Square Will Be One Of 3 Major Business Platforms Or….

Square Will Be One Of 3 Major Business Platforms Or….

One of the most common questions I get as a payment services professional is, “What do you think of Square?”. I often express my respect for them as they have helped millions of micro-merchants enable mobile payments, and access funding while they’ve built their business.

What I appreciate about Square and their CEO Jack Dorsey, is they started in 2009 to solve a problem. Jack’s friend, Jim McKelvey, missed out on a $2,000 sale of his glass faucets he was trying to sell because he didn’t have a way to accept credit cards, inspiring them to come up with a way to help others with the same problem.

If You’re Wondering Where Square Is Headed, I’ll Tell You.

I believe the financial industry is undergoing a tremendous makeover with the convergence of lending, payments, point of sale, marketing, accounting systems, and banking and I think Square helped open the door to the idea of a payments provider owning 100% of the services provided to a merchant.

As a result of merchants being open to this scenario, we’ve seen more POS systems begin to follow Square’s lead on owning more of the merchant relationship. Point of Sale systems like Toast, Clover, and Cake, which all launched after Square, all require you to process on their payments platform.

This is just the beginning and it won’t end with payments. Let me explain why.

Remember The Automobile Industry?

When the automobile industry took root in the 1890s in America, there were hundreds of car manufacturers and by 1930 the market in America was dominated by 3 manufacturers: Ford, General Motors, and Chrysler. The others completely went out of business.

Do you remember the Austin Automobile? Probably not. It was a manufacturer in Michigan from 1901-1921 and they manufactured a 1,000 units before closing their doors.

The same will happen in 10 years when someone asks a new restaurant owner if they’ve ever heard of First Data, Heartland, or TSYS. They will not have ever been heard of due to the need of legacy providers to consolidate in order to compete with new entrants like Square and Stripe.

Where It’s Going.

With financial institutions beginning to understand the threat that new providers like Square and Stripe bring to the market, along with other technology initiatives like Blockchain, Artificial Intelligence, and IoT, payments providers are consolidating, and banks, like Bank of America, are rethinking their payments future.

These financial institutions will stop at nothing to compete for the control of cash flow, even if it means acquiring every relevant solution that touches the merchant. Major processing platforms like First Data, Heartland, TSYS, Vantiv, and WorldPay have all been acquired in the last 3 years. Point of Sale systems, such as Micros, MobileBytes, Dinerware, Digital Dining, Restaurant Manager, and Future POS, have all been acquired by a payments processor over the past 3 years.

These purchases were primarily about purchasing an active merchant base while these organizations attempt to build new technology that will move them into the future.  The existing technology is useless especially when it comes to achieving the outcome that the current market demands; technology that communicates across all departments of an organization while giving merchants access to the data they need to be successful.

The Future Big 3.

The future in every industry segment will, in my prediction, have 3 major providers that provide integrated business platforms that will serve as the primary platform merchants run their business from. It is not far fetched to foresee financial institutions like Bank of America building their own payment platforms and acquiring major point of sale, accounting, marketing, payroll, and software platforms to directly serve their customers.

FIS, Fiserv, and Global Payments, the institutions responsible for much of the industry consolidation, will also join them in this endeavor to deliver feature-rich solutions to the markets they want to serve and it won’t be a single solution. The future will require these organizations to deploy multiple integrated platform solutions for each segment they serve with support teams that cater to that specific niche.

Square will be met with much competition now that it has realized that micro-merchants aren’t profitable and has started to move upmarket. For Square to succeed as one of the future Big 3 providers in any market segment, much of what has made them attractive to micro-merchants will disappear. 

What Got Square Here, Won’t Get Them There.

Many industry experts have been following Square’s development and have been wondering if they will decide to become a bank. If they do, this will likely drive additional changes in the financial sector that will involve major banks and payment processors. As the convergence continues and these providers fight over merchants, Square will have to change at least 3 things:

  • Flat-rate payments will come to an end.

Square has learned that flat rate payment processing at 2.75% is a bad deal for them. Coffee shops and food trucks where the average ticket is less than $10 love this pricing because traditionally interchange costs are often 3% before the payment processor adds their markup. Square lost several million dollars doing business with Starbucks and likely won’t continue this program due to its drag on their profitability. This is why their new pricing models included a transaction fee when they launched their advanced POS and terminal offerings.

  • Software costs will increase.

