PEP Episode 059 — Top 3 Most Important Clauses and Terms For Your ISO Agent Agreement | Contracts Matter!

What’s Really in Your Agent Agreement? Legal Pitfalls Every Payments Professional Should Know.

In the world of merchant services and electronic payments, contract pitfalls aren’t just inconvenient—they can be career-altering. Agreements that look standard at first glance often include fine print that chips away at residuals, restricts future business opportunities, or limits your rights to dispute unfair terms. Unfortunately, many ISOs and agents don’t realize the risks until it’s too late.

In this episode of The Payments Experts Podcast, produced by Global Legal Law Firm, seasoned payments attorneys Christopher Dryden and Leo Arzumanyan join Jeremy Stock to break down what every industry professional should be watching for in ISO and agent agreements—before signing on the dotted line.

Residual Revenue at Risk

Compensation clauses often sound fair—until you realize the residuals can vanish after termination, or that new fees introduced into merchant accounts might quietly reduce your take-home. Dryden warns, “Unless you’ve got some sort of residual revenue share pool calculation, how do you really know what you’re getting?”

Many agreements lack transparent monthly reporting, and some include tight dispute windows or waiver provisions that prevent agents from contesting underpayments.

Restrictive Covenants That Go Too Far

Non-compete and non-solicitation clauses are often drafted far broader than what’s enforceable. Arzumanyan points out, “They make it so broad where just by executing the agreement, you might already start violating it from day one.”

These clauses can block agents from working with a wide—and sometimes ambiguous—range of processors, vendors, and affiliates, creating compliance traps from the outset.

Cross-Border Contracts and AI in Legal Drafting

The conversation also explores the growing complexity of cross-border agreements in a global payments landscape, and how emerging AI tools are starting to reshape how contracts are written and contested.

Why Legal Review Isn’t Optional

Too often, legal help is sought after disputes erupt. By then, the options are limited, and the damage is done. This episode offers practical, proactive guidance from payments law experts on how to spot red flags early, negotiate fairer terms, and protect your residuals, client base, and business autonomy.

If you’re serious about building a sustainable business in merchant services, this is essential listening.

Listen now to protect your portfolio and future-proof your payments career—with legal insights direct from the attorneys who specialize in the payments industry.

Leo Arzumanyan (00:00):

I can’t tell you how many times clients email an agreement to Chris or I and they’re like, Hey, can you please review? I took a look. It looks good to me, but just wanted a second pair of eyes on that. And then we looked through it and it is not good at all, and the client would’ve screwed themselves over, got themselves into all sorts of issues, potentially down the road because they don’t know what to look out for because they don’t do this day in, day out the way we do.

Jeremy Stock (00:23):

Welcome to the Payments Experts podcast, a podcast of global legal law firm. We hope you enjoy this episode today. We’re really excited. We have in studio joining us, our founding and managing partner of the law firm, Christopher Dryden, as well as one of our associate attorneys in the transactional department, Leo Arzu joining us, and we’re talking about ISOs and ISO contracts. Some of the most important elements that should be in there, gentlemen, take the conversation away.

Leo Arzumanyan (00:58):

Sure. I think first maybe we get started by just kind of giving a brief definition of what an agent ISO agreement looks like. They’re kind of called a lot of different things. Referral agreement, referral partner agreement, agent agreement. Overall, a lot of it has the same fundamental concept throughout all those agreements, which is the agent is the party, that’s the downstream party who is referring merchants over to an iso, prospective merchants, and then ISO reviews the referred merchant, and if they approve ’em, underwrite them, approve them, onboard ’em, then the agent gets residual compensation every month from the processing activity from that merchant. And that’s kind, I think the basic definition of what a agent agreement is.

Christopher Dryden (01:39):

I guess it’s not always the iso, it’s the ISO or its vendors. Yeah, because depending on the sophistication of the iso, most ISOs aren’t a party to the merchant processing agreement. A lot of ISOs don’t do underwriting, they don’t do risk management. They rely on the processor or the sponsor bank. But overall, yeah, I mean it’s just the compensation terms primarily between the person out selling for the person who’s submitting to the acquirer and processor.

Leo Arzumanyan (02:11):

And the reason for this podcast, we just thought it’d be helpful for everyone out there that’s listening, just kind of highlight a couple of the key terms that we find are most important to flag anytime you’re about to enter into this type of relationship, whether you’re primarily when you’re the downstream partner, we’re near the agent.

