The Missing Piece in High-Ticket Payments

James Shepherd: Hey everybody. James shepherd here with another edition of the Merchant Sales Podcast. Today I've got Bob Lovinger jumping on from flexbuy talking about consumer financing products. I still believe this is one of the big missed opportunities, uh, in kind of the ISO agent world and even the ISV world as well. But it's one of the things that Square and Stripe and others like it have done really well in terms of offering kind of embedded, uh, financing options for consumers. Whether that's buy now, pay later, or more traditionally consider consumer financing, which is what Bob, uh, does. So we're going to dive into that interview after the interview we have today in Payments. Patty and I get into kind of a longer uh, discussion on this one, talking about, um, interchange, uh, the, you know, recent, uh, class action lawsuit and the $38 billion proposed settlement, um, and just kind of the role of the card brands in the industry right now and some of the legal actions that are being taken. And so I share some thoughts on that as well. So I think you'll enjoy that one. To stay up to date, um, don't forget about our sponsor. We love having our sponsor, which is Nativia. You can head over to nativia.com/cc Sales Pro, that's nativia.com/ccSalesPro to learn more about all that they have to offer. Whether you're an ISO, an agent or an ISV looking to grow in the payments industry, take a look at Nativia and let's dive into today's episode. Welcome to the Merchant Sales Podcast. Hey everybody. I'm here today with Bob Lovinger. Bob is the founder and CEO of Flexbuy, also the CEO of Coach Financing. How are you doing today, Bob?

Bob Lovinger: I'm great, James. Thanks for having me back on.

James Shepherd: Absolutely. Uh, great to have you as always. So we're going to be talking today about high ticket merchant accounts, um, how to sell them, how to add value to them, how to add revenue from them. So we're going to talk about the high ticket world. Before we do that, Bob, take a second to just give us just a high level view of what is flexbuy, what is Coach financing? Tell us a little bit about kind of your, your world and what you do.

Bob Lovinger: Sure. Uh, we live in the world of customer financing. You may know it as buy now, pay later. It's become a buzzword, a buzz phrase, you know. But, uh, basically our business is all about helping merchants create high turn high ticket sales into an affordable monthly payment so that, so they can make the sale. So you Know, the higher the ticket, the harder it is to connect on that sale. And we help the merchants with, find with the, you know, financing platforms to help their customers.

James Shepherd: I love it. Yeah. And I think these two talk about the difference between the two because I think Coach Financing is a little more specific to, to the Coaching vertical.

Speaker C: Right.

James Shepherd: And then Flex Buy is more of the general purpose.

Bob Lovinger: Yeah, you know, I founded Flex, uh, by going on 12 years ago. Um, we purchased Coach Financing last July. And Coach financing is a niche. You know, we were always involved in coaching, uh, you know, uh, you know, flexify. But coach financing, that was their niche business. Um, you know, coaching is a hot category and financing and merchant services and you know, we purchased it, you know, in July and it still operates under that brand. It's a great, it's a great brand with a great history.

James Shepherd: Yeah, that's awesome. Okay, so let's dive into High Ticket for a minute. So let's first of all talk about what merchants are we talking about. So you mentioned coaching right there. Give me four or five others. What are the, what are the big verticals that you guys are finding? There's a lot of opportunity in this kind of high ticket, um, world.

Bob Lovinger: Yeah, there's great opportunity in medical. There's a great opportunity. And really in all professional services, um, you know, the intangibles, there's, you know, home improvement, you know, the housing market, as far as sales are down, which means people are, have to fix their homes, um, auto repair, you know, anything you could think of that's $1,000 or higher. Really, that's our wheelhouse. But, um, you know, there's no way, I mean, there's, there's verticals that I never knew existed until I got into this business, you know, but they all need financing. You know, consumers demand it.

James Shepherd: Sure. So if I'm an agent or an ISO, I'm out there, you know, selling. And so I'm trying to get into professional services or maybe I'm trying to get home service, contractors, things like that. What are some of the things outside of what you do that you've seen to be kind of challenges in terms of like I'm trying to sell a high ticket merchant. You know, I want to get them on the payment processing. We'll talk about the consumer financing in a minute, but I want to get them on merchant processing. What are the challenges to that sales process that agents and ISOs run into?

