PEP Episode 043 — The ISO Survival Guide: Innovation in a Consolidating Payment Industry | Guests Payzli.com

Introduction

The payment processing industry continues to evolve at a breakneck pace, with smaller, nimble players like Payzli positioning themselves strategically against industry giants like Fiserv and Visa. In a recent Payments Experts Podcast episode, industry veterans discussed the changing landscape and how innovative ISOs (Independent Sales Organizations) can still thrive despite increasing consolidation.

The conversation began with a critical examination of how major acquisitions have transformed the industry. When First Data acquired Card Connect and was subsequently acquired by Fiserv, many ISOs experienced significant service disruptions. What once took hours to resolve now took days. As one guest explained, “When you go public, the dynamics change a bit, but the worst change happened when they got bought out of the public market by First Data. The culture that had been built, that entrepreneurial drive, the ‘support the partner’ mantra, dissipated pretty quickly.”

This consolidation trend raises a fundamental question: Can traditional ISOs survive in today’s payment landscape? The answer seems to depend on innovation and technological adoption. The guests articulated a compelling metaphor, describing Payzli as “a very nimble speedboat,” Fiserv as “a big yacht,” and Visa as “the water” – the fundamental infrastructure without which nobody could operate. This analogy perfectly captures the ecosystem dynamics, with each player filling a distinct and necessary role.

What sets apart successful ISOs today is their ability to leverage cutting-edge technology while maintaining a human touch. For example, Payzli has developed an AI-driven review generation system that engages customers immediately after a purchase through push notifications, collects feedback through simple questions, and leverages AI to create authentic reviews that can be pushed to Google. This type of innovation represents the future of payment processing – solutions that go far beyond simple transaction processing to provide merchants with meaningful business tools.

The conversation highlighted a crucial distinction between different types of ISOs. Traditional retail ISOs that simply resell payment processing services face an uncertain future, while wholesale ISOs and Payment Facilitators (PayFacs) that build proprietary technology and integrate with platforms like Visa Platform Connect have stronger growth potential. As one speaker noted, “We’re talking Web3, we’re talking IoT, and it’s moving there rapidly. The traditional payment landscape where you’re selling credit card terminals is gone and far gone.”

Risk management emerged as another critical differentiator. In an industry where merchants’ funds can be held for extended periods due to suspicious activity or chargebacks, responsive communication becomes essential. The guests emphasized their partner-centric approach, noting that “Not receiving your deposits for days or weeks can potentially put you under.” By maintaining open channels of communication during sensitive situations like risk holds or complex underwriting, forward-thinking ISOs can distinguish themselves in a crowded marketplace.

The podcast also touched on industry challenges, including questionable practices around the MATCH list (Member Alert to Control High-Risk Merchants) and reserve holdings. While Visa rules technically prohibit declining merchants solely because they appear on MATCH, many banks maintain policies against accepting such merchants – creating a paradoxical situation where compliance itself becomes complicated.

As the payment industry continues its rapid transformation, companies like Payzli demonstrate that ISOs can thrive by combining technological innovation with responsive customer service. The future belongs not to the largest players, but to those who can adapt quickly, build meaningful relationships with their partners, and deliver solutions that address merchants’ evolving needs in an increasingly digital marketplace.

Transcript

James Huber (00:01):

Square, arguably could have wiped everybody out.

Naim Hamdar (00:03):

Everyone. Everyone.

James Huber (00:05):

If they were more like you guys. Right. And then I had a question. You said you guys are the speedboat and I pictured a really nice one, fi serves the yacht and I pictured a really, really nice one. What’s visa?

Naim Hamdar (00:20):

I mean he is the water man.

James Huber (00:21):

Yeah, exactly.

Khara Cartagena (00:25):

He is God without the water. You don’t go any the payment dodge up there.

Jeremy Stock (00:34):

Welcome to the Payments Experts podcast, a podcast of global legal law firm. We hope you enjoy this episode.

Naim Hamdar (00:48):

It’s a unique name. P-A-Y-Z-L-I. You’ll find all sorts of information about us.

James Huber (00:55):

What’s the VLI stand for? ZLI. The ZA

Khara Cartegena (01:00):

Different way to shape to spell Paisley.

James Huber (01:03):

Yeah, pay easily. Oh, I like that. Pay easily. Okay, that’s good. Oh, pay easily. Oh, I got it. Paisley. P-K-Y-Z-L-I got it. That is clever.

Naim Hamdar (01:15):

Right. So when I was exploring getting back into entrepreneurship and when I went behind the scenes at T-Mobile and I understood they were making money residually, the store owners we’re just hustling phones, right? As good as your next sale. I got inspired again through that conversation, through my teacher and I was like, I need to find residual income. And voila, I fell into payments and have never looked back since. It’s like the best business in the world.

