second violations, five on the customer complaints, it goes from one to 25.

Allen Kopelman (29:16):

Yeah, well, that’s kind of crazy. I mean, I don’t like that whole secret shopper thing. There’s some app called Presto Shop or something, and all these locations are in there of merchants that are on that are passing the fee, and then they’re asking secret shoppers to go in there and get receipts.

Christopher Dryden (29:37):

Really? I hadn’t heard of that. That’s crazy.

Allen Kopelman (29:39):

Oh yeah. There’s an app, Presto shop, it’s called. You can sign up to be a secret shopper, and then it’ll show you all the places in the area around where you live of things to go secret shop, and there’s a whole bunch of things listed in there for Visa

Christopher Dryden (29:56):

Almost sounds like entrapment. I think a bunch of people were targeted. I’ve heard this from a few larger players tied to one particular acquiring bank. I just don’t want to name names just because I know all these people, but it was almost the acquiring bank’s response to it that put the scrutiny on the ISOs. At least that’s where they feel like there’s a common thread. I don’t know the veracity of that, but I did find it to be pretty interesting. But going back to the dual pricing rule, what do you think a could dual pricing rule? I mean, new York’s got the leading legislation at this point that everybody kind of seems to be following, and I think if you have dual pricing, that’s sort of been a flagship for how other state actors would do it. But what do you think? Do you that’s really good, or do you think it needs to be a little more abridged?

Allen Kopelman (30:58):

I mean, I think that’s kind of onerous to merchants to print menus out with two prices on it. I think people who buy with card don’t care. They’re going to spend their money, they’re going to use cards, and people don’t like to. And then there’s a whole nother group in society that likes cash, and that’s just the way it is. There’s people that walk around with cash on them all the time. They pay for everything in cash. And then there’s people that put everything on a card.

Christopher Dryden (31:31):

I mean, I get that bigger. I think management wise and cashback and rewards, I think it makes more sense as a cardholder. I don’t see the need to have a whole bunch of cards just give me the best deal, and I can manage all of my purchases from one place, and I don’t have to deal with having multiple cards. I limit the use of a lot of my cards, but at the same time, cash is going to go away. You think? I mean, I still think the utility of cash is ultimately going to go away. Even when we were in Vegas a couple weeks ago. I mean, the way that they’re doing the voucher machines and you can use a card to get into anything. I agree with you. I think that there’s a lot of benefit to cash, and at the same time, I kind of see it going away at some point, don’t you?

Allen Kopelman (32:31):

No, I don’t see cash going away. I think it’ll take a long time to get rid of cash.

Christopher Dryden (32:36):

Why?

Allen Kopelman (32:38):

Because there’s so many people that get their paycheck, they just cash it or they get a pay card, and the minute they get their pay card, they hit the ATM, they get the cash. They’re not using those. They don’t have bank accounts. You have a lot of unbanked, underbanked people using pay cards is huge. How many payroll companies, if you asked a DP, how many payroll cards do they issue? Those are not really bank accounts, although you can use it as a bank account. I bet you a lot of the people just go and just take the money out. I mean, we are in the ATM business, so we have an ATM that’s near a very large distribution center, and there’s two ATMs in this store. I want to tell you what, on Friday, those things get emptied out because all the workers come over and take out to 500 bucks off of their pay cards every Friday

Christopher Dryden (33:45):

Is the pay card. And forgive me for being ignorant here, is the pay card, can it also operate as a prepaid reloadable card, or does the money have,

Allen Kopelman (33:57):

Yeah, they’re getting their paycheck put on it every week.

Christopher Dryden (34:01):

But can they actually use it at a normal card terminal?

Allen Kopelman (34:05):

You can walk up to a terminal and put it in it. It’s got a Visa logo on it or a MasterCard.

Christopher Dryden (34:12):

So what do you think the mindset is with that? With people still banging away and getting the money out?

Allen Kopelman (34:17):

They like the cash?

Christopher Dryden (34:19):

Yeah. Or is it just because the strip doesn’t like cards used? Hear me. Alright.

