Baxter Lanius of Alternative Payments

[00:00:00] , and I'm going to start by , and I'm going to start by , and I'm going to start by . Hello ladies and gentlemen, welcome to a June 20th edition of the MSP Initiative, MSP talk, or we like to call it MSP Initiative live. MSP Initiative com.

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[00:02:56] Last shout out to our friends at Roost. I was down at the Flow Conference. Not, I feel like 24 hours ago I left ish and congratulations to those guys. I know it's hard to put on an event, especially your first one of this size.

[00:03:15] 240 MSP attendees is a pretty good swing at a first time event. So congratulations to the team down there and I was happy that I was able to join the fun and put a little George spin on things. Cause you know, I love pizza and nighttime activities apparently.

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[00:04:08] By the way, this may be the only person with that name that I actually know. Love the name, love the name. Baxter from Alternative Payments. How are you doing today? I'm great, I'm great George. Thanks for having us. Thanks for jumping on.

[00:04:22] I know you guys were chatting right before I jumped on, but seems like you're another Northeasterner. Northeastern New York, New York, New York, born and bred, have a lot of friends in the Philadelphia corridor and Philadelphia area. Eagles and Giants, a huge rivalry.

[00:04:40] Hey, for as much as people say it's everybody in Dallas, which by the way, there's a lot of truth to that. I would say from a divisional standpoint, since New York's so close, there's definitely a rivalry there. Although, I don't know what's going on.

[00:04:55] Every time I look up there, like, you know, Daniel Jones gets a contract and we signed your best player and I don't know what's going on there, but somebody's gotta figure it out. The rivalry is only good, but then Dallas breaks all these rules.

[00:05:08] The rivalry is only good with both teams are like competing, right? Like, Clarks and Petter. That's what makes them fun. Exactly, but NFC Easter, right? Sometimes it's NFC Lease. Sometimes it's NFC Beast and every year is a different story. Although, you know, if I somehow,

[00:05:26] I know you probably know this, Eagles Packers opened up the season in Brazil. Are you headed down? We'll see, but I was told I should look into security fights. I don't know. Is it worse in tailgating for an Eagles Giants game or going to Brazil? I don't know.

[00:05:46] Should I go back and watch the Fast and Furious movies? Maybe I'll pick up a tip or two. It feels pretty safe these days. Depends on whether you're in Rio or is in Sao Paulo. It's in Sao Paulo. Yeah, yeah. So we'll see. We'll see. Anyway, I digress.

[00:06:05] I will start off these sessions with, I don't know, a little bit of history on you. That usually leads into a little bit of history about your company and that way people can get a little bit of background on your story a little bit

[00:06:18] and then we'll go into the rest of it. Yeah, that sounds great. And yeah, so my quick story is really, I'm an investor by training, which is, I guess, a little bit of naughty word in the MSP sector. But it's an interesting story

[00:06:33] and I was involved in a acquisition of a global MSP called Presidio back in 2014. And then subsequently invested in a security bar called Optive Security. And then the firm I worked with acquired tech data and merged tech data with TD Cinex. Wow.

[00:06:54] So that was a PE company or something like that? Yeah, so the firm's called Apollo Global. It's a very, very large global private equity fund that I worked with for about four and a half years. And through a lot of these experiences on the MSP,

[00:07:10] the tried and true MSP side, the VAR side, the software side as well, really understood this challenge around invoicing billing and payments. And it was a problem for us at tech data. It was a problem for us at TD Cinex.

[00:07:29] It was a problem for us at Optive Security. It was a problem for us at Presidio. And along the same lines, I spent a lot of time reading the news about Stripe and how easy Stripe was making software payments. And continued to kind of monitor the market

[00:07:48] and really understand like, how do MSPs play into this area? How do they serve SMBs and mid-market clients? And I got to a certain point really at year end 2020 after COVID hit where I was like, I just need to go do this. And so I left Apollo,

[00:08:08] pretty nice attractive salary and bonus structure and started alternative payments to ultimately build a better payments platform in the MSP space to really help clients get paid faster and take a very different approach outside of just kind of pure play software.

[00:08:29] And so if you ask any of our clients today, of which we have a little over 300 now, our approach is not just software, it's also customer success and it's post sales and it's educational and it's knowledge transfer. And that type of equation really has allowed us

[00:08:50] to be successful in the market. And it's a very differentiated approach that a lot of people take in this market. But it's been an incredible journey for the last four years. And we're excited for the next 20 years to continue to build a leading payments company

[00:09:04] and ultimately help MSPs get paid faster. That's awesome. Apollo Global, right? Big name. I mean, I know they were involved in Rackspace and a lot of other companies that we're all, that kind of upstairs from MSP land probably on the vendor side to some degree.