James Huber (01:51):

Yeah, we love it too. I mean that’s why we like this industry. We like working with guys like you that are innovating and moving and hustling. And so I’ll clarify my comment of why I would boo someone like Card Connect. One I loved First Data. I loved working with them when they were privately held company. It was great. They were all about the ISOs. We almost went to work for them doing their collections work. So I heard when you said collections, I was like, my man, how we started out in the industry is we would sue on the leases when people would default on their 10 VX twenties that they got leased for a hundred bucks a piece and they had one point of sale. So anyways, that’s how we got started in the space and they were great. Their senior council, I consider a friend kind of frenemies.

James Huber (02:42):

And the reason we didn’t go to work for ‘EM is we’re like, no, we don’t want to get conflicted out. We’re have way more fun suing you guys. And then so as it progressed, and this is a topic of our last podcast, we’re going, you guys don’t even care about the ISO anymore. It like you don’t even want the ISOs anymore and Card Connect. For example, last year they sent out that notice that said, oh, we’ve been billing you guys wrong. You owe us 400 grand for the last 10 years. Don’t worry, we’ll just take 60 KA month. So it’s gnarly. So they’re really operating against. So I’m just curious, and I know this isn’t what we plan to talk about, but what are your guys’ thoughts on can the ISO survive this consolidation and that basically the processors don’t seem to have any interest in the iso?

Naim Hamdar (03:35):

Yeah, I’ll take that man. I’ll take that. Part of the reason at my core, right? Because it was a pretty decent size ISO for Card Connect and when the acquisition happened or when you go public, the dynamics change a bit, right? The company changes a bit. So CardConnect transitioned into a public company and they changed a little bit, but the worst change happened when they got bought out of the public market by First Data. So the culture that had been built, like that entrepreneurial grind, like the support, the partner mantra, that dissipated pretty damn quick. And what I began to see is when Fiserv came in and did a merger with First Data, it just completely fell apart. The whole partner ISO channel is put to the wayside. I mean, it was so bad that, and I’m extremely loyal. Loyalty is at my core, but I’m also loyal to myself. I’m loyal to a company until that company kind of stops doing what they do. And that was back in 2017, 18 is when I began to think, I’m like, look, I can’t tie myself to a company a like Card connect that has been acquired and has no decisionmaking ability anymore.

Naim Hamdar (05:10):

What used to take a couple of hours, same day issues that they would resolve for me is now taking 4, 5, 6 days. That’s a problem for me. So not to knock them. Look, everybody goes through an evolution and as a company you make decisions of what you want to evolve to. They made a decision when they decided to sell the first data, good for them. I mean they had a great exit. But when you transition into this large organization, just know business is going to change and the partnerships that you’ve built your core on your business on, they’re also going to experience that. Are you willing to put them through that or are there other things at your core that are more important to you? To me, we’re built on the partner channel and because where I came from, we’re in the people business. And when you’re in the people business, you want to make sure that those people who are helping you grow are okay.

James Huber (06:25):

So how do you think, let’s forget Card Connect for a little bit. Sounds like none of us really can, but do you guys think the ISO has a future in this industry? Will the ISO survive Before we were discussing, we’re talking about really

Chris Knee (06:43):

I think with us they do.

Naim Hamdar (06:46):

Yeah. So that’s a loaded question, James. Yeah, it is

James Huber (06:50):

Question. That’s why we’re here.

Naim Hamdar (06:51):

Yeah. And let me address that, right? You’re starting to see a transition where for the past five, six, even seven years, large companies are merging, large companies are acquiring to eat more of the share first data. You have to give them props where props are due, right? I think one of the biggest accomplishments that they’ve had over the years is the creation of Clover, right? Because you can’t escape. You cannot escape Fiserv. You have to do business with Fiserv at least a little bit because the market demands it. They’ve done a great job putting their name out there. So we will use Fiserv, but we’re an FSP. We’re an FSP. And the difference between the traditional retail ISO and a wholesale ISO slash FSB is we abide by a different set of laws when it comes to how we interact with Fiserv. We also set up a payment rail through Visa platform Connect.

Naim Hamdar (08:08):

Visa platform Connect is they’ve rolled out a ton of functionality for an ISO that’s looking to have better technology to go to market with. So you have to bring solutions, but you can also strap on solutions from Visa Platform Connect in order to power your payment systems and end market and end user product. So I think yes, the ISO will survive. I think it’s going to take a different level of ISO and a different level of alignment for you to survive The traditional payment landscape where you’re selling credit card terminal, that’s gone, right? And it’s far gone. I mean things that are happening right now, we’re talking Web3, we’re talking IOT, and it’s moving there rapidly. So what is the strategy that you have in place that’s going to allow you to align with a company that has this technology at their core? And that’s what the traditional 10 99 sales partner out there has to begin to ask themselves is,

James Huber (09:30):

I’m not talking about the 10 90 nines, I’m talking about you guys. How do you guys weather the storm?

