Who really controls the flow of money in payment systems? The answer might surprise you. In this eye-opening conversation with payments industry veteran Eric Grover of Intrepid Ventures (https://intrepidventures.net/), we uncover the fundamental power dynamics that determine how interchange fees move through the ecosystem.

Eric and Christopher Dryden, Esq., discuss how payment system economics fundamentally flow toward those who can affect transaction volume, explaining why interchange typically benefits issuers rather than merchants. He explores the regulatory challenges facing the payments industry, from CFPB restructuring to state-level interchange restrictions that threaten to create an expensive, unworkable compliance patchwork.

• Interchange fees flow to issuers because they can affect payment volume share, while merchants are typically price takers
• Asymmetric pricing is at the core of merchant and acquirer discomfort with the current system
• The CFPB is being dramatically scaled back under the new administration, potentially creating a regulatory vacuum
• State-level interchange regulations like Illinois' ban on fees for tax and tips pose multi-billion dollar compliance challenges
• Industry consolidation continues with Global's acquisition of WorldPay, though earlier mega-mergers are partially unwinding
• ISOs must evolve beyond payment processing to remain relevant, with software integration becoming essential
• Payment protectionism is increasing globally as countries develop national systems and resist foreign processors
• Central banks in countries like Brazil both regulate payment systems and compete directly in the market

Grover explains that despite merchant complaints about interchange costs, the flow of fees to issuers isn't primarily about covering expenses—it's about economic leverage. Banks can shift transaction volume between networks, giving them bargaining power that merchants typically lack. This creates what Grover calls "asymmetric pricing," where acquirers and merchants become price takers in the system. But what would happen if consumers became completely indifferent about which payment method they used? The entire economic model might flip, with interchange potentially flowing to merchants instead.

The regulatory landscape is undergoing seismic shifts as the CFPB faces dramatic restructuring under the new administration. While the Supreme Court upheld the bureau's funding mechanism, its staffing and focus are being radically curtailed. This creates a regulatory vacuum that states are rushing to fill—with potentially disastrous consequences. Illinois and Colorado are already implementing state-level interchange regulations that would cost billions to implement and create a compliance nightmare for payment processors, networks, and merchants alike.

Meanwhile, industry consolidation continues with Global's acquisition of WorldPay, though interestingly, we're seeing a reversal of the "mega-processor" trend from 2019-2020. Companies that once touted the benefits of operating across the entire payments value chain are now divesting units, suggesting that management complexity and cultural integration challenges can outweigh theoretical synergies.

Contact Eric Grover at eric.grover@intrepidventures.com to learn more about navigating these complex industry dynamics and staying ahead of the regulatory curve.

**Matters discussed are all opinions and do not constitute legal advice. All events or likeness to real people and events is a coincidence.**

Visit Global Legal Law Firm today: https://www.globallegallawfirm.com/

A payments podcast of Global Legal Law Firm

Anthony Malatesta, Principal at Wellesley Hills Financial (https://www.wellesleyhillsfinancial.com/) joins Global Legal Law Firm’s Christopher Dryden and Jeremy Stock to share crucial insights about positioning payment businesses for optimal valuation and successful exits.

What's the real difference between a merely profitable payments business and one that commands premium multiples at exit? According to Anthony Malatesta of Wellesley Hills Financial Group, it comes down to intentional preparation, data analytics, and strategic positioning.

The journey into payments is rarely planned. For Anthony, it began with an unpaid college internship that evolved into a career at the intersection of capital markets and payment processing. This unique perspective allows him to bridge operational realities with financial valuations – precisely what most business owners lack when focused on day-to-day operations.

Most payment professionals are shocked to discover how unprepared their businesses are for potential exit opportunities. When asked for basic operational information like employee compensation structures or downline agent contracts, many admit it would take weeks to compile – a deficiency that can slash millions from transaction values during due diligence. The businesses commanding premium valuations have systematized their operations, reporting, and financial management long before exit opportunities emerge.

