Joe Troyer 0:41
Hey everybody, it's Joe Troyer, and welcome to Show Me The Nuggets. Today, I have on longtime friend Brad Weimert and we're gonna be talking about all things merchant account and ultimately protecting your cash flow and mitigating risk when it comes to merchant accounts. I got some doozy stories about merchant accounts. I'm sure a lot of you guys do as well. And Brad's always been the guy that I turn to to say, Hey, what do I do about this? How do I protect myself against that, and I really wanted to bring him here to do each and every one of you guys a service. So without further ado, Brad, man, welcome officially to the show.
Brad Weimert 1:17
Thank you, sir. It's been good to see you a couple of times recently. And when you said that I just remembered I think the first time we hung out in New York years ago with Kevin Wilke,
Joe Troyer 1:30
I was gonna remember I thought it was maybe Traffic and Conversion. But I think you're right it was with Kevin Wilke in New York City. Yeah, a long long time ago. That's awesome man. And, and our roots like intersect before that we were both with with Cutco and vector marketing and kind of had a role in there in our lives and and John Ruhlin and some other people that we still go way back with. So it's, it's cool hanging out, getting to see you at, you know, all these events and stuff is really cool. So give us a little bit of background, before we talk about Easy Pay Direct, we talk about everything that you're doing these days, how'd you get into this digital marketing world, that's kind of where I like to kick things off.
Brad Weimert 2:10
Yeah, very deliberately, when, when people every so often, I'll pull everybody I know, and ask them to help me get more self awareness of myself. And when I do that, the two words that tend to pop up routinely are deliberate, and disciplined. And I have my own struggles with both of those things. But it leads to how I get started with this better act, which is, I grew up really delinquent. I got arrested probably 12 times before the age of 18. And then I found a sales job, which was commission only selling knives, basically door to door. Not quite, but basically. And at some point, through that journey, I hit the point where I thought, this is like, all encompassing, all my energy is going into beating everybody, I need to stop this thing. And I need to think about the future.
And so I I had gone like halfway through college at that point. And it took me four years to do that halfway. And I thought, Alright, the next year, I'm going to get as much done as I can like, I'm going to do 18 credit hours a semester, I'm not going to stop during the summer, I'm just gonna go, and I'm gonna keep selling, but I'm not going to do it for competition, I'm just going to do it for money, ignore everything else. And while I do that, I'm going to build a list of things that are important to me. And that list was things like no cap on income, recession resistant, tech focused residual by nature.
One of the big ones was building a network through the process. And as I assess kind of opportunities in the future, I found credit card processing. And it fit all of those checklist items, with the exception of one of the checklist item, which was the ability to make a lot of money fast. Epic fail on that front, credit card processing is very slow build. But I did a bunch of real estate investing to get me through that. So that's kind of the fundamentals and what brought me to today
Joe
Man, when you talk about putting on your check checklist, building a network in the process, if somebody asked me Joe, like, who's who's some of the best people in the industry of building a network? Man? I would, I would definitely put your name on that list. So kudos to you. I think you've definitely for for validation for yourself. You've definitely done a great job building a network. I mean, if somebody arrives in Austin and wants to know everybody overnight, I mean, I would be like, Yeah, you got to talk to Brad.
Brad Weimert 6:38
I appreciate that. You know, what's interesting about it, it was some, you know, stroke of I can't call it brilliance or genius. It just stupid luck. As 26 year old Brad was thinking through these items, but you know, the catalyst was, I sold knives for six years. And at the end, I had 3000. Mrs. Jones? Yeah, I was like, What the fuck am I gonna do with 3000? Mrs. Jones, like, what do you do with that list? You know. And actually, you mentioned John Ruhlin. And one of the things that helped move me down this path was, he was selling to business owners, and he was selling them corporate gifts. And I saw that little bit and I thought, Man, I want to know the business owners. And to date, the single most valuable asset that I have in my life, are relationships. And a lot of them have come through the lens of entrepreneurship.
Joe Troyer 7:31
Yeah man, that's awesome. So let's transition now let's start to talk about how did Easy Pay Direct, your merchant services company actually end up coming together then?