Bob Lovinger: Yeah, you know, what we're seeing now is, um, you know, we're dealing with a very sticky economy. You know, it's. It's, uh, things out there. Prices are up, people are more uncertain. So what you're having is consumers that are less willing to, you know, use their existing resources, whether it's credit card or whether it's money in the bank. So they want to compartmentalize their transaction. And, um, you know, it's a matter of getting the clothes, you know, and with. No matter what the business is. A lot of businesses are innate as far as being must need or must have products or services. If you live in Arizona and you eat and your, uh, H Vac goes down, you know, it's not optional. You have to fix that H Vac, you need air conditioning. You know, so there are some things that. But there are some things that are, you know, on the border where, you know, unless you can, you know, convince that consumer, you know, persuade them that they have to have it, you know, they have to get into that zone where it's a must have, um, you know, they're going to walk away unless. Unless the. Unless the payment process becomes easy for them. So, you know, we're there to, to help merchants and, um, just to give them another option, just to give consumers another way to go. And, uh, you know, our business is way up. You know, we've seen tremendous growth. Um, you know, the worse the economy, the more people depend on financing. So, you know, we're up, you know, substantially year over year. And I see that continuing.

James Shepherd: Yeah, sure. Help my audience understand this a bit better. So let's start with the broad kind of, okay, like buy now, pay later, consumer financing world. Like, what is the direction of that market? We've seen a lot of news reporting on, like, you know, maybe additional regulation in that market and some other things like that. And then we're seeing increased demand. What's. How do you view the overall m. You know, market segment that you're in?

Bob Lovinger: And you know, buy now, pay later is really the affirm the client is of the world. You know, the, the lenders that are in the retail space and they're basically at the checkout. So, you know, you're, you know, the same place your credit card processing is going to be. You're going to see Klarna and you're going to see a firm. And there's been a lot of controversy with those businesses because, you know, they've been growing substantially and they've been doing it through, um, you know, kind of liberal policies as far as pushing people into, you know, financing all kinds of things. I mean, Clara, you know, Infamously, I think, got involved in, um, you know, one of the food delivery services. You could technically finance your pizza, you know, type of thing, you know. So, you know, there's been a lot of controversy there as far as not having enough, not having enough of, ah, ah, you know, um, check, um, and balance as far as, you know, not letting people go beyond, beyond their means. And a lot of people have their stories out there about that. So, you know, we operate, you know, while we offer some of those type of products. You know, our core products are mostly in the installment loan areas. So, you know, it's, you want to buy something for X and you know, you could finance for X and it's a finite, finite amount. You could work it into your budget. You know what it's going to be. And um, you know, there's, there's no surprises and you're not, you can't abuse it. You can't go up, you can't go up from there. You can't start at 5,000 and turn into $15,000. So, you know, um, you know, the, there's room for buy now, pay later. And you know, I use that phrase too sometimes because it's kind of generic now. But really, um, the buy now, pay later space is the, you know, the checkout, you know, the retail financing options. Check out this smaller ticket, you know, mostly on the retail side. But you know, a firm technically will go up to $25,000, you know, Claudette. So they will do larger stuff. But, you know, they're mostly known for the retail space, you know, the checkout space.

James Shepherd: Yeah, right, got it. What, what is that experience like? So, like with, with, uh, Flexbuy, let's say in particular. Right. So let's say I've got, uh, I don't know, let's say I've got a furniture store and they want to use this because people come in, they want to buy these, you know, three couches and whatever, and it's going to be $7,000. Um, how, what is the experience like for the consumer when they, if this merchant has flex by.

Bob Lovinger: There's different experiences, you know. And you know, honestly, retail is not our wheelhouse. There's better options, least more convenient options. So there's options out there where, you know, um, it's kind of a seamless process with, you know, you know, with the sale, you go to rooms to go, you buy furniture. You know, they. Right. At the right, you know, right. The salesperson takes your information, they approve you. Essentially a credit card that you use at the Checkout and.

James Shepherd: Right, right.

Bob Lovinger: You can purchase your furniture. You know, we have some products like that, but that's not our wheelhouse. But, um, you know, you know, you know, you got synchrony. Who's famous in that space and.

James Shepherd: Right.

Bob Lovinger: A lot. They do a lot of stuff at the retail space. Um, our, our experience is more about, you know, the, the face to face. The, the, the larger tickets. I mean, our average ticket is around $7,000. So, you know, we're dealing in the larger ticket category where, you know, it may not be a checkout type of thing, but it's a give and a take. It's, you know, let's make this sale happen. Let's structure a sale. And, you know, that's what, you know, ISOs need to understand is, you know, their credit card volume can be increased if, if they, if they show their, you know, the merchants how to be more flexible. So, you know, transactions these days may not be cut and dry. It may not be, let's take out the credit card and pay $5,000. It may be, let's put $1,000 down using the credit card. Let's finance, let's finance the rest. Or let's put $1,000 down. Uh, you're using the credit card. Let's take some money out of the checking account and let's finance the rest. So, you know, sometimes these, these sales are more of a hybrid variety. And, you know, we're seeing more and more of that too. And that's part of the role that, that's part of the role that we, that we play. Our platform allows for that. It allows for flexibility and for merchants to really figure out how to structure their sale.

