PEP Episode 042 — The Future of ISOs: Adapting or Dying? | With Special Guest David Leppek of SignaPay

Introduction

The traditional payment processing landscape is undergoing seismic shifts, and this provocative discussion with David Leppek, CTO of SignaPay, examines what many in the industry have been whispering about: are Independent Sales Organizations (ISOs) facing extinction?

Major processors like First Data and Fiserv have been systematically pushing out their ISO channels, preferring direct relationships with software companies that now serve as the true acquiring partners. This consolidation creates a troubling gap in merchant services – who will advocate for higher-risk merchants when ISOs disappear? The legal experts at Global Legal Law Firm alongside Leppek explore how this shift might drive legitimate businesses underground or toward less regulated payment methods.

The conversation delves into card brand policies that increasingly favor issuers over acquirers, creating fundamental conflicts of interest in how payment disputes are handled. A fascinating case study emerges around Visa’s acquisition of Verify, which transformed a free chargeback prevention tool into a $45 per inquiry service – effectively killing a product that helped merchants avoid costly disputes.

Cryptocurrency looms as a potential disruptor, though the panel debates whether its limited adoption after 15 years suggests inherent limitations or active suppression by incumbent payment networks. As one panelist memorably puts it: “My worst investment was getting into crypto. My second worst investment was selling it.”

For payment professionals, merchants, and financial technology innovators alike, this discussion illuminates the power dynamics reshaping how money moves in our economy.  The future of payments may depend less on technology than on who controls access to the networks where value is exchanged.  Ready to navigate the changing payments landscape? Subscribe to the Payments Experts Podcast for more insights on how legal and technological shifts affect your business.

Transcript

Chris Dryden (00:00):

We used to fight about this all the time. People will ask me questions like what, blah, blah, blah, blah, crypto. And I’m like, ask James, because I’m just not into it. I don’t see it. And most of it was because it was speculative, but he would say, oh yeah, it’s doing really well. And I would say, yeah, what can you spend it on, bro? Its not fungible at all. Where are you going to spend it? That’s great. That’s a bigger number in the ledger.

Jeremy Stock (00:24):

Woo. You did okay. In the end though, James,

James Huber (00:28):

What I say is my worst investment ever was getting into No, my second worst investment was getting into crypto. My worst investment was selling it. Yeah, totally.

David Leppek (00:41):

You don’t own any crypto any longer,

James Huber (00:43):

Only the stuff that I can’t get out.

Jeremy Stock (00:48):

Welcome to the Payments Experts podcast, a podcast of global legal law firm. We hope you enjoy this episode. Today we have in studio managing partners of the law firm, James Huber, as well as Christopher Dryden and special guest joining us remotely. David Lepe, chief Technology Officer at Cigna Pay. David, welcome to the podcast.

James Huber (01:16):

David, when we were talking, you sent over, we were banging around topics on this and actually the one that stuck out to me is you said death of an iso. Does the ISO still exist? From our perspective, yes, because it’s 90% of our clients, but over the last couple years in particular, this is what I’ve been saying with First Data pushing people out, card Connect, continue to push ’em out. It’s weird that the biggest processor in the world seems to not care at all about their entire Salesforce.

Chris Dryden (01:52):

Yeah, I think that’s the acquiring partner today is the software company. So the question becomes why do I need a salesperson for the software company? Maybe, I don’t know. Really interested in your take on it for sure.

David Leppek (02:05):

Well, 90% of your customers, it’s a hundred percent of my experience and career, but it demands some attention because Tesis is now 99% direct competitor with their ISOs. Fiserv, as you said, have been essentially eating their lunch forever.

Chris Dryden (02:29):

Yeah, no, no, no. We saw a long time ago where it was sort of like that when payment tech split apart a long time ago and First Data took the ISO channel and then they just jettisoned it off and nobody wants an ISO these days. And what do you think that the cause potentially is for that?

David Leppek (02:50):

Well, I mean the, cause everybody’s swimming upstream. The problem is, is that each one of us, as we sell our ISO end up saying, let’s go ahead and start it over after we’ve waited off a non-compete. And when we do it, we’re finding that it’s harder and harder to go ahead and strike the same kind of deals because they just don’t exist anymore.

James Huber (03:09):

Right. Yeah. I mean, I’ve seen it in anybody who wants to be A FSP agreement, the Fiserv FSP agreement. I look at people, I’m go, why would you even sign this? The pricing’s horrible retail deals better than this, but they want to be able to board their own merchants. So we’ve been looking at clients who are sitting on an old first data, fine, let’s call it a first data agreement, and I’m going, this is worth a lot of money if you can do it. But then they get in your way and they don’t even really let you do that either.

David Leppek (03:43):

You’re exactly right though. You’re almost at a point where you have to seek out the legacy agreements that you can still kind of backdoor into.