Allen Kopelman (34:27):

I mean, listen, you walk into a nail salon and they go no tips on the credit card. They want you to give cash to the people. All the people that make, let me tell you, we have one bar that we work with one, and they take no cash in that place. None. There’s no cash. It’s only credit card. Everything’s on a credit card. But I got 50 other bars. They take credit cards and cash. And I’ll tell you right now, we dispense out of our ATM machines that we have, and we have a very small fleet. We dispense about over a million dollars a month out of those machines.

Christopher Dryden (35:08):

My favorite bars, it’s all cash. So seriously, my favorite bars in the world, my favorite bar in the world is a place called the Saloon in North Beach in San Francisco. If you’ve never been there, they got blues playing almost every night. It is an awesome place. It’s been there since 18 69, 18 70. It survived the earthquake. And you roll into this place, and I’m telling you it hasn’t been remodeled maybe since then, but you roll in and it’s all cash, baby. There’s no such thing as a cart. I don’t even think there’s an ATM on the premises. It’s just like you got to roll in and it is what it is. But I noticed

Allen Kopelman (35:48):

That that’s the whole thing is you have a lot of businesses that are still out there cash only. I’m done. Go get your car. If you have an older car and you go get it repaired and the guy’s like, oh, it’s 350 bucks. And you go, oh, how much for cash? The guy might do it for less money and you just go to the ATM and bring him some cash.

Christopher Dryden (36:09):

Yeah, I mean there’s a lot of industries like that that are untapped. I mean, I just had some work done at my house and obviously Venmo and Zelle were kind of with the construction industry or handyman home improvement. They were probably in a middle for a little while, but now that the government got wise to anything over $600, but they won’t take card. I mean, I’ve asked, yeah, we’ll take it if you want to pay for the surcharge, but give me a check. I’ll make my way to the bank. I don’t care. Or I’ll do remote deposit capture

Allen Kopelman (36:43):

All the time. I have lawn guys, the guy who cleans my pool, the guy who does power washing for my comes over. They’re like, oh, you want to pay the fee? We’ll take a card. If not Zelle us the money. Even my AC guy Z him the money or he is going to charge you a fee.

Christopher Dryden (37:03):

Yeah, no, it’s interesting. And those guys, it matters, right? I mean, that’s the thing about the fee. I mean, look, we sometimes feed it through. It depends. We try not to be too draconian about it, but it makes a difference that 3% makes a difference for people on margin. It really does. And especially the really tight margin businesses in retail or in gas and gas stations. It’s just kind of crazy that we’ve gotten to this place where interchange is so high and even with a 3% cap, it’s not like there’s some great reward for the merchant. They just keep it at a particular level because it’s easier to manage from that perspective. And it’s kind of passed through equally, and you don’t have to reconcile anything. But yeah, I mean that’s why I asked you that one opening question, which was what do you think the barrier is for people? Because me, and maybe the percentages have changed, but I think small to medium sized businesses are easily greater than 50% of the businesses out there. And I think every single one of those that interchange or whatever they’re paying on a per item transaction fee, total effective rate, it makes a huge difference.

Allen Kopelman (38:32):

I think some businesses just think my customers aren’t going to like it, so they don’t do it. So they’ll just raise their prices. And then other businesses are like, no, I’m going to do it. Other people are doing it and I don’t care. And if it doesn’t affect my business, then I’m going to keep doing it.

Christopher Dryden (38:51):

Do you think that this is a tool, as you talk to people and see agents out in the marketplace, do you think that this is a tool that they’re using to acquire merchants? And how do you think that they’re doing that considering you’re able to sell this regardless of who you sell for?

Allen Kopelman (39:11):

Well, I think agents use it as a tool to sell. The thing I don’t like is to see the agents paying the merchants back a kickback every month. I think that’s not right.