James Shepherd: M. Interesting. Yeah. Yeah. So when we talk about. More your wheelhouse. So again, let's say, uh, again, let's use coach financing. Right. So we have a coach. They're charging, you know, $10,000 for their webinar and package deal or whatever that they do. How does that work? Are they embedding something on their, like on their, you know, landing page or something? Is that.

Bob Lovinger: It's very simple. We have a platform for our, you know, for our coaches, let's say, and it's a multi lender platform. That's about 35 lenders in it. Every merchant that enrolls with us has a unique URL. We make them a landing page. Um, they could use it a lot of different ways. They can email the application link, they could text the application link. They could send someone, um, you know, to the, to the landing page, or they could do it over the phone, you know, which is a lot of coaches do. So it's just a matter of simple application. They do it over the phone. Within, within a matter of seconds, they'll get offers. If there are offers to be, to be had. It's all soft credit pulse, which is very important because, you know, increase can affect a consumer's credit. So it's a soft credible. Um, if the consumer likes the offers and wants to go forward, they can do it. If they don't, they could walk away, you know, no harm, no foul. So, you know, we encourage our merchants to bring into. Bring financing into the fold because it doesn't take away from their other options. So if they have other options, if they have a credit card, if they have money in the bank, it doesn't take away from that. It just financing just gives them another option. And what ends up happening is to people that use financing, the tickets tend to be higher. So, you know, a lot of coaches may have a, you know, good, better, best type of model and you know, have different things. Maybe with the financing people can get what they actually want. They wanted the best, but they couldn't afford the best, so they had to settle for good, you know, so the financing just gives them more options. It changes the paradigm of the, of the economics of the deal. Right. So instead of having to come up with $10,000, now you have to come up with 10, $350 a month, you know, figure into my budget. And that's a lot easier, A lot easier to swallow.

James Shepherd: Yeah, for sure. For sure. Yeah. Super interesting. What do you think about, you know, again, off topic a little bit, I guess, but just AI, uh, you know, is AI impacting what you guys are doing? I'm thinking about, you know, use cases of like having the AI to help them figure out which options are the best or whatever. Like, are you, are you seeing that coming in?

Bob Lovinger: Yeah, as a matter of fact, yeah, it is. Um, May I? Is coming into the market. As a matter of fact, we recently rolled out a Revolver now platform which is in a platform of credit cards. We've got about 100 credit cards in there that most of them will, will, um, issue the card, the card number at the point of sale. And you know, um, not all of them do and they won't do it in every case. And it's, you know, it's just an ancillary platform. But we built that and we used AI into narrowing, you know, where the, you know, you know, where the consumer can.

James Shepherd: Right.

Bob Lovinger: You know, can get their credit card. But you know, AI for us is, you know, I, you know, there's great, there's great and, and not so great about AI. Uh, we use AI a lot from the standpoint of it's helped us in, you know, workflows and helped us in our internal dealings. But you know, AI gets in trouble is if you don't train it properly and you know, you don't make it finite. You know, this AI is great when you know, here's the scope, here's your. They know it, knows exactly where to operate in. But if you don't tell it, don't make stuff up, you know, don't go outside of the scope. If you go outside the scope, transfer to a person or switch to a letter human being, handle it, they'll start pulling information and that may not be relevant, but I mean AI is just in the very, very beginning of this industry. We're going to see it more in even the logic and we're not there yet. We're going to get there of how lenders are chosen within our platform. You know, right now we use traditional algorithms and you know, FICO scores and everything else. But you know, I see a time, probably the next six months where we're going to get to the point where we're going to let AI really narrow down, you know, what the best option is for consumers.

James Shepherd: Yeah, super interesting. Yeah. I mean, you know, so again going, let's circle back for a minute here. So again, agents and ISOs, right? They're going out there, they're, you know, they're getting these high ticket deals. It sounds like in your wheelhouse a little more the card not present environment, getting some higher ticket deals along those lines. They need consumer financing. Help us understand the economic side of that for them. Right. So for the agent or the ISO, how does this all kind of work? They understand, you know, payment processing and residuals and interchange. But how does it work with, with consumer financing?