Brad Weimert 7:41
Yeah, so when I built that list, actually another person that ends up being in our ecosystem, quite often, Pete Vargas introduced me to a credit card processing company. And it kind of, you know, I think at the time, it was a 1099 gig. And that's what I wanted to do. I just wanted to sell stuff. And I didn't know anything about the space. And so I met this company, this guy, Sean Kramer out in Phoenix, and I was a 1099 for his company. And so when out and I was kind of, you know, same thing, I knew I was knocking on doors, trying to walk into businesses and close accounts. And throughout the course of about two and a half years, ecommerce had taken off.
This is kind of '06, '07, '08. And I had friends that were starting internet based businesses. And so I would try to do their credit card processing through Shawn Kramer's company to this company in Phoenix. And all the accounts kept getting declined. And they were like, Oh, no, they can't do that. And I was like that, to me, I thought that doesn't make any sense. You know, like, obviously, they're gonna be able to accept credit cards, why does this company not want to do it. So I go and set up a contract with the new credit card processing company as a 1099. And then they'd get declined, and then I'd set up a new one.
And throughout the course of about three years, I gotten to this place where I thought, there's this risk issue in credit card processing, there's this thing happening, and I wasn't clear on it, but I was kind of beating my head against the wall trying to figure it out. And at the time, I built up a residual of about 10 grand a month, which was enough to like sustain life and, you know, live and a client of mine at the time was selling real estate education products, doing seminars, a mastermind group, you know, a monthly membership. And he asked me to partner with him and run the company. And I thought, okay, so I took a salary and equity in that and kind of pressed pause on the credit card processing.
And the nice thing about is it's residual, right, so it kept moving. And then I just hustled for about two years with him. The partnership was riddled with challenges. He's an interesting cat. But what it taught me was a ton, about selling information, how that model works, and also the risks. inside of that model relative to merchant accounts, and so I got to see it firsthand as a business owner. So when that partnership dissolved, I functionally launched Easy Pay Direct, started building software started hiring people. And it was really with the idea of, hey, how do we effectively create a fast, safe way to accept merchant account or to accept payments, when you're in these models that end up having chargebacks? Or end up? Being called risky by credit card processing companies?
Joe Troyer 10:32
Gotcha. It makes perfect sense. So Easy Pay Direct started about 2012? You guys fast forward today. 20 plus people strong? Obviously, you guys are a dominant force in our, our ecosystem in our industry. Who do you guys kind of serve now? Who's the audience? Who do you guys work with? somebody's looking for for a merchant account? And they're thinking, hey, maybe I can talk to Brad, who is kind of your ideal target market these days?
Brad Weimert 11:00
Yeah, I mean, broad stroke, we define it as people where the card is not present. Meaning that you don't have a physical credit card machine that somebody is putting a physical credit card into. So card not present businesses that are doing one 100 million a year, that's kind of the broad stroke. We work with lots of businesses that are, you know, half a million dollars a year or a little smaller, but we provide the most value, once you get to that place and beyond.
Joe Troyer 11:26
Perfect. So you hit on something, you know, you talked to a little bit about the the high risk merchant, is that really defined? Brad? Is it as easy as saying, just taking cards over the internet? Like if you're in that bucket? Is that automatically high risk? I know when I've gone to get merchant accounts, I'm always classified as high risk even when I am able to show a good history and low refund rates, low chargeback rates, etc.
Brad Weimert 11:52
Yeah, that's a huge question. But the answer is that, and I'll explain what risk is because people generally don't know what like, what you mean, when you say risk, like, why are you high risk. But it's a spectrum. And as soon as the card isn't present, the likelihood of fraud goes through the roof. So if a somebody wants to steal a credit card and use it, are they going to walk into a store to buy things? No, probably not. They're probably doing it online, right or over the phone. So immediately, fraud goes up. But beyond that, they look at our industry looks at the statistical likelihood of dispute of a consumer disputing a charge. Now, if we back out for two seconds, or 34. The risk in general is that as consumers, one of the cool things about using credit cards is if there's ever a problem, you can just dispute it.
Right, you always have that recourse. Now, here's the risk. The business owner, the first thing that happens when a dispute happens is the money gets pulled out of the business owners account. And then they get to fight to get it back. If the business isn't there anymore, the credit card processing company has to pay for it. So the big risk for a credit card processing company is a business goes under. And once they go under consumers still have six months to dispute a charge. So for that six months, any disputes that come in the credit card processing company has to pay. So all of it revolves around the likelihood of a specific business or an industry having that problem.
