PEP Episode 026 — Dissecting Payment Industry Changes and Challenges with Patti Murphy

Podcast Description:

Embark on an intellectual expedition with the renowned payments industry expert Patti Murphy, whose career zigzagged from aspiring Rolling Stone journalist to becoming a pivotal figure in the payment industry. In a candid conversation hosted by James Huber of Global Legal Law Firm, Patti shares her unique narrative of witnessing the birth of electronic payments and the transformation of banking regulations. Her stories span the rise of ATMs, the surge of debit card usage, and a time when checks reigned supreme. Patti’s ability to strip down complex financial concepts into digestible insights offers listeners an opportunity to grasp the enigmatic world of banking and payment systems.

We peel back the layers of the financial world, revealing the surprising fact that our deposited money isn’t just sitting in a bank vault—it’s part of a vast network of ledger entries and transactions managed by the Federal Reserve. The episode unveils the intricacies of fractional-reserve banking and sheds light on the sparse regulations that govern electronic payments. With Patti’s guidance, we dissect the Durbin Amendment and its multifaceted impact on consumers, merchants, and the banking sector, illuminating the industry’s opaque inner mechanics that are so crucial to our economy.

Looking ahead, Patti and James mull over the resilience of the payment sector, highlighting the steadfast presence of giants like Visa, MasterCard, and PayPal through turbulent economic periods. Our discussion traverses the realm of ‘junk fees’ and the political tug-of-war over industry regulation. As we scrutinize the ever-evolving payment landscape, Patti imparts wisdom on the urgency for clearer rules, the growing awareness among small business owners about fee structures, and the influential lobbying efforts that continue to shape the future of financial transactions. Join us for an enlightening session that promises to leave you with a richer understanding of the cashflows that keep our global economy ticking. Visit our special guest Patti Murphy at https://www.proscribes.net/

Podcast Transcription

Patti Murphy (00:00):

It was his first attempt. It was his first shot at lobbying, and he was just mind blowing. He was like, they took us out on cruises. They had these big state dinners for us. This is just a, this was just a small piece of legislation. James, imagine if, imagine if suddenly a new regulation came out that was gonna affect Visa, MasterCard. Can you imagine the whining and dining that would go on?

James Huber (00:33):

Oh, I’m sure. I’m always curious about that. I was like, what? Because you took me on your boat and you gave me food. I’m gonna do what you say.

Patti Murphy (00:42):

Yeah.

James Huber (00:42):

I, I, I’ll sell out real quick, but like, you gotta put a bag of cash,

Patti Murphy (00:47):

Right? You and me both, bro.

Jeremy Stock (00:51):

Welcome to the Payments Experts podcast, a podcast of global legal law firm.

Speaker 4 (00:59):

We

Jeremy Stock (00:59):

Hope you enjoy this episode. Hi. Welcome to the Payments Experts Podcast, a podcast of global legal law firm. Today we are very excited to have in studio with us, James Huber, managing partner of Global Legal Law Firm, as well as special guests joining us on Zoom, Patty Murphy of Proscribes Inc. Patty, thank you so much. You’ve got tons of experience in the payment space. Really looking forward to this conversation. Jump right in.

Patti Murphy (01:27):

Tons of experience. And a lot of people probably don’t know me as Proscribes Inc. They know me as the Green Sheet. They know me as the big mouth who’s always talking about whatever that has to do with payments. Uh, I like to refer to myself as the payments maven of the fourth State. Um, <laugh>. I like it. I got, I got started in this, like everybody else. I got started totally by accident. I got outta college. I was young when I got outta college, and so I got an internship with a bank regulatory agency. And one of my jobs was to con, was to compile the daily, uh, news digests for the senior staff. Great way to learn about banking. So I did that for quite a few years, well, not quite a few, probably about four or five years. And then I went out and sold myself as a, as a banking reporter.

Patti Murphy (02:22):

Now, mind you, I graduated from college with a journalism degree thinking I would write for Rolling Stone or New The New York Times, but instead here I am. Um, but, uh, so I started, when I started writing about payments, um, it was really, electronic payments was very new. In fact, they didn’t even call ATMs, ATMs. They called them customer bank communication terminals. Wow. Hmm. <laugh>. Yeah. What a boring name. Um, but, you know, so, so I really got in on the, on the ground floor when debit cards. It was in the early eighties when debit cards was first coming out. Uh, visa, MasterCard were really amping up the, um, the efforts to get cards into more merchant’s hands. They’re, you know, pricing ’em low, getting ’em into more merchant’s hands. I, um, did a bunch of newsletters. Back in those days, newsletters were all the rage.