Bob Lovinger: You know, and we also work in card present obviously, you know, when people go into, into people's homes to do home improvement, that. Sure, I guess as well. Yeah. So, but the economics are, it just, it works just like credit cards, you know, where you're making uh, you know, a percentage of, you know, of the, of the transaction. The difference is, is that you're not going to get as many transactions typically, but the ones you're going to get are going to be higher. So the commissions, you know, you may make on a, on a uh, ten thousand dollar transaction, uh, with financing, you May make as a uh, ISO 200, you know, so, you know, it would take a lot of traditional type of swipes to get 200 out of it. So I mean we have some, you know, we have merchants, a lot of merchants doing six figures. We have a couple merchants doing seven figures a month. So you know, there's a lot of high volume merchants out there that really have learned how to incorporate financing into their everyday business. So it's not just a let's go to financing if somebody doesn't have the money. It's, let's start there. Because the assumption has to be, all right, this consumer may not have this money. It's like if a car dealership assumed that everybody has enough money in the bank just to buy a car for cash, they assume the opposite. They assume that we need needs financing. The real, you know, the, the businesses that have made the most of, of you know, the biggest ones out there and you know, um, in the coaching space and other space incorporate financing almost from the start. So it's part of their sales funnel. It's probably, it's part of, you know, we're going to assume they're not going to make it and you know, there's products out there and we're going to be, you know, launching a product. There's others out there, um, where they'll basically help merchants pre, qualify that consumer as they enter the sales funnel. So they'll know the possibilities of what this person has available to them.

James Shepherd: Yeah, that's, that's super interesting. What, so what about once the, once the financing is, is completed, so the, you know, again the, the, you know, the money was, was transferred, the merchants got their funds. Um, now that consumer, what do they do? Is it, are they now connected directly to that lender to make those payments back or is there some like platform through or how does that work?

Bob Lovinger: Yeah, it's the um, each lender is their own agent. So it's like you know, once they, once the consumer takes out a loan with whoever they're taking out a loan with, the relationship is between them and, and the lender. So it's um, you know, the merchant doesn't have to worry about it. There's no chargebacks. Typically, you know, there's a few products out there with chargebacks, but you know, most of our products do not have chargebacks.

James Shepherd: Um, meaning, Meaning the, meaning the lender is taking the risk on the debt.

Bob Lovinger: Right, right. I mean there's some high risk, you know, in the coaching space, there's some high risk lenders out there that will make the merchants part of the, part of the risk assessment. But for the most part, um, you know, our core platform doesn't do that. So you know, once the, once the ISO makes their money, they get to keep their money. So it's really a great system.

James Shepherd: That's awesome. Um, anything else Bob, that we didn't talk about that you're working on now with Flex Buy and Coach financing that we should have talked about today. I just want to make sure we didn't miss anything important.

Bob Lovinger: Yeah, I mean we're always, you know, we're always working, you know we're coming. Our platform now a, ah, core platform is built on a pretty old stack. It's been around a while and. Sure. You know, I think, I think you know how it is when you're in the middle of running a business and it's going well, you don't always have time to dig in and make sure, make improvements. But we're coming out with 2.0 in early, uh, Q3. That's going to really be a game changer. So it's going to be a much better platform, much more, much more pliable for them from the merchant standpoint as far as branding and white labeling and all that kind of stuff. Um, and even from the, even from the ISO, from the sales partner standpoint, um, it's going to be much more transparent. So you know we, you know we do, we, we care very much about our sales partners. So we have a lot of ISOs that are sales partners. They mean a lot, a lot to us. Uh, we understand the value of acquisition costs because we acquire merchants in other ways and the cost are high. So we value when, when an ISO brings us, brings us business. And you know the other thing that we've um, done is, and we've evolved into this is um, you know, we don't, we don't need our ISOs to sell. We just need them to identify opportunities for us and we'll do the selling for them because they have enough on their plate. You know, I, I've been in the credit card processing world. It's complicated. You know, trying to get them to learn something else is hard, you know. So yeah, just under, just understand when a uh, merchant needs financing, it's really any time if they're in the high ticket space they should have financing and at the end, and even if they do have financing, they may not have all the financing options that will be pertinent to the, to their business.

James Shepherd: Yeah, love it. Well Bob, it's Always fascinating having you on. I think it's so interesting what you're doing. The consumer financing can be like uh, uh, either a big missed opportunity for a lot of ISOs and agents or it could be a big revenue stream. Um, for those who want to reach out and learn more, where would you send them to, uh, find out more about your company working with you?