[00:09:25] The whole payment thing is all over the map. I mean, obviously you know the history here is like only two companies really spent a lot of their, like there's a lot of tertiary companies, right? QuickBooks into it payments and you go to your bank,

[00:09:39] credit card processor and obviously Stripe, PayPal, bill.com, et cetera, et cetera, et cetera, right? Like these were like companies who didn't have a focus in MSP land just kind of orbited, right? Yeah, you had the two that came before you, right? One got bought by CatGlyde,

[00:09:59] the other one got bought by Kaseya and then their paths went where they went. So they kind of paved some road for you, right? And MSP land, it's not a bad thing by the way. You know, like the first person isn't necessarily always the winner.

[00:10:14] Probably the person that comes after them is probably the winner. History says that, that's just George, you know. George. There's a lot, and there's also a lot of like conversations around quoting and quote to order and payments and leasing and there's companies specific

[00:10:41] to like Great America comes to mind and somebody who's like, hey, we're in the leasing business, right? So if you wanna push that over to us, this is what we specialize in, okay, got it. At the end of the day, big picture,

[00:10:56] whether it's an MSP, whether it's a donut shop, cash flows king, okay? We all know this. A lot of MSPs, if you know, and they'll pull dipoles now retired, right? But he used to say, hey, a lot of MSPs are not just breaking even,

[00:11:13] they're just not making money, they're losing money, right? So if you're not actually profitable and you're also not getting paid on time, game over, right, like you just end up in trouble. All right, put all that out there to set the board.

[00:11:27] This is an important topic because getting paid, getting paid on time and having that whole thing be affordable by default is important. Like the ones that you mentioned, right? The stripes and the guys that come, are in that category even pay pals at time,

[00:11:45] it's expensive to, or into it payments, right? With QuickBooks, it's expensive, right? Like you're giving up your dollars to the other guy, and like I get that's how the game is played, but if you don't have to give up as much of it, you try not to, right?

[00:12:03] So like, so I'm gonna start there, right? Cause I put a whole lot of things there. I'm gonna talk about costs. I'm also gonna talk about, and I would love to hear your opinion on this part of it, traditionally transactions from a credit card processing standpoint,

[00:12:23] I know there's bank transfers too, but from a credit card processing standpoint, this vertical, this category, IT services, I guess is viewed as like a dangerous category, right? From a classification standpoint for some reason. I don't know if like there are just a bunch of problems

[00:12:40] or fraud or who knows, right? Maybe you can explain it to the masses here, but like I've heard of transactions basically getting hung up for weeks, right? Like the credit card got swiped, the phones never got released, and like all of this extra leg worker was required

[00:12:57] to even get it where the destination to get the ball rolling. So let's start with costs, with all the players, right? And let's talk about how this category works and what keeps the money flowing versus what gets things stuck. Yeah, no, you've set the ground very nicely

[00:13:21] and ultimately my takeaway from everything that you just said is that this world's really complicated. If you're an MSP and you're trying to run your business and you're also trying to understand what solution do I use for payments, it can be challenging.

[00:13:42] Because it's what they just go to what's in their mind easy, right? Exactly. Oh PayPal, no problem sign up for PayPal. Good, good, good. And it's like, uh-oh. Like I've seen people sign up, create a new business, sign up for a PayPal account

[00:14:00] and like PayPal gave them a hard time just to approve their account. I'm like this is supposed to be universal. I don't understand what the problem is. Well, or PayPal charges you 5% for a transaction. And so all of a sudden, you've just signed a big contract, $5,000, $10,000 a month.

[00:14:19] And now you look at your bill and you're only receiving $4,500. And you're like, hey, where'd my $500 go? I signed up for PayPal, not some extortionary service. And so what's really interesting is I'll start from the top. Now, the reason why IT services in the MSP market

[00:14:46] has historically been higher risk is because of the way in which hardware previously got sold. And that an MSP would acquire the hardware and take the balance sheet risk from a VAR and then would resell it. And so because of that, the MSP was spending $10,000, $50,000, $100,000

[00:15:12] out of their pocket to front the money and then getting paid after the fact call it a 10% margin or 20% margin depending on the way in which he's running a business. And so because of that, they were taking on a lot of risk. And because of that model,

[00:15:29] they then got categorized as this high risk reseller of hardware. Now- Even though a lot of their services are professional services, labor, help desk, there's other things, right? But you're specifically starting with physical goods. Well, and physical goods, whether you're making more of your profit on professional services,

[00:16:00] your revenue coming from the hardware side is actually quite significant if you're purchasing servers and laptops, right? So if I was looking at a business and you sold $500,000 worth of computer equipment and made only $50,000 on it and then you sold $500,000 worth of services and made 50% on it,

[00:16:24] your business is still 50-50 hardware and services. So it got categorized incorrectly. And I would say that like the model's still incorrectly categorized for a lot of processors. And that adds on incremental fees that get passed onto the MSP. Now, because of this classification,

[00:16:47] they're actually getting a higher transaction rate. From an interchange perspective, if businesses are categorized within this IT services market, they will get categorized at a higher interchange rate from the card networks. You're already in trouble. By the way, Alicia Wilson pops on and says,

[00:17:06] as a former banker, PayPal makes her cringe. Thanks, Alicia, you're not the only one. Makes us all cringe. But the next point is fees, right? And so we kind of identified a little bit of it, why are there higher fees? But a lot of it's credit card related.