Christopher Dryden (02:27):

Yeah, I was going to say, we look at these agreements from both perspectives. Sometimes they’re brought to us by an agent. Sometimes they’re brought to us by an ISO wanting us to create for their downstream agent. Most of the time when we do agreements, we just try to make ’em fair. Usually if we’re on the downstream side, which would be the agent, they’re really one sided and we just try to equalize ’em as much as possible. And I think a sign of, I say this to Leo, if we do a page or two of an agreement and there’s so much read on the page that we’re essentially rewriting the agreement as the agent up to the iso, it’s not going to be received well. And usually it’s not the sign of a good partnership that’s coming. I mean, it’s kind of like if I’m asking for something that I think is fair and it’s totally being undone for no particular purpose other than to just have the upper hand, I would just not look for that type of partnership.

Leo Arzumanyan (03:39):

Yeah, exactly. And I think this topic really matters because if you get ahead of it, you’re going to save yourself a lot of money and avoid a lot of problems down the road. Because one thing I’ve noticed ever since I started working here was a lot of the times our clients come to us after the fact and they’re like, we never had this reviewed and now we’re in this shitty situation, so please let us know what to do going forward. But if you have an agreement reviewed by attorneys who specialize in the industry who know what they’re doing, you can prevent a lot of problems.

Christopher Dryden (04:09):

Or you can just kind of tell your client, here’s the disadvantages that you may have going forward. And they’ve got eyes wide open entering into a relationship. That’s the important part is look, you guys make whatever business decisions you want to make, but here’s the ramifications potentially. I think we’re pretty decent at reviewing agreements and redlining them and trying to find good partnerships because we do litigation and we see where it breaks down. Yeah,

Leo Arzumanyan (04:37):

Exactly.

Jeremy Stock (04:40):

I’m curious, I’ll throw this at you. We have so many relationships in this industry. Chris, you brought up a great point. If you see so many red lines in that agreement that the agent’s looking to make with an iso, that’s a big red flag to you. It should be to that agent. Are we able as global legal law firm with all of our relationships to say, Hey, we can probably introduce you to somebody that would maybe give you better terms?

Christopher Dryden (05:03):

Oh, no, no. We do it all the time. I had a look there. There’s a select number of processors. Look, we had one of our consistent longtime clients have us red line an agreement, they want to go into Canada, and there’s very few processors, right? And we did a red line for Global’s Canada agreement and we sent it and they gave it back, and I went through two pages of how they responded to our red line, and I just emailed the client and went, Hey, I’ll continue to review this and do what you need me to do, but if I were you, I would never enter into this agreement to begin with because if there is ever a dispute, I can see how you’re going to get treated right now based on their willingness to redline things that are truly negotiable. Right? I mean, it’s when it’s just to take it or leave it.

Christopher Dryden (05:58):

I don’t know why you would want to be in that. Yeah, I mean we know tons of people. It is kind of weird. I mean, this is kind of a little bit off subject, but Fiserv’s a good example, and you wouldn’t know this. You haven’t been in it for a long time, but Fiserv used to be the place for iso, and if you wanted to be a registered iso, Fiserv was, it was First Data, but that’s where you went. At a certain point in time, there were so many people that paid the registration fee. I just think that First Data didn’t see it as a real profit center. And so they acquired Card Connect and basically pushed every first data retail ISO down to Card Connect, and that’s still kind of how it is. And at a certain point, they don’t want to do business with you anymore.

Christopher Dryden (06:48):

And some of these ISOs have become super ISOs and have gotten so big that you’re going to get better pricing, better service, better offerings by somebody who’s built an organization geared around agents versus a processor who doesn’t even really want to have a relationship with you. And that’s why you get people in the space like CardFlex or Lura or my camp or SIM or any big FSP, because there’s a lot of ’em, right? Shift four, there’s a bunch of these FSPs that essentially built what I would consider a mini processor. They do everything but process. That’s kind of how everything’s evolved. And so you’re probably better off and going to get much fairer terms by going to somebody who understands who you are and wants to do business with you because you’re going to make the pie bigger for everybody.

Leo Arzumanyan (07:49):

No, exactly. And I think that’s actually great background to go into our next segment, which is let’s discuss maybe a couple handful of the most key provisions that are important when you’re entering into this relationship. What to be aware of, what to flag. So to me, I think off bat for an agent, the most important provision to look out for is anything regarding compensation or residuals. It doesn’t matter what it’s called. It could be defined in the agreement as compensation residuals, referral fees, partner fees, as long as you just make sure that you are reviewing and flagging that provision that has to deal with how you’re going to get paid. One of the biggest risks and things that we like to address when we are trying to make the agreements more equitable, as Chris said, our ultimate goal is just kind of even it out because a lot of times the leverage is really all with the upstream partner and we just want to equalize it where we can.