While many industry voices have declared "the ISO model is dying" for over a decade, Anthony reveals a more nuanced reality. Traditional processing-only models face compression, but software-integrated payment businesses are securing extraordinary multiples – some reaching 80-90x compared to traditional 30x valuations. The market continues rewarding businesses that increase merchant stickiness through vertical-specific solutions and additional value-added services.

For payment professionals contemplating strategic positioning, Anthony emphasizes "product over price" approaches rather than racing to the bottom with rebates or cash discount programs. The most valuable businesses have shifted from transactional relationships to becoming essential operational partners for their merchants. This approach not only reduces attrition but creates multiple revenue streams that significantly enhance valuation.

Perhaps most critically, Anthony highlights the importance of understanding your business at a granular level – from attrition metrics to sales team performance analytics. These insights enable strategic adjustments that directly impact enterprise value, creating intentional pathways toward successful exits.

Ready to transform how you approach your payments business? Connect with Anthony and his team at MerchantPortfolios.com or WellesleyHillsFinancial.com to discover what your business is truly worth and how to maximize its value for your eventual exit.

Take control of your business future by understanding the true value drivers in your portfolio and building an intentional strategy to maximize them. Your exit value depends on it.

**Matters discussed are all opinions and do not constitute legal advice. All events or likeness to real people and events is a coincidence.**

Visit Global Legal Law Firm today:

https://www.globallegallawfirm.com/

A payments podcast of Global Legal Law Firm

Two payments industry veteran experts talk about electronic payments in a way you have never heard before. Join Christopher Dryden, Esq., and special guest Allen Kopelman, Nationwide Payment Systems, Inc., for this in-depth, fascinating discussion.

Check out Allen’s new NPS One platform coming soon, offering merchants a comprehensive business tool with rapid approval, virtual terminal capabilities, invoicing, links to accounting, embedded finance options, and more.

The payments landscape is transforming rapidly through consolidation, technology integration, and changing fee structures, leaving merchants and payment professionals scrambling to adapt. Major processor mergers like Global Payments acquiring WorldPay have reduced competition while software companies increasingly control payment relationships, disrupting traditional ISO business models.

Software has become the central battleground in payments. When every business operation connects to software platforms, those platforms increasingly dictate payment processing choices. "ISO software is the new ISO," as one expert noted, with many businesses finding their payment options restricted by their essential software providers. Private equity-backed companies are purchasing previously "agnostic" platforms and redirecting merchant payment streams, creating significant challenges for payment professionals who built businesses on residual income.

Dual pricing (formerly cash discounting) and surcharging have emerged as critical merchant strategies, with approximately 35% now passing processing fees to customers. This shift occurs amid complex regulatory challenges – Visa capping surcharges at 3% while MasterCard maintains 4%, alongside state-specific regulations in New York, New Jersey, California, and Colorado. Merchants face practical implementation hurdles, especially in retail environments where displaying dual pricing on physical merchandise creates logistical nightmares.

Despite digital acceleration, cash maintains surprising resilience. Many workers receiving pay cards immediately withdraw cash, while certain business segments (contractors, repair services, salons) continue offering cash incentives. One payments expert reported dispensing over a million dollars monthly from a small ATM fleet, demonstrating cash's enduring role in specific economic sectors.

The industry faces critical ethical challenges too. Some agents program terminals to display higher surcharges than merchants actually pay, creating hidden profit centers. Others establish questionable referral relationships that potentially violate card brand rules or trigger money transmitter regulations. Without industry-wide agent tracking or standardized licensing, these problematic practices continue unchecked.

What does this mean for your business? Understanding these shifting dynamics helps you make informed decisions about payment processing, software integration, and fee structures. Whether you're considering implementing dual pricing, evaluating integrated software options, or simply trying to minimize processing costs, staying informed about industry trends provides crucial competitive advantage in an increasingly complex payments ecosystem.

**Matters discussed are all opinions and do not constitute legal advice. All events or likeness to real people and events is a coincidence.**

Go say hello to our guest Allen Kopelman over at https://nationwidepaymentsystems.com/

Visit Global Legal Law Firm today: https://www.globallegallawfirm.com/

A payments podcast of Global Legal Law Firm