Chris Dryden (03:50):

Yeah. I actually see that I work on the transaction side and where people have had a difficulty, especially technology getting direct deals, they’re starting to buy their way into the market just to directly board. And the interesting part is that historically it’s, Hey, I want to get into an FSP agreement, wholesale iso, I want to carry risk. Now it’s gotten to the point where I want to buy a retail ISO just so I can board because I can’t get a direct deal.

David Leppek (04:18):

It’s the old story of buying a bar just to get the liquor license.

Chris Dryden (04:23):

Yeah, totally. I guess my question would be is what do you see as market forces really pushing that you have the benefit of working, what I call having worked inside? I mean, you have a much better perspective and view of the upstream entities than James and I do because we’ve never had the benefit to work directly for them. We’re always on the other side of the fence, and so we can only surmise a lot of times in how things operate or what they look like on the interior. But having had that perspective and knowing that entity a little bit better than we probably do, what do you think is really driving that?

David Leppek (05:05):

I think each one of these companies have their own ideal client, and as that client evolves with their capability and the various channels that they’ve purchased or pursued, it becomes more and more difficult for the historic guy to come in and say, I’m just going to go ahead and set up a brand new deal and start with relatively little capital to do something that isn’t just very focused on one particular vertical.

James Huber (05:34):

Yeah, I’ve seen that of a lot of preferential treatment of we’ve got our guy, this is our honeypot, we’re betting the farm on them. And I’ve seen that from the banks in particular. Even the banks that were big for a minute got in a whole bunch of trouble. They’ve said, I just like this person here and we’ll sit here and be like this person. They’re the one that caused all the issues. They’re like, right, but we made a whole bunch of money and now we’ve increased their prices. And I mean, the nice part is everybody’s getting better over time at limiting liabilities and things like that. Getting good merchants in, getting the bad merchants in, but making ’em look good and things like that,

Chris Dryden (06:18):

Or bad ISOs in and learning underwriting and risk associated with particular verticals. I mean, we’ve seen banks literally take on an ISO with a lot of over promise, under deliver just to glean the system that they use in the vertical that they primarily focus in.

David Leppek (06:41):

I think I know exactly what you’re talking about. You

James Huber (06:44):

May, yeah. Yeah. We’ve seen that a couple times and I’ve actually been warning people a little bit about this of like, yeah, they’re promising you everything. They’re going to keep you on here. But I would think, I always kind of wondered the banks, well, banks don’t like to really do anything except for lend money, but I’ve always wondered why they’re not capitalizing on this more. They could be making so much more money and they could be doing it themselves because the rules say they’re actually supposed to be doing everything or a whole lot more than they do, and they just outsource it all to these people, to the ISOs. And I’m wondered, are the banks moving that direction? Is that one of the reasons?

David Leppek (07:23):

Well, if you think about the history of why an ISO exists in the first place, it’s because of the fact that the bank isn’t a very aggressive business. Having once worked for a bank myself, I remember reading D Hawk’s book on the creation of Visa that this is a place where a lot of people go to retire. You take a job at a bank and you just sleep the rest of your life. I am not that type of person, so I didn’t last very long at a bank. But a lot of times, I think the reason the ISO is chasing these different verticals is because the banks, right? The bank has the capability to do it. There aren’t a lot of banks that have the appetite to do it

James Huber (08:07):

Right. I think another problem for the ISO is a huge problem, and we don’t have to get too far into it because we talk about it a lot on this podcast, is it’s not just the lack of getting good terms for let’s say, a startup iso. There’s also a whole bunch of other things, but one of the biggest problems that the ISO is having right now, and it has always been the problem is where to make their margin. And with the surcharging and the cash discounting rules, making it way harder to make a margin. I guess where I want to go with this is what does it mean if the ISOs can’t survive? What happens to the industry?

David Leppek (08:49):

That’s a great question because as these processors are going upstream and they’re building more and more direct feature functionality, as software becomes more a component of it, you get more of these entities that are just looking for the merchant to come self sign up. I tend to bet on the entrepreneur that they’re going to come up with better ideas and better ways to go ahead and re-skin a business model in a way that draws more attention. And so I guess optimistically, I don’t believe that the ISO ever will die, but I do believe that people are actively working in a way to try to limit the ISOs opportunities.

Chris Dryden (09:33):

I always go back to the fact that if you look to see in the progression of the ISO, how it went from sales to more full service, I still think that there’s a lot of those ancillary services that go with the processor relationship all the way down to the merchant where they just do it horribly in comparison to the merchant. And so unless you can see some sort of change as to, I mean, servicing is the big one, right? I mean so many times will Fiserv pick up the phone? Will the person have some sort of knowledge base or just be someone in a call center has no idea about what Fiserv really does? Can they really assist? How many people do they have to put that ticket up for a change to occur? We’re talking about electronic payment processing here when something, I mean, look at the Clover debacle, right?