Joe Troyer 13:26
Wow. Yeah, I didn't think about a business closing and that trailing six months, I've never thought about that, from a risk standpoint, only really thought about while the business was in business accepting credit cards.
Brad Weimert 13:38
Yeah, well think about it this way. How often do businesses go under? Yeah. All of them. I mean, how long like, every business at some point ends its lifecycle, right? The vast, vast, vast majority. So at a minimum, the credit card processors exposed during that frame. And that's where like risk is a spectrum? Because on the on the front end, you're just looking at that, right. But as you go through it, then it's like, Okay, well, what kinds of industries have a higher likelihood of going under? Or just having consumers dispute in general or the combination? Or fraud in general, right?
Joe Troyer 14:11
Gotcha. That makes perfect sense. So being in a risky category or being deemed as high risk, is there anything that people can do, right to still get good rates to still get good status to protect themselves? What do you tell people?
Brad Weimert 14:31
Yeah, so first and foremost, I'd say that if you're if you're just selling widgets on the internet, you're on the risk spectrum, but you're not super high. But as soon as that widget turns into a type of widget, that is judged more heavily CBD Yeah. Then you are you are higher on the risk spectrum. The other thing that weighs heavily in is the type of marketing you do. So if I do and I'll answer your question directly, but I think it's helpful for people to get it because sometimes like we get a lot of people that come through, they're like, No, no, we're not high risk. And I'm thinking, like, nobody wants to be called high risk, right. But in my head, I'm like you are so squarely in this horribly risky profile.
I know you don't want to be called that. But you are. So I think understanding it helps. So, you know, if you, I could write a 200 page ebook, and I couldn't sell it for $7, right, and it would have a certain risk profile, I could take the exact same 200 pages, I could read them in a video form and do a membership course, that's 50 bucks a month, or 300 bucks a month, totally different risk profile likelihood of chargeback, I could take the exact same information and do a seminar in charge, and literally read this ebook, verbatim, and charge five grand, but it's happening three months from now. And it's $5,000.
So the dispute profile changes, I could read the exact same information from the E book in a course at Harvard, and charge, whatever it is, you know, 70 grand a semester, and the risk profile is different. Right. So the marketing model has a lot to do with it. And the bits of it is that even if you are perfect, if your business is perfect, you've never had a dispute never had a refund, you still sit in potentially an industry that has an issue. And so the people that are looking at risk and controlling risk, if they're not really good at what they do, it's very easy for them to just do a sweeping change and say, Hey, we're done with your industry.
So if you're a business, the first thing to know is like, Where are you on that spectrum, right is your marketing model, something that your competitors generally have challenges with chargebacks, or your or your product type or whatever. So you want to know that first. Second, because if you know that, and you know that you're on the higher end of the spectrum, your first priority is not rates, it's making sure you have a stable account, that's not going to get closed or multiple stable accounts. If you if you are on the spectrum, but you realize you're lower on the spectrum, then you can say, hey, I want to drive a little bit better rate, or I want to get the best deal possible.
The course of action there either way, is to look for the providers that understand your business model. And you know that because when you go to sign up, they ask you about your business model. If you go to sign up, and they don't ask you anything about your business model, necessarily, it means that they didn't control for risk, right? So like Stripe and PayPal are great products, if you're trying to vet a business concept, or you have a tremendously low risk business, but necessarily in their model.
They didn't do any underwriting so they don't know who you are, what you do, how you operate, what you sell, how you sell it, how you deliver it, if you deliver it, right. So the only way they can protect themselves against this threat is closing your account or holding your money. Yeah, and a bunch of merchant account providers operate that way too. Because it helps conversion on the front end. Right? If you can get people in and set up their accounts immediately and just deal with the risk later. Great. You bored more business? I just don't think that's the best solution for the entrepreneur.