Square has been patient while building their platform and in order to fund future development and deliver the returns that every public company must deliver to its shareholders, they must increase profitability. This will require them to attract and retain the best talent; this investment will require significant ongoing capital. This investment will not only be made in the area of leadership and software development, but also in regards to expanding their existing support staff. 

Restrictive agreements will likely be implemented or banished, industry-wide.

As the payments industry continues to consolidate to build new platforms that provide the experience, integrations, and features merchants want, the agreements that merchants have grown to hate, will be implemented to protect their investment. This is just an opinion, but the fact is Square has built a stable business because they offered a pretty safe and reliable service to merchants that major processors didn’t want to serve. Serving the same merchants that large financial institutions want to serve, will require Square to play hardball and this will likely include long-term contracts, or the rest of the industry will eliminate contracts entirely.

  • Specialization in key industries.

Serving an unsophisticated merchant base hasn’t required Square to develop a deeply sophisticated feature-set. This may be why small restaurants and retailers were the first markets they developed a POS offering for. Square will likely, after building deep integrations and features in this space, develop the features needed in-house or acquire other business platform assets that they can integrate their payments to serve key markets. The key thing to understand is, building a platform from scratch with deep features for a specific industry takes serious commitment and capital. Plenty of POS companies had plenty of capital behind them and turned out to be very challenging in many respects, remember Micros?

Who Will It Be?

Square, Stripe, FIS, Global, Fiserv, and other financial institutions will be jockeying for position in the industries they want to serve. The key thing to understand is, being a payments platform that does everything for all merchants won’t make them one of the 3 major providers in a specific segment, each provider will have to dedicate significant time, teams, and capital to building and developing first-class solutions for the market they want to serve. It will be through specialization, not generalization. The few specialized solutions will own 80% of the market, while dozens of generalized solutions will serve the remaining 20% of the market.

You might be asking yourself, “What does the future look like for my business software provider”? I think there will continue to be tremendous growth in the ISV space with many major players being acquired by the financial institutions that own the banking, payments, and technology relationships. With ISV’s wanting more payments revenue and payments providers needing something other than merchant processing, this is inevitable. ISV’s will be wholly owned subsidiaries of financial institutions purchased for their IP and industry-specific tools and knowledge. Instead of ISV’s partnering with PayFacs like WePay, Stripe, or ProPay, they will be owned by the parent company of these solutions.

The challenge merchants face at this point in time, is determining which industry provider they are willing to partner with long-term to help them compete in their respective industry. Purchasing what appears to be an okay solution today, won’t be enough as customers require a dynamic purchasing experience from businesses they do business with. Having the right technology, support, and partners will be key for businesses, and the business platform they select will be key in assisting their differentiation in the marketplace.

In 5 years, I believe Square will be one of the “Big 3” business platforms serving a specific niche industry or they will serve the remaining 20% of merchants that don’t demand deep industry-specific features and I believe the same about Stripe, PayPal, Global, FIS, and Fiserv. 

How Should You Approach Your Technology?

As a business owner that is in the process of determining which systems you will use to take your business into the future, it’s important for you to keep a pulse on where technology is going as it will likely impact your ability to attract and retain the right employees and customers. It can also help you navigate the technology decisions you will need to make in the coming future, whether that be for point-of-sale, payment processing, marketing, or even accounting.

Knowing the right questions to ask will be key to ensuring your business thrives as our market continues to change. Having a partner like the Northwest Advisory Group, will also be to your advantage as you make these tough decisions and enter into agreements with newly formed business technology platforms. If you are wondering what platforms are likely to be good for your business, we’d love to start the conversation with you.

Why Negotiating Payment Processing Systems Is Pointless

Why Negotiating Payment Processing Systems Is Pointless

Every day, there’s a merchant out there in the world doing their best to negotiate for a new payment processing system, and it’s not their fault. Being a business owner is flat out hard, and dealing with all the vendors, employees, and customers while trying to turn a profit is no small feat. Then tack on the task of trying to understand what they are paying for credit card processing and many just want to throw in the towel.

When it comes to credit card processing, business owners typically print out their merchant statements and hand them over to a few credit card processing agents, who likely don’t know how to read them either, to see how much they can save them. This is the process they use every time they start looking for a new payment processing system and they typically end up with the same results time after time.

This process is broken, and here’s why.

  • Most payment processing agents don’t understand their own proposals.