[00:17:29] So the market kind of thinks of payment processing fees as specifically tied to a credit card. So I pay to process a credit card, I pay 3%. You go to the donut shop, the donut shop charges you 3% for that credit card swipe. Not the consumer but the donut shop.

[00:17:49] And within the B2B market and with the MSP market, we as a business and an entity and a company just don't think that that's appropriate and don't think that's right. And so how do you migrate your clients processing from credit card to ACH,

[00:18:10] which is a lot cheaper of a solution? So 3% is kind of like the worst case scenario. You make 100%- PayPal's 5%. Well, in a PayPal's 5% for dumb other reasons, just because of their wallet kind of wallet structure and transferring from PayPal to PayPal,

[00:18:34] it can be international, it can be domestic. Like they're solving a handful of other things within the market than just George paying me or me paying George. Okay. On a typical domestic transaction of me showing up to the donut shop, typically what you see is 2.9% plus 30 cents. Okay.

[00:18:59] You can search that on Google, you'll see it 500,000 times over. That's pretty much the market. American Express is a little bit more expensive because America Express charges merchants a little bit more. So typically you'll see 3.5% or 3.3% plus 30 cents. And didn't Capital One acquire Discover?

[00:19:20] Like wasn't that this year? It was, it was. I think it's still going through part Scott Riley around monopolistic behavior but regulatory approval. But that's right. And then there are Discover cards which are much more in line with Visa and Mastercard. Okay. But so if 2.9% plus 30 cents

[00:19:43] to just make sure we're being fully transparent is the upper bound of the worst case scenario for an MSP then what's the lower bound today? The lower bound is an ACH transaction. And an ACH transaction as I've told a lot of our customers

[00:20:02] and which is a transparent manner of working, an ACH transaction cost me 15 cents flat. No. Now we process hundreds of millions of dollars and so we get access to discounted rates. But that's the lower bound, right? It's 15 cents. The upper bound is 2.9% plus 30 cents.

[00:20:27] So if you're falling within any of those bounds, you're what I would consider in market, right? You're in the general vicinity of what things cost to process payments. Okay. But obviously you wanna fall to the 15 cent cap, right? 15 cent, yeah. And so how do you get there?

[00:20:49] You get there by introducing ACH as a primary form of payment processing, right? So move away from the 3%, 2.9% plus 30 cent per transaction fee, which is variable, right? So $100 transaction turns into $1,000 transaction. It's not capped. Your $3 fee goes to $30 and then it goes to 10,000, it goes to $300.

[00:21:20] But back to the first wrinkle that I mentioned about the categorization or misclassification or whatever you wanna call it. Have you seen, I definitely happen to see credit card transactions. I know that for a fact, but have you also seen large ACH transactions get held up similarly?

[00:21:39] So large ACH transactions, so this is another wrinkle in the equation. A lot of payments companies are sit on top of other payments companies. Okay. So if I, alternative payments does not, but a lot of other companies, when you work with them,

[00:22:04] they are just a mask or a cape on top of other companies. And when a transaction goes through, that's maybe outside of what the average transaction size is for that client or for that MSP, that transaction can sometimes be flagged by these third-party intermediaries

[00:22:28] that the mask or that the cape is hiding. So what happens is it's just, it's a law of averages and risk assessment. If every single transaction you do is $1,000, and all of a sudden you try to process a $10,000 transaction, which is 10 times your average,

[00:22:49] someone within the supply chain or the value chain will say, hey, George, wait, we're gonna slow down that transaction because that's 10X what your average transactions. It kind of makes sense. Well, it does make sense. However, in the payment processing space, which has always been a very opaque,

[00:23:14] kind of guarded, sketchy space where people are charging 5% to move money around and it should be 15 cents, it gets people upset naturally, right? Yeah, for sure. Especially if they're paying that premium, if they're paying the 5%, and it gets stuck in the water pipe somewhere,

[00:23:37] then they really get frustrated because they're thinking, all right, transact today, I'll get tomorrow. Exactly, right? And it comes out of left field. You've been working with somebody for six months, everything seems to be going okay. Now all of a sudden you have a $15,000 transaction

[00:23:53] from George, it gets held up. How are you gonna pay your bills? And what's the longest you've seen somebody's transaction get held up like that? Four weeks. Wow, what was the reasoning? Or what did they have to do to get it out? It's just a process.

