As more threats continue to emerge for MLS’s and ISO’s, payment providers should be taking action today to protect themselves for when the inevitable happens, their payment residuals become worthless. At Adszy, we believe that blockchain and crypto are undoubtedly the future of all things commerce. If you are reading this post and starting to feel a little discomfort as to your job security, you can relax now. This isn’t a doomsday post. In fact, it’s quite the opposite.
Truth be told, our company’s management team is compromised of over 30 years of experience in the payments business and we feel that a modernized payments ecosystem is necessary. Crypto will likely take years to gain mainstream traction primarily because the authorities to be stand in the way. Not to mention, there’s been no shortage of negative headlines surrounding the highly publicized currency of the future. In order for an entirely new system to work, it’s the consumers that have to buy in, not the merchants. While your merchants would fire you in a heartbeat to avoid paying 2-3% in fees, the reality is that consumers don’t stand to benefit the way businesses do.
The argument could be made that consumers have more control over their personal data when using crypto vs. a credit or debit card, however, security is one of the biggest concerns preventing consumers from adopting the currency in the first place. Today, I would prefer my money under my mattress but, that doesn’t mean I wouldn’t trust all my money be converted to crypto in the future.
The reality still stands, one day payment reps will find themselves out of a job if they don’t start thinking proactively today. We believe that with a new ecosystem comes more opportunity that ever. One enormous advantage payment aggregators have over traditional ISO’s is the fact that they can scale much faster using digital marketing. As opposed to filling out a merchant application in person, waiting for an approval from underwriting, and then waiting for hardware to be shipped, aggregators can allow their merchants to start accepting credit cards within minutes, not days. The best part, they often don’t even have to pick up the telephone.
Cryptocurrency will ultimately make building software much easier when it comes to integrating payments. While many companies like PayPal, Stripe, and more recently Square have been good at this, most payment companies suck at eCommerce and in-app payments. Software is getting more affordable than ever and it seems like there’s an app for just about everything.
As a payments rep or an independent sales organization (ISO), you should possess some sales skills which will always have a place in the world. Even the biggest of tech companies like UBER, Apple, and Amazon still need sales people. Perhaps there’s a silver lining to payment agents and ISO’s ultimately being disrupted by a decentralized ecosystem.
Today, some of the larger payment companies like Heartland Payments (acquired by Global) offer their agents a 2.5x multiple on their portfolios. If you aren’t familiar with multiples, 2.5x means they will purchase your book for 2.5 times your annual revenues OR 30x your monthly recurring revenues. For example, if you have a portfolio worth $100,000 in ARR (annualized recurring revenue), it should be worth roughly $250,000.
On the contrary, point of sale and software companies are trading at much different multiples. In fact, some software companies can trade as high as 10x on annual sales or 120x monthly sales. While both payment and software companies are catering to the same merchants, why would someone choose to sell a service that is inherently less valuable?
Even if a software company was trading at a modest 4x, that same $100,000 portfolio would be worth $400,000. As yourself, which do you prefer? Payment companies and/or reps have a tremendous opportunity to start selling integrated technology platforms as opposed to selling credit card processing on rates alone. If you already have a solid foundation of relationships with business owners, you could be in a position to literally double your net worth over the next 12 months. Not to mention, it’s a hell of a lot more fulfilling offering services that actually help your customers grow their business. While I’m sure your customers appreciate the savings here and there, they still view you and your services as a major sunk cost.
Follow our blog to read more on how payments reps can start taking action to set themselves up for the next 15 years.