Joe Troyer 18:10
Yeah. So you're looking for somebody that has a vetting process and asked about the business model, because then they're doing kind of their due diligence on the front, instead of doing it on the back when you cause a problem, or they see something they don't like, that makes perfect sense. Yeah. So when you when you talk about chargebacks or refunds, obviously, you know, chargebacks, on your account refunds on your account aren't good things necessarily. Is there kind of general rule of thumb about what's acceptable in the industry in terms of refund rate chargeback rate? Like are there KPIs that a business owner should be like, hey, team, we need to focus on keeping these rates under these certain levels?
Brad Weimert 18:48
Yeah, totally. So chargebacks are the easy one to address, which is Visa MasterCard, both have set programs for excessive monitoring. And those are made for systemic chargeback problems. So like MasterCard has a program that is, if your chargebacks are at point 9% and 100, chargebacks a month, for two consecutive months, MasterCard is gonna monitor you. And that's like the hard fast, nobody gets around it concrete rules. And what happens is when a business owner gets put in that category, the credit card processing company gets fined every day for keeping you on the books. So there's tremendous disincentive to keep you on the books. Now if you're doing enough volume, and the margin is big enough on your account.
And that's a big if and this is where you don't want the cheapest rates possible. If you have chargeback problems, you want to leave margin there because you want the processor to have incentive to keep working with you. Otherwise you get put on that list and the processors like Yeah, fuck all this. They're risky, and I'm not getting any money. Not worth it, you know, but if they say hey, there's risk that popped up, we started getting fined. But we're making a bunch of money in this account, then maybe they'll keep you there. So you've got the concrete Visa, MasterCard rule,
Joe Troyer 20:09
Is that fine called something? Is there like a term for that? Yeah, well, like is it classified as something?
Brad Weimert 20:16
Yeah, that MasterCard historically has had what's called the excessive monitoring program, excessive monitored merchant, or excessive chargeback merchant, and then monitored merchant. And they actually rolled out a couple new programs more recently, but it's the same idea. And then the fees related to that, that go to the credit card processor are, you know, internal, that's relevant for larger businesses, because it's got that one of the criteria is the 100 chargebacks a month. So if you're doing a high transaction, business that becomes relevant.
A lot of entrepreneurs though, are in the lot that we work with are in the like, you know, one to 10 million year range, where they don't have, they don't have enough transactions, where 100 chargebacks a month is going to happen. Unless they have a low dollar amount with that. So the other thing that's really relevant is most credit card processing companies, we use the benchmark of 1%. And we just say, hey, if your chargebacks approach 1%, that's when you start to get in hot water. And it depends on the provider. But the 1% rule is a good rule to live by. That's like any entrepreneur can look at their numbers and say, Oh, well, shoot, you know, I'm at one and a half percent. That matters for every credit card processing company out there, they'll look at that. And that'll be a consideration. In terms of refunds, that's a fun question.
Because in the like, in the info product space, if you have 20% refunds, that's maybe a little high, but like, pretty normal. If you have a coffee shop and you have 20% refunds, you better shut that shit down. Like you're doing something weird with your coffee. You know, so it's very dependent on the industry that you're in, in the marketing model, right? If you if you sell information, and you do straight sale, and it's, you know, a $7 ebook, the refund rate would be expected to be different than if you do a recurring product that has a free trial on the front end. And then you get, you know, 100 charged 100 bucks a month in perpetuity after that, right, that's going to be a higher refund rate, and chargeback, right.
Joe Troyer 22:21
Yeah, the perspective there's is, is really interesting, never thought about it like that. But you're exactly right. So um, fun merchant story, time. So love it when I first started marketing online, was before, like Shopify and anything else. And so I started doing e commerce back in the day with a product called OS commerce, if you if you remember that shopping cart, and I had a bunch of different ecommerce sites, and one of them, we were, were drop shipping all the brands except for one on this ecommerce store, this widget store, and 80% of our sales came from these products that were dropshipped that we only made like a 20 or 30% margin on and after shipping, it was next to nothing. And this other product we actually carried in house, and we made an 80 or 90% margin off. So we would let people order and then we'd try to convince them right to take the other product instead.
Right. So I mean, you could basically call it a bait and switch. But we were running it incorrectly because I was so green to businesses and merchant accounts. And so we're literally charging the customer. And like 80% of the time they would take the upsell, but we did it on the phone after. So it's literally 80% of the purchases were getting refunded and then charged a different amount. And you can probably guess what happened? So um, we got blacklisted.