[00:24:12] Now, we are everything within our value chain. So we built our entire platform from the ground up on top of payment rails. So on top of bank rails and on top of the card networks. Okay. And so we play that risk assessment tool ourselves.

[00:24:35] Okay, so you're not answering to someone else. So you are the man. Exactly, we are the man. Which allows us when we work with folks to not hold up the transaction for four weeks because we're not waiting for Joe Schmoe to make a decision. We are the man.

[00:24:59] We control who operates within our platform and who pays who. And so what we've seen is to answer your question specifically with a transaction that gets held up for four weeks is nobody really knows, right? Because no one's really, people are just saying,

[00:25:20] hey, George, it's a risky transaction. The MSP doesn't know, the end client doesn't know. It's just caught in the system. And a lot of the businesses that are in this value chain or supply chain are very, very large businesses, right? They're processing billions and billions

[00:25:40] and billions of dollars. So they don't necessarily, they haven't been taught customer support and success and they're not trying to really accelerate your $15,000 transaction. And then here's what happens, right? It gets stuck. Then they try and cancel it. That gets stuck.

[00:26:01] And then all of a sudden, now everybody's money's in limbo and they're gonna try and send it a different way. But oh, by the way, the customer's already been, like it's like their account's been docked that money even though it's not been delivered.

[00:26:14] And it hasn't been returned yet because it's got stuck in the cancellations. Now all of a sudden it's gotten worse. And now everybody's pissed off. That's exactly right. To be frank, right? Like what's amazing about this industry is that this happens very, very large businesses.

[00:26:33] I mean, we paid a Fortune 500 company for a software and annual software license. We've been working with them for three years. It's not a big contract. I think it's like $5,500. They emailed us three months after we paid them saying, where's your money?

[00:26:56] I said, we paid you your money. Say we don't have any documentation that you paid. We're like, well, what do you mean? They're like, wow, we received, we were supposed to receive two transactions for $5,500 and we only received one. I'm like, well, can you confirm

[00:27:19] that the one was my business? They're like, we don't have enough information to confirm that the one was your business. So we're asking you to confirm for us. So I then went back and I just took a snapshot of my ACH transfer within my bank account

[00:27:40] and sent it to them. And I said, hey, here's the documentation that we submitted and sent you $5,500 for your bill. And they said, we don't have any documentation. And I said, well, I just sent you the documentation. They're like, hey, we need this type of documentation.

[00:27:56] So then I had to go to my bank. I got a specific, it's called a tracer report on that transaction and I sent it to them and they said, okay, sorry for the inconvenience. Thank you so much. Like it's the other guy who hasn't paid us.

[00:28:12] So your point here in this story, by the way, real world, it just happened to you, right? It's not just a fake story. Is it doesn't matter the size of the company. Everybody's playing the same game. That's what you're saying. Everybody's paying the same game.

[00:28:26] I think ultimately the system in the US is quite antiquated and it's one of the reasons why payment processing is expensive for some companies. Yeah. And it's one reason why people oftentimes don't have great experiences is because the ultimate underlying infrastructure, right?

[00:28:51] Which is the bank rails, doesn't have a ton of clarity. And then when you build on top of one, two, it could be even three companies, you're basically creating more complexity within the platform that is facing the MSP. Okay.

[00:29:09] I'm gonna go off of the rails for one second and we'll get back to what you're trying to talk about. Is the future of then these digital currencies, right? The Bitcoins and Ethereum's and I guess anybody can create a coin these days.

[00:29:25] Just be careful that you don't run into FDX, I guess. Like do you see a future where that technology becomes the new way versus the current antiquated system? I think there are a lot of learnings from blockchain technology in terms of how to build

[00:29:48] a better, more instantaneous payments solution and payments platform. I think there's a lot of technology that we will leverage as payment facilitators and payment processors in this space that will help us streamline some of these challenges and simplify a lot of transparency in the market.

[00:30:16] That I am not bullish that it will revolutionize at least the US market. Okay, fair. Just I know this question comes up to you at some point in your path, right? So I figured I just ask because... I think there's a lot of interesting things to do

[00:30:36] with cryptocurrency and blockchain technology. It won't revolutionize at all but there are definitely a lot of learnings to leverage like on international money movement, for instance is like a very good one where you can move money faster internationally by leveraging blockchain technology and leveraging cryptocurrency.

