PEP Episode 004 — Payments Conferences Recapped! NEAA & ETA Transact

In this episode, Chris Dryden and James Huber give us a deep dive into how the electronic payments world has evolved through the lens of industry conferences and payments trade shows – two of the biggest and best, ETA Transact and NEAA. The positive evolution of how more and more women have been entering the payments space over the years. The experts also discuss some of the important issues that are current and front of mind in the industry.  Whether you’ve attended a conference of this nature, or not, you’ll find this discussion informative and entertaining.

 

Jeremy Stock (00:00):

Welcome to the Payments Experts Podcast, a podcast of global legal law firm ISOs, FinTech, pay fax agents, merchants, processors, acquiring banks and card brands. If these terms mean something to you, this podcast is for you. If these terms aren’t so familiar, this podcast is even more for you. We hope you enjoy this episode of pep, the Payments Experts podcast. Welcome to the Payments Experts podcast. Really excited to have you with us today. We have Christopher Dryden, managing founding partner of Global Legal Law firm, recently attended the Northeastern Acquirers Association Conference. And James Huber, managing partner of the firm who is just at eta, transact. Gentlemen, welcome.

Chris Dryden (01:00):

Good morning. How are you?

Jeremy Stock (01:02):

Good, good.

Chris Dryden (01:03):

How are you, James?

James Huber (01:04):

I’m doing great. Excellent. I’m actually glad to not be at eta.

Chris Dryden (01:09):

Yeah. And why’s that?

James Huber (01:10):

Well, those conferences, I mean, we’re out there, we’re out there working, you know, we’re out there trying to figure out what the pulse is of what’s happening. We’re mostly meeting with our existing clients, um, trying to meet new faces. Didn’t see a lot of new faces. You know, I’ve been going to this conference for about 15 years, um, and I did see a lot less faces. Um, but I did, yeah, I, I did an interview with Dale, um, I don’t wanna butcher her last name, I wanna say Lasage. Um, but that was probably wrong. Anyways, from the Green Sheets. And she writes for transaction trends too. And, you know, was also admonished to walk the line at ETA because I have had somewhat of a tumultuous relationship with that, um, association.

Chris Dryden (02:05):

I’ve had collateral damage from that. Tumultuous.

James Huber (02:07):

Yeah. Yeah. We’ve, uh, we’ve, we’ve been, uh, slapped on the hand. But anyways, uh, the, the really positive thing that I did see was they had the empowHER, movement of women in the payment space. And that was really interesting to see because when we got into the industry, you know, we are the mavericks in the space. We are looking to disrupt this place now that I’m, you know, one of the old gray hairs, you know, it’s nice to see them actually embracing change in their industry and seeing women. I mean, we all know that women are smarter than men in most respects. So seeing them, you know, pushing women into this space and, you know, that’s run by men. You know, we do depositions where at from banks particularly, they’ll say, this is a really rough atmosphere to be a woman. And that’s bled through the industry. You know, we have, you know, one client who we keep seeing, getting sidelined.

Chris Dryden (03:09):

It, it, it, it is though. I mean, and I’ve just talked to enough women, some clients, some non-clients, even casually, especially about the, I I will say I, I feel like the shows are a little more tame than they used to be, but they sure are. At the same time, you know, some of the behavior, um, not always the greatest, but whatever, uh, you know, I, I, I actually think that that Pulse has been there, maybe not on the ETA level, but with W NET, uh, you know, I feel like W Net’s been going strong almost a decade now. And yeah, they, they’ve got a, you know, a pretty good footprint at the regional shows. And I always feel like most of the women that I encounter in the industry are a part of that organization. And I’ve only heard positive feedback. I mean, they always have.

Chris Dryden (03:56):

I I, and I don’t, and I won’t say this cuz I don’t know this for sure. I don’t know if their events that they hold, um, at the shows are open. I think you have to be a member, but I don’t think that there’s any prohibition on a guy being a part of wnet. So I think you could go. Yeah. Um, I, I cuz I, I think I’ve actually been invited before at, at one of ’em, I think Liz Pike invited me. She, uh, green Rhino. Uh, if you need anybody in recruiter, like you need a recruiter for anybody in the payment space, uh, Liz is really good. Um, but I think she invited me once to, to one of the events.