Christopher Dryden (39:22):

I thought that that was a violation of card brand rules. And then I went and looked at it because you’re not supposed to have any sort of contract with the merchant directly related to the payment processing. And I don’t think it says written contract. I think it’s any contract. So I think people who are doing that are actually in danger of getting blackballed potentially. But

Allen Kopelman (39:42):

There’s a lot of ISOs that do that. I mean, I even had an agent come to me one day and he’s like, I want to deploy my own deja vu terminals. I’m like, what? I’m like, we don’t allow that. And he’s like, well, no. And I said, why do you want to do that? And he goes, oh, well, I want to charge 4% on the machine, but then we’re going to set the merchant up at three and a half percent so the merchant can make money on the cash discount, dual pricing,

Christopher Dryden (40:12):

And has no idea that what they’re doing. Look, you can’t do that.

Allen Kopelman (40:20):

I said, we’re not going to allow that. I said, we deploy the terminal. We have the ISO that we work with. They deploy the machines out, and we’re not going to program machines like that because that’s a violation of the rules. So we’re not going to do that. But I’ve seen people telling me that they’re doing it. Hey, I talk to reps all the time, and they’re like, oh, I have this auto repair place. Can you set it up under service station SIC code? I’m like, no, I’m not doing that.

Christopher Dryden (40:52):

So are they actually taking the money and then giving it back to the merchant?

Allen Kopelman (40:57):

Some reps are,

Christopher Dryden (40:59):

But in what you were describing with that programming on the terminal, is that doing a split fund or is that still something that they’re taking? Because what you just described to me, no,

Allen Kopelman (41:09):

The merchant’s passing, no, the way that works is the merchant’s passing 4%, but on the contract only getting charged three and a half, so there’s a 50 points extra going to the merchant,

Christopher Dryden (41:22):

Which is obviously also lying on your credit application there, which isn’t a really good thing. But I see it even from a different perspective of when you’re grabbing money that somebody else is entitled to, and then you’re giving them that money and you’ve carved that out with them, you’ve just become a money transmitter, believe it or not.

Allen Kopelman (41:44):

I mean, you’re paying. You could say they’re signed up as a referral partner.

Christopher Dryden (41:48):

Yeah, but yeah, yes and no. But when the merchant is the merchant and a referral partner, I don’t know how well that’s going to hold up.

Allen Kopelman (42:01):

There’s a lot of people doing it right now. I don’t agree with it, but there’s a lot of people doing it. I just tell people, they’re like, oh, some rep’s offering me money. And I’m like, okay. I said, if you want to lower the fee, we can analyze your statement. We try to give people a very fair fee because we just give a fee and then one monthly fee to cover the whole thing, which includes a terminal, and then that’s it. You don’t have CI fees. We try to bundle it all together to make it all simple. So you pay 39 bucks a month, that includes your terminal, your statement fee, your platform fee, your PCI fees, every fee. There’s no other fee on your statement

Christopher Dryden (42:45):

Other than just whatever it costs to actually process the transaction.

Allen Kopelman (42:49):

Just whatever it costs to process the cards if you’re on cost plus flat rate or you’re doing dual price.

Christopher Dryden (42:55):

So this is kind of off topic, but I had a phone call before this, and I always tell people we do one of a few different types of litigation cases, and most of the time it’s former employees, former agents poaching. And I start to see serial agents out there as I talk to people, and I still don’t understand. I think app, formerly Mac has something where if there’s some bad actors in the space, they keep a running list. But on the acquiring side, I never really see that. I don’t see it on the sales side. I feel like ISOs are willing to just take on whatever new accounts regardless of how long they’re going to stay on. But I’ve always said, why isn’t there this list out there that everybody sort of subscribes to where if you purchase a residual from somebody and they go and recapture the merchant, or you’ve got somebody who’s working with you getting a signing bonus and then all of a sudden they’re no longer working with you and now they’re flipping the merchants out. And what you just said is another instance where if you did see agents operating in a capacity that ultimately is kind of like a violation of card rules and card ran rules and maybe of kind of industry standards that are giving an unfair advantage. I’ve always said, why is there not this agent database where people in the instances, they’re somehow being reported or recorded, who