Chris Dryden (10:24):

I mean Fiserv and Clover, it was a great idea, but at a certain point in time that Titanic ness of Fiserv got in the way of really adequately servicing equipment, which was necessary for a merchant to operate. And so I think where the opportunities have generally landed for the ISO is where the processor and the bank, but the bank doesn’t do much, but the processor just doesn’t perform well operationally. And so I still think that there’s always that place. I just don’t know how that stays coupled with sales to make sure that that component is there for true margin.

David Leppek (11:08):

Yeah, I mean, again, I believe that the entrepreneur is going to come up with the way to make a model that works, but it’s more and more difficult when you’ve got the consolidation throughout the industry that makes more and more of these technical solutions just part of the big animal.

James Huber (11:31):

I see a huge problem being that a lot of merchants won’t be able to get processing a lot of online merchants, well, every merchant’s online, but I’ve been told that Visa, they’re lowering the fraud caps. So you’ve got to have way more low risk business, but all the low risk business will go ISO probably start taking it at a loss leader, which a lot of people do already. But all that business is going to self sign up software and everything like that. And where the ISOs nowadays thrive is helping these underserved merchants who have trouble getting processing, they have a lot of chargebacks, they need help mitigating that, beating friendly fraud and things like that. So all of those businesses, I mean, there’s a lot of merchants out there that are actively looking for processing all the time, and they think they know how to run their business, but they don’t.

James Huber (12:23):

And so where the ISOs and the advertisers and the affiliates kind of fill the gap in there a little bit. I think 99% of the latter is actually a problem. But where the ISO has really strived is being merchant’s advocate, explaining to the banks, Hey, this business is actually okay. A lot of times we get hired for that of here’s the legal opinion letter of what these guys are actually doing is fine. They’re not transmitting money because they never take it, and things like that. So I think in that area, this could really hurt the economy in whole of you’re having a lot of people missing out on transactions, and when 75% of our economy is on consumer spending, this is something that you really shouldn’t be messing with.

David Leppek (13:14):

Yeah, no, I agree. But you make a great point. When you talk about Visa in particular and the rule changes that they’ve made to chargebacks, I’m not an expert on what those rules are, but as I understand it, they’re starting to combine it across the bid. And so a big aspect a lot of the ISOs have done over the years have been juggling and managing their bins with their individual bank relationships for chargeback to sales ratio. Well, now all of a sudden you’re being evaluated across the board. It’s going to make it that much harder for somebody to go ahead and facilitate the merchant that due to their industry or other idiosyncrasy is going to find themselves in regular problems, travel, for example.

James Huber (13:56):

And think of the banks that have the higher tolerance for that. They’re going to be out of the business.

David Leppek (14:02):

Exactly.

James Huber (14:03):

Or out of the business. They’ll still be in business most likely,

Chris Dryden (14:06):

Or it’ll force people to go underground. I see that as an issue too, where I watch all of these technology solutions backend into card payment acceptance through somebody like PayPal or Stripe, but there’s really a lot of merchant of record, whatever that term may actually mean. But there’s a lot of merchant of record aspects that are taking place where people are basically money transmitting, I mean far more than I think that they ever have before. And I see the lack of flexibility to allow merchants and ISOs a space to find processing being just another driver of people trying to find problems with the architecture and the system to circumvent it. And that’s not going to help things. I think they’re seeking compliance and what they’re going to get in return is a lot of people just trying to circumvent the safety protocols in there, and now all of a sudden you’re finding things that you never even dreamed of that we’re inadequate from a safety perspective or a fraud prevention perspective.

David Leppek (15:16):

Yeah, absolutely.

James Huber (15:17):

I mean, the agents, it’s a good point because let’s go down a level. The agent, their role is really the operator at the switchboard connecting the right people to the right place because there’s payment processing out there for everybody. Maybe not I, Coke dealers get processing anywhere. They might call it someone. Yeah, they might. But there’s processing out there for everybody. So you can’t, and I looked at you specifically why, but if they’re shut out of the system because there’s no margin for them anymore, there’s no way for them to even get an agreement. Again, the problem is you’re going to have people not having no idea how to start a business where to get the payment processing and then yeah, maybe it goes underground and it goes all to the North Korea cryptocurrency. This is a threat. By shutting down the ISOs, you are aiding terrorists.

David Leppek (16:26):

I love to believe that. That’s true.