[00:30:57] But within a domestic bank-to-bank transfer type structure, there's other technology that's out and that's continuing to come out like FedNow and real-time payments which will mimic in some way the cryptocurrency environment. Okay, so let's pick one piece of what you just said

[00:31:23] and let's try that for a second. International, right? I mean like we got two countries bordering United States, right? There's Canada and there's Mexico, right? So like we don't have to go far to have this conversation. You want to start going into other places

[00:31:37] that MSPs live like UK, Ireland, Europe or Australia, New Zealand, APEC. Now we can go there too, but like I don't have to even get on a plane. I could drop Canada if I wanted to. So let's talk about the international currency piece then

[00:31:51] because I'm going to tell you right now because the MSPs are starting to either merge, acquire or just build these conglomerate type multi-location things, you know, I see it way more consistently where it's like, oh, we have an office in Toronto

[00:32:07] and an office in New York and an office in, you know what I mean? Like this happens all... Yeah, well, I mean, listen, it's the reason why international money movement is challenging is because there's regulatory requirements within each geography, right?

[00:32:24] And so there are tax implications of moving money from one country to another. There are banks that are regulated in specific geographies and they're banks that are not regulated and can't operate in specific geographies. So how do you efficiently move money around? Wire? What?

[00:32:47] Wire transfers, I don't know. Well, wire but typically, you know, at least US banks will charge you more for an international wire transaction. Oh, for sure. Yeah. Then you'd probably 3X, 4X more, yeah. Yeah, so and the reason why that is is typically because you're getting,

[00:33:08] you're sending money from one bank to another bank and those banks are not under the same regulatory environment which requires both banks to basically double check and spend more time approving the underlying transaction. Again, because of money laundering, because of all of these illicit businesses that take place.

[00:33:35] Okay, so hold on a second. Are you saying that all the, like the wires are supposed to be instant? I don't know if that's actually true but are you saying the only reason they charge more is because there's more labor involved in validating the transaction?

[00:33:52] That's why wires cause more? I mean, it's the cost of doing business, right? I mean, there's more labor, there's more regulatory filings and approval and compliance requirements. If you're a bank that's sending international wires, it's the same reason why alternative payments, for instance, does business in the US

[00:34:11] but we don't accept MSPs in Canada or Mexico or in Europe today because it's gonna cost us a lot of money to build into those geographies. If, again, if we want to build all of the infrastructure from the ground up,

[00:34:28] if we were built on a platform like Stripe, we could immediately offer our services in the world but we would be making very little money and add risk to our business. Right, cause at that point you're not the man. You're hoping the person on,

[00:34:45] you know, you're sitting on top of doing their job. Okay, I mean, listen, we're learning about things that you probably don't like as an MSP, you don't ask these questions until you run into an issue. Let's be honest. Totally. But I've been around long enough.

[00:35:00] I've heard this and it's not just one off. It's becoming more consistent where these big services, right? The squares and stripes, all these guys, the PayPal's literally create a wrinkle for you that breaks your cash flow. Not only that,

[00:35:16] creates a bad taste in the mouth of your customer because you're using that service to transact. They didn't tell you how to get the money to them and then like all of a sudden they're like, why don't we just send you a check?

[00:35:24] It would have been faster at this point. Yeah, we've seen a lot of situations in which an MSP is using Stripe. One day Stripe wakes up and decides that payment account is high risk and they shut it down. Oh. And so full stop. Wow.

[00:35:42] And if you're an MSP, some percentage of your revenue is coming in through Stripe. Now that percentage has been shut down and those customers who are paying by Stripe and all that credit card information now needs to get fully reset up.

[00:36:01] And that's, you had other priorities that you're focused on and now all of a sudden you have to dump all the other priorities and focus on this other solution and this other iteration. And again, it's challenging. It's real. Like the pain is certainly real

[00:36:18] and it's not just Stripe. There's other people in the environment and in the payment processing space that it happens. We heard just last week another company on boarded with us because they were using a different platform. They held up a payment for I think 17 days.

[00:36:37] See, by the way folks, we did not talk before this call. Kind of just jumped on and like put the car into drive. I stumbled into this conversation. I just want to point this out. This is real. It's totally real. The other thing that's real in this space

[00:36:55] is a fair amount of blurred lines in terms of what people are actually paying for payment processing. Sure. It's like the end of your telephone bill where you're like 15 lines of charge like how you what it is. Yeah. Yeah, that's a perfect example.

[00:37:13] It's just like your telephone bill but it's your telephone bill with three telephone bills. And so I three bills together and then aggregate them and then divide it by your revenue to understand in my pain again, upper bound 2.9% plus 30 cents, lower bound 15 cents per transaction.