James Huber (04:31):

And I mean this, this was the, I think that the event that they had was open. Um, but one thing that came out of one of these events was probably the most interesting thing that I heard at the conference, which was every single payment facilitator might be required due to forthcoming legislation to get a mtl, a money transmitter license. Yeah. Which we know and have dealt with will take at a, if you’re clipping 18 months and probably cost you now, I mean, when we looked at it years ago, it was like a million dollars in, you know, fees and bonds that you have to put up for each state, but it’s probably doubled now. But that rumor turned out to be incorrect. I verified that with Scott Talbot, who’s on the hill all the time. But that I, everyone I was talking to, this was chatter, you know, it was the rumor mill, which would really disrupt, um, a a very valuable practice in our, in our industry.

James Huber (05:37):

I, I actually dunno what a lot of people would do in that scenario because not everybody’s gonna go get it. But the nice thing is, in this industry there are a lot of really smart people with their head on a swivel. And that’s, that, that was cool to be at this conference to see this rumor spread. You know, it, it happened the night before and I heard it, you know, from 10 different people and I think it was at one of the, you know, um, empower events where this came out. But hearing it in the morning and everyone going, okay, what are we gonna do? They’re already, they’re already planning Yeah. To change. And that was

Chris Dryden (06:11):

Well, yeah,  I mean I, I I feel like they always are. It’s interesting. I don’t have an ax to grind with eta. I’ll just say what I said years ago to Dell when he worked there, which, and I, in every show I go to, I go see Scott because everything that he talks about I find very interesting. Like, I think I mentioned on the Surcharge podcast about how there are some people looking at, uh, char in charging interchange on sales tax, which I thought was a very interesting, uh, issue to kind of look at and maybe analyze. Um, I just think that who ETA applies to or appeals to is such a smaller group of people today than what it was when it originally started.

James Huber (06:53):

Yeah. I mean, and my, when I, I gave a speech that was my beef with E T A and I literally got dragged out of there by my ear with Jason Oxman and it was, you know, you’ve forgotten about the sales agents. Yeah. You know, that this is the constituency. And when I talked to Scott about it, he’s, you know, he said like, James, we’re not the regional shows. There are plenty of regional shows, but I still feel, you know, I did hear some beef of people going, you know, this is S SL F too, this is e t a slf too. This just sea level people. And I’m also, you know, at this point now that we’re working with, you know, more processors and you know, the larger companies, I’m going, well this is actually great because all of my clients are here. And when we go to the regional shows, we’re picking up agents who, you know, have beef with the processors need contract review and stuff like that. That’s who we’ve always, you know, really loved working with. But you know, now a lot of these sea level people started there. Yeah. And now that they’re up there and that this is their space and their playing field and it’s really cool to see them all there because there are more of them, you know, the conference, I think it is, it’s shrinking probably even though they might not say that. But there’s, there’s still a lot of power players there and it’s cool to see them all in one spot.

Jeremy Stock (08:14):

Hey James, Chris, I’m just curious for the layman out there who’s listening to this podcast right now, cuz it does, that’s, I was surprised to hear this. You’re talking about the conference may be shrinking, getting smaller over time, but yet payments, the industry itself seems to be exploding. Yeah. Can you kinda explain

Chris Dryden (08:30):

That? Yeah, that I, I was actually just gonna make a comment about that. So I was talking to somebody in the last week because they were surprised that I didn’t go to e T A and for me it was just the travel to the East coast on a short timeframe. And I just did that with N E A AA and it throws off, throws me off quite a bit. But what’s taken place more than anything is, is that there’s an echelon of companies that basically run this industry. And it’s not as though it’s, you know, most of the, most of the primary players have been there, they’re not going anywhere. And really as payments has gotten larger, those entities have their own unique set of issues surrounding the law. And where ETA was a trade association when it first started, and it was sort of like the head trade association.

Chris Dryden (09:28):

It’s turned into a lobbying organization and the things that they do are much more sophisticated, geared to sophisticated businesses. Whereas when you look at the acquiring space and you look at the generators of merchant accounts, these are sales organizations, these are salespeople. Not to say that some of them aren’t extremely sophisticated and smart, but the level of the, the sophistication of the entities that they run aren’t the same as looking at Fortune 500 companies that are partnered with banks and banks. And so, excuse me, who ETA caters to is more of the macro and they’re looking at much larger macro issues that, so their focus has really pivoted and shifted to a, a different place. Whereas it’s not just about acquiring, it’s not just about, um, you know, it, it really is about, uh, looking at their constituency, which if you go on the floor, their constituency is Fiserv Global. I mean it, it’s just large organizations with large workforces. And, and I, so I just think it’s really shifted quite a bit. And I, maybe it had to with how prevalent payments is cuz it, you know, today payments is such a a, a centerpiece to so much business, you know, whether it’s uh, you know, IP or it’s banking or like, it just is kind of the connector of a lot of different companies, but commerce in and of itself. Yeah. I, I I sort of see them as looking at things from a very different lens.