Brad Weimert 23:48
Matched.
Joe Troyer 23:48
I don't know what the term is.
Brad Weimert 23:51
Match.
Joe Troyer 23:52
So we got that. And then basically had a hell of a time getting any other merchant account to even look at us. Yeah. But was it was really just a problem in me understanding the business, I could have very easily as a business owner handled it differently. And I would have never been in that risk scenario.
Brad Weimert 24:13
Yeah, what but I think that those are like, that's, that's a really good story, it opens a really good lesson for your audience. Because, look, if there are, without question, just super shady business owners out there that are deliberately trying to game the system. And we know that that happens. That's true in any space and anything you do. But the vast majority just don't know the rules and don't really care. Like they don't want to know the rules. They just want to make money and make their business work, right.
And it's like, I just want the payment thing to work. But it's so helpful to understand the context because it helps you as a business owner, make better decisions, right have self awareness to make better decisions. So those things are super, super, super common. Your provider should be able to look at You when you go through that and help you with those scenarios, not pass judgment on you for what you did. And unfortunately, 99% of providers out there operate like stripe and PayPal where it's like, everything was cool, because we were looking at you now we're looking at you, and it's a problem, close that shit down.
Joe Troyer 25:16
Yeah, I mean, and it was like we were doing it for a year at the same rate, no higher, no lower 70 to 80% of the transactions and never said anything. And then it was just gone and blackballed one day. And the worst part is, we were in due diligence for an exit, literally selling the business and then got blackballed, and then couldn't get a merchant account, and couldn't get the revenue back online. And so the whole deal fell apart. And it took me another 18 months to actually off board and get rid of the company that I was trying to sell because of the lapse in revenue.
Brad Weimert 25:55
Wow that's brutal, man, yeah, the list you're talking about. It's called the MATCH list, it's member alert to control high risk. And it is one of the more serious types of blacklist because everybody in our industry has to check it before we are allowed legally to board a merchant account. So we have to do this check where we say, Hey, is this person on the list? Another term for the MATCH List is the TMF, the terminated merchant file? Yeah, they're synonymous, but we have to check it. And it is extensive. So it's like your full name, social security number, address URLs, previous known business associates, email addresses.
And I mean, people pop on that thing that, like we had, we had somebody show up as a MATCHed merchant. Now, maybe six months ago, only reason he was on it is because he had a business owner, seven years ago, they got put on the MATCH list for an unrelated business. But he showed up. Yeah, and it's, it's so like, we got to dig into that and find that out and resolve it. But most, most providers don't take the time to do it, it's like once you're on it, it's really hard to get off of legal recourse is the action there. But that's still 50/50.
Joe Troyer 27:10
So hopefully, a lesson that everybody can take away, don't get on that MATCH list, pay attention, try to work with a provider like Brad or somebody else that will actually give you advice and look at your accounts and not just actually do the underwriting right like take you through a process instead of just giving you the little flick at the end, because they don't like you. It was really rough. And it really impacted my business and my livelihood. For the next couple of years being on that MATCH list
Brad Weimert 27:33
huge in most people, you know, the it, you're going to be on it for five to seven years. If you don't, if you do nothing else. And then hopefully after five to seven, Bill, you'll get taken off, you'll drop off. But we have a couple banks that we work with that will look at why somebody was put on the match list. And we can board them even if they are on the match list. But it's case by case, and it's just a horrible pain in the ass. So as with most things, the issue is easier to solve on the front end. And just avoid getting put on it make sure that you pay attention. And yeah, and like you said, it's really working with people that do underwriting on the front end. So when you're going through the when you're going like think about it like a mortgage, you know, like you go through and you want the house?
Yeah, you go through the underwriting process. And yeah, it's kind of a pain in the ass. But once you have the mortgage, you're good, right? As long as you pay it. You want merchant accounts in the same way. So let the underwriters do their job, ask the questions. And you know that that gets into the nitty gritty of who's good at underwriting. But But yeah, that's a good rule of thumb.
Joe Troyer 28:43
So we talked about Visa and MasterCard, specifically with chargebacks. Obviously, American Express has always historically, at least to my understanding sided with the consumer a lot more when it came to chargebacks. Is that still kind of the state of the market today? Or how are they different or similar to Visa and MasterCard?