Leo Arzumanyan (08:41):

One of the biggest things I’ve noticed when I’m reviewing these agreements, and I do this daily, is these type of compensation provisions will often have a few kind of gotchas, whether it’s they’re going to terminate the agent’s residuals after the agreement is terminated or whether they set really high minimums. These are issues that I think need to be addressed and cut out because really it is not fair if the agent is bringing over a processing relationship to the ISO and the ISO is going to continue to receive revenue as long as they keep making money off of that relationship, that moneymaking relationship should also stream down to the agent. They should continue to get paid. So I think that’s one of the big ones is negotiate sort of perpetual residual clause or language where your rights to compensation are not terminated for X, Y, or Z. And sometimes they really like to throw in all kinds of really subjective reasons where we’ll terminate the agent’s compensation for things that you can’t even really quantify or it’s just entirely in their discretion.

Christopher Dryden (09:43):

Well, I mean, okay, so I’ll play counterpoint to you here. Sometimes what you get coming down is what’s come down to them. Unfortunately, there is this nebulous language that exists in their agreements upstream at times when they talk about reputational harm or

Leo Arzumanyan (10:04):

Industry,

Christopher Dryden (10:06):

Something that’s just kind of like this. You can’t do anything that

Leo Arzumanyan (10:11):

May cause harm,

Christopher Dryden (10:12):

That reflects poorly on us, may cause harm, but a lot of times that that language is in their agreement and so they just feed it through. I don’t think I’ve ever seen an instance really that that’s been triggered, but I think it exists because of that push it down.

Christopher Dryden (10:32):

Where I see the problems with compensation is the devil in the details. So what most sales agents don’t understand is that transaction processing is actually complex. There’s a lot of revenue items that go into making up the revenue associated with transactions processed by a merchant, and there’s many more expense items. And so they try to make it easy for agents, but sometimes they’ll make it too easy and they’ll create a formula that basically says, you’ll get this percentage of net income, and net income includes these four things and some others, but then they don’t really tell you what any of those are and some others, and then they don’t show you what they are. So I mean, I’ve heard of another thing that Leo and I we kind of go back and forth on, but compensation, they will say, you have to waive your rights to complain about your compensation within a period of time.

Christopher Dryden (11:31):

Usually it’s 30 days, we will get it extended to 60 or 90, but it’s not really the days. If you get a residual payment and then you get a residual report that just gives you a number and it doesn’t tell you how it’s calculated, then you can never actually complain because you can’t ever figure it out. And this happens all the time. I think this is actually the biggest problem that we have, is that nobody’s telling them, I hear all these agents say, well, I get a hundred percent. And I’m like, okay, a hundred percent of what? I mean, unless you’ve got some sort of residual revenue share pool calculation, how do you really know what you’re getting?

Leo Arzumanyan (12:15):

You don’t. Yeah, you don’t. Yeah. And he touched on one of the points that we were going to discuss a little bit down the road, which was you also also want to look out for does the agreement have some sort of language regarding a detailed report for your compensation? So that’s something we always like to throw in there if it doesn’t exist. And that just basically says, Hey, look, every time you’re going to pay the agent, which is on a monthly basis, we expect that the agent is provided a detailed report kind of outlining how you arrived at that compensation, lays out the costs, the fee, everything that goes into the compensation that agent earned that month. He or she should be aware of that, and that’s really important.

Christopher Dryden (12:52):

Well, and the other part of it is that, look, the reason we’re having this thing is because contracts matter. I had a consultation with a guy last week and he didn’t have any written contract upstream or downstream, and I was perplexed by the fact that he was operating this way. Look, contracts matter and the language in contracts matter, so the waiver provision, that’s enforceable. So we trigger the waiver time period from the later of payment or receipt of a report. If you never get a report, then I say that your time period’s never started as far as I’m concerned, but you get in front of a judge and you have a written contract, the judge is not going to get outside the four corners of the contract if the language is precise and it’s not ambiguous. So it’s so important to have all of this stuff. That’s kind of why we’re doing this whole thing is to make sure people aware, like, look, be aware of your agreements.

Leo Arzumanyan (13:56):

Yeah. One of the biggest things besides making agreements equitable is what he just said is making them clear. Because a lot of times they’re ambiguous or I’ll see things that’s just like a pet peeve of mine when I’m redlining is there are terms that are either capitalized or not capitalized. There’s definitions that are there or not there. We just try to make it really clear so that if this does go to litigation, we hope it doesn’t, but if it does, you can point right to this section, to this definition and be like, look, it doesn’t get clearer than this.

