By Allen Kopelman
Nationwide Payment Systems Inc.
The payments industry prides itself on being self-regulated, but some individuals and companies are detouring our guidelines and best practices. We can't allow unscrupulous payment professionals to hurt our merchants and undermine our credibility. It's time to rise as a unified community and put an end to these subpar practices:
Congratulations to the desperados who pay people to use merchant services. Thanks to your contributions, the race to zero has just become the race to subzero. Ever hear the saying, "Desperate times call for desperate measures"? Don't believe it.
Anyone can have a bad day, even merchant level salespeople (MLSs). Do you think Toast, Square and Stripe are giving kickbacks to businesses that use their services? Sharing hard-earned processing revenue with merchants is a fool's errand.
There are a lot of ways to be more transparent in our business, such as presenting all rates and fees to a business owner. Processing is a two-way street; make sure your merchants understand what you are doing for them and explain what you expect from them.
Let them know who to call for support, how to log into their merchant portal to get reporting, how to respond to chargebacks and what they need to do to be PCI-compliant so they can avoid paying noncompliance fees.
ISOs buy portfolios and come in with a giant wrecking ball, purging accounts that don't meet their risk criteria and assessing new fees on those that do. This makes the agents and our entire industry look bad. It also takes agents away from selling by putting them in damage control mode as they rescue merchants and move them to new processors.
Leasing a terminal for $99 a month for 48 months means a merchant is paying $4,752 for a terminal that sells for $500 to $800. Add sales tax and a state leasing tax to that, and the total cost rises above $5,000.
Some companies have a buyout at the end of the lease; others continue to draw payments indefinitely. Leasing terminals or POS systems at exorbitant prices and with unconscionable terms to merchants who never even use these systems—just because you want to make money from them—is not a good look. I have seen merchants find out they have been ripped off, and they're in a non-cancelable lease. We will not allow agents who do this sell for us, because we do not want to be associated with this type of business practice.
Sometimes reps don't know that they are presenting high-risk accounts as low-risk, because they don't ask the right questions; other times they are participating in the fraud. In some cases, the merchant is a fraudster showing an MLS a website selling basic consumer goods, clothing and electronics, but hiding the real product behind it.
You can't see that they are really selling CBD, gambling or illegal items. The MLS gets fooled, and maybe underwriting does not catch it either. Sometimes a simple Google search could reveal something about the merchant, but there are other telltale signs, such as uniform or high pricing on all items. If you ask for the inventory pictures, they may make excuses. I've also seen MLSs participate in this type of fraud.
I get it that everyone wants to make money, but do it the right way. Underwriting doesn't always catch this type of fraud, and it impacts everyone. Vendors get burned, MLSs have a harder time getting new accounts approved and underwriters become extra cautious.
We sent in a deal, and the underwriter asked how we got the client. We explained it was an internet lead, and they showed us that the documents were all fake. I could teach a whole class on how to spot this activity now.
Most merchants that participate in subpar deals are taking advantage of an ISO or MLS, which is not a good way to start a relationship. Instead of beginning a relationship at a competitive disadvantage, create a partnership of equals with complementary skill sets.
People are lured into this industry with the promise of residuals and entice merchants into cash discounts and dual pricing 0 percent programs that offer kickbacks. Others go so low on their rates that they erase any possibility of profit for themselves and the rest of us. When MLSs get 80-85-90-95 percent splits, there is little left over for other MLSs, ISOs, banks and processors. It's time for everyone in the value chain to think about how we can be better.
Want to know more? Keep reading The Green Sheet and consider following me on LinkedIn, where we can share ideas and support each other. 
Allen Kopelman, a serial entrepreneur, is co-founder and CEO of Nationwide Payment Systems Inc. and host of B2B Vault: The Payment Technology podcast. Email him at allen@npsbank.com and connect on LinkedIn https://www.linkedin.com/in/allenkopelman/ and Twitter @AllenKopelman.
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