Patti Murphy (03:22):

And I happened to do one on checks. I had a newsletter on checks. At the time, we were writing like 50 billion checks a year. I met Paul Green, I was putting on a conference. I met Paul Green. We hit it off. Before you knew it, Paul was asking me to write for the green sheet. That was 20 years ago. Um, before that, I wasn’t really big into, I didn’t know a whole lot about credit card acquiring and, and all those nuances. All I knew were, I had spent a lot of time in Washington covering the Fed and Congress. So I knew the laws and the regulations, uh, which sort of gave me a different perspective on things. And as you, anybody who’s read me over the years has seen that different perspective continues to change. Um, but that’s the short of it.

James Huber (04:19):

I’m, I’m curious, Patty, when you were reporting on banks banking, that it’s not a topic that the banks like to, like to be reported on. Right. They like to keep their own not stuff down. So how, how were you received in the, not in the marketplace, but for your subjects? I mean, were you, you know, having to,

Patti Murphy (04:41):

I actually, I, I actually did really well. Part of the time I was there was during the thrift crisis when all the savings and loans were, were crashing. So there, it was just sort of like mob journalism, right? Right. Um, but after that, one of the things I used to really pride myself on is, and what I do pride myself on, is taking the most complex subjects and making them understandable for everybody. And so I would get, you know, atta girls from the big banks as well as from the Fed and the other regulators, um, which I always thought was great if they, you know, if, if they weren’t complaining that I was doing my job. Right. And, and the banks, you know, the banks they don’t like to talk to, to people. But when once you make friends with the right people at the bank, it’s, it’s not that hard. And I was really lucky in those days. There, there were a lot of, cash management was one of the areas I covered a lot of big cash management banks, a lot of things going on. And I like to say I had, I had a good personality to go along with it.

James Huber (05:54):

Yeah. I mean, I can agree with that. I think biggest thing that, you know, I didn’t know until I was in law school is the bank doesn’t have your money. No. I went down there and I was like, I just wanna take all my money out. I don’t know what I wanted to do. Maybe I wanted to roll around with my, you know, $800 or whatever it was, <laugh>. But <laugh>, as I said, they said it was some, it was more, I think it was like $11,000. It was like what they give you, the school gives you or student loans or whatever. Right. And I was like, I want it outta here. And they’re like, we don’t have it. And I’m in downtown San Diego at US Bank, and they’re going, yeah, we don’t have that here. And I’m like, you don’t have $11,000 here.

Patti Murphy (06:35):

Nope.

James Huber (06:36):

Nope.

Patti Murphy (06:37):

Yeah. Yeah.

James Huber (06:39):

And that I, I found that, like, it blew my mind. And then I didn’t really learn how mu how nobody has it until even much later. Mm-Hmm. Can you break that down in your, in, in the way of how banks actually don’t have our money and why?

Patti Murphy (07:00):

Let’s see if I can figure this out. Mm-Hmm. <affirmative>, uh, I go in, I make a deposit. The, uh, in most cases, it’s, it’s a check deposit anyway, right? It’s not a cash deposit. Those checks go into a clearing system that goes through the Federal Reserve. That money is posted to the, let’s say it’s a check for you write me a check for a thousand dollars. That thousand dollars is posted to my bank account or my bank’s account at the Fed. Um, and that’s basically where it stays until, you know, every couple of days a bank will call up and say to the Fed, Hey, we need about $5,000 in ones fives and coins. Can you deliver it to us? And the Fed comes up with an armored truck and delivers it to it. But all the bank, the, those big boxes that you see on the streets, all they’re doing is writing numbers in ledgers.

James Huber (08:05):

Right. And to add to that, what, what I, I didn’t learn until much later is that the bank takes your money, 90% of it and goes, and Le lends it out.

Patti Murphy (08:18):

Lends it out,

James Huber (08:19):

Course goes and plays with it. And then where they go play with it, they take 90% and then they go play with it. And it goes layer, layer, layer, layer. Right. Where money’s not even real anymore.

Patti Murphy (08:32):

No. Because you’re making money that like, let’s say you borrow a hundred dollars and then you’re making $105. Right? Well, where did that $5 come from?

James Huber (08:42):

Where did it come from?

Patti Murphy (08:44):

Uh, that’s something that’s always blown my mind as well. Um, but the lending process between the lending process and, and the, and the Fed storage process, no wonder you couldn’t get your $11,000 <laugh>.

James Huber (08:59):

Well, it was probably for the better actually.

Patti Murphy (09:01):

Yeah. You would’ve rolled around in it. Yeah. They might’ve done you a favor there,

James Huber (09:04):

James. Well, yeah. And well, I think what I didn’t realize too is that $11,000 is like that, that much money, so Yeah. Um, but maybe they would’ve given it to me in ones. Um, okay. So since money’s not even real

Patti Murphy (09:21):

Right.