Naim Hamdar (09:36):

Yes, I think so because look, the way we’re going to weather the storm is we’re aligned with the largest player in the industry and that’s Visa. So we’re utilizing Visa platform Connect in order to power our iso, also our partners with our bank. So paisley’s a little bit different than your traditional iso,

James Huber (10:08):

Right? Why don’t you tell us what does set you guys apart

Naim Hamdar (10:14):

A lot, man, A lot sets us apart. I don’t want to hug the whole call, but when you think about some of the technology that we’re rolling out, we’re exploring how we can use AI for example, in order to streamline our operations, the way we build technology, the end solutions that we’re providing merchants from chargeback mitigation to generating reviews. So think of Paisley as a very nimble speedboat and then think of Fiserv as a big yacht. Big yacht is dominant. It takes up a lot of space, but it doesn’t move as quick because it takes a lot to move that yacht. But Paisley, we could implement the latest tools, the latest technology when we see something that actually makes sense. I’ll give you an example. We have a point of sale system and within that point of sale system, one of the biggest pain points for merchants in the beauty service space, because that’s kind of the vertical that our point of sale system is focused on is reviews.

Naim Hamdar (11:37):

So we got to work and we began to think about, okay, how do we recreate the reviews process utilizing some of the tools that we have access to today that didn’t exist two years ago. And we put together a phenomenal process that engages with a customer at the end of a sale through a push notification, whether it’s in app or text message or email. Well, they’ll receive a link, they click on the link, they go to a page, answer three questions, simple questions about their experience. And then on the back end of that, AI is going to take that information. We have embedded information within the point of sale that we understand about the consumer, understand about the business. We’re going to match that data and we’re going to spit out a review that now you can push to Google and we can do things like that. And we’re always going to be able to do things like that. Fiserv is not looking to fill solutions like this. So there’s a space for ER and then there’s a space for innovative ISOs. I think the level of innovation has changed and has shifted. If you’re an ISO that’s innovating in the same way that you used to back in the two thousands or 1990, you’ve already lost.

James Huber (13:10):

Yeah, I kind of said at the beginning is one of the reasons we love this industry. We called ourselves global because we liked our clients so much. We saw global everywhere. We were like, oh, we want to sound like our clients. And then interestingly, an attorney was fighting with us recently and he said, don’t you think it’s a little misleading to call yourselves global when you only have offices in the USA? And I had all these great response and one of ’em was like, no, we’re just named after the shape eight. But anyways, so one of the reasons we like what I

Naim Hamdar (13:49):

Think to the point though, it’s not just about technology, right? So many people get it wrong. They’re like, okay, technology, technology, technology. We don’t want to talk to anybody like look at Square for example. They’ve done well, but in my opinion, they could do way better.

James Huber (14:07):

They could do way better. No, all of our clients, they used to say they’re sales organizations now they all say that they’re fintechs companies because yes, you have to be because Square, square, square arguably could have wiped everybody out. Everyone if they were more like you guys, right? And then I had a question. You said you guys are the speedboat and I pictured a really nice one, FI serves the yacht and I pictured a really, really nice one. What’s visa?

Naim Hamdar (14:37):

I mean, visa is the water man.

James Huber (14:38):

Yeah, exactly.

Khara Cartagena (14:42):

God, without the water’s, the pavement Dodge up there.

Chris Knee (14:50):

Yeah, I mean I think some of the most sensitive situations and payments can revolve around risk related situations or underwriting situations. Whether it be a large merchant that you’re trying to get approved as a sales partner or you have a merchant who has funds held due to suspicious activity. These are situations that as a sales partner and as a merchant, you really want to feel like there’s white glove service happening for you, especially as a business owner, not receiving your deposits for days or weeks can potentially put you under. So just trying to really have all channels of communication open with merchants and partners. That’s something that we definitely put emphasis on. We’re definitely a very partner centric organization. Starting with the top. I mean, as NA mentioned, he’s been operating in that capacity for 20 years as a sales partner. So really we’ve tried to instill that strategy and throughout our organization and really just try to make it a great experience for partners and merchants, especially during difficult situations like a risk hold or a complicated underwriting package. Really just try to have direct communication

Chris Knee (16:19):

Turnaround time too. That’s what we found. There were situations where we had merchants growing at 40% per month and literally just shouting across the room, Chris, what can we do about this? What are we willing to do? And getting that immediate response is fantastic.

Chris Knee (16:37):

Yeah, I think underwriting turnaround and just onboarding in general, I think the speed, the faster that you can get an account submitted, underwritten, approved, equipment deployed, it’s extremely important, especially to our partners that we work with because using that to throw car connect under the bus today, we also operate in a sales, we have a sales retail ISO relationship with Car Connect. So we’re still dealing with slow onboarding times with ’em, whereas we try to really emphasize the speed of submission to underwriting, to approval, to equipment deployment. Something that we a lot of really take pride in here.