Christopher Dryden (14:22):

Yeah, I would say most commercial litigation comes from imprecisely drafted contracts because what litigators are intended to do is look at the contract and find some sort of wiggle room to create a tribal issue, to settle a dispute. That’s the whole idea of it. We are in a arbitration right now, and the entire arbitration was the counterparty, which I can’t say who anybody is, but the counterparty terminated the agreement or chose not to renew the agreement, but the agreement can only be terminated by breach and failure to cure, which never happened. And I don’t think, well, I take it back, we found some emails that went back like 10 years that that provision was there on purpose. And it was interesting because our guy didn’t actually draft the agreement, the counterparty did, and the counterparty is the one that said, no, that’s what it means. This only terminates if there’s breach. And right now we have an entire arbitration around this because somebody else bought the company that our client originally contracted with, and now they want to read the agreement totally differently. I mean, it’s just interesting, but all of it happens that way.

Leo Arzumanyan (15:38):

I’m glad you brought that up. I was going to ask you if you can give some examples. I don’t do litigation, so I’m sure you see it all the time, right? Where

Christopher Dryden (15:45):

I’ll give you one. So this is one I think that every agent should look out for that I’ve been harping on Leo to make sure that he puts in these agreements because I’ll do consultations with people and they’ll come to me, and generally I can lend a helping hand, but sometimes I’m really stuck. So I had a guy that was working with, I can’t even remember who it was. I don’t think it was direct with teis, but it doesn’t really matter. So he comes to me and he says, Hey, they’ve added these fees onto the merchant processing agreement, but they’re not on my schedule A, but I’m not getting to share in the revenue associated with him. I thought maybe he was being charged the expense related to ’em, but he said, no, no, no, it’s just that they’re not on there. So I went and I read the agreement.

Christopher Dryden (16:34):

I said, well, unfortunately for you, not only can they amend the Schedule A with notice to you, and you have some rights associated with that, but I said, how do I get you revenue for fees that aren’t even contemplated by the Schedule A, because they’re new fees. So if there’s a regulatory fee or some software fee or something that goes into effect upstream that’s related to the merchant relationship that the agent created. So if you don’t have it on your schedule, you don’t get, that’s not part of your revenue share pool. And if you don’t have something in your agreement that says, if any new fees are assessed to the merchant under the merchant agreement, agent will receive 30 day notice before they go into place and we’ll have opportunity share, we’ll have an opportunity to share in the revenue, the net revenue associated with such fee, then you’re stuck. And now you’ve got the upstream people making money and they’ve cut you out. And it’s not necessarily intentional, I think it just may have happened, but at a certain point in time, you got to negotiate for yourself. So we put this into almost every agreement.

Leo Arzumanyan (17:44):

Now. I’m glad you brought that up. And Jeremy, as you can see, I’m sure you’re noticing a trend or a theme, which is equity, right? We try to really make these equitable, and that leads me to another provision that I always make sure to look out for, and that’s the importance of reviewing any non-solicit or non-compete language. There are two issues that I personally constantly see when I’m reviewing these agreements when it comes to non-solicit, non-compete. First is that a lot of the times, the agreement language is actually not the way they draft their non-competes are not even legal in the state that that agreement is being governed under. So California, for example, has very strict laws when it comes to

Christopher Dryden (18:22):

There is no

Leo Arzumanyan (18:23):

There non-compete

Christopher Dryden (18:24):

Except a very minor, just so anybody who works in California, just so you know, not only is there a prohibition on non-competes, non-competes include non-solicit if you were a worker, and there’s a question whether it extends to independent contractors, but if you’re in California, there is no such thing as an independent contractor really. If you, for whatever reason, have a non-solicit throne at you, even that can probably be invalidated and most people don’t know it. It’s just one of those things where there’s no issue. Now you go to another state like Texas is a good

Leo Arzumanyan (19:03):

One, Texas, Florida,

Christopher Dryden (19:05):

They actually have really precise non-compete statutes where it has to be limited in its temporal scope. Can’t be for too long, can’t be for too big of an area,

Leo Arzumanyan (19:16):

Has to be reasonable.

Christopher Dryden (19:17):

It has to be reasonable. So if you’re an ISO and you only do business in four states and you say that they can’t compete with you for a year nationwide, that’s not reasonable. So you have to pay attention to what’s coming at you, and you have to look at how broad the language is on the non-solicit. I always find that they’re just way too broad.

Leo Arzumanyan (19:39):

That was the second issue I was go bring up was that, so the first issue is that oftentimes they’re just drafted in a way that’s not actually enforceable under certain state’s. Law, California, just being a great example of that. It’s funny, Chris mentions some of the examples of non reasonable are they try to prohibit any solicitation across the country. I’ve seen some where across the entire world, they’re just prohibiting you from doing business anywhere on earth, I guess.

