In high risk payment processing, price matters, but service matters more. Could it be that the human touch is what matters most in high risk payment processing — but has fallen by the wayside asks Donald Kasdon?
In an interview with PYMNTS’ Karen Webster, T1 Payments Founder Don Kasdon stated that a few themes have dominated the merchant services industry in the past few years and are likely to continue.
Among the biggest trends changing the payments landscape, said Kasdon: “The consolidation [among merchants services] has gotten ridiculous. Everybody is buying each other, and by 2020, there’s likely to be 10 large players, and that is it … A lot of the basics are getting lost in the transition.”
Amid this backdrop, T1 Payments, said Kasdon, operates as a domestic PSP and has just finished its licensing process in Europe in order to cement its status as an international PSP as well. The clientele, he said, spans “regular retail, all the way up to the eCommerce side … actually everything, and we have everything from cruise liners up to restaurants.”
And where there may be just a handful of firms competing for the same business, as a PSP, Kasdon noted that his firm takes on board everything — “risk, payout, you name it.” But in the interest of running business smoothly across clients and the risks they carry, Kasdon noted that “we have a gut check” on every client that is conducted jointly across all of T1 Payments’ staff members.
“If we hear of anything that is kind of odd on a customer service phone call, someone will come grab me … and we have some large partners through which to have transactions watched,” wherein alerts come through emails or text messages. If a client, said Kasdon, says, “My lowest price point is $10, my highest price point is $25 … I will stop [the transaction] at $25.01.” As for the overall client relationship maintenance, he said, “you know, within the first week or two … if the relationship is going to be good or bad … Did you miss something in underwriting? We use everything we possibly can” to identify risk, calling out specific relationships with G2 and Thomson Reuters.
Beyond the risk control, there’s also the question of competitive differentiation, as the merchant services industry is “getting a little convoluted,” according to Kasdon. “I understand value-added services to a degree,” said the CEO, “but when you start adding so many services, what is your core, then? I’m not a bookkeeper, I’m not a restaurant checker, I’m not any of those things. Once you get into that, you kind of evolve into a pseudo-technology company.” As a result, he said, customer service falls by the wayside. “The bigger players? You don’t even have a phone number to them.”
The approach, then, overall, is to let the tech providers “do their thing,” where Kasdon maintained the processor focus should be on onboarding merchants and ensuring they get paid.
Kasdon maintained that being a successful processor can also hinge, in part, on picking and choosing among the payment types to support. When Webster asked about T1 Payments’ support of alternative payments, the executive noted: “Some of the methods scare me, like bitcoin … the cryptocurrencies. I’ve had people come to me and want to do them. I prefer sticking to the basics until [alternative currencies] are tried and true.” As for Apple Pay and PayPal, “they are gimmicks at the end of the day. I live in Vegas, and we don’t really take them very often here.”
Those services get used in “big tech cities, like Manhattan or San Francisco. Most of the country doesn’t use it.” His own clients, said Kasdon, do not really use Apple Pay or PayPal. And that insight comes, said Kasdon, through his firm’s focus on in-store payments. “Online, it’s a different story.”
For in-store payments, “mom-and-pops do not want to pay to evolve” and may stick to free services, even at the expense, for example, of eliminating some conduits to transactions such as cards.
And in Vegas, that constant center of conventions, there can be some interesting wrinkles in payments. “We’re seeing a lot more of the international payments here in Vegas,” said Kasdon, “to try to evolve the city. The cross-border stuff does come into play. I need to give it if someone asks for it.” Webster noted the rise of “shopping tourism,” where Chinese tourists load up prepaid cards with thousands of dollars of stored value (via friends and family) and then come to Vegas with an average on the card at $10,000 for shopping and gambling. “We’ve had problems in casinos and memorabilia stores where the government stops the transaction.” In one case, an $80,000 transaction was stopped in the midst of buying Mike Tyson boxing gloves and had to be verified. What happens in Vegas … pays in Vegas?