Chris Dryden (16:31):

Me too. Well, it’s funny too, to touch back on something that James was talking about where you’ve got the real margin and what is being targeted by the ISO to make money. I saw for a long time it was understanding how transactions were processed and routed, and when we were talking about this, I loved it because you gave all of these subject matter topics of like, Hey, what should we focus on? And when I looked at it, I’m like, we should focus on all of this because I think all of it is relevant, right? I don’t know how deep we can get in a podcast, but I think touching on a lot of the subject matter you raised was really important, but you were talking about Durbin too, and did it miss the mark and is it really effective? And I agree with you, but I’d love to hear your thoughts on that a little bit more.

David Leppek (17:19):

Well, I remember Durbin one and how angry I was that they’re trying to make the argument that you can differentiate a regulated large bank from a non-regulated small bank for the purposes of a government regulated interchange category. What it did is it threw a bomb into the industry making everybody having to try to figure out a new way to go ahead and calculate how everything was going to go ahead and be billed, what the portfolio was, and at the same time, simultaneously encourage a merchant moving away from a more secure pin based transaction to a less secure signature based transaction where there are higher chargeback risks and other problems that come along with it. So the latest iteration of Durban two talking about having multiple credit channels for the credit industry, I don’t know where we’ve landed on it, but it’s just going to do the exact same thing. And if you are, remember when the first Durban amendment happened? Visa essentially said, Hey, it’s our ball. We’re going to take it and go home. Here’s fan enough, you can’t take 9 billion out of the ecosystem and expect that they aren’t going to make it up someplace else. And they ended up making 10 billion by going ahead and creating a convoluted billing mechanism that to this day, very few people still fully understand.

Chris Dryden (18:46):

Yeah, I came across something, it is a little bit of a transition, but I came across something recently that I was surprised at. So we were doing some surcharge analysis and there was some communications between Amex and a merchant about surcharging Amex cards. One, look, I’m not an Amex card holder. I didn’t realize that Amex has a debit card. That was something that was very new to me. I always thought that Amex was solely credit, but the interesting part was that amex, when I went and researched it may be exempted from Durban on that level, they were saying, oh, you have to surcharge all the cards uniformly. And I wasn’t even aware that they had a debit card, but then I also found out that they are, because they’re a closed loop system, they’re most likely exempted from Durban in regards to surcharging a debit card. But I thought that that was really weird because most people’s access to Amex is through the Blue program through traditional processing with Visa, MasterCard on the front end, and I thought that that was so strange that they could get exempted out through that program so long as it’s under, what is it, under a million dollars for Amex op Blue on a processing annually. But I thought it was strange that your direct salespeople don’t have the same ability as what they’re selling, who you’re partnering with. I just thought that that was really weird.

David Leppek (20:10):

Yeah, Amex has only had a debit card plus or minus some historical stuff in Europe since November of 23. And I would bet that if you were to take a list of all of the people who have an Amex debit card, 99% of them work for Amex.

Chris Dryden (20:32):

Exactly.

James Huber (20:33):

I want to circle back, just to be clear, when we’re just talking about Durban part two, we’re talking about the credit card competition act that’s being brought back up. And then I want to circle back even further is I don’t like the effect of the Durban one, but I liked the idea because at least somebody was touching this, at least we have one piece of legislation every time we give a presentation on what are the regulations that affect the processor and the ISOs and the card holders and this and that. The other thing, there’s a couple kind of related to banking, but there’s really only one.

David Leppek (21:14):

So you’re telling me you like regulation.

James Huber (21:16):

I love regulation. We’re attorneys if there’s clear rules. I love the clear rules because then I’ll tell you how to break,

Chris Dryden (21:23):

But that’s not true though. You’re talking, there’s only one attempt at federal regulation state regulations out there. I mean, California is crazy that we have something called the Beverly Song Act, which has been around since I think late 1960s or 1970, and that’s been regulating credit transactions for a long time, and it’s constantly updated depending on how the point of sale operates. I mean, there’s a ton of laws around it. And now with surcharge, I think that’ll expand. I don’t know if states will combine with one another to create some sort of uniform credit card or debit card processing is like they unravel the federal apparatus, but there’s other legislation out there.

James Huber (22:11):

Yeah, no, I’m just at the federal level. Yeah, there’s nothing, and the other reason I like it is he clearly sees that Visa and MasterCard are making way too much money and have a monopoly on it. Now, you can see how much money Visa in particular spends on lobbying, and I think they put just about everyone else to shame, and I always use the comparison for the NRA, but they actually don’t spend that much money Visa does though.

Chris Dryden (22:39):

Yeah, no, it’s

James Huber (22:40):

Insane amount. Every single state, every single level. And that’s why we are seeing that the state legislation, like New York, their legislation follows exactly what Visa says for Surcharging. And so we’ve made the argument in our complaint against Visa of they’re basically a state actor because they’re sitting up here, Strom the place.