When I worked for the 5th largest payment processor in the country, I didn’t attend my first training on how fees are calculated from Visa and MasterCard until I was 6 months into the job.  I had co-workers who had gotten hired months before I and it was also their first training. Meeting with any credit card processing rep off the street doesn’t work. A rep that doesn’t understand interchange fees, the different pricing models, the difference between point-to-point encryption and end-to-end encryption, can’t provide you with the guarantees that you want to hear before switching to a new processor. They also can’t guarantee that you’re going to save the money you were hoping to save.

  • It’s difficult to negotiate with limited information.

I always cringe when a business owner tells me they recently renegotiated their rates for their payment processing system. I say that because it’s impossible for a business to negotiate their rates. Visa and MasterCard have been taken to court on several occasions because of this challenge. In current news, Kroger has disabled Visa in a wasted effort to influence Visa to lower their credit card fees.

It’s also challenging because you can only negotiate the fees you know about.

The only portion of your bill that is negotiable is the profit your payment processor earns to provide the service and there can be as many as 40 different fees they add to your statement to ensure they get paid. The reality is, unless you have the time to monitor these different fees, you will likely see your rates go back up a few months after you switch payment processors.

  • Deceptive billing practices and arbitrary rate increases.

The final reason negotiating your merchant services doesn’t work is, payment processors will just change the deal on you. This includes the point of sale companies that require you to use their merchant services. These financial institutions know you don’t have time to read your merchant statements and know you need to hear positive commitments before you sign your banking information over to them. They know that once you sign the agreement, especially if it’s tied to a point of sale system, you’re locked in and it’s harder to leave and start over with another payment processing system.

That’s why within their agreements are clauses that enable them to add fees to your merchant processing statement without requiring you to sign a new agreement. They just add it to your merchant statement communications and enroll you in the new fees regardless of the impact on your business.

I recently met with a company that is paying $125 per month for PCI compliance and they didn’t even know they’d been paying for it for several months. The sad part about it is, the fee is completely bogus. The merchant, if we hadn’t brought it to their attention was going to waste $1500 per year on a fee that doesn’t exist and wasn’t on the agreement they “negotiated” for.

Payment processors, when no one is watching, will do what is best for them and their shareholders. That is why you keep having to switch your payment processing system to get a better deal. Merchants that continue to jump from processor to processor chasing the golden rate are doing it wrong. It’s also counterintuitive to them getting what they really want, a payment system that is streamlined and efficient. It’s one of the reasons we have streamlined our partnerships and migrated closer to the platforms that are innovating new technologies for the future.  Saving money is great, saving time is even better.

What Merchants Should Do

The only way for merchants to protect their business from the deceptive billing practices of point of sale and payment processing companies is to outsource the management of their payment processing system. This enables merchants to eliminate the challenge of shopping for a new provider, a new point of sale, or new payment technologies on their own with their own limited industry experience on limited time.

Outsourcing to a company like the Northwest Advisory Group provides business owners with an insider that can help them source the right technology while also protecting their margins from arbitrary rate increases and deceptive business practices many continue to experience when dealing with their payment processing system.

If you’re tired of trying to stay on top of your payment processing system all on your own, we’d love to start the conversation with you.

You can also learn more about our concierge service to see how we are helping businesses solve this problem.


Why You Should Never Meet With Another Payment Processor

Why You Should Never Meet With Another Payment Processor

Today, I sat with a business owner as we met with a credit card processing company that sold them $600 worth of equipment on a 48-month lease for $400 per month.

The business owner had been having problems with the credit card swipes on their Revel POS system and they took a call from a local company claiming to be the best credit card processor in the world. Unfortunately, when the business owner met with the credit card services agent, the agent made everything sound amazing and got him to sign to get new equipment.

A week later when the equipment arrives, the merchant realizes that the FD-130 credit card terminals don’t integrate with his Revel POS system and that he unknowingly signed a lease for equipment that doesn’t work with his system.

As I sat there across the table from the company that trains agents how to scam merchants, I realized why business owners like you should never meet with another credit card processing company.


The first reason is the industry is far too complex for a business owner to understand how to make a quality decision on which provider is going to be best for their business. This is why merchants switch processors year after year and never quite find what they are looking for. In addition to it being difficult to understand, payment processing agents, even the least educated ones, can be very persuasive and promise significant savings without caring if the merchant sees the results they promised. By the time the merchant gets their merchant statement, they realize the savings never materialized.

You would think that this problem would be solved with POS systems like Revel, Toast, and Clover offering their own payment processing solution, but it hasn’t.