Christopher Dryden (20:03):

But that’s because they’re just grabbing contracts and they’re cobbling them together or they’re using AI and they don’t know how to use

Leo Arzumanyan (20:11):

Ai. They know how to it

Christopher Dryden (20:11):

And what they’re, they’re pulling down from AI are a bunch of clauses that might not actually assimilate with one another.

Leo Arzumanyan (20:20):

And so the second issue that I was going to say that I always see is that are too broad where they will just lay out such a long paragraph of all these different entities and parties that the agent can solicit. And again, not only does this violate a lot of state’s laws, it’s just far too broad and unenforceable. But my bigger issue is just these entities, these parties, they’re not even under the scope of what we’re doing here under this. It’s the referred merchant that the agent should not be allowed to solicit away from the

Christopher Dryden (20:53):

Iso. That’s like saying I go out and I resell for somebody who resells at and t and I can’t do any business with at and t ever on my own, right? I mean, there’s just nonsensical terms in these agreements.

Leo Arzumanyan (21:06):

The

Christopher Dryden (21:07):

One that I always see is, look, we live in a capitalist society, competition, anti-competition, statutes matter and competitions promoted. When you basically tell me that I’m going to be in violation of a contractual provision for things that I don’t even know,

Leo Arzumanyan (21:25):

Right when they list any of my vendors,

Christopher Dryden (21:27):

I don’t

Leo Arzumanyan (21:27):

Know your vendors,

Christopher Dryden (21:28):

I don’t know your vendors, I don’t know your other merchants. I only know the people that I dealt with you. I guess it’s probably better to say what is off limits.

Christopher Dryden (21:39):

What’s off limits is when you refer a merchant to your upstream vendor for a particular service, you can’t undo that. You’ve done it. You’ve created a contract. You have to abide by the contract so long as they continue to pay you. Now, if they materially breach the contract and they stop paying you for some BS reason, then at that point in time there’s a question of whether or not you can go and recapture that person. Another place that I see this is it’s not just non-solicit, it’s also in confidential information. Everybody wants to say this is, oh, that’s my trade secret. That’s my confidential information. Really your relationship with your acquiring bank, which is required to be disclosed that every potential offer to a merchant and on your website, that’s your confidential information. Really, it’s the ludicrousness of how people want to read these contracts to say that they’re enforceable. Alright, let’s talk to the judge because I’m not really interested in trying to convince you. What you’re saying is just horseshit right now.

Leo Arzumanyan (22:48):

And I really want to hone in on one of the things Chris said is you see it all the time with these non-solicit where they do list out so many different entities. The agent cannot solicit any of the vendors, affiliates, and affiliates isn’t defined. So does that mean any parties you’re affiliated with or does it mean a party that you own? Right? They just list, they make it so broad where just by the agent entering into the agreement, executing the agreement, you might already start violating it from day one because maybe you don’t know, maybe you’re already doing business with those parties.

Christopher Dryden (23:17):

Well, there’s another spot. I’ll finish on this one, but think about it from this perspective. Say I run a call center and that’s how I do my marketing, and I’m just buying legitimately lists of bonafide businesses to call on. I call, I give my pitch, maybe I have multiple calls, and finally the merchant on the other end says, you know what? I’ll send you my current merchant statements. It happens to be for somebody that used to partner with, right? At that point in time, am I really, after I’ve spent money on good faith marketing and I learned right before I’m going to sign these people that they happen to be contracted at some point with these people over here, am I really? Now after I’ve done all this stuff supposed to not go forward, that’s a restraint on trade. I’m in free trade. I am doing things that I’m legitimately allowed to do.

Christopher Dryden (24:15):

I’m not using anything that you gave me. I have no idea that you have any relationship with this merchant. I mean, because the thing I’m, I’m a non-exclusive agent. I’m allowed to work with multiple people. What happens that I’ve signed these competing agreements that I’ve run up against somebody and now I’m in constant fear because oh, I’m going to have my residual shut off because I went and took a merchant and I was able to give them a better deal over here. I think at a certain point, you’ve got to kind of find an agreement with the other side about that particular instance. I see the same thing with employees. Legitimately, you can’t work with somebody and then go and poach that person. That’s not something that you’re supposed to do. It’s just like you’re not supposed to poach your merchant absent material breach. I’ve even seen language in a contract that says, not only can you not solicit, not only can you not interfere with an existing relationship, you cannot hire. So we have worker mobility rights in this country. That’s a restraint on free trade. You’re basically robbing a worker of their ability to go and apply for a job that’s publicly listed. Really, you’re telling me I can’t hire that person. So that’s where Leo’s really good is he rolls into these restrictive covenants and just carves ’em up.