James Huber (09:22):

We don’t even know where it comes from and it’s not really even regulated.

Patti Murphy (09:31):

No.

James Huber (09:32):

And here comes electronic payments where we’ve been, I mean, we’ve been in the space, uh, 16, 17 years at this point, Uhhuh <affirmative>. And when we got in, it was just, it was just moving away from knuckle busters.

Patti Murphy (09:46):

Yeah.

James Huber (09:47):

Yeah. And it was the true wild West. These were car salesmen, you know, get getting off the lot going and saying, Hey, I can sell this and make way more money. Right. So that’s where we’ve started out. And now, you know, we still represent sales organizations and they’ve had to change, but there has been really no regulation. When I bring in, we bring in new attorneys or people that are working on this stuff, you know, we go, they’re, they’re always like, what can I read? Like, where are the rules? You know, in the law we’re like, tell us the rules so that we can then, you know, tell our clients how to go break them. But what, where are the, you know, what are the rules that apply to payments?

Patti Murphy (10:33):

You know, the only rules that really apply are what’s in the examination handbooks, you know, bank examiners go into a bank. They, they have these rules sort of like that, the, that the regulatory agency is written. You know, you can’t lend to these people. You can’t give more than 10,000 in cash. You gotta have all these auditing procedures in place. And, you know, they go through these handbooks and they write up a report at the end of a week or two and say, yeah, this bank is doing okay, or This bank isn’t doing okay. We better put it on a watch list.

James Huber (11:13):

Mm-Hmm. <affirmative>.

Patti Murphy (11:14):

And that’s really the, you know, that’s one of the reasons why people, like, um, why am I pulling a a a blank on this? The, uh, the congressman who passed the, uh, Durbin Amendment, Senator Durbin, right? It’s the reason why Senator Durbin and people like him get so far, because there’s nothing out there that really regulates credit cards. Credit cards are a consumer issue. They’re also a small business issue, which is really kind of a consumer issue as well. You know? And, you know, this is one of the things that, that, that worries me and I think should keep some people up at night in this business. Nobody expected the Durban Amendment to be passed, because basically it got slipped into a very big piece of legislation late at night when nobody was watching. The same thing could happen with the credit card competition act.

James Huber (12:21):

Yeah. And that, that’s concerning. I mean, I, there’s that, the Durban Amendment exists. I like it. I’m happy that there is some regulation because, so they know we exist. We know that, you know, trillions of dollars aren’t just, you know, totally blind to the people that are, you know, supposed to be keeping us safe. And I’m happy there’s something there. I like that Mr. Durbin has enough power. You know, I think during Covid when they were saying, Hey, we’re gonna jump, jump the rates, Durbin said, you’re gonna what? And they said, oh, nevermind. Nevermind. Yeah. Yeah. And, um, but I agree. I think I was on your and James’s podcast, James Shepherd’s podcast, when the credit card competition act first came out Mm-Hmm. <affirmative>. And we’re going, this thing is a nightmare.

Patti Murphy (13:13):

Oh, oh. Absolute nightmare. I mean, they don’t, the thing that blows my mind is that whoever wrote the law didn’t really understand how the system worked.

James Huber (13:24):

Right. You

Patti Murphy (13:25):

Know?

James Huber (13:26):

Well, I like, the part I liked about it was that it seemed to want to break up the Visa and MasterCard monopoly. Right. I think we all all agree. Everybody in the industry will agree that Visa in particular has a humongous monopoly Yes. On credit cards. That’s a yes. Yes. I have a, I, we’re, we’re, we have our class action against Visa, and they’re going, what are you talking about? Right. There’s tons of other networks, <laugh>.

Patti Murphy (13:55):

Yeah. Sure. Not as big as you are. Right. <laugh>. Right. You know, James, do you remember, you may not remember this, but years and years ago, there was a show called Rowan and Martin’s laughing. And Lily Tomlin would play a telephone operator. Yeah,

James Huber (14:11):

I do remember that. Yeah. Remember

Patti Murphy (14:12):

That? And she would always mess everything up. Mm-Hmm. <affirmative>. And, and her line would always be, we don’t care. We’re the telephone company. Right.

James Huber (14:21):

Right.

Patti Murphy (14:22):

I think of Visa sometimes about that. We don’t care. We’re visa. We’re so big. We, that’s a perfect analogy. We run everything and everybody has to do what we say they have to do.