The second reason you should never meet with another payment processor is because there are no consumer protection laws that protect you from being scammed by a credit card processor. This means if you sign the wrong agreement, the laws in your state, or the Attorney General will likely do nothing about it.

When I worked in the insurance industry, I had to pass a background check that included a financial review and credit report. The merchant services industry is not scrutinized or regulated in the same way which is why there are so many dishonest business practices prevalent in the industry.


With an industry being complex, and unregulated you don’t want to give your most important financial information to the wrong company. This can wreak havoc on your business and can cost you a significant amount of money and frustration. As a small business owner, or business of any size, it’s never in your best interest to lease a $200 credit card terminal for 48 months regardless of how sweet the rates sounds. That’s a routine bait and switch deal that has been going on in the merchant services industry for years. You don’t have time for that!


After meeting with hundreds of merchants and listening to what frustrates them about merchant services, we have created a service that allows them to never meet with another payment processor and it’s called Concierge.

For a monthly fee, we manage and monitor the merchant services for business owners so they don’t have to deal with evaluating bids and reading through their merchant statements every month.

If you’re tired of having to evaluate your payment processing, being in the dark about your rates, or not knowing who to call when you have question, give us a call or start a conversation with us.

Myth #1: Going Direct Is Best For Your Business

Myth #1: Going Direct Is Best For Your Business

As a business owner needing a quality solution to accept credit cards, you are constantly pursued by credit card processing agents telling you to “Go Direct” so you can eliminate all your payment processing headaches. This “pitch” is used by thousands of credit card processing agents across the country even if they don’t work for one of the few actual direct payment processors.

As a consulting firm that works in partnership with direct processors and independent sales organizations, we understand why this pitch is bogus!

Credit card processing is nothing like buying furniture or refrigerators. The credit card processing rates are set by the card issuing banks and the card brands (i.e. Visa, MasterCard, etc.) and are non-negotiable. In fact, these rates equate to as much as 90% of your overall bill in most cases as I mention in my recent article “Where Credit Card Processing Fees Go”.

I’ve come across merchants processing with direct processors that were getting great rates and service, and merchants that were being overcharged and mistreated by their direct processing relationship, so going direct is not the silver bullet.

The reality is, the experience you will have with your merchant service provider along with what you pay is dependent upon how they configure your fee structure, the technology they provide, and their approach to customer service. These vary from company to company and it’s up to you to have an interview process to determine which provider is the best fit for your business.

How We Help

Northwest Advisory Group is a payment consulting firm that helps businesses eliminate the stress related to managing payment processing. We accomplish that by understanding the needs of our clients and recommending payment solutions that help them reduce costs, save time, and increase revenue.

If you’re interested in learning more about how we can help you save time and money, let’s start a conversation.

Where Credit Card Processing Fees Go

Where Credit Card Processing Fees Go

Every day, millions of business owners pay credit card processing fees without knowing where the fees go.

To make matters worse, there are millions of credit card processing agents calling on these business owners every day, promising them reduced credit card processing fees.

In today’s article, I will explain where your credit card processing fees go, so you have more knowledge about choosing your next credit card processor.

Here are a few definitions for the terms used in this brief article:

Card Issuing Bank: Bank that issued the credit/debit card being
used to make a purchase. The fees paid to Card Issuing Banks are
referred to as Interchange.

Card Brands: Visa, MasterCard, Discover, American Express. The
fees paid to Card Brands are referred to as Dues & Assessments.

Payment Processor: The service provider that authorizes and
routes funds from the paying customer to the business, while
paying the associated fees to Visa, MasterCard, Discover, American
Express, and the Card Issuing Banks. The fees paid to the Payment
Processor is referred to as Mark-Up.


When you sign up for a merchant account to accept credit cards, you are agreeing to pay several financial institutions when the fees are drafted from your bank account. You are paying the Card Issuing Bank, the Card Brands, and the Payment Processor.

The credit card processing fees paid to the Card Issuing Bank are called Interchange and equate to over 80% of your credit card processing fees. These fees are non-negotiable, so no credit card processor can reduce these fees.

The credit card processing fees paid to the Card Brands are called Dues & Assessments and are less than 10% of your fees and are also non-negotiable.

So 90% of the credit card processing fees you pay every month are non-negotiable and are paid to the financial institutions that issue credit & debit cards and the Card Brands like Visa, MasterCard, Discover, and American Express. The only fees that are negotiable are the credit card processing fees paid to the Payment Processor who provided you with the merchant account. Their fees are referred to as Processor Markup.