David Leppek (23:07):

Yeah. Well, I mean, I think a lot of the original card brand rules fell along the lines of federal and state regulations, but then it reversed itself because when Visa was in a position of having to create rules that hadn’t been considered at the state and federal, they made up their own mind, and then they’ve gotten themselves into some trouble and having to back out of it and change it. And for years, visa would tell you we’re not the police, we’re not the Visa police. They would look for the bank to go ahead and enforce it, which I’ve always thought was a huge fallacy because as we’ve already said, the bank isn’t very aggressive about doing anything. So Visa’s coming into the bank and saying, here’s our program. Please package it up and put a bow on it. And then Visa’s mad that they’re not enforcing those exact same rules when they themselves aren’t aggressive enough to go ahead and pursue them. Right?

Chris Dryden (23:59):

Well, they do if there’s a profit motive for it. I mean, it is amazing how much pushback I get when I do an agent ISO agreement, and it talks about, oh, you’re responsible for all fines. Well, which fine? Is it the fine that was initially assessed and Oh, you won’t show it to me, and is it the amount or is it the one that you negotiate after you take the original amount from my residuals? Right. Yeah. I do believe that there’s a lot of things that happen behind the scene that we don’t have any sort of visibility on. That is a true look. If it’s about making money, they’re going to keep it hidden and they’re not going to say anything about it.

David Leppek (24:40):

Yeah, I think you’re right. I mean, we all know of multiple cases where maybe somebody was fined and it just never made the light of day, and if it did make the light of day, then it would stop it. I personally had an incident where a merchant was being fined for a credit card breach that was never actually breached. No money was stolen, nothing was ever lost, and yet Visa fined them. The ISO put them on Match, and the merchant was essentially out of business.

Chris Dryden (25:10):

Well, it’s the same focus with secret shoppers, right? I mean, a lot of people don’t know this either. G two, I think it’s wholly owned by MasterCard, and this is one of the primary tools to do rub crawling, to figure out are people actually in line with their merchant processing agreement? Are they subject to a ton of secret shoppers out there? And then the fines don’t necessarily correlate to what the offending behavior is. And so I always wonder how much money Visa is making outside of interchange with all of the extra, and I would say they’re ticky tack, but they’re really not. I mean, it’s pretty extensive.

James Huber (25:48):

Yeah, yeah.

David Leppek (25:49):

Oh, no, it’s very extensive.

James Huber (25:52):

Well, let’s go. When we’re speaking of these companies being owned, I think it’s actually a decent transition, and Jeremy was kind enough to put your topics. They’re taped all, there’s like five copies in front of us.

Jeremy Stock (26:07):

You’re

James Huber (26:07):

Welcome, James. Yeah, so I’m interested in this. We work, we deal with issues with merchants that have a whole bunch of chargebacks. Of course, being in the legal field, you wrote how Visa destroyed the rapid dispute resolution or RDR as we call it, by selling it through the acquisition of Verify. Yeah.

Chris Dryden (26:27):

Tell us what your opinion on that one. I think you’re right.

David Leppek (26:30):

Yeah, no, in the early days of VDMI,

Chris Dryden (26:36):

V-M-P-I-V-M-P-I

David Leppek (26:38):

Visa Merchant Purchase Inquiry, this was a free PI, we could basically essentially create a web hook, have a listener, and get notification that we’re about to get a chargeback, and then select industries. You could go ahead and process the refund and say, no, no, no, don’t issue the chargeback. We’ve gone ahead and refunded this chargeback and for select industries where the cost of the chargeback is higher than the cost of the product or whatever the case may be. There are all sorts of merchants that would rather have paid that fee to do that. When Visa released it, we were one of the ISOs that coded to it, and we sold it to our merchants as an advantage. About two years into it, visa starts coming back saying, Hey, we’ve decided we’re going to have to start charging for this. I’m sitting there raising my hand saying, how much are you going to charge? Initially they’re saying, 5 cents. Then I start asking, who are you going to charge? They said, oh, well, the merchant, you don’t have a relationship with the merchant. You have a relationship with the bank. Okay, we’re going to charge the bank. Well, does the bank need to do a contract amendment with me, the iso, so they’re being charged and I’m paying them. Eventually they buy Verify, and that 5 cents became $45.

Chris Dryden (28:00):

Yeah, the alert prices were psycho, right? I mean, just to get an alert, it was, yeah, 40, $45 for sure. Well, and it’s such a

James Huber (28:10):

Revenue driver.

David Leppek (28:12):

They bought Verify, and Verify had a revenue stream dealing with high risk merchants, so they had to go ahead and justify his cost structure, but the result was the only merchant that could continue to use this product now was one that was essentially committing some sort of horrible transaction, almost fraudulent that they could afford a $45 per inquiry cost. Basically, it killed the product for all of my merchants. We had to turn it off because everybody would rather pay a $25 chargeback fee than a $45 inquiry fee.