James Huber (14:34):

And when we say, I mean, you said it, the banks are governed by their own internal rules that most of us haven’t seen. Right. I can sometimes get them through a subpoena, but Visa’s rules, it’s largely the same thing. It’s just self-governance and these rules, you know, I always talk about, I’m reading through and I’m like, oh, I finally found what I’m looking for. Oh, but this only applies to the Crimea region or

Patti Murphy (15:01):

Right.

James Huber (15:02):

In Australia. Right, right. And when I had, we did a presentation with, uh, Rob Johnson from Visa, Uhhuh <affirmative>, and we’re all beating him up saying, Hey, this surcharge cap is ridiculous, and stop fining people. Like, just let us surcharge debit cards and raise the rate a little bit and we’ll be cool. He is like, well, you know, what we’re gonna do is we’re gonna rewrite the, the card brand rules. And it’s like, great <laugh>, because nobody cares about the card brand rules. I will walk into a court, a courtroom, and judges at trial be like, well, your Honor, they’re violating the card brand rules.

Patti Murphy (15:37):

And they’ll say, who cares?

James Huber (15:38):

And they’ll say, if it were illegal, they’d be in jail. It was like, well, these are the only rules that exist. These, those are the only what.

Patti Murphy (15:46):

Right, right. And that’s the thing. It’s, it’s, it’s, it’s been an industry that’s been running rampant for years and getting your arms around it. It, it become, I that’s what I mean in a way. I, I like Durbin because he is trying to get his arms around it. It’s just that the people he has doing the work don’t understand how the system works.

James Huber (16:07):

Yeah. No, I agree. And it’s so interesting because everybody, I think every single person I’ve talked to has said, no, this is a nightmare. Oh. Who has any, any knowledge. So I just wonder who’s helping him. You know, why not call? I mean, obviously he should just call me. But, um,

Patti Murphy (16:25):

Well, yeah, obviously <laugh>, you know,

James Huber (16:27):

He hasn’t, I’m waiting spend every day waiting for him to call

Patti Murphy (16:30):

Stand by the phone with bated breath and, uh, hope that he does. But

James Huber (16:34):

Yeah, he doesn’t. Uh,

Patti Murphy (16:35):

But you know, there’s another thing in Washington I think people are, are probably may or may not be familiar with, which is the debit interchange issue, you know? Mm-Hmm. <affirmative> debit interchange is something that is regulated right now. And the Fed is proposing what I would call a buzz cut or maybe a buzz kill <laugh>, um, that would lower the permissible cap, um, to 14.40 cents down from about 21 cents. That’s a significant, that’s a significant haircut. Um, you know, and it apply. It would, and this is the other thing that, that also I find interesting. Debit interchange regulations apply to any financial institution with more than $10 billion. The new credit card competition act is gonna apply to any financial institution with more than a hundred billion dollars. So as time goes on and banks get bigger, the limits on regulations keep going up.

James Huber (17:42):

Mm-Hmm. <affirmative>,

Patti Murphy (17:44):

I don’t know about you James, but a $10 billion bank is still a pretty significant bank in my, in my book.

James Huber (17:51):

Yeah. They can probably keep my $11,000, but I’m sure what, uh, can you explain how that cap will work? Who does that affect? Is it just the bank? Is the card holder get any benefit?

Patti Murphy (18:02):

The card holder isn’t getting any benefit. Only the merchants getting any benefit from that, and the bank is being screwed by it because the bank is used to getting the debit interchange. It’s the reason why banks handed out all those debit cards back in the eighties and continue to hand out those debit cards. Because every time you and I go to an ATM or use it at a, at a supermarket, they’re getting some interchange. And right now they’re getting about 21 cents interchange. If it’s a debit card drawn on, say, B of a wells chase, um, Citi, any of the really big banks. Right. Um, if it’s a smaller bank, if it’s a credit union, the sky’s the limit. Right. They can, they can charge as much interchange as they feel like.

James Huber (18:53):

And who is it if, if it’s just on the debit rail? So if I don’t use my pin, am I still on the debit rails?

Patti Murphy (19:00):

No.

James Huber (19:01):

So I get kicked off, so I have to punch in my PIN to, for the bank to really benefit, because that’s way higher than they get on the credit card side.

Patti Murphy (19:09):

Way higher. Way

James Huber (19:10):

Higher. What, what do they get on the credit card? Side 0.0003%?

Patti Murphy (19:16):

Yeah, maybe, or maybe maybe 30 basis points.

James Huber (19:20):

Right. So, so for the, the debit network, I mean, every single card in my wallet has debit capability. Mm-Hmm. <affirmative> minus, I mean, I think my credit card has it too, but that’s separate. It’s the,

Patti Murphy (19:36):

You know, isn’t that usually like a, what do they call it, a cash advance or something?

