On the heels of Aldelo’s facelift comes Aldelo Pay, Aldelo’s homegrown processing service to give them a “free POS” offering. The truth of the matter is that some merchants are looking for lower upfront costs, and if paying substantially more money over the long run allows them to get into a solution then “free POS” is an offering every processor should have in its pocket (it’s not our fault most merchants can’t do basic math).
If this was where the story ended there wouldn’t be an article; if Aldelo launched a “free POS” offering with bundled payments it would just be par for the payments course.
But instead we’ve heard grumblings in the Aldelo Channel. There seem to be three main grievances that Aldelo’s dealers are voicing.
The first is that Aldelo is directly calling merchant accounts to offer Aldelo Pay. Many of Aldelo’s dealers are already ISOs (independent sales organizations) or have strong payment processing relationships. Their payments agreements stipulate no soliciting: the Aldelo dealer cannot suddenly switch payment processors and go after existing accounts. “This has put me in a really difficult position,” explains an anonymous Aldelo dealer. “My payments partners are calling me asking why their merchant account just switched to Aldelo Pay and they’re thinking I had something to do with it. This has created legal trouble that I didn’t need, for something I didn’t even do.”
There’s also another downside to this. “We used to receive good deal flow and leads from our payments partners. Now that our payments partners think any merchant they send our way has a chance of being poached by Aldelo, they’ve stopped sending us leads.” Aldelo’s dealer agreement does give Aldelo the rights to contact accounts directly and solicit their support services but it doesn’t specify anything about soliciting payments. According to Aldelo’s reseller agreement,
If Dealer is unable or unwilling to provide, market or promote Supplier’s 24/7 help desk technical support and software upgrade subscriptions (“Services”) to any End-User, Supplier may offer and provide such services to End User without compensation to Dealer.
The second grievance relates to the processing fees offered by Aldelo Pay. Aldelo ideally wants its channel to pick up and offer Aldelo Pay in place of whatever payments partnerships they have now, but some dealers think it’s a non-starter. “Look, I get that Aldelo needs to have a ‘free POS’ option and I don’t fault them for it. But when I look at the processing rates they’re offering it’s uncompetitive. I can offer my merchants 0.08% above interchange and $0.06 per transaction. That’s less than half of what Aldelo Pay costs the merchant. If I’m asked to sell on Aldelo’s rates I lose the deal 9 out of 10 times. The merchant who takes Aldelo’s deal will be bankrupt in a few months and they’re not the clients I want to support,” elaborates another Aldelo dealer.
The channel’s third complaint is much more nuanced, so for that we need some background.
Aldelo’s customers skew smaller – likely around $500K/year in revenue. These merchants are cost-conscious and many of them will run hardware and software until it stops working. When Aldelo Pay reps call on Aldelo merchants, they’re upselling POS software upgrades as well as Aldelo Support contracts. In many cases the upgraded software doesn’t run on the merchant’s existing hardware, requiring the merchant to change hardware. But if the merchant has also terminated their dealer support contracts in favor of Aldelo Support, they won’t get hardware support. So instead of a cheaper hardware fix, Aldelo is forwarding the merchant to a different dealer to acquire the requisite hardware. “They’ve really got us over a barrel. They’re taking support from us and sending the merchant to a different partner for hardware. It’s almost like Aldelo is actively trying to eliminate their channel,” gripes a dealer.
Yet the dealers have signed up for this behavior contractually. Another snippet from Aldeo’s dealer agreement,
Supplier shall have the sole discretion to determine which dealer in its dealer network shall be referred sales lead opportunities, business opportunities, and product opportunities within and without the geographic territory assigned to Dealer.
When we read Aldelo’s reseller agreement it doesn’t seem Aldelo has the rights to push payments, but we’re not lawyers either. The sticking point seems to be around the definition of Products:
“Product(s)” shall mean any sealed software packages, software downloads, hosted software services, or any other software developed by Supplier composed of (a) the computer programs encoded on software diskettes, CD, USB, downloadable files, and hosted software services, in the form generally released by Supplier to its customers, as described in section 1.1.a to 1.1.e below; and (b) the user guides, reference manuals, and other materials developed by Supplier for distribution and use in combination with such computer programs.
1.1.a Aldelo® POS Branded POS Suite of Software Solutions
1.1.b Aldelo® Branded EDC Suite of Software Solutions
1.1.c Aldelo® Branded Media Display Software Solutions
1.1.d Aldelo® Branded Enterprise Cloud Software Services
1.1.e Aldelo® Branded Cloud API Integration Gateway Software Services
Aldelo Pay is listed nowhere in the Producs definition, but Aldelo gives themselves an out by saying they have the rights to contact end-users if the dealer doesn’t promote Aldelo’s products as the “preferred hospitality software solution” as explained below:
Dealer shall use its best efforts each month to advertise, market and promote the Products as its preferred hospitality software solution to its End-Users
We asked Aldelo for their response but they said they would prefer focusing on dealers and customers who were excited to grow with them. We justifiably asked Aldelo to share the contact information of some dealers who were excited for the opportunities ahead and could refute these claims, but none were given.
That’s a tad odd.
So what happens next? Do payments companies avoid working with Aldelo resellers altogether? Do the dealers and payments companies forward Aldelo’s dealer agreement to a law firm and raise a class action? Not sure, but none of this would be happening if the industry wasn’t so damn addicted to payments.
For those interested in following our analysis, refer to these sections in Aldelo’s reseller agreement:
Article 1.1, Article 5.3, Article 10.1, Article 10.6, Article 18.3
Add comment