Leo Arzumanyan (25:43):

And on that point, in the more extreme examples, not only do they have language where you can’t hire anyone from the iso, but again, they do that whole same thing, laundry list of you can’t hire from the ISOs employees, the ISO subsidiaries employees, the ISOs affiliates, vendors. Again, we don’t know who your vendors are. We don’t know who these affiliates are, and you’re just restricting freedom of employment across so many different avenues. And Jeremy is why I think this podcast is so important because really you got to review your agreements. You got to anticipate problems so that you can alleviate issues down the road.

Christopher Dryden (26:20):

Actually, you need to hire us. You

Leo Arzumanyan (26:21):

Need to hire us, of

Christopher Dryden (26:22):

Course, to review your agreements. I will tell you what, when you’re making $20,000 residual and on the open market, it’s worth at least $400,000, you’ll be thankful that you spent $5,000 with us to make sure that your agreement’s Exactly.

Leo Arzumanyan (26:36):

And I was going to say, you got to hire us because I can’t tell you how many times clients email an agreement to Chris or I and they’re like, Hey, can you please review? I took a look. It looks good to me, but just wanted a second pair of eyes on that. And then we looked through it and it is not good at all. And the client would’ve screwed themselves over, got themselves into all sorts of issues, potentially down the road because they don’t know what to look out for because they don’t do this day in, day out the way we do.

Christopher Dryden (26:59):

Well, it’s interesting too. We had, so Leo and I go back and forth all the time and I let him run, and then we figure things out sometimes. And one of the things that I pride this organization on is not doing meaningless work. We’re not chasing work down. I’m not trying to figure out how to do more work. I’m trying to figure out how to manage and do really good competent work on what is in front of us already. But we create relationships. And we had a client come in this week, and he had seven agreements that he needed done, and two of the agreements were to do cross border stuff either in the UK or in the eu. And Leo did a great red line, and then I started getting into the red line. First off, it looked like it had been drafted by somebody who was not a native English speaker. That was the first thing. So there were a lot of things to correct because the language was just so choppy. But I went down to Leo’s office and I said, Hey, man. So next time you get an agreement like this, I think it’s really important. And then it ended up happening a couple days later, which is the funny part.

Christopher Dryden (28:12):

I said, if the other party breaches this contract, I emailed the client. I said, if the other party breaches this contract, what are you going to do? Are you going to go to the UK or the Holland in the Hague,

Leo Arzumanyan (28:25):

Lithuania or whatever to go

Christopher Dryden (28:27):

And enforce your rights under this agreement? He said, no. And I said, well, then what? Does it really matter what you signed? Get the compensation terms down, make it look like you have an agreement. But at the end of the day, doing something cross border, it’s difficult. And then literally he’s all, okay, well then fine. I’ll just sign it as it is. I said, yeah, perfect. I said, we don’t even need to spend time on this because the enforceability would be so difficult. I said, you think they’re going to come after you? I said, no. So I asked him what the purpose of the agreement was, and he told me, and I said, six in one hand, half dozen in the other. It’s not as important. You’re never going to try to enforce it. It’s not domestic. Flip side of that is we have a client come to us.

Christopher Dryden (29:06):

He’s got some people doing servicing offshore, and he is like, well, an NDA does our existing NDA work? And I said, sure. And then he says, well, what about an independent contractor agreement? So I gave him the same spiel in reverse. Just realize that if they breach this contract with you, even if you sue ’em here, you’re not to enforce against them. You have to go somewhere else. How are you going to stop ’em? Whatcha going to do? It’s the danger of doing things cross border. I would say if it’s America, Canada, America, Mexico, it’s a lot easier. We don’t have to go that far. You’re doing something across an ocean. Good luck.

Leo Arzumanyan (29:46):

Yeah, good looking, enforcing that agreement.

Leo Arzumanyan (29:49):

I think this is all a great discussion and really helpful for anyone listening. How about we touch on the future now, which I think is AI and how AI is going to intersect with the payments industry, maybe things we’re seeing or that we’re hearing about, because whether it’s Chad, GBT from OpenAI, whether it’s grok from X, Gemini, from Google, these companies on a daily basis are improving their technology and people are using them. So one thing I’ve been seeing, actually, two things I’ve been seeing that’s very interesting in our industry and how it intersects with AI on the client side. I’ve seen examples of our clients clearly use AI to draft an agreement, and they come to us and say, Hey, just I drafted this. Can you take a quick look? And again, the same exact issue because they don’t know what should be in the agreement, and they don’t know how to properly use ai. It’s a horrible agreement and it’s not an agreement that would in any way protect their interests. So that’s one danger of AI that I’m seeing.