[00:37:34] Where do I fall? So it's really to be honest George like it's really one reason why I was so excited about starting this business and by taking that plunge. And from the ground up, the way in which we built the business from a software perspective,

[00:37:53] from a people perspective, from a relationship perspective, like we are the most transparent game in town because it's super important for MSPs to understand and know like what do we get charged for our transactions and how much, what's our cut? How much are we making?

[00:38:14] And that's been our approach. No, I like that. Let's go to the other side of the conversation. I mean, specifically from MSP, this happens pretty regularly like the integration conversation, right? Part of the reason that people turn on quick books into it payments is because,

[00:38:32] oh, you just send an invoice out and it says pay here. And even though it's probably the most expensive way, second to PayPal, the accept payments, maybe even more like it's just they try and make it so easy a caveman can do it.

[00:38:45] You just press go and off you go. So, MSPs have a pretty big investment in many things, right? And like so many tools out there, but whether it's a quoting tool, whether it's a PSA system, whether it's maybe these things tied talk to each other,

[00:39:03] maybe they're separate tools, whatever. Then you got the bookkeeping system, right? And then like, oh, by the way, there's the I need to get paid and like how much of that can I do through the tools versus outside the tools or do I have to post it manually?

[00:39:19] And then like all of a sudden you're four pieces in in order to get the wheel to actually spin. And the harder you make that process, the slower you get paid, the slower you get paid. Well, we already just went through that cash flows king.

[00:39:34] So like that's a pretty important piece to the puzzle. Let's talk about that for a second. Yeah, it's probably the most critical piece of the puzzle for an MSP. And the reason why that is, is a pretty simple reason

[00:39:52] is that the majority of MSPs invoice out of their PSA, but they account for that invoice out of their accounting software or their ERP software. And so how do you get not only the invoice information but also the customer information as well as the payment information

[00:40:12] and whether it's outstanding overdue paid and when it's been paid into the accounting software to simplify your understanding of, are you making money or are you losing money? And that is why this is challenging. And that's why the integration component of PSA into accounting is so important.

[00:40:40] Now, to add a wrinkle into the mix, another big challenge is that many MSPs are using software solutions that either were historically on-prem or are currently on-prem. And that adds another very big wrinkle because if the software,

[00:41:03] rather the PSA or the accounting software is not in the cloud, then you cannot very easily push information from one to the other or to both or one subsequently. And that's in summary kind of why this pain is real. But for a lot of companies

[00:41:27] that are using cloud-based solutions, it has become a lot simpler and we hear very, very little to no complaints on the way in which, at least for us, the way in which these integrations have been built and push data. Sure, I mean, I think part of this just,

[00:41:52] especially in the examples that we gave earlier in the call, right, hey, I need a deposit for a big hardware order or I need you to put it down payment or maybe there's a progress billing, right? Where I'm, you know, there's a project

[00:42:04] and I'm gonna bill you some up front, some in the middle, some at the end or maybe it's more just, hey, I wanna be able to collect all of my money the same day on a reoccurring basis at the beginning of the month

[00:42:15] so I don't have to run after you all over the place in order to make sure that I'm getting what I need to pay my bills. So like some of this is just the modern way, like every SaaS company kind of already works this way, right?

[00:42:27] It's like, hey, you subscribe, some bill you on the same day every month, some bill you at the first of the month. Done. Easy. MSP a little bit all over the place because the buying motion is not like a SaaS company. I was actually talking about this

[00:42:42] on the last MSP initiative call, I was like, MSPs don't necessarily, tell me if you have any of these, I would love to go and check it out. Have you found an MSP where you can just e-commerce your way into an MSP agreement on their website? No.

[00:43:00] Right? I can't just say, oh, I have 32 employees, I'm on Microsoft and I use iPhones and Windows computers. Sign up. It just doesn't happen. So like the whole buying process is not what we see today on Amazon, right? Click buy credit card shows up, right?

[00:43:24] Like you didn't talk to anyone, you didn't see anyone, you just hopefully you liked it if you didn't, you return it back. Well, and I think the software market is really the only market in which it is generally an e-commerce experience.

[00:43:39] And there's still a lot of categories that are not, right? You know, I was evaluating a software solution the other day that I thought was really interesting checkout experience and they just screen shared to a quote basically. And then as we adjusted the number of people

[00:44:02] for this versus that add-on, et cetera, they did it with me. And then they just sent me that quote. And so it was a consolidated, basically buying experience. We worked on the quote basically together and then I got to receive an email to sign off on that quote.

[00:44:24] I think that is probably the next iteration of where this kind of like MSP contract billing and voicing goes. But right now that software does not exist today. Okay, that's fair. So as much as we can learn from every other industry, right?