Brad Weimert 29:02
Yeah, I mean, it really just depends on how nerdy you want to get about payments, but high level, the I say Visa and MasterCard just because they had 92% of the market. So that's the language that I tend to use, I really I clump all the card brands in there when I say that the all of them at this point in the game are issued by banks or can be issued by a bank. Meaning that like if you want a visa, you could get a visa from Chase, Bank of America, Capital One, etc. Historically, if you wanted an American Express, you get it from American Express, you know, banks are issuing it. So we refer to our space as the bank card industry for that reason. Amex has always been its own own creature and has self identified as a consumer a high level consumer brand. And they still are, they take care of consumers more than the other car brands do. And as a result, you're more likely as a consumer to win at this Have you on an Amex and you are other cards?
Joe Troyer 30:02
Speaking of disputes and fighting disputes? Is there a goal of how often you should win a dispute? Because I feel like I feel like anymore. It's it's hard to win disputes. Even if you provide all the proof. Even if like you were in the right, you can prove it. IP address Terms of Service like everything. And it's still like, hell, what do you mean, we didn't win that dispute? Like, it's obvious? What's the state of affairs with chargebacks? And should you fight them? What should your expectations even beat?
Brad Weimert 30:34
Yeah, that's a broad question too, because it depends on the industry that you're in, right, and the frequency with which you get the chargebacks, and what types of chargebacks you're getting. So if you get chargebacks, that are all labeled fraud, you've got to attack issue, you need a filter on your checkout process that scrapes fraud, that prevents fraudulent transactions from going through. And so many software's do this, our gateway does it, but many software's do it. If you're getting actual disputes from consumers, because the product wasn't delivered, as expected, for example, the first thing to know is that going back to that 1% rule, whether you win the chargebacks, or lose the chargebacks, they still count towards the 1%. So if you have a chargeback problem, you got to eliminate getting them fighting them doesn't matter, you got to you got to cut it off early. And there is a inverse relationship between refunds and chargebacks. If you make refunds easier, you get less chargebacks.
So that's your first line of action. If you truly are like modifying things, and you're growing at the right rate, and you're happy with everything, and you're still getting some chargebacks and you're doing enough volume, where they're just you got to deal with them and you want the money. You know, how you win them is what you just said, it's collect the IP address, get the terms of service, and keep your process tight. Some credit card processing companies make it easier than others to file the disputes and manage the dispute process.
There are third party companies that will do it for you also, like chargebacks, 911, or chargeback guru. The challenge with them inherently is that they are incentivized to fight the chargeback as opposed to prevent them. Yeah. Right. So they have an inverse incentive to what you actually want, which is to never get the chargeback in the first place. The best tools out there are what most credit card processing companies have access to them. We try to set them up for any large merchant, but verify and ethica are these products for chargeback alerts. And they're now they're both owned by Visa and MasterCard.
But the way they work is when a chargeback comes in the bank. So let's say Bob has a chase visa. And he disputes a charge. As soon as he disputes it with chase that network ethica or verify pings the credit card processing company, who then pushes the alert down to you and says, Hey, Bob disputed the charge, and it happens in real time. So you get it right away, you then get a short window of time where you get to choose to refund the charge or not. And if you refund it, it never turns into a chargeback. So that's that's a huge, huge tool for people that have a chargeback issue.
Joe Troyer 33:32
We're definitely under 1%, I would say maybe half a percent, quarter of a percent, something like that. And we have very tight TLS and everything else, and we still don't want them. We show that people logged in, they access their purchase, they agreed to the terms of service. And it's like, I didn't authorize that charge. Or I didn't get the product. And we don't win most of them. So it's really interesting that you say that, I think, yeah, we would we would definitely probably be in lieu. Just give the refund when they came in and it hit just to not have to deal with the I mean, all of the data that they want and then still losing it anyway. I just rather give the refund and not have to deal with it. It's just not worth the hassle of most to me.
Brad Weimert 34:21
Yeah, totally. Yeah. Yeah. Why? Why have that be a chunk of your business to go after that when you could just, let's just stick with happy customers.
Joe Troyer 34:30
Love it, man.