Christopher Dryden (30:46):

And the other thing is, is that we are in such a unique industry. You cannot take a general independent contractor agreement and think that you’ve actually gotten what you need from it to have, it could be enforceable in certain ways, but it’s going to have a lot of ambiguity and it’s not going to speak to the detail of these relationships

Leo Arzumanyan (31:06):

That we’re talking about. Yeah, there’s so many levels in what we do, as you can see from everything we’ve talked about so far today that

Christopher Dryden (31:11):

The agreement, we’ve talked about software.

Leo Arzumanyan (31:13):

Yeah,

Christopher Dryden (31:13):

Exactly. I mean, I don’t even want to get into that on this, but there’s a lot of things that the agent could be selling here, right?

Leo Arzumanyan (31:18):

Agreements are not just agreements. There’s a lot that goes into it. So one side of the coin that I’ve been seeing is clients are using AI and thinking they can just get away with it. And you can’t. This industry is far too specialized. There’s too much behind the scenes that a general language model cannot at least yet encompass. And then the other side of things that I want to talk to you about is where do you see the payments industry as a whole going forward when it comes to ai? How are they using it? Just for example, I’ve been reading articles where firms are using AI for underwriting, for credit review and things of that nature. So have you seen anything that’s come across your

Christopher Dryden (31:58):

Radar? So it’s difficult. I think if you build a formula and you teach the AI what the criteria are, I think it could be a really good tool, but that’s more for transaction risk management, underwriting somebody for a merchant account, maybe to prevent fraud, maybe to prevent some kind of chargeback, automatic detection. The problem is, is that it doesn’t interface with public databases to understand here for underwriting, right? I’m going to go and I’m going to try to underwrite somebody for an account related to a

Leo Arzumanyan (32:34):

Business.

Christopher Dryden (32:35):

Unless you’ve shoved into the AI portal, something about the business, potentially the public database for the formation of the LLC, how much you have you scraped the internet and public databases to shove in what you need to be able to actually spit out with what you have on an application is accurate to look at it and utilize it. Now, I think for sophisticated ISOs, FSPs and upstream vendors from even that, I think they’re probably getting into this.

Christopher Dryden (33:10):

I think from where we look at things, what the agents really need to do is work with somebody who understands residual reporting and how revenue and expense is allocated to transactions to put that into a system that can then take data. I mean, we have this dispute going on right now. We are on the other side of an ISO that went from priority to IRIS when they were with priority. Priority uses a reporting system called mx iso. Mx ISO is very detailed. It has a lot of data fields that on the residual report don’t even populate because some merchants don’t use them, but they’re there because it’s a comprehensive reporting system. So back in the day, some of our clients, when they worked for this iso, when they got the reporting, they may not have understood it, but they got complete reporting about how their residuals were calculated For the rev share, this ISO went from MX iso, and now they have that same data put into iris.

Christopher Dryden (34:20):

Iris is an agent management system for really working with your agents and doing reporting, and it’s got all sorts of functionality. But for agent reporting, it’s now taken a residual report with a hundred fields of data, shoved it into seven fields of data, and you now don’t know from the information going in how it unpacks from while it’s being shown to you. The other thing about IRIS is, is that you can manipulate the data and exclude some fields, so you could exclude some fields of revenue, include some fields of expense that shouldn’t be there, and now it’s just this nebulous profit expense or revenue expense to get profit. And when they switched over, almost every single one of the agents had a reduction in residual revenue between 10 to 25%. And when the agents went to ask ’em about it, they were like, oh, well, we were paying you out of the wrong column, blah, blah, blah, blah, blah, blah, blah. So there’s manipulation that goes on with this data. That’s why the reportings really important. But I think if you were able to, I think somebody who does consulting in this industry that has knowledge about how residual reporting from a very detailed level and the Schedule A can be reconciled with one another, I think AI could be used for that to make it so that it’s less manual and laborious for the consultant so that they could offer the service to agents.

Christopher Dryden (35:55):

And I think it would legitimize the industry. I mean, look, the one thing that I’ve seen about this industry is that as it relates to ISO agent relationship, there’s less abuse of the agent on a widespread scale. I think agents have become more sophisticated, and I think ISOs have been willing to create better partnerships with agents. Now, there still are the outliers, like this ISO that I was mentioning that get people that aren’t familiar with the industry promise ’em a whole bunch of stuff. They get people who aren’t used to making the amount of money that they’re now making, and they don’t even question what they’re being paid because they’re just like, is better than it was. And then when they do question, that’s when they find a way to terminate you. I feel like those players are less and less in the system because technology is legitimizing what’s happening and there’s good relationships to be had. But I think AI could really help the agents from that perspective.