There are only a dozen or so companies that transfer money in North America for credit card processing. These are companies like TSYS, Heartland, First Data, Chase Paymentech, EVO, Elavon, Global Payments, WorldPay, Vantiv, and Clearent. Over 90% of all credit & debit card transactions are processed on these platforms. These organizations profit by charging you a Markup on top of the credit card processing fees you pay to the Card Issuing Banks, and the Card Brands. Sometimes they transparently bill you, other times the fees are hidden among fees paid to Visa, MasterCard, Discover, and American Express.

Here are 39 of the most commonly billed fees:

1. Monthly Support Fee
2. Statement Fee
3. PCI Compliance Fee
4. Transaction Fee
5. Per Item Fee
6. Authorization Fee
7. Next Day Funding Fee
8. Percentage Per Item Fee
9. Customer Support Fee
10. Monthly Maintenance Fee
11. Regulatory Fee
12. Annual Fee
13. Inflated Interchange Fee
14. Inflated Network Fee
15. Surcharge Fee
16. Backbill Fee
17. Qualified Fee
18. Mid-Qualified Fee
19. Non-Qualified Fee
20. Keyed Transaction Fee
21. AVS Fee
22. Batch Header Fee
23. Risk Monitoring Fee
24. Early Termination Fee
25. Non-EMV Fee
26. Data Encryption Fee
27. Interchange Clearing Fee
28. Monthly Minimum Fee
29. Voice Authorization Fee
30. Chargeback Fee
31. Application Fee
32. Gateway Fee
33. Retrieval Fee
34. Data Breach Fee
35. Savings Program Fee
36. Equipment Leasing Fee
37. Reporting Fee
38. Compliance Fee
39. Refund Fee


When we work with businesses, we focus on taking the time to understand their industry, business and how they are currently accepting payments. We then analyze their systems to make sure they are processing with the most efficient payment processor for their industry and ensure they are being billed properly by their payment processor. Finally, we help them eliminate any unnecessary Mark-Up fees they pay while providing secure, flexible payment processing solutions.

If you’re thinking about your credit card processing fees and would like some help, let’s start a conversation!

Has Your Credit Card Processor Failed You???

Has Your Credit Card Processor Failed You???

Yes, I’m admitting that credit card processing companies FAIL.

This is one topic your credit card processor won’t like admitting.

Unfortunately, failure happens.

I have a long list of failures as a human being and credit card processing professional.

The road to learning the payment processing industry hasn’t come without making mistakes.

  • The $20,000 adjustment I paid out of pocket to meet the savings goal I projected when working for a direct processor.
  • Not programming the credit card equipment right the first time.
  • Quoting the price of equipment, only to order it and come to realize I misquoted the price.


These are all mistakes I’ve seen made by other companies including mine. It’s an unfortunate aspect of being human.


The rapid change of technology can get the best of you, even when working with a single provider.

Working with dozens of platforms can magnify that challenge.


I wish there was an easier way to learn.

If I remember my grandmother’s insight correctly, she said “A bought lesson is better than a taught lesson”.

I suppose it’s better because with it comes the financial challenge or pain it creates, and the humility you need to grow into a better leader for the future.

We tend to learn better by the 2X4 to the head instead of by the metaphor to the ear.

We recently absorbed the cost of a payment solution for a customer due to the unforeseen costs associated with implementation, and it caused us to postpone a software license were eager to launch.


I want to sleep well and night, and sometimes that means doing whatever we can to make sure the customer is taken care of at the end of the day.

The true testament of your payment processing relationship is not whether or not they make mistakes.

It’s how they handle the mistakes that determines their value.

When we talk with business owners about their experience with credit card processing providers, they share with us all the problems they’ve had.

The challenges they experience working with credit card processing companies are often met with, unreturned phone calls, lack of responsiveness, and a commitment to blame-shifting.

We believe in facing challenges head-on while ensuring the same mistakes are not repeated.

As you shop for the perfect credit card processing relationship, make sure you look for one that admits when they are wrong and are committed to doing what’s right as a response to their own failure.

Remember this one thing.

It’s okay to fail, but it’s never okay to shirk your responsibility or intentionally harm someone’s business.

If you suspect that your credit card processor may be shirking their responsibilities to you, it may be time to have a conversation.

We won’t promise you perfection, even though that’s the likely result, but we will eternally do the right thing.

If you’d like to learn more about how credit card processing providers get paid, download a copy of our unbiased report on credit card processing.