James Huber (19:40):

Yeah. So every card has a pin associated with it. Yeah. I think that you can do a cash advance, but nobody should be doing that on their credit card ever. Um, but so all of my cards are debit enabled. And what are people talking about of, we wanna stop the banks making so much money when these are the banks, the, the 10 billion ones that are collapsing.

Patti Murphy (20:06):

Yeah, exactly. Exactly. You know, um, they’re just really, and it, and it kind of reminds me of, of back in the 1980s when the, when the thrift for collapsing, it’s like, we’re just making for bigger and bigger banks up on the top because, you know, those

James Huber (20:29):

Banks do you think they’re trying to do here? They’re trying to centralize banking.

Patti Murphy (20:33):

I don’t think that’s exactly what they’re trying to do, but I think that that could, that could happen. I don’t think it’s a plan, but I think it could happen. Let’s see. I mean, let’s face it James, we have 10,000, at least 10,000 financial institutions in this country. What do they have in Canada? 12.

James Huber (20:52):

Right?

Patti Murphy (20:52):

Six in the UK maybe. I mean, 10,000 financial institutions is a lot of financial institutions. I’m not saying, you know, 9,500 should go away, but maybe something fewer than 10,000 is gonna, is gonna be what we’re gonna end up with.

James Huber (21:13):

But who, how, how does that benefit anybody? Isn’t that having a broader marketplace? I know that when I, you know, we love our little credit union over across the street, and when I go buy a car, they’re like, you know, Hey, I got pre-approved online and this and this and this. And the bank go, they go, oh, wait. Here. No, we run it through. We have this relationship with the little bank of here’s a lower interest rate. Just take the car, basically.

Patti Murphy (21:39):

Right, right. Yeah. No, I, I, I agree with you. I don’t know, I don’t know who’s gonna benefit from this, but I think credit unions are gonna be the last to go because they are the people’s bank.

James Huber (21:52):

Right. Right. So, you know, let let the, I mean, some of the, some, some banks, I don’t wanna say every bank, a lot of banks that we see, they have no idea what they’re doing. Mm-Hmm. <affirmative>. And particularly related to payments we run into big surprise. We run into the banks that don’t know what they’re doing. ’cause they’re the ones involved in litigation. And it’s kind of an afterthought because for a long time and it’s starting to change, but the banks weren’t even making that much money off of being, this is from the sponsor bank perspective. Mm-Hmm. <affirmative>. Um, it’s, they’re starting to change. ’cause I think they’re getting wiser and they’re seeing that, you know, there’s actually a bunch of liability, but a bunch of the big guys are gone. Is there any conversation I, I don’t wanna say at your level, but what, where you’re watching related to the bank’s participations in the payment network, in the electronic payments industry?

Patti Murphy (22:47):

No, there isn’t. Uh, the, the conversations I’ve heard, and it’s, and this has been a few years, is more reticence. Yeah. They don’t wanna get caught up in, in, in all the quagmire. You know, it’s like, look at let’s city, let’s chase, let all those big guys take care of it, because it’s too much of a hassle. We, when you have things like chargebacks, when you have things like visa, MasterCard, regulations that you gotta fill, when you have things like Senator Durbin trying to regulate, you know, further regulate the industry, would you wanna get into, into a business like that?

James Huber (23:28):

Not a, not as a sponsor bank. I mean, if I’m sitting on the board, I’m going,

Patti Murphy (23:32):

No way.

James Huber (23:33):

Yeah. You’ve gotta be, you need to be really selective. One of the issues I think for these banks is they’re looking for ways to make more revenue. Right. Because what we’re talking about is the bank, they’re getting squeezed. Yeah. And so they’re, you know, so and so sees, you know, the guy pull up in his Ferrari to the golf course. He’s going, what are you doing? He’s like, Hey, I’m in the payment space. You know? And he is going, Hey, well, hey, I’m, you know, vice president of a bank. Where’s my Ferrari?

Patti Murphy (24:04):

I think I’ll go get a Ferrari. I think I’ll go get into the payments and get a Ferrari.

James Huber (24:09):

And they think they will. I mean, we see this a lot of times is they like it, it looks sexy. There’s lots of money. It’s cool. You know, it’s, it’s every, but

Patti Murphy (24:17):

It’s a whole different way of working from being a banker James. Right. I mean, bankers sit behind their desk and they wait for people to come to them.

James Huber (24:26):

Right. And it’s stuffy and it’s boring. And now, you know, we don’t have any more iso clients. They’re all FinTech companies, right? So now we’re in FinTech and you’ve got a Ferrari, and let’s do it. Oh, let’s go to this conferences that aren’t banking conferences.