James Huber (11:09):

Well it’s interesting too because their, their Conti constituency is, you know, everyone in the payments space. But when the lobbying really started, they were lobbying for Visa and MasterCard whose interest many times tend to be at odds with, you know, our processor ISO’s clients. So I’ve always found that interesting and I found it very interesting and I heard a lot of chatter around the floor and surrounding areas. Visa wasn’t there, <laugh>. And I think it’s because people might have had their short wooden baseball bats going, you know, pretty angry about the surcharge cap. Yeah. And, you know, be going, what’s going on? So I, you know, I forgot to, you know, get a formal comment on why they didn’t attend. But, you know, everyone can assume cuz they would be swarmed. What are we supposed to do? You know, I’m, I get four emails a day. Can you explain the surcharge cap

Chris Dryden (12:07):

The conversation that I had while you were gone with somebody who was surprised I wasn’t there was, I wonder what the convention floor is like. It must be like crickets because when you look at whose uh, exhibitor, it’s just, they’re like hanging out and talking to one another because there’s, there’s not a lot of people It was ac necessarily,

James Huber (12:25):

It was actually pretty lively, way more lively in years past cuz it was in Atlanta. And on

Chris Dryden (12:30):

The convention floor itself.

James Huber (12:31):

On the convention floor itself. Cause it was spread out. You know, I would have, I was running laps going meetings cuz it was all over the place. But unlike other years where people just hang out at the bar to the entrance floor, people actually had to buy a ticket. So I think that was a benefit. But, um, yeah, no, we, I, I mean I think we, we have our, you know, gripes with ETA because it’s the one big organization and we want it to be, you know, perfect for our clients. Um, but Jeremy, you bring up an interesting point I think is where you want it to go is, you know, would a merchant, uh, a small business owner go to ETA? Never or no, there wouldn’t be purpose. Would they go to a regional show?

Chris Dryden (13:16):

Yeah.

James Huber (13:17):

And

Chris Dryden (13:18):

I think they’d probably find it interesting. I think they’d find

James Huber (13:20):

It really interesting and they might find a bunch of different technology solutions. So I’ve heard ETA using a new word, calling it an expo and my thought is, okay, are they trying to do that? Because I know what my, the last regional show I went to, I can’t remember what it was all POS companies.

Chris Dryden (13:41):

That’s the funny thing. Like money 2020 seemed to, in recent years supplanted ETA in certain respects. And one of the things about Money 2020 is the entrepreneurial bend to it, right? Mm-hmm. <affirmative> like almost anybody could be there hawking their wares and a lot of it’s technology based. And so I do believe that maybe the, a little bit more of the freedom of the construct in which they operate, maybe that’s what made money 2020 a little more appealing even though that’s expensive. Yeah. I mean, you know, you really need to have purpose to go there. You know, I mean that’s, and I look at both those conferences that way, whereas the regional shows, like they’re, they’re built and geared more for, you know, just the common everyday business person in this industry that’s more like a, a cog that works within it and you know, kind of makes it run. You know, those are, uh, anybody that listens to the James Shepherd podcast, you know, like they’re Yeah, they’re, they’re they’re gonna be there, right? I mean, these are guys that are like feet on the street if would, if I’ll call ’em that even though they might not be feet on the street these days.

James Huber (14:46):

And it is, I mean I, the regional shows, I for the same reason, I go get in one place so you can gather everything going on right now, snapshot in time, you’re going to hear it. Everyone’s having the same conversations. You know, 10 years ago we go to these conference and everybody’s going, you know, how many basis points do you have on your first data contract? And I remember leaving being like, if I hear interchange Plus again, I’m gonna, you know, pass out.

 

Chris Dryden (15:10):

Well I, I’ll say, so n e aa we, we exhibited and we haven’t exhibited in a long time. And we did it just as on a whim cuz one, one of the other attorneys wanted to do it. Which in retrospect now having sat at the booth with him, and I will say n e aa, extremely affordable for us to, to uh, actually exhibit. But we sat and it was nice to actually have a centerpiece where people came and spoke to us and kind of, you know, shared what they’ve got going on and what they’re doing and, you know, any like, you know, people that we didn’t necessarily know. So rather than walking around, we actually had people coming to us and, you know, when people wanted to refer folks to us that we also know that were exhibiting on the floor, we were right there.