Bob Lovinger: Yeah, they can go to flexspy.com as2x's um, they can email me@bob ellexpy.com uh and you know I'll either communicate with them, appoint them, you know I have some great team here and you know we'd love, we'd love to get them on board and see if we're a good fit for them.

James Shepherd: Awesome. Bob, thank you so much again for taking your time today. Really appreciate it. Always great to have you on.

Bob Lovinger: Thanks James. I appreciate it.

Speaker C: Now for today in payment brought to you by Proscribes Inc. With Patty Murphy and James Shepard. So the big news this week James is that the federal district court judge has given preliminary approval to the proposed 38 billion dollar settlement in the decades long uh, legal practice involving Merchants and Visa, MasterCard. Wow. Uh, U. S District court judge Brian Kogan said that the uh, proposed settlement was quote, fair, reasonable and adequate. Um, just as an aside, about a year ago they rejected one that was $30 billion. I guess it just took $8 billion to make it fair and adequate.

James Shepherd: Yeah, starting to make some real money.

Speaker C: Uh, merchants aren't very happy though. National Retail Federation as well as the national association of convenience stores um, have panned the proposed settlement and so several large retailers, no surprise here, Walmart being one of them.

James Shepherd: Of course. I think, I think Walmart wants that 38 billion just for themselves.

Speaker C: I think that they want the 38 billion all to themselves. Exactly. Uh, and it's interesting because when I was re, when I was doing some research on this I found a study by the, by the um, an economist at the University of um, Miami that said that large retail, you know the largest merchants in the country stand to save the most from the settlement. Nearly $3 billion a year in fees.

James Shepherd: Wow.

Speaker C: And they're still not happy.

James Shepherd: Yeah, well, uh, that's because they think they can get 4 billion I guess.

Speaker C: You know, I mean, I mean I'm in terms of the agreement, you know it was announced last, last November I thought was, was you know, pretty ambitious. I mean. Yeah, you know it gave uh, probably the biggest to me the, the most salient um, feature of this, of the settlement was the ability for Merchants to pick and choose which cards they should. They, they take, you know. Yeah, commercial, premium, consumer, standard, consumer, you know, uh, you know that would give them the power to at least contain interchange a little bit.

James Shepherd: Well, yeah, it does in, in theory. I mean I think in practice, like is Walmart really going to provide a customer experience where they, you know, uh, decline 30 of Visa cards because they say this type isn't supported? I mean, I don't know. I, you know, to be honest, I

Speaker C: don't think Walmart is, but I could see, I could see smaller versions doing it.

James Shepherd: Yeah, I, maybe, I mean it's, it's funny like I, I get annoyed every time I go. I don't go to Walmart much anymore. I do the delivery, but when I do go, I always get annoyed because they don't take Apple Pay, you know, um, and they decided not to do that because they wanted to push their Walmart Pay thing. Um, and it's like that's just annoying, you know, like that, even that little bit of friction to me, it's like, well, I use Apple Pay everywhere else, why can't I use it at Walmart? It's just really annoying. And again, you know, they're pretty smart about this so they're, they're profiteering in a way that makes sense for them. But I think from a customer experience perspective, are they really going to choose, pick and choose different payment methods? I mean you already can't use Apple Pay or, or you know, I would imagine you can't use Google Wallet either. Um, so that's, that's annoying already. And then if they get out rewards cards and it's just at some point it ends up being nickels and dimes where I think they need to, um, you know, they're trying to think about the customer experience, hopefully and they're trying to get a settlement large enough that's going to make sense for them to just accept all forms of card.

Speaker C: Well, you know it's, it's interesting. It's sort of like when um, what's that store Target did the red dot card, which is basically an ACH based card.

James Shepherd: Right, right, right.

Speaker C: I mean my understanding was they, excuse me, they gave um, customers like a special discount if they would use that card.

James Shepherd: Right, right, right.

Speaker C: Um, would you see in the possibility of merchants doing that around certain types of cards?