Patti Murphy (24:41):

Oh, and by the way, there’s Neobank, let’s not forget Neobank, you know, the whole concept of, of piggybacking, you know, on the banking system so that you can have a totally online bank that’s ah, right, that’s a hot, that’s a hot topic these days because they, you know, they don’t have any of the brick and mortar investment necessary. So they can offer far better benefits.

James Huber (25:09):

I, I never want to go into my bank. Actually, I haven’t been into a bank for year. I think our bankers, they come to us now because they probably know I’m going, I’m outta here.

Patti Murphy (25:19):

I had, I had to go to, I had to go to my bank for something, a

James Huber (25:23):

Lollipop.

Patti Murphy (25:24):

My, yeah. My credit union for something. I can’t remember even what it was. It was about a month or two ago. It was during working hours and the door was locked. Oh, <laugh>.

James Huber (25:34):

I bet it was.

Patti Murphy (25:36):

I I was like, you know, then they saw me and they unlocked it and let me go in and get whatever it was that I needed to get. But this was like, not even in a bad hard town. <laugh>, <laugh>,

James Huber (25:48):

You know, they saw you coming.

Patti Murphy (25:50):

<laugh>. Yes. That’s it. Here comes Murphy here. I got

Jeremy Stock (25:54):

A quick question for you, kind of from coming from a, a perspective maybe that from the listeners you’re mentioning that the banks are getting the squeeze here. We see on our end a lot as well, Patty, the merchants definitely get the squeeze.

Patti Murphy (26:07):

Oh yes.

Jeremy Stock (26:07):

Who’s winning here? Is it just Visa and MasterCard? Who are the winners in this situation?

Patti Murphy (26:12):

They are the only winners. And in fact, it’s funny, I tell my friends who are investors, you know, invest in Visa, invest in MasterCard, invest in PayPal, they’re recession proof. You’re never gonna lose money because all they do is make money.

James Huber (26:29):

That’s it. I mean, it’s one of the reasons that we, you know, ever since Covid, when we saw that electronic payments truly is recession proof. Right. You know, we, we started our firm in the payment space during, uh, the last big re either the financial crisis of thousand eight Mm-Hmm. <affirmative> and payments was still booming. Right. It was fabulous. And you know, Chris, Chris and I were hilarious. ’cause we’re sitting here and they’re like, recessions coming recession. And we’re like, come on, recession

Patti Murphy (27:00):

Great

James Huber (27:01):

For payments. Anytime there’s change, our firm does really well. Right. Because it’s a shift. You know, even the, you know, we’re huge. We’re very much against the surcharge cap and how they’re enforcing that. Right. But that happening has created a ton of disputes. And, you know, we’re all of a sudden important. And it’s one of the, the big issues in the space that we’ve been talking about is so under-regulated, you know, when I was, again, when I was talking to the Visa guy, Rob Johnson, he’s like, look, you know, we can all agree we don’t want regulation, but all of us out on the street, we do want regulation because we wanna know what rails to operate within. So that, again, my attorney can tell me to break them. ’cause right now, my attorney’s just telling me to break non-existent rules.

Patti Murphy (27:48):

Right. And, and, and, and, and at least, at least you have something that you can, that you can look at and say, okay, I’m doing what I’m supposed to be doing. Or instead, what you have is, I’m just gonna go about business. And all of a sudden outta nowhere, visa comes and goes, whack. Nope, we can’t do that.

James Huber (28:06):

Yeah. Or the DOJ we’re discussing briefly, and this is probably a topic for another day, but they just came down on a company that was, you know, had, you know, fake accounts and they’re load balancing. Right. Maybe selling real products, maybe not. But that’s not, I mean, it’s, it probably is money laundering, but it’s, it’s so widely done in this industry that it’s going, look, if somebody will tell me that I can’t do this Mm-Hmm. <affirmative>, I will. Mm-Hmm. <affirmative>, uh, I will not do it. Or I will do it with the awareness that, you know, I better have, you know, my Bahamas bank account and the chopper on the roof ready to go, um, <laugh>. Because otherwise, yeah, these people, they’re, they’re, they’re working hard and they’re doing this and they’re, you know, making money and, you know, supporting people without knowing what they’re doing is even wrong.

Patti Murphy (28:59):

That, James, let me just turn this around a little bit since we know that I am an interviewer by nature, but something else that’s been going on in Washington that’s been talked about a lot is junk fees. I, I feel that that could hit our industry.

James Huber (29:17):

I, I think it could. Right now it’s, they’re kind of, they’ve, they’ve said in the beginning they were saying no. Right. We’re not going there. Right.

Patti Murphy (29:26):

But

James Huber (29:27):

The thing with ju, I mean, the way I look at junk fees, the best example is Ticket master. Right. It’s always different. I don’t know what’s in there.