Allen Kopelman (44:34):

Could maintain

Christopher Dryden (44:35):

That? I don’t know. It would have to be some sort of independent group. I mean, it would be something that almost like a membership club where the members subscribe to it. A third party who’s not in the capacity of the member is somebody who maintains it and actually verifies some of the data associated with it. But I’ve always thought that we were talking about chargebacks, right? I mean, this is something that I think would be extremely useful to agent heavy ISOs because obviously there’s plenty of them. I mean, look, the insurance industry is a really good analogy to us, except that the insurance industry requires a license, but you can be an independent insurance agent and throw your own shingle. And so I kind of look at it as the reason that you have oversight attorneys, the same way we’ve got the bar associations is to make sure that everybody’s kind of playing by the same set of rules.

Christopher Dryden (45:32):

And one of the things that’s always been problematic in our industry is people are trying to bend and break the rules left. I mean, my first client was a 0% qualified, 1% qualified debit credit, blah, blah, blah. Never mentioned a downgrade surcharge and did a savings estimate that basically allowed them to shove like a lease in there. And I felt I didn’t understand that when I first started representing I was new to the space, but as you can see, that’s not really the greatest way to sell. I’ve always just been interested in when you see stuff like this, you stay away from it for yourself, but I just throw it out there whether or not there’s an idea of how could you sort of combat some of these practices.

Allen Kopelman (46:21):

I actually came up with an idea to have an association for sales reps. I showed it to James Huber, your partner,

Christopher Dryden (46:30):

What’d he say?

Allen Kopelman (46:31):

And he thought it was a good idea. He goes, go find 20 people who want to join up the problem’s not finding the 20 people. I could find 20 people, but the problem is licensing. Several years ago, me and another friend of mine, Steve, went to go visit the Department of Business Regulation in Florida. And we said, why can’t you license and credit card sales reps the same way you license a restaurant, a realtor, an insurance agent, a mortgage broker, et cetera, et cetera, we’re collecting the same amount of information as those people. Why isn’t there a licensing way to license? Their kind of answer was is that there’s not some standardized education and there’s not standardized like tests. If you want to be a CPA or you want to be an attorney, obviously there’s standardized education and testing, so that doesn’t exist. You have the ETA has the CPP, but I mean they’re not even proud of it because if they were proud of the CP program, it would be on the homepage of their website, it would be featured, and more people would want to be a CPP.

Christopher Dryden (47:54):

No, I mean, that kind of makes sense to me in a certain regard because I mean, what are they going to become rules experts? I mean, that’s not what salespeople do. So it makes sense. But the reason I brought up what I brought up was because what I’ve seen occur is one agent getting the personal financial information of a merchant under a relationship with an ISO who’s ultimately responsible for safeguarding that information with terms in a contract that say what you’re supposed to be doing with those things that you’re collecting, turning around and committing identity theft, signing the merchant up to a new processing agreement, telling them, Hey, I got a new terminal for you. It’s not going to cost you anything, yada, yada, yada. Putting in the new terminal. They never sign a contract. They may not even know who’s processing payments for ’em, depending on whether or not the statements white labeled and they just float from processor or from ISO to ISO to ISO and just screw people.

Christopher Dryden (49:07):

And a lot of times the person that’s really the one that’s harmed the most is the merchant because they don’t even know what kind of agreements and they’re being the victim of identity theft. And somebody’s got their information, which includes their driver’s license, voided check tax ID number, social security number, and it’s just being reused. I mean, we had a situation, we have a leasing client. We had a situation where a guy was doing this, and he was actually on the DocuSign creating a business email address, and he didn’t realize that the business email address, when you went on there to recover it from where he was creating it, we could see where it was being sent to. Wow. And so we went to the FBI that was like two years ago, two and a half years ago, and he’s still doing it

Jeremy Stock (49:57):

Today. Thank you for listening to this episode of the Payments Experts Podcast, a podcast of global legal law firm. Visit us online today at global legal law firm.com.