Chris Dryden (28:50):

I actually heard of what I’ll call sub ISO that we represent. They were trying to get RDR turned on for their merchants, and they wouldn’t turn it on. Their upstream vendor wouldn’t turn it on, and I didn’t know what that was all about. Is that something that now it’s being made unavailable in its entirety? Maybe

James Huber (29:10):

Because there’s blowouts on it and people don’t pay it?

David Leppek (29:15):

Well, not to mention, remember, visa considers the issuer above the acquirer, and so if you have an industry where one issuer is being targeted or a whole bunch of chargebacks that they’re not going to go ahead and get the benefit of and the price, they might decide you’re not qualifying entity for RDR.

Chris Dryden (29:36):

Yeah. Explain that. They favor the issuer over the acquirer. What does that mean more laypeople out there?

David Leppek (29:43):

Well, what I mean is that if an issuer through any of the processes for mitigation of chargeback 3D, secure VNPI or RDR end up costing the issuing bank more than the acquiring bank, they can just say, look, we’re not even going to let you qualify for this program because the cost to our issuing bank is going to be so high that it doesn’t make sense for us to let you enroll in this program.

Chris Dryden (30:13):

But doesn’t that show a a true conflict?

David Leppek (30:17):

It does. Aren’t you guys, the lawyers who tackle that?

Chris Dryden (30:20):

Well, we try, but I don’t know how many people listen to us on it. I’ve said this for years in the chargeback regime that it’s run by the card brands and there’s a cost. There’s a cost associated with it. There’s all these fees around chargebacks, and yet if the data was available, I guarantee you that it would be far skewed in the issuer or the cardholder’s favor. And my elementary logic to that has always been, well, how much money do they make on charging cardholders and how much money do they make on interchange? And there’s a disparity between those two things. And because of that disparity, there’s always been favoritism to the issuing side. Now, that’s just me talking. Do I have any proof of that? No, not at all. But it just seems logical to me that that’s probably what’s taking place. But I mean, I’m so far down into the weeds potentially on that. I’m not really sure if people even understand what I’m talking about. But I do think that it’s ironic that an entire section that is more prominent today than it ever has been of our financial services industries here in the United States is run by private quasi public actors who have conflicts of interest that are apparent on their face and nobody’s saying anything about

James Huber (31:43):

It. And it’s not just conflicts of interest. You’re promulgating fraud. You’re allowing it to happen. I mean, it’s gotten a little harder, but in five, 10 years ago, we had one case that was, we were just local counsel for American Express. The guy went on an $80,000 vacation across Europe, had him on video going into the hotels signature,

Chris Dryden (32:07):

Amex. It was Amex.

James Huber (32:08):

Amex, exactly going to hotels. And they were still, he’s still going, it’s not me. It’s not going to pay. And I think they eventually maybe pay some small amount of it too. He totally got away with it. So yeah. So you’re looking at that. They made all their money. What do they care? And I’m going, well, I have my card. You’re supposed to be protecting me. And so you could go under the guise of, oh, I’m protecting the consumers from fraud because you use your card and you should be safe. But what about all the businesses that are getting defrauded? We’ve got a client who just got destroyed, selling, not destroyed, he’s doing fine, but he is selling high-end products, and he got hit by a clear scam ring, and he’s going, Hey, I need my money back. And they’re going, tough luck to him when there’s the bank that failed, the processor that failed. Nobody caught this. And they’re like, well, why didn’t you catch it? And he’s like, well,

Chris Dryden (33:09):

How am I supposed to do that?

James Huber (33:10):

How am I supposed to do

Chris Dryden (33:11):

That? Yeah,

James Huber (33:12):

You guys have all the tools. You were the ones that knew there were eight card cardholders from the same bank, all buying things around the same time, like processor. You saw this.

Chris Dryden (33:23):

In fact, not only I’m contracting with you for those tools that you promoted yourself about, and then they just failed. But it’s my fault that they failed. And there’s no other game in town for people to go anywhere. I mean, look, this is a real segue into something else, which is when does crypto really take hold and why does it take hold? Because these are the exact reasons that people have really latched on to cryptocurrency and said, well, I don’t have to deal with all that bullshit.

James Huber (33:56):

Well, I don’t think I heard something the other day. I said, basically, it’s never going to happen. It’s been around as long as Uber, it’s around. It’s been around for 15 years, and people still aren’t using it for anything other than to speculate on its value.

Chris Dryden (34:13):

I think POS systems are starting to actually integrate it,

James Huber (34:16):

But no one’s using it.

Chris Dryden (34:19):

We’ll see. I mean, I think the big banks have to figure out where their place is with it.