Chris Dryden (15:54):

I actually found that the exhibiting in comparison to what we had historically done, I I, I’d rather enjoyed it. That was actually my favorite part was to sit and converse with people and do so like more on the floor than, you know, out in the bar. But I always like going to the regional shows just because similar cast of characters, I get to check in with people that I don’t always get to check in with when we’re doing our normal work weeks. And, um, and I legitimately really, like most of the people that I encounter at the, the shows that all, you know, seem to be really, really good people and I get to see people and carry on these relationships with folks that live 3000 miles away. Any AA was in Boston. Boston is a great city. I find it very similar to San Diego in certain respects. And so I really enjoy it. I find the people there, uh, as long as you’re not at a sporting event to be extremely pleasant, <laugh>

Jeremy Stock (16:47):

Uh, I was gonna say great people in great sports teams.

Chris Dryden (16:48):

Yeah, exactly. You know, but, uh, the cool part, uh, about going to Neaa was, you know, we work with people that are primarily on the East coast and then we, you know, we could see ’em, you know, we could see ’em and, and sit down and talk to ’em and you know, have dinner and, and it’s just a, it’s, you know, people that I wouldn’t normally see. I I, I get to actually have a face-to-face with, and we do so much remotely these days. Um, n Neaa was a little bit different. Uh, I was there kind of like I feel rather quickly. Um, the shows are really short. Uh, really it’s just a, the first evening and then the following day. Um, the, you know, I think I said it on the surcharge podcast. The visa cap was like what everybody was talking about that and, and uh, cash discount and where that’s gonna go related to the visa cap.

Chris Dryden (17:40):

But the other thing that I noticed, if I was gonna sit and actually say that I noticed something, um, you know, myself and another attorney here, we do most of the m and a work and most of the contract work and 2022 and, and even 2021, it was extremely busy on that front for us. Like we grew exponentially where I couldn’t even handle most of the work. We had to get another attorney to come in. Now we’re both kind of full <laugh> full up on that work or we were, but as we kind of continue to move through 2023, the thing that I heard from the people that I do business with and and and that we represent while I was there is that some of the m and a stuff is really drying up. Like there’s little nibbles but you know, it doesn’t get to the finish line. Seems like there’s a lot of retraining following the letter of intent. Um, you know, and a lot of this is just dependent on macro perspective of, you know, what do interest rates look like? There’s still plenty of money to out there that needs to be deployed.

James Huber (18:39):

Yeah. Why do you think it’s, what, why do you think it’s drying up?

Chris Dryden (18:43):

Um, I think the money’s getting more expensive and there was already funds that were accounted for that need to be deployed where they’re not gonna go out and get more money. Um, I also think that right now we’re in more of a seller’s market because of that. And uh, and that might sound odd to people cuz you would think that you would be able to buy a lot easier because there’s less buyers in the marketplace. But I really think right now the buyers are just going to be, uh, you know, just a, they’re going to look for books and they’re going to pay accordingly. I have just seen some crazy numbers over the past couple of years Yeah. Of multiples. And recently what I’ve seen is, uh, things kind of move back in line or I’ve also seen in the most recent Lois I’ve done, I’ve seen a lot more, um, EBIT evaluations cuz that’s where people seem to want to go.

James Huber (19:41):

Yeah, that’s really interesting. I don’t hear anybody saying, you know, I’ll pay you 36 x for your book, which was, you know, the magic number five years ago. No. Everything I say I see is EBITDA now

Chris Dryden (19:52):

That and, and I and I, well, and I and I guess that might go to the fact that ISOs are a little bit, um, multi-varied today and it’s not just residual

James Huber (20:03):

Revenue, right. Not just sell in the book.

Chris Dryden (20:04):

Totally. Yeah. So there may be more of a business operation cuz things may be more technology driven. Obviously, you know, equipment, there’s probably, you know, I would think some sort of dovetailing there where there’s additional revenue being made. But yeah, I, I see a lot more EBIT evaluation and, but I could, I pinpoint to one thing necessarily that is slowing the marketplace down interest rates. I mean that’s Yeah, for sure. Yeah. I, when you have banks failing and, and look, I don’t think that, you know, the, there needs to be hysteria around some of these bank failures. I just think that’s probably more mismanagement than anything. But I do think it gives people pause and, you know, I I also think that some of the sellers based on the the environment the last few years have very unrealistic expectations walking into the marketplace because you know that that, and I, I’m starting to see purchasers try to do things that are robbing arbitrage opportunities for sellers to their downstream. Um, I don’t know. It’s an interesting spot. I’ve just seen a lot less activity. I’ll put it to you that

James Huber (21:22):