James Huber (17:24):

A lot of team does a great job. Lot of merchants going, I’ve got reserves tied up and I can’t even get to the right person’s desk.

James Huber (17:32):

So unfortunately for a lot of those people that call us, we say, Hey, yeah, that company that you’re going after, actually we’re their lawyer. So have somebody contact us. But actually a lot of times it works out where we go, Hey, let’s waive conflict. And we just represent both parties to help expedite that. But that shouldn’t even have to happen a lot of time. And for a lot of our clients, it doesn’t happen because they’re at least discussing it. But when you have a draconian contract, which it kind of needs to be that says, I can hold this money for 180 days related to the last processing activity and oh, you had one chargeback, so I’m holding 2 million of your money. A lot of times it just seems a little unreasonable unless there’s actual risk. I get it. Why am I going to put myself out?

James Huber (18:27):

You’re doing a business that you’re doing a timeshare business where, or getting people out of their timeshares and you’ve taken all these people’s money and you’re saying, oh yeah, I could take six months to a year, a couple of years to get you off. Sure, that person can still do a charge back and you hold their money. But other businesses, it just seems like we see a lot of time of it’s a little unreasonable and you’re not even supposed to be able to use or play with this money. So why are you holding it? And the reason is because I can, and I like seeing big numbers on my bank account. I log into my laptop before bed. It makes me feel cozy, safe and warm. But it’s not your money. So you’re holding it just because you can, because the card brand rules don’t say anything. They just say it has to be reasonable. Absolutely.

Naim Hamdar (19:19):

Yeah. Let me make the decision. Let me look into this merchant. Give me the warning, let me look into him and then I’ll make the decision if I want to do business with him or not.

James Huber (19:29):

Well, I’ve never heard of a situation where a processor or somebody came after another processor or bank for not putting someone on match because they had a blowout account. I’ve never heard of that happening. So fine that’s out there because how you’d have to go figure it out. But anyways, I’ve never heard of that happening. But boy, I’m always scratching my head here is it’s hard to get processing when you’re on match. The Visa rules say you can’t decline somebody just because they’re on Match. But almost every single bank says we don’t take match. So how are those banks not in violation of the Visa rules? I mean, they’re in violation of Visa rules all over the place because most of ’em aren’t doing what they’re supposed to be doing. They rely on you guys to do it all and then they say they’re doing it, but they’re not. But aside from that, how are they not violating Visa rules? Just for that alone?

Chris Knee (20:32):

We lost no comment.

James Huber (20:33):

Credit policy. So I can That’s

Chris Knee (20:42):

So interesting.

James Huber (20:43):

Contradiction. Gay people can’t buy my cakes, but it doesn’t make it. Okay. So anyways. Alright, well do you guys

Chris Knee (20:51):

Have Your honor? No comment, you’re honor. No comment.

James Huber (20:55):

You’re completing the fifth. That’s what that’s called. Do you guys have anything else that you’d like to bring up? This has been good. It’s good to hear a lot about your business. I think a bunch of our viewers or listeners will be interested in contacting you guys. So how about you give us, what’s the best way to get in touch with you guys?

Naim Hamdar (21:13):

Yeah, I mean the best way to get in touch with us is support@paisley.com. That’s a great way for our whole team to have you have access to our overall team. Check us out on our website, P-A-Y-Z-L i.com. If you’re interested in a partnership or merchant account, there’s plenty of places on the website to find us on

Chris Knee (21:40):

LinkedIn.

Naim Hamdar (21:41):

LinkedIn, Facebook. We’re everywhere, man. It’s a unique name. P-A-Y-Z-L-I. You’ll find all sorts of information about us.

James Huber (21:53):

The ZLI stand for ZLI, the Z.

Khara Cartegena (21:58):

A different way to spell Paisley. Yeah,

James Huber (22:01):

A easily. I like that. Pay easily. Okay. That’s good. Oh, pay easily. Oh, I got it. Paisley.

Naim Hamdar (22:09):

P-A-Y-Z-L-I

James Huber (22:11):

Got

Naim Hamdar (22:11):

It. That is clever.

James Huber (22:12):

Yeah. Awesome.

Jeremy Stock (22:14):

Well thank, yeah, it’s been great having you guys on the podcast. Thank you so much. Thank you. Thank you for listen this long to the Payments Experts podcast we’ve had with us today, Kara, Chris, and Naim from Paisley, go check them out@paisley.com. James, as always, thank you and we will see you on the next one.

James Huber (22:30):

Take care guys. Thank you so much. This long to end. You always do that, but it’s like, man, you’ve made it through.

Jeremy Stock (22:36):

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.