James Shepherd: You know, again, I've thought for a long time that so, so here's the thing to remember, right? Merchants don't really do anything. Uh, you know, merchants work with software companies that do things that allow them to do things. Right. So the question is, would point of sale companies and payment processing companies create more innovative strategies around payments pricing and acceptance if this was available? Yes, I think so. Um, but I think that I don't, I would say I don't think it's necessary to restrict certain car types in order to have that innovation. I think it's more about the transparency of the data. I've talked about it for years but I, I still think that the, the interchange cost should come back with the card authorization, um, as you know as raw data. So that, that way you know the payment networks and you could send that and then the point of sale company could say well we want to do a, we want to enable the merchant to do some kind of pricing where it's like more like a surcharge but it would be a surcharge based on the actual cost or it could be a discount. Right, you could do that as well. Um, but that idea of saying hey, if you want to use your card here, you have to pay for it, you know, one way or the other. Um, and so I think there's a lot of room for innovation there. Um, but yeah, I'm not, I've just never been a big fan of the like don't accept these or you know, even like American Express. I've always been a big fan of American Express like to say oh we're not going to take a max. It's like really, it's like an extra you know, 75 basis points or something and you know the average spend is higher.

Speaker C: That's cutting off your nose despite your face.

James Shepherd: Exactly. Yeah. And it's, and it's like you're, you know again you're each of these, these cards. I mean there's a reason like a rewards card does have a much higher average ticket size than a non rewards card. So Walmart is benefiting from the card networks and, and what they're doing and by them to allowing people to use their rewards card they're more likely to sell that big screen TV than, than if they didn't. And so I, I think I agree value.

Speaker C: But you know it's been interesting how many articles I've seen like um, in the, just in the past week since this uh, settlement was tentatively approved articles about oh you're not going to be able to use your rewards card, you're going to lose your rewards cards and you know, yeah, it's sort of the scare tactic, right?

James Shepherd: Yeah, they want people to shoot the, the, the you Know, settlement down. And I guess my thing, Patty, that's interesting is I. One of the things, I guess that bothers me is I feel like right now we're in this environment in the payments industry where the wrong entities are dealing with the wrong things. So it's like, okay, if what we're saying, you know, there's several things here, right? We're saying, okay, Visa and MasterCard colluded together to artificially inflate interchange and stifle competition, right? It's like, agreed. Does anybody disagree with this? I don't even know if anybody disagrees with this anymore. But, like, okay, that's happened. So. So there are financial damages there, right? So it should be that the Justice Department should come after and say, that's antitrust violation. You know, like, you shouldn't do that. And then they would inflict these penalties and share, et cetera. So it's like, again, class action. It's like, okay, I get it. It just seems kind of like, wow, it drags. And it's kind of an annoying way to deal with this. It's like, ultimately the claim of this, you know, lawsuit here is that they colluded together and, you know, implemented any competitive practices. It's like, well, that's, that's something for the Justice Department, so why are we dealing with that? And then we have this other issue of like, oh, we really think the cost of interchange itself is too high, right? Well, if the cost is too high, number one, make sure you're not dealing with a monopoly or a duopoly. So that's the Justice Department. And if you're like, well, we are, and it's still too high, well, then go try to regulate it. That's the government. That's the government's job. You know what I mean? I don't think we should, but I'm saying that's how.

Speaker C: I mean, I think if you go and regulate it, then that opens up a whole nother can of worms. But here's my point. I. You know, when they, when merchants complain about interchange, really what they're complaining about is the cost of acceptance, right?

James Shepherd: Of course.

Speaker C: And interchange is only a small piece of that.

James Shepherd: Well, I would argue interchange is for most merchants, um, you know, let's say non cash discount, you know, surcharging merchants, it's probably 85% of the problem. And when you look at, you know, a Walmart and Amazon, it's. It's 97% of the. Of the cost. Right? Or 90% at least, because, you know, you have Your car. Of course you guys have your card brand fees in there too. But if you, if you take interchange and card brand fees and put those together, that's all Walmart and Amazon pay. They don't, they don't pay a markup. You know what I mean? So um, and even for small merchants, I mean if you're on interchange plus 50 basis points, well, interchange is two point, you know, whatever, 2.1%. And then you got your 50 basis points of three fourths, you know what I mean? Like so, but, but again it, it just, it uh, just frustrates me of like the way it's being approached and who's trying to solve it is just, it's, it's my same issue I have with Visa and MasterCard. When they come after, you know, when they try to make all these surcharge and, and cash discount compliance rules, it's like, no, this is about the merchant's free speech rights. You're a private company, you know, it's like a, ah, business owner gets to do whatever they want to do and that's it. And so don't you, you know, it's like if you have a problem, then go to the consumer protection agency and say I have a problem. Don't, don't try to be like, oh, we're this private company and we're gonna pretend we have a police force. It's like stop. You know what I mean? So I, I, to me, I just feel like the payments industry right now, there's a lot of things going on where I feel like the car brands are, you know, attacking these problems that, and I feel like they backed off a lot in uh, fairness in the last few months. But, but it's like they're attacking these problems that are not theirs to attack. And then we've got these class action lawsuits that ever seem to go anywhere that lasts forever and at the end of the day it's like, what are we doing here? Like if we're going to solve, if, if we have a problem with the uh, antitrust violation, Justice Department, if we want to try to figure out regulation or my, my proposed thing which is transparency, like I would love to replace the uh, you know, Credit Card Competition act with the Credit Card Transparency Act. Like give us the data. How much is this transaction at the moment of authorization at the point of sale so that we know what to do with it. That's a completely reasonable, uh, request. It could absolutely be done in a, in a 6 to 12 month time frame. That's not crazy.