[00:44:48] The easier you make it to have somebody say yes and pay you, the better it is for everyone. Time kills everything in this conversation. Longer it takes for you to send a quote, invoice, you know, get a transaction going, get paid. Like that just messes with everything

[00:45:04] that comes behind it. So you're saying today, June 2020, 2024, you're finding that tying into the MSPs tools in order to make that process, not the one that you just talked about, maybe that's the future, but like the way that it's working right now,

[00:45:22] that's not hard to get set up so that you can actually get new customers on board it and reoccurring transactions transact. For people who are using cloud-based software on the accounting and the PSA side, it's not challenging. Now, if you're using a PSA that was historically on-prem

[00:45:47] that has now migrated to the cloud of which there are a handful, there are some wrinkles. But cloud-based stuff, and for those ones that they're wrinkles, it's really like 1%, less than 1% of the time, they're really edge cases. The biggest challenge that we see is when someone's using,

[00:46:07] I mean, just to name names, someone's using QuickBooks desktop. That's the biggest pain point that we see. I would say everything else is, you're pretty good, the integrations work, very well generally. Now, some of them are not as tight,

[00:46:25] some of them have not been built by some folks as well, but they should work instantaneously in real time, 99.9% of the time for the long tail of integrations outside of QuickBooks desktop. Okay, which my understanding is QuickBooks desktop is going end of life if it hasn't already, right?

[00:46:45] Like they're basically- I think in a, you can't buy it anymore, but we'll see when they wind it down. I mean, it's still a very, very big business for Intuit. Oh, I gotta think that more people are still using desktop than cloud or hosted or online

[00:47:01] or whatever the hell they call it. I think in the MSP market, I think that's definitely right. Yeah, everywhere, I think that's generally just right. Okay, so MSP comes to you and says, I saw you at an event, I saw you on MSP initiative, website webinar

[00:47:18] whatever somebody told me about you. Why should I talk to you versus pick everybody else? What's the benefit that you're giving me that would make me go here versus elsewhere? Yeah, I mean, it's a great question. I think it really comes down to two things.

[00:47:41] One is the software that we've built is extremely easy to use for both you and your end clients, which drives greater adoption and greater use. And so if you're not, if 100% of your end clients are not paying online today, our software will most certainly help with that

[00:48:01] just based off the UI and UX alone. The second piece is really customer support and customer success. We've built a team that helps you. It also helps your end clients to pay online and our goal of our business

[00:48:18] in what we talk about as kind of the holy grail is 100% of your clients should pay through one system and 100% of your payment volume should be fully automated, credit card or bank account on file being drawn when your invoices do. And that holy grail is very challenging

[00:48:41] for a lot of MSPs to get to. It takes a lot of hand holding, it takes a lot of conversations within clients, it takes a platform that's simple and easy to use and that's what we've built and that's what we've put together.

[00:48:55] And then a lot of the edge cases, because we've built this from the ground up we've sorted out whereby our clients just don't have those edge cases. And to put the cherry on top, typically when I talk to anybody,

[00:49:09] I say, listen, I will give you 100% money back guarantee. If you are not pleased with alternative payments, we will reimburse 100% of your subscription because I am so confident that we have designed a product, we have designed a team and we have designed a process that everybody will love.

[00:49:29] Is this the, we're gonna deliver your pizza within 30 minutes or less guarantee? That's your guarantee. I feel like that's a similar guarantee. Okay, great. Are you exclusive to IT and managed services land or is this just a focus for you? You'll deal with anyone.

[00:49:49] Today, 80% of our customers are MSPs. Okay. And the 20% that are not MSPs are clients of MSPs who just have a phenomenal experience and say, hey, I need this for my business but our sales team today does not sell into any markets other than the MSP market.

[00:50:09] We don't go to any conferences other than MSP conferences. We spend our time exclusively on MSPs but because of the simplicity of the platform and because of the experiences that we've created for our customers, we obviously don't turn down business. Understood. 80%, that's still good.

[00:50:29] And the fact that that's your target market. So like just curious what when you left your very nice high paying job at your PE company, why did you choose MSP for effectively an industry that could literally do business with any business? Really because of the billing,

[00:50:52] invoicing and payments problems that we faced at Presidio, Optiv, Tech Data, TD Synapse. Like again, the reason why MSPs have historically been categorized as high risk is because they're more complicated businesses, right? You're reselling software, you're reselling hardware, you're reselling services, not reselling, you're providing services.

[00:51:14] And that creates challenges around invoicing. That's the reason why you have a PSA is to manage the entire process and solving that pain point, which is extremely astute, which really not many people have solved is why we're in the market. The last thing I'll mention too,

[00:51:39] which is an interesting thing about the MSP market is it's our estimate that only about 10% of MSPs who use PSAs are utilizing a payments platform that integrates with their PSA. How did you come to that metric? Just a lot of research and a lot of time.