Patti Murphy (29:36):

Never know what you’re gonna pay. Right.

James Huber (29:38):

You have no idea what you’re gonna pay with our fees, not the law firm’s fees, but in our, our industry. Right. It’s, you know, 3% interchange here where the problem is. Yeah. I see some sales organizations selling a lot of junky fees. Right. What, where it absolutely could go interchange.

Patti Murphy (30:01):

Yeah. Yeah. There’s a

James Huber (30:03):

Hundred. Last time I checked it, it was like 10 years ago. There’s 173 different interchange levels. Yeah.

Patti Murphy (30:08):

It’s, it’s a lot more than that now.

James Huber (30:11):

But they’re, you’re bundling it, but you’re not. So, you know, when we get into a lawsuit and I go, you know, Hey, you’re padding the fees. I don’t know what I’m doing. You know, I don’t know what I’m paying. You’re paying me incorrectly. I am always correct. Because by design, you know, the, the best example is the kilobyte fee. Right. It’s a dynamic fee that’s constantly moving. Right.

Patti Murphy (30:35):

And

James Huber (30:36):

They will say under oath, we estimate it.

Patti Murphy (30:39):

I know. Isn’t that I, I <laugh>, that always blows my mind. That’s, man, that’s, I have a, I I have a rental unit on my property. And so I had somebody put in a little kilowatt reader so I could charge them, um, usage. So I didn’t have to pay both electric bills. I finally threw my hands up on that. It was like, wait a minute, this, this number in no way. <laugh> corresponds with the number that’s on my bill. Right. And then I been arguing with them for about two years, James. And Yes, not yesterday, last week I got a bill from the electric company for $6 and 97 cents. <laugh>. Guess they figured out finally <laugh>. Yeah.

James Huber (31:24):

That’s great. Yeah. Yeah. I, I could see it. I could see it getting there. Uhhuh,

Patti Murphy (31:30):

<affirmative>. Um,

James Huber (31:32):

And that, that would be scary.

Patti Murphy (31:34):

Yeah.

James Huber (31:34):

But I don’t think it would, don’t see it going to the high level of affecting what you said. You know, the guys that are Teflon at the top, because they spend so much money lobbying. I think that that is 99% of the reason that there is no regulation. Originally we were going, it’s too complex to be regulated like Guy. I mean, even the guy that tried to, and

Patti Murphy (31:56):

I think originally it was too complex, but then it became too profitable.

James Huber (32:02):

It became too, too profitable. And it’s also now common knowledge. I mean, COVID was great for the industry in a lot of ways. ’cause now people understand, you know, when I go in the courtroom, an old judge will be like, why don’t you guys just use cash? I don’t even use my credit card. But now everybody’s used it. Everybody understands that small, small businesses pay these fees. Mm-Hmm. <affirmative>. And people

Patti Murphy (32:24):

And, and big businesses pay to keep the fees where they are.

James Huber (32:29):

Right. Right. And Visa and MasterCard pay to keep their fees exorbitantly high.

Patti Murphy (32:36):

Yeah. I, um, I, last summer, a friend of mine asked me to edit a book and that he was writing on a, a, a, it was the Check 21 act. That was the, the legislation that Electronified checks. And he had a whole chapter in there about lobbying. And it was his first attempt, it was his first shot at lobbying, and he was just mind blowing. He was like, they took us out on cruises. They had these big state dinners for us, this is just a, this was just a small piece of legislation. James, imagine if, imagine if suddenly a new regulation came out that was gonna affect Visa, MasterCard, can you imagine the whining and dining that would go on?

James Huber (33:28):

Oh, I’m sure. I’m always curious about that. I was like, what? Because you took me on your boat and you gave me food. I’m gonna do what you say.

Patti Murphy (33:37):

Yeah.

James Huber (33:37):

I, I, I’ll sell out real quick, but like, you’ve gotta put a bag of cash.

Patti Murphy (33:42):

Right. You and me both, bro. Yeah. I think the one other thing that’s interesting is how much, how closely Congress is looking at some of these big deals involving banks, namely the Capital One Discover merger deal.

James Huber (33:58):

Yeah.

Patti Murphy (33:59):

Um, you know, Senate Majority Leaders, Schumer has already raised concerns. You know, I, you know, this, I think this could be good for competition, frankly.

James Huber (34:09):

I think it would be great. I don’t, I’ve never even seen a Discover Card.

Patti Murphy (34:13):

I actually use my Discover card more than almost anything else I use because it has the best rewards of anything.