Speaker C: Right.

James Shepherd: So it's like that would be good then allow the free market to innovate and do what it does best. Um, but you know that's, that's my opinion. I feel like these, these other things just tend to drag and you know.

Speaker C: Well, you know, it also goes, goes to um, you know, to speak of the litigious nature of business these days.

James Shepherd: It is, Yeah.

Speaker C: I mean everything's litigation. Like the next story that I'm coming up with that I have to share with folks is that the Financial Technology association has asked a Tennessee court to invalidate a new sales tax and international remittances, um, that originate in Tennessee. They um, are claiming that it's unconstitutional because only the federal government can regulate international trade. And they're basically saying remittances are international trade. Uh, I mean it is, it is a, I mean it's pretty hefty. It's a ten dollar tax on all cross border remittances plus 2% of any transaction. That's over $500.

James Shepherd: Oh wow.

Speaker C: Yeah. You know, that's not nothing. Yeah, I mean the state expects to generate 54 million a year, um, in new tax revenues. But you know, taxing international remittances is actually, it's like a new uh, a new shiny, shiny object for, for taxing authorities. Right. Yep. Because uh, Oklahoma has been uh, doing, it has been taxing international remittances since 2009. And I was really surprised to find that the uh, one big beautiful bill act put a 1% federal, uh, excise tax. Right. Regardless of what state you're in.

James Shepherd: Yes.

Speaker C: So, um, you know that it's interesting but you know, 1% isn't, isn't a lot. But if you take 1% on top of $10 and hey, throw in 2% because you're over $500 and you're sending money home to, you know, to, to the family. Yeah, that, that really adds up. And you know I think the other thing that, that it does, it, it sends a lot more of this, of this um, money into underground networks, you know, non sanctioned providers, uh, which, you know that, that the thing, the thing about regulated money transmitters are, is that they, they function like banks. They have to, they have to file suspicious activity reports, you know.

James Shepherd: Right.

Speaker C: Drug dealers or whatever, you know.

James Shepherd: Yeah.

Speaker C: And I think that that's, that's something that you know, these things, these laws are gonna um, could potentially affect. Right, right, right. So, and let's see, what else do we have? Oh, um, this was an interesting piece that came, you know, um, some interesting news that came across my desk this month, this week. Um, and it is in. The timing of course is perfect. I was working on an article for the Green Sheet about AI in. In. In Payments and uh, you know the. As you would expect, of course the card brands are putting their weight behind AI Visa, Uh, I don't know if you saw this, but they've partnered with OpenAI so that now the chat box will not only make recommendations and shop for consumers, but they can make payments too. So it basically turns Chat GTP into your personal shopper.

James Shepherd: Yep. Yeah, well, and this is what um, Walmart, uh, tried to some extent to like have, but it was more of a. What would be, you call it mcp. So it was more of a, uh, you're still in ChatGPT, but Walmart kind of comes into Chat GBT, whereas this is saying ChatGPT goes to Walmart.

Speaker C: Right.

James Shepherd: And Walmart website and buy something.

Speaker C: Right, right. And uh, and then MasterCard for its part is unveiled what it's calling Agent pay for machines, uh, to support a. To a machine to machine payments. Um, mostly this would be like micro payments. You know, the infrastructure can handle payments that are continuous, embedded, permissioned and executed at machine speed. Can also support credentialing controls, guaranteed settlement across cards, stable coins and other payment types. MasterCard said in the press release, which I thought was really interesting. Um, you know, it's sort of like leave the. It sounds to me like they built this to leave the door open for whatever the next innovation is going to be.

James Shepherd: Yeah, for sure. Yeah. Well, and again that's their. I feel like that's the job of the car brands in the payments industry. Their job is to facilitate innovation. They're just, here are the tools. Build what you want.