Leo Arzumanyan (36:51):

I think those are all great points. One thing I would issue a word of caution. I’m a bit of, I guess a nerd when it comes to the AI topic. I’m really interested in it. I’m always listening to podcasts on the letters, developments in ai. I know pretty much everything that’s going on with Gemini, with grok, with Chad, GBT, with cloud, which is from philanthropic. So I know what these models are capable of and what they’re doing. No matter how sophisticated you are, sophisticated FSP, iso, whatever the case may be, you still have to be very careful because one issue that I don’t particularly foresee going away for a long time is the issue of hallucination when it comes to ai. That’s an actual term that describes how these large language models operate, which is very frequently, and this has been in the news and across all kinds of industries, the AI model will hallucinate and output things that are blatantly untrue. But because it’s written in a very intelligent way, sound true, or it might reference a statute or a law or a case that does not exist.

Christopher Dryden (37:56):

Exist. Yeah. I mean, this happens. We’ve seen this where attorneys are using AI and they’re citing cases that don’t even exist. But I know it happened early on with Michael Cohen, right? Where he put that in front of a judge. But it’s all the time now. We still see it happen all the time. All the time. There’s sites that we look at, they don’t even exist. And this from our angle, this is attorneys and law firms trying to expedite and provide a product faster, better they think, but they don’t really see that.

Leo Arzumanyan (38:34):

Yeah, they don’t see, and they understand the technology

Leo Arzumanyan (38:37):

Because AI is a large language model, really, if you want to boil down to it for everyone to understand, it’s a word predictor. The model just predicts the next word in a sequence of words based off all the information out there. Oftentimes it hallucinates the next words because it wants to please you in a way. So that’s kind of how I would sign off on this podcast is I would just be issuing this cautionary tale of be careful. Don’t just rely on AI to get your work done quicker. Come to people who are professionals who know this industry the back of their hand, and people who use AI know AI and know what they’re talking about.

Christopher Dryden (39:14):

Yeah, I mean AI for dating apps, sure. Yeah, maybe, but nothing too serious.

Jeremy Stock (39:22):

Gentlemen, that was an awesome conversation. Really, really appreciate it. Enjoyed it. Is there anything lastly that you want to say to close us out, or what do you guys think?

Christopher Dryden (39:31):

I do my normal pitch Look, it’s sort of like there’s a lot of things about our society that are just backwards when it comes to your contract and what you get paid. It’s important and it’s worth it to invest a little bit of money, and we won’t gouge you. We’re here to build relationships with people. When you get successful, you’ll remember. I mean, people come back to us all the time, and it’s because, I’ll just say this story. I had a lady hit me up the other day, did a contract for her for a year ago. She spent maybe like 2200 bucks around there for us to do an agreement. Had a couple phone calls with her. She was super nice. She hit me up last week out of the blue and just said, Hey, I’ve got a different business. I’ve got a vendor who doesn’t want to continue to service us, and they’re going to terminate.

Christopher Dryden (40:22):

And she said, I believe that we have rights, and is this something that you can handle? And I was like, sure. But because of how we related to her the first time, I feel like she felt comfortable to come back to know that we would give her the kind, like, Hey, this is what you can do. This is what you can’t do, and it would be for an affordable price. I’m not looking to gouge you. I want to actually find relationships where people continue to come back. And I feel like that’s what we built. So when you’re talking about the contract that’s going to dictate if and how much you get paid and what you bargain for, I think it’s worth a little investment.

Leo Arzumanyan (41:01):

And just to piggyback and close it off, it is really an investment, and I view it as an investment on two fronts. One, you’re investing in the success of your company and of your future. So you want to make sure everything is taken care of upfront. But two, I view it as you’re investing in a professional relationship that will bear fruit for you down the road. I kind of view our clients as our friends where I’m just trying to protect our friends’ best interests, because our firm does things a lot different than other firms. We don’t view it as just a transactional relationship where we just do one-offs and we don’t talk you ever again. We engage with our clients. They are our friends, so we look out for our friends. And I think you’re investing in a relationship beyond just, you shouldn’t think of it as like, oh, I have to spend X amount of money. You should want to spend that amount of money because it’s going to prevent you from spending a lot more money down the road. So come to us. Chris and James bombard me with agreements every day. So I don’t think there are many people in this country that do these agreements on the frequency that we do it in this industry. I’d say that’s brought, right? Yeah.

Jeremy Stock (42:06):

Excellent. 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.