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How low can merchant services go?

he said. "Giving merchants any kind of rebate for merchant
services is utterly absurd."

Rice also pointed out the tax liabilities that this upside-
down model creates, suggesting people aren't considering
the long-term implications. For example, merchant fees are
a business expense that comes out of your top-line revenue,
he said, and that's deductible revenue for business owners.

"Getting that money back creates a tax liability," he added,
and if you're getting that money back under the table, what
does that say about your ISO business partner's integrity?

Reflecting on his ISO business, Rice said Magothy
Payments reports referral partner rebates and bonuses,
which is legally required for partner payouts of over $600
per year. A payments attorney, speaking off the record,
agreed kickbacks have legal and tax implications and are
not ethical.

By Allen Kopelman "This is dirty," said someone else who asked to remain
Nationwide Payment Systems anonymous. "It's not professional to give away your own
hard-earned residuals, and it makes our industry look bad."
e've all heard about the race to the bottom.
Is it my imagination or is history repeating New lease on life
itself? It was bad enough to see desperate
W agents driving down processing pricing, but In 1998, when I started in this business, leasing was huge
now it looks like the race to zero doesn't stop at zero. These and the main way to make money. We were offering
12-month or 24-month leases, avoiding the high-priced
desperados have gone from giving merchants a deal of a
lifetime to paying them to take these deals off their hands. 48-month leases and their big monthly payments. But as
ISOs began selling equipment outright and then giving
it away, we pivoted to selling used and refurbished POS
How can we let this happen? I set out to collect opinions equipment to stay competitive.
on this trend at the 22nd annual Southeast Acquirers
Association conference. While not all of my sources wanted Then big integrated POS systems became huge business,
to go on record, judging by their passionate responses and
colorful language, it's clear no one is happy about this new and they too became "free," which isn't really free if you
read the fine print. It's more of a subscription service, such
trend.
as hardware- or software-as-a-service.
Legal, tax implications
Today's merchants expect low entry costs and monthly fees
Jaron Rice, founder and CEO of Magothy Payments, made for their hardware, software and POS systems. Technology
good points about agents who voluntarily split their changes fast, and no one wants to be stuck with obsolete
residual payments with merchants. "If your agents are equipment.
paying merchants for their accounts, they're not selling,"
Any merchant who got stuck with an end-of-life or non-
compliant POS would be reluctant to buy any hardware
outright or to buy once-and-done software and be
Then big integrated POS systems responsible for compliance and security patches. It makes
became huge business, and they sense to pay a small monthly fee and never have to worry
about that stuff.
too became "free," which isn't really Writing on the wall

free if you read the fine print. One of my favorite books, Who Moved My Cheese? by Spencer
Johnson and Kenneth Blanchard, made some good points.
The authors realized most people are afraid of change, and
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