Way. Yeah. I mean I think this would be a great topic for another podcast, but I I think if you were considering to come back as we’re talking about these conferences, if you were considering selling a book, I totally agree. I would, I would go to this conference and drop little hints. You know, I always say don’t over shop your book these days. I think still, still go shop it because there are people, you know, there’s the, you know, scarcity, I want to buy a book. You know what? We get an email at least twice a month usually from the same people, you know, hey, do you have any books to buy? We’ll buy ’em up. Um, but I think, you know, and we know most of the players in the space and can route people to the right spot. But I think going around at these conferences and getting a pulse, you know, you won’t hear it from us, you’ll hearing from all the other people there, which will verify what we’ll say of what you can look to get in this market and what you’re looking to pay. You know, you’ll always find people that are like, yeah, I’m just looking to buy like a small book of, you know, a hundred merchants or whatever. I don’t care if they have risk. And I think these conferences would be an ideal place to really understand what the current value is. Cuz it changes

Chris Dryden (22:40):

Yeah. A lot. And the struc the deal structures change. Yeah. The, like, what I’ve seen most recently is to absorb some of the higher multiples. There’s been significant go forward commitments. Right. Right. I mean, and, and then that way you’re kind of bringing the multiple down for the old by replacing it with new and Yeah. You know, there’s benchmarks that need to be hit, satisfied for both attrition and go forward production to be able to meet earnouts. And look, I, I see these things taking place, but what I’ve seen most, at least the last couple of years and even recently in the first quarter, is that almost every single deal has go forward production and, but all of it’s geared towards I’m gonna accumulate as much volume and velocity to bounce. Right. And, and every purchaser is an ongoing concern. These are not investor companies. These are larger ISOs, super ISOs that are looking to, you know, get enough, uh, get enough processing volume underneath their, their umbrella and then bounce. You know, I haven’t even seen an offer of tag along rights that much just cuz it gets super messy. That’s awesome.

James Huber (23:51):

I’ve seen that too.

Chris Dryden (23:52):

Yeah. I mean I saw one in an LOI the other day, the concept of it, but then it was like, you know, the, the draft of the LOI and or the APA related to it was just all over the place. It was really hard to follow. So, but you know, like I said, people are trying to get creative. Yeah. Um, but yeah, I think that I I do believe that that’s probably a podcast in of itself. Yeah.

James Huber (24:13):

I think it is. Um,

Chris Dryden (24:14):

But, but that’s at ne aa. If there was one thing that I walked away with outside of the VCAP and cash discount, it was that, you know, some of the people that I know in the marketplace, they get into due diligence, they get down the road and then a deal falls apart.

James Huber (24:30):

That’s the

Chris Dryden (24:31):

Worst. Yeah, I heard that from, uh, Anthony, right? Yeah. I mean like, yeah, he’s had a number of things come by his plate and you know, they get to working on it and then all of a sudden for some reason or another, and a couple of the ones that he was telling me about, it looked like the sellers had coal feet. They looked at the residual and then all of a sudden said, eh, maybe I want to keep this monthly income.

James Huber (24:51):

Exactly.

Chris Dryden (24:52):

I, I don’t know. You know?

James Huber (24:53):

Right. Yeah. Taxes. Um, alright, any closing thoughts on these conferences before we wrap it up?

Chris Dryden (24:59):

I would say if, even if you’re old, but if you’re new to the industry, I would say that going to a regional show is really beneficial. A because most of the people that go to these, they’ve been in ’em for a while. Yeah. Um, the breakout sessions are, are generally pretty good. Um, you will see crossover between the shows on the subject matter, the breakout sessions. So if you’ve gone to one, you may be seeing the same thing at the next one. Yeah. Uh, because things don’t move very quickly in the industry necessarily. So, you know, between S E A A and M W A A, which is a couple of months, you, you know, you might have the same subject matter, but they’ve got tons of educational stuff that you can learn. You’re gonna meet other similarly situated people that do the exact same that you thing you do, you may find partnerships with some of those people. Yeah. I, I think it’s really beneficial to go in. It gives you a really good pulse on what’s happening, but more on a day-to-day level. Right. A day-to-day, how does the iso, how does the agent operate at this point?

Jeremy Stock (26:00):

Awesome. You guys. Excellent conversation. Thanks again today to Christopher Dryden and James Huber of Global Legal Law Firm. How going? Thank you for listening to this episode of the Payments Experts podcast. New episodes first and third Thursdays. If you’re interested in learning more about PEP and how Global Legal Law Firm may be able to assist you, please visit us at global legal law firm.com. To schedule a free consultation, give us a call at (888) 846-8901 or email us at pep@attorneygl.com. And once again, thank you for listening. 1, 2, 3. Come.