[00:52:03] So the opportunity value for alternative payments is 90% of the market from an MSP IT service provider land are doing it a different non-integrated way. That's what we've seen. Wow, that's a very high number. So when you run into all the people at these events

[00:52:24] and the industry talking to people, what did they tell you the reason why they don't have this figured out already? Like why didn't they connect them? Yeah, I think there is a perception that it's expensive, a perception that they lose control of their end clients,

[00:52:41] a perception that it doesn't work, a perception that it's not secure. And those are probably, I would say the top four reasons why people are not embracing it. I think the other piece is that a lot of people are still accepting payments via alternative payments,

[00:53:07] plus Stripe, plus checks, plus wires. Oh yeah. And so the reason why customer support and customer success in post sales is so important for us is because we work with every single one of our MSPs to understand why they are accepting checks in those circumstances,

[00:53:30] why they are receiving payments through Stripe, and then figuring out and designing a playbook to get those clients two alternative payments. Okay, that's fair. So like the whole, do you often find, I will number one, you already offered the money back guarantee, that's pretty cool.

[00:53:53] There's probably a term on that, but I'm sure somewhere it's written, 30 days, 60 days, 90 days, something like that. Do you find that you're saving people money when by the time you read these eight page telephone transaction fees that we talked about, like are you consistently finding

[00:54:11] that there's money to be saved? Yeah, so on credit card processing alone, in terms of switching credit card transactions to ACH, we've already served, saved our customer base over a million dollars. Wow. That's a good number, I like that. On the time savings perspective,

[00:54:33] we typically see around five to 10 hours a week, a month depending on what the process is and depending on where they're coming from or to. The most important metric from our perspective though is how have we accelerated your payment cycle? And when MSP typically comes to us,

[00:54:57] they're typically on average getting paid in 35 days. That's what we see, 35 days after the due date. Oh, so 65 days? 65 days, exactly, from the creation date, let's say. Wow, that's a lot. 35 days from the due date. Now that's average, right? So if you receive a check 180 days after,

[00:55:21] you obviously blend that in, we're able to reduce the 35 days to just under seven days. So 37 days? Sorry, 35 to seven. Okay, awesome. So we're able to reduce the time it takes for clients to pay by 80%. And the reason why that is,

[00:55:46] is because we, again, work with our partners, work with their clients to get payment methods on file and then we automate those payment methods running in conjunction with the due date of that invoice. And that really kind of hits the nail on the head as to,

[00:56:08] hey, why did you build this business? What value and outcomes are you driving and what's available in market today? 37 to five. You should have just stopped right there, that's good. I mean, listen, if you're getting paid 37 days after the due date, I mean,

[00:56:29] you're floating a lot of money, you're floating your own money and you're paying interest on it to be honest with you at that point. So inflation's 5%, right? So if you're not gonna take anything away from this session, guys, you're not a bank. You're not a bank.

[00:56:48] Do not act like one. Safeguard your funds. I've seen many MSPs literally go out of business because of this whole conversation, literally not getting paid on time, floating money, borrowing money, interest, like getting paid late costs you more, period. Nobody can convince me otherwise.

[00:57:11] Back to this was great, by the way, I love the name. I wish, yeah. There are a few dogs with the name, George. Like Dexter's in the category, Baxter, right? You know, like there's certain names. They're like, I just think they're cool. Baxter's a great name.

[00:57:27] Where do people find out more information about alternative payments? Yeah, you can visit our website, alternativepayments.io. You can always reach out to me, my email is Baxter at alternativepayments.io. My cell phone number is 917-744-6597. Call, text, I'm available anytime. This is like a trend.

[00:57:47] Jen, are you following all the people that give out their cell phone number on these sessions? This is like crazy. Like it's like a phenomenon that I never thought would happen. But okay, dude's putting himself out there guys. Use this effing phone number. That's awesome. I love that.

[00:58:02] You know what, Jen? We should go back and look at all the sessions and like post to people who gave their number. I mean, I've lost track. It's more than 10. That's awesome, Baxter. I can't wait to see you in person.

[00:58:13] I'm sure we're gonna see between now and end of the year. You guys are definitely out and about. And depending on what airplane I'm on that day, I'm sure we'll land in one place. Yeah, definitely George. It's been a pleasure. I really appreciate your time.

[00:58:26] Jen, thanks so much for setting this up and excited for what's to come and see you around in the next couple of months for sure. Absolutely. Guys, this session was recorded. We're gonna post it on all the places we talked about before. MSPInitiative.com under Sessions, YouTube,

[00:58:39] all that jazz. Check out alternativepayments.io, not .com. So I like the I-O. And we will continue these sessions twice a week, usually Tuesdays, Wednesdays, one o'clock Eastern time. Baxter, have a great one for everyone else. Catch you on the next one. See ya. Thanks, George. Bye.