The Green Sheet Online Edition
July 28, 2025 • 25:07:02
Street Smarts
Are you selling products or processing?
The payments industry is at a crossroads. On one side, ISOs are developing their own gateways, software and POS systems. On the other side, formerly "processor agnostic" third-party providers are stealing accounts from merchant acquirers and making payment processing a mandatory part of their products and services.
Protect your residuals
Want to guess what we'd tell a third-party service provider that promises never to touch our accounts? Some of it is not printable. Can you blame us for being jaded, after seeing the same movie repeatedly? Agnostic systems have hurt our agents, stolen our residuals, and hog-tied our merchants into long-term contracts with no price protection, as they can raise prices whenever they want.
People who have only been in the business for a few years may not be aware that the days of selling agnostic software are fading. News flash: merchant level salespeople (MLSs) need to work with ISOs that fully own their technology stacks. While you may make less money upfront and on residuals, you'll protect your long-term residual income. These ISOs provide a safe harbor for selling without the threat of lost accounts and stolen residuals.
Protect your valuations
In the current environment, having a portfolio of countertop terminal merchants is worth less than having a portfolio of merchants using non-agnostic software or POS systems. MLSs need to protect their valuations by working with companies that offer a full suite of in-house solutions.
The payments industry is changing rapidly; companies that do not have technology will not be around in five years. ISOs need to move fast and build or acquire software companies. Partnering is not enough and not a good strategy. What's to prevent a third-party partner from selling down the road and seeing the new owners switch the merchant accounts and monetize the payment revenue?
Remember when Lightspeed switched their (our) merchants to Stripe? Merchants wanting to keep their current processor had to pay $400 or 50 basis points, whichever was greater. It didn't make financial sense for merchants to stay with us, so they left, and there was nothing we could do about it.
Protect your business
Terminals are still around, but hardware sales in general are going away. Toast, original equipment manufacturers (OEMs), and other companies offer hardware-as-a-service (HaaS) and software-as-a-service (SaaS). This approach enables merchants to continuously refresh their technology without fear of obsolescence. It shifts the focus from simple mechanisms to solving problems and helping merchants run a business.
At a time when any company can sell software to your customers online, it's time to figure out what you're going to sell and how you're going to sell it and build your business around a few products. Do you think Toast, Square or Stripe users care what rate they're paying? They're buying a product.
Product or processing?
In my recent presentation at the Southeast Acquirers Association, I asked people if Toast sells processing and almost everyone in my session raised their hands. Toast does not sell processing. They sell Toast with very high rates. How do they get away with that? It's simple. They sell product.
If you're still thinking of yourself as a credit card person, consider changing your title to Business Solutions Provider. This business is changing faster than ever, and AI is pouring gasoline on software development, accelerating our time to market.
When ISOs try to recruit me, I ask them the following:
- Tell me about your technology.
- Tell me what kinds of merchants that you will approve.
Other than that, I do not care about the Schedule A, terminals or cash discount. Everyone has that. I want to know if you own your own POS, software and gateway, and if you approve so-called high-risk merchants. Quite a few SEAA exhibitors did not have the right answers to these questions and need to start thinking about tech.
To quote Mike Nardy in a recent Facebook post, "If you start building tech today, you're already too late." And I agree with that assessment.
Fool me once
Despite rumors to the contrary, the terminal is not dead. Some merchants use countertop terminals; others prefer vertically focused apps and software. ISOs and MLSs need to offer solutions based on each merchant's unique preferences while protecting their hard-earned residuals.
The SEAA exhibit hall had over 70 software and POS vendors out of 136 booths, which is over 50 percent of exhibitors. I've never seen that many before in 24 years. I can't help but wonder how many of them will be around next year and how many will be bought by ISOs and no longer be agnostic.
MLSs, I encourage you to get out and talk to those companies and forget about the processor-agnostic players. Don't make the same mistake that I and countless other ISOs have made by trusting "agnostic" providers. They mean well but none of them has a crystal ball that tells them when they're going to sell. Once that happens, private equity will do whatever they want, and the first thing they will do is monetize payments. We saw it with Lightspeed and others, and we'll see it again.
Every experience is a lesson, and this is one lesson I don't want to repeat. Choose your partners wisely, and make sure they own their technology.
Want to know more? Keep reading The Green Sheet and consider following me on LinkedIn (www.linkedin.com/in/allenkopelman) 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 Biz to Biz podcast. Email him at allen@npsbank.com and connect on LinkedIn www.linkedin.com/in/allenkopelman/@AllenKopelman.
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