David Leppek (34:25):

The early days of crypto, the problem were technical, getting consensus in a time that made sense. The fluctuating value of it, and I would try to equate this to anything else you trade. The only reason that the US dollar seems stable is because we’re looking at it from the perspective of the US dollar. If you were looking at it from perspective of the Japanese yen, it would be jumping all over the place. And so cryptocurrency looks to jump all over the place, so people look at it as a speculative resource. But the other problems are operational. Cryptocurrencies is like ether that allow contractual terms. I’m going to hire you to mow my lawn, but you’re not going to get paid until the lawns actually mowed mine satisfaction, things like that. Those operational things need to be properly vetted out before you can start baking it into a point of sale and other solutions.

James Huber (35:18):

Right? It kind of struck a nerve with me. I was all in on crypto in the beginning. I’m going, this is the future. This is great. And people were starting to buy it when it was going wham way higher. They’re going, great. I get to buy a free Tesla. My money went up. Oh, great. I can go to this business and no one in my family who looks at the bank statements will know what I did there and things like that. But hearing it’s been around as long as WhatsApp, I’ve been forced to start using WhatsApp right now. I don’t know why people can’t just text, but it’s fine. But Uber, same thing. People are using these, nobody’s using this for anything but gold. People use it. Ask my wife, everything else. People are actually using these investment vehicles. I mean like Forex, I guess you’re not using that, but that’s

Chris Dryden (36:21):

Betting. But you want to know something. It’s not used because the card branch shut it down. We have a client that is a tech guy, and he found a disparity between the exchange rate and Argentina, and he was selling in here and he was selling us digital coin and then selling it off to people around the world, and then they would convert it in Argentina, and the exchange rate was so beneficial. They were doing arbitrage off of it. And the minute that I think he was with Stripe, and the minute that they found out, it was like smack boom, done. And not only that, you owe us 5 million. I mean, it was kind of crazy, but the guy’s thought process was so entrepreneurial about, Hey, I see a weakness in the marketplace that I can leverage. How is that any different than the stock market?

Chris Dryden (37:13):

Right? Mean? But when he started to do it with currency trading because of the use of, oh, well now you’re a money transmitter. Hold on. I’m buying it. It’s staying at the mint for us digital coin. It’s US digital coin. I’m never taking possession of it, and then I’m wholesaling it out to other people even though I own the right to it. It was almost like you buy a right to sell a house and you hold that right for 30 days on some sort of option, and then you find a subsequent buyer and you make a little money between what you bought the option for and what you sold the option for somebody else to exercise. It was the same sort of thought process that anybody does in business, and yet, because the initial transaction involved a card brand issued card, the minute that they saw it, they just cut it.

James Huber (38:09):

Well, I’ve heard the card brands say maybe I haven’t heard them say, but I think they’ve issued statements of we’re not worried about crypto one. They’ve said, if crypto somehow got ahold of 3% of people doing money, it would be one of the biggest successes of all time. It’s nowhere close, but it’s still, how are you going to get your money onto crypto? Somehow you have to get it on there, and so the card brands aren’t going away. I don’t think They’re not worried about it. I think they’re looking at it from a more pragmatic, it’s not, we’re too big to fail of just we’re still in play here. We’re still going to have a role. And I think adoption is, I’m looking at it as I don’t see it happening.

Chris Dryden (38:54):

We used to fight about this all the time. People will ask me questions like, what? Blah, blah, blah, blah, crypto. And I’m like, ask James. I’m just not into it. I don’t see it. And most of it was because it was speculative, but he would say, oh yeah, it’s doing really well. And I would say, yeah, what can you spend it on, bro? It’s not fungible at all. Where are you going to spend it? That’s great. That’s a bigger number in the ledger.

Jeremy Stock (39:19):

Woo. You did okay. In the end though, James,

James Huber (39:22):

What I say is my worst investment ever was getting into No. My second worst investment was getting into crypto. My worst investment was selling it. Yeah, totally.

David Leppek (39:35):

You don’t own any crypto any longer.

James Huber (39:38):

Only the stuff that I can’t get out still own some of those. I got

David Leppek (39:42):

A call the other day from the company out of the uk, the ledger, the nano, the little

James Huber (39:49):

Cryptocurrency

David Leppek (39:49):

Storage wallet. Apparently I had something like 11 cents worth of ADA on a nano device, and somebody figured out a way to hack it, and so they called me and they wanted to send me a free nano device and help me transfer my ada.

James Huber (40:08):

Yeah, probably not worth it. I bought one of those. I never used it either.

Jeremy Stock (40:14):

Yeah, that’s right, James. Yeah. You never went to the cold wallet.

Jeremy Stock (40:17):

No. Really quick, guys, if I can interject a question while the system here looks like it’s kind of updating, David froze for a second there. David mentioned the operational hurdles to crypto. Chris, you had said, because we talked to Julie Douglas just the other day, and she mentioned that through her system they might be taking crypto payments in 2025. It seems to me that if it was an operational thing with all of the resources behind the banks behind Visa, MasterCard, they have figured it out by now to James’s point, which scares me to think that it’s not ever coming, is what I’m trying to say. What do you guys think about that?