James Huber (34:20):

I’m sure it does. And that’s why I can’t get one in my wallet. But yeah, no, I think that, I mean, capital One is a huge player. Right. And I think it’s great. I think that they should be pushing this up, but guess who’s pushing it down?

Patti Murphy (34:34):

Yeah.

James Huber (34:35):

The bad guys.

Patti Murphy (34:36):

The bad guys. But you know, if you had to discover Cap One that actually would make that credit card competition act far more viable,

James Huber (34:48):

It

Patti Murphy (34:49):

Would because Discover has the rails.

James Huber (34:51):

Yep. Yeah. No, yeah. Then it would, yeah. Okay. So then, yeah, let’s prop discover up. I mean, my thing, I like to, you know, be angry at Visa mostly a lot. But there is, it is pretty cool to be able to walk up to something and pop my phone, I’m told. Oh, yeah. Oh yeah. You know, you’re not even gonna need to get outta your car to get gas soon. Yeah,

Patti Murphy (35:16):

Yeah, yeah. And I have to admit, I, you know, take, take, taking my card, touching a soda machine and having a can of soda come out the first time that it happened in an airport, my mind was blown.

James Huber (35:29):

I love it. And it is cool. And it’s, I mean, one of the reasons we really love the space is it’s always changing and people are getting smarter and thinking about it. I

Patti Murphy (35:39):

Don’t know how that is exactly why I love this space. I have friends that say to me, you know, 40 plus years you’ve been writing about payments. Why? And I said, because it constantly changes. There’s always something new that I get to write about and learn about.

James Huber (35:56):

And I, I hear, I know that MasterCard puts on like, you know, uh, where they, you know, give out grants to tech companies Yes. And stuff like that. Does Visa do any of that? Yes, it does. Oh, they do it too. All

Patti Murphy (36:10):

Right. They both do it. And in fact, they’re both very good also at working with the, um, underbanked, not necessarily in this country, but in India and places like that. They’ve been really, um, contributing a lot to building some of those networks for obvious reasons. Right. Uh,

James Huber (36:27):

<laugh>. Yeah. But

Patti Murphy (36:28):

Not, but the fact is, is that, that they’re

Jeremy Stock (36:30):

Not altruistic Patty. They’re not just doing that at

Patti Murphy (36:32):

Altru. Not, not, I don’t think so. <laugh>. But, you know, the fact of the matter is, in a lot of these countries, there was no way to exchange value for merchants and customers to exchange value. They couldn’t carry cash around all the time.

James Huber (36:53):

No, no. I know. What, what’s the one in Africa that took off? Gangbuster?

Patti Murphy (36:57):

Uh, yeah. Uh, ke Kiva ki no. Yeah. Uh, ke K something.

James Huber (37:03):

Yeah. And they, all of a sudden, people are going, oh my gosh, I can buy and sell stuff

Patti Murphy (37:08):

Without K Penza. I think that’s what it’s called. Right? Cape Penza. Yeah.

James Huber (37:11):

Without literally going and trading a goat. So

Patti Murphy (37:14):

I, um, there was a, there was a guy that ran an ISO down in Texas about 10, 15 years ago. Went to India and built one of those networks. Yeah. Like, call me from India. He’s like, Patty, I’m making more money over here in India than I made selling merchant services in the us.

James Huber (37:31):

I bet. Of course. Um, well, Patty, thanks for coming on. Any closing thoughts? Anything we need to know that’s, you know, gonna come attack us from right field?

Patti Murphy (37:41):

Uh, the only thing I can say is, listen to the Merchant Sales podcast, please. <laugh>. Yeah,

Jeremy Stock (37:48):

Please. Patty, would you tell our audience how can they find you? How do you want them to, to,

Patti Murphy (37:52):

To see you Sure. Find you online, et cetera. Anytime you ever What I do is I, uh, you know, I’m a writer by profession, so I do a lot of writing for people in addition to, you know, to the Green Sheet. If you’re interested in getting ahold of me, Patty, P-A-T-T-I at proscribes, inc. Just like it sounds. P-R-O-S-C-R-I-B-E-S-I-N-C, although I usually do Proscribes Inc. With a k just because it looks cool.

James Huber (38:22):

Um, that does sound cool too. <laugh>.

Patti Murphy (38:24):

Yeah. When I’m talking to people. Right. Like, put it on the letterhead just so it looks good, but yeah.

James Huber (38:30):

Yeah. Awesome. Thank you so much. Thank you

Patti Murphy (38:33):

So much. Hey, love to do this

Jeremy Stock (38:34):

Again, guys. Yeah. Great conversation. You got it. Thank you, Patty. Thank you for listening to this episode of the Payments Experts podcast, a podcast of global legal law firm. Visit us online today at global legal law firm.com.