Speaker C: Yeah, yeah.

James Shepherd: So.

Speaker C: Right. I mean, you know, it's sort of like, you know, back in the old days, the uh, the computer companies, you know, we're making these computers to do this, you know. You know, at first I remember, I'm. I'm old enough to remember when the. For the first uh, computerized reading, the price, you know, barcode readers. Yeah, M. You know before that they use that to key in, you know, the prices. And then uh, you went from barcode readers to uh, frequent, uh, you know, the frequent shopper cards to, to credit, uh, and debit cards. Uh, um, I joke. The next thing, I mean, I don't, I don't go to grocery stores, but that often I usually order and have it delivered to me. But that's yet another innovation. You know.

James Shepherd: Yeah, sure.

Speaker C: I mean, think about that. I mean I could see them, you know, I could see this. Uh, in fact, the next story I have for you is kind of delves into that. I could see them having robots pick. Getting the, the stuff off the shelves that I order.

James Shepherd: Right, of course, that's, that's definitely coming. Yeah, no doubt about that.

Speaker C: Yes. In fact, it's already, it's in the check business. M. Because, you know, despite the proliferation of electronic payments, you know, checks, uh, are, there's still billions of checks a year that are written. A lot of them are written by businesses to other businesses.

James Shepherd: Right.

Speaker C: So, um, you know, processing these checks can be labor intensive for banks. And they've established these lock boxes which are, you know, remittance processing centers to.

James Shepherd: Right.

Speaker C: And they automate a lot of that. But, um, you still got to open the envelope and take the stuff out, right?

James Shepherd: Yeah, yeah.

Speaker C: So JP Morgan Chase has uh, deployed AI and robotics to automate this manual paper based, uh, process. Yeah, um, Chase has always been a major player in the lockbox space. And um, you know, for banks that handle um, this mail, this bill, generally you take it out and they, everything's digitized from that point on.

James Shepherd: Right, right. But they're even, they're even digitizing the first part now.

Speaker C: They're digitizing the first part. Last year, Chase said it deployed its first of its kind robot at one of its lockbox sites to open envelopes, move and unfold the contents, remove staples and separate pages, as well as scan and track the content.

James Shepherd: Oh, wow.

Speaker C: Which are all processes that humans used to do. Right, right. Um, they said they uh, were able to capture third, the data capture that previously required 13 billion keystrokes a year. Prehuman operators are now automated. 13 billion keystrokes.

James Shepherd: Wow.

Speaker C: Man, my hand hurts after I do, you know, a couple thousand.

James Shepherd: Yeah.

Speaker C: Yep. Well, and again, they um, they said they, they said they had processing accuracy of 99.999, which is better than any human operator could ever do.

James Shepherd: Oh, I'm sure. Yeah. That's, that's crazy. Yeah, but I mean, again that's. No, those are, those are uh, jobs that were lost and now those people are, you know, trying to find the next, the uh, next job that they can do. I mean, I think again, I think that the, the physical activities, you know, are, are definitely going to be some of the last to go. I mean there. It is very difficult to automate some of these things. Like, even, even something as simple as that. It's amazing they were able to automate that.

Speaker C: Which is pretty crazy because amazingly were able. I mean, I've been in check processing centers. I don't know if you've ever been in. Huh. It's crazy. And. And in fact, you know, there's something that goes between banks when all the checks are combined. It's called a cash letter. Right. And a cash letter is nothing but a canvas bag with a bunch of checks inside of it.

James Shepherd: Right, right.

Speaker C: Yep. So, um, I. When, you know, that's probably the, you know, the last thing left that they haven't been able to figure out how to get it. Get those, uh, those remittances, you know, those checks. Excuse me, Those checks into the bags.

James Shepherd: Yep, yep.

Speaker C: Yeah. Yeah.

James Shepherd: Crazy.

Speaker C: But, um, you know what's really interesting is if you, you. I've met many a banker that I met, started off in the business working in the check processing shop because it's. It's overnight work and they would do it while they were in college.

James Shepherd: Yeah, the entry level. Yeah, for sure.

Speaker C: Yeah. Yeah. Anyway, well, that's it for this week, James.

James Shepherd: Awesome. Well, thank you, Patty, as always for keeping us updated today. So appreciate you doing today in payments. Thank you for listening to the Merchant sales podcast. Whether you are an industry veteran processing executive or just trying to learn about the payment space, we appreciate your time. We hope you will tune in next week for m. More information and tips on building your merchant services business.