James Huber (40:54):

I think they have it figured out. It’s just getting people to use it. I don’t

Chris Dryden (40:58):

Even think it’s that. I disagree with the 3% thing that you just said about it being a great success story. I don’t think, and I used to think it was maybe the banks, but now maybe, I think it’s the card brands. They can say whatever they want. They don’t want this disruptor in the marketplace. There’s no way They have to figure out how they’re going to somehow align with it to continue to make money from it by creating something that combines crypto and traditional card acceptance to allow Visa MasterCard to continue to be the pimp in the payments world.

James Huber (41:40):

Well, they are. I mean, one of the big ones is XRP, and they’ve partnered with Chase, so they’ll just get a piece of it.

Chris Dryden (41:45):

That’s what I’m saying, and I think that that’s where you’re going to see it where, and then it’ll convert over to Stablecoin and I don’t know how much ability to speculate out that there will be, but

James Huber (41:55):

There was none. But yeah, we don’t hear about the US DC anymore. I know. We were all terrified of that, of us, them making us use that money, and then who was it? I think it was on one of these podcasts where they’re like, Alan, Alan, what if they put an expiration date on your money? You have to spend it by this. Your speeding tickets, paid automatic, everything like that. I didn’t like that kind of Orwellian outlook, but I’m kind of glad we haven’t heard about that,

Chris Dryden (42:24):

But they can’t do that. It’s the same thing as a gift card. You throw something on, it stays there until it’s no longer there.

James Huber (42:30):

Hey, it’s our money. It’s our government. Watch what happens now.

Chris Dryden (42:36):

Yeah, but we pass laws about stuff like this. Maybe on the state

James Huber (42:39):

Level, we passed a lot of laws.

Chris Dryden (42:42):

Okay. Alright. Well look, what else do you think is going on in the payments world? The people that, the 45 people that regularly listen to this podcast would be interested in?

James Huber (42:54):

Three of ’em being our

Chris Dryden (42:56):

Parents. Yeah. Three of us here.

David Leppek (42:58):

Yeah.

James Huber (42:58):

Yeah.

David Leppek (43:02):

Truly. I don’t know what else is going on. There’s all sorts of things going on, consolidation’s, driving everything. The current political administration is defunding the CFPB. What’s the result of that going to be other than potentially another four years of successfully not having to worry about it?

Chris Dryden (43:26):

We need a lot more high risk processors. That’s what I’m saying. Yeah. Be all

James Huber (43:31):

Out there.

David Leppek (43:31):

Yeah.

James Huber (43:32):

Why not? David, we never asked what you do. What’s your role? Why don’t you fill us in on that and how people can get in touch with you if they want to?

David Leppek (43:41):

Well, I’m the chief technology officer for Cigna Pay, and I’ve actually been here for one year now.

James Huber (43:46):

Congratulations.

David Leppek (43:47):

Cigna Pay is of course, famous for payload, which is their dual price pricing model. Used to be cash discount, IE surcharge. We’re working on a bunch of technology infrastructure to improve our transaction processing and fixing things like rounding errors, which have always been a big problem for the surcharge world.

James Huber (44:14):

That’s right. We can’t surcharge on our software because of rounding errors.

Chris Dryden (44:20):

Yeah,

David Leppek (44:21):

I can help you fix that,

Chris Dryden (44:22):

Even though we were asking, we wish you could help us fix that. No, actually we’re using two systems right now because testing something else out for our firm management software, but I don’t think we got a response back, but we’re asking them if we can have our own payments company API into the firm management software. I don’t think we’ve gotten a response back, but

James Huber (44:45):

Jeremy’s phone’s going to start ringing now with everyone’s listening to this global processing’s available. Every single one of our clients hits us up

Jeremy Stock (44:54):

Multiple times. It’s looking promising, Chris, believe it or

James Huber (44:57):

Not, you hear that?

Jeremy Stock (44:58):

Yeah, we’ll see. I’ll let you know. We did get an email. Listen,

James Huber (45:00):

Best bidder gets it. Alright, David, do you want people contacting you for any reason you want to give your email out there? All right, great. Well, this has been

Chris Dryden (45:08):

Great. I love it. Yeah, he’s like, look, my phone rings enough. I got 10 people outside my office right now.

James Huber (45:16):

Yeah. Awesome. Well, thanks for joining

Chris Dryden (45:18):

Us. Alright, thanks Dave. Really appreciate

James Huber (45:20):

It. Yeah,

Chris Dryden (45:20):

I’ve had a great time.

Jeremy Stock (45:22):

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.