{"id":12493,"date":"2022-02-17T06:27:15","date_gmt":"2022-02-17T12:27:15","guid":{"rendered":"https:\/\/reformingretail.com\/?p=12493"},"modified":"2022-02-17T07:49:12","modified_gmt":"2022-02-17T13:49:12","slug":"shift4-looks-to-be-killing-their-channel-partners-with-fee-increases","status":"publish","type":"post","link":"https:\/\/reformingretail.com\/index.php\/2022\/02\/17\/shift4-looks-to-be-killing-their-channel-partners-with-fee-increases\/","title":{"rendered":"Shift4 Looks to Be Killing Their Channel Partners with Fee Increases"},"content":{"rendered":"\n<p><a href=\"https:\/\/www.statementsimple.com\/\">Statement Simple<\/a> gave us notice that many Shift4 resellers received a letter delivered via certified mail. <\/p>\n\n\n\n<p>Hmm, okay?<\/p>\n\n\n\n<p>The letter explains the fee increases these resellers will be seeing in their Schedule A (their effective buy rates) that were going into effect in 30 days. By reading the letter &#8211; certified with delivery confirmation &#8211; the reseller agrees to the pricing changes.<\/p>\n\n\n\n<p>Jeez, kinda makes you think processors like Shift4 should at least extend the same courtesy to their customers instead of burying fees in their statements :\/<\/p>\n\n\n\n<p>But no matter: let&#8217;s dissect the Schedule A changes, seen below.<\/p>\n\n\n<iframe loading=\"lazy\" class=\"scribd_iframe_embed\" src=\"https:\/\/www.scribd.com\/embeds\/557925815\/content?start_page=1&view_mode&access_key=key-LYCKnw2ws5IOOwgGcnRz\"  data-auto-height=\"true\" scrolling=\"no\" id=\"scribd_557925815\" width=\"100%\" height=\"500\" frameborder=\"0\"><\/iframe>\n\t\t<div style=\"font-size:10px;text-align:center;width:100%\"><a href=\"https:\/\/www.scribd.com\/doc\/557925815\" rel=\"noopener noreferrer\" target=\"_blank\">View this document on Scribd<\/a><\/div>\n\n\n\n<p><\/p>\n\n\n\n<p>Frankly, this rate sheet is wholly unworkable, particularly for restaurant or low ticket verticals.<\/p>\n\n\n\n<p>For starters, it&#8217;s a $0.05 buy rate on transactions.<\/p>\n\n\n\n<p>That means for a merchant doing $50,000 in monthly volume with a $25 average check the buy rate starts at $100\/mo.<\/p>\n\n\n\n<p>But that&#8217;s <strong>if we don&#8217;t separate out auth, cap, and settle<\/strong>. It&#8217;s really hard to discern from how this is written, but it&#8217;s possible the fee is $0.05 for each, or $0.15 per transaction. If that&#8217;s the case then the buy rate triples for $300\/mo out of the gate. <\/p>\n\n\n\n<p>Then Shift4 is marking up every PIN debit transaction by $0.15. Assume 10% volume is PIN debit, that&#8217;s another $30\/mo.<\/p>\n\n\n\n<p>Before each chargeback there&#8217;s a retrieval: looks like Shift4 grabbing $15 there too (the real cost is about $1.)<\/p>\n\n\n\n<p>Daily batch fee of $0.35 -&gt; another $10.50 per month.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">All in, there&#8217;s 39 basis points (bps) before the reseller can even make a profit.<\/h4>\n\n\n\n<p>For reference, Toast&#8217;s average margin is 55 bps.<\/p>\n\n\n\n<p>Anything above 39 bps? <\/p>\n\n\n\n<p>Well, Shift4 gets half.<\/p>\n\n\n\n<p>So even if a Shift4 reseller wanted to match Toast&#8217;s margins of 55 bps, they would only earn 8 bps while Shift4 would earn the balance of the 47.<\/p>\n\n\n\n<p>But hey, at least you don&#8217;t have to own any of the risk, amiright?<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">But if the auth, cap, settle is $0.05 <strong>per<\/strong>?<\/h4>\n\n\n\n<p>Well, then the reseller buy rate is 71 bps, and Shift4 resellers are hosed.<\/p>\n\n\n\n<p>Here&#8217;s a table to show you what we mean. Let&#8217;s take three sample merchants with different annual gross processing volumes (GPV) and calculate the Shift4 reseller annual buy rate at 39 bps and 71 bps.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large is-resized\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" src=\"https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.46.36-AM.png?resize=426%2C125&#038;ssl=1\" alt=\"\" class=\"wp-image-12532\" width=\"426\" height=\"125\" srcset=\"https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.46.36-AM.png?w=614&amp;ssl=1 614w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.46.36-AM.png?resize=300%2C88&amp;ssl=1 300w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.46.36-AM.png?resize=370%2C108&amp;ssl=1 370w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.46.36-AM.png?resize=270%2C79&amp;ssl=1 270w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.46.36-AM.png?resize=570%2C167&amp;ssl=1 570w\" sizes=\"auto, (max-width: 426px) 100vw, 426px\" \/><\/figure><\/div>\n\n\n\n<p><\/p>\n\n\n\n<p>But we all know buy rates are usually expressed in cents per transaction.<\/p>\n\n\n\n<p>So we&#8217;ll convert those 39 bps and 71 bps into effect per transaction buy rates to make buy rate comparisons easier.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large is-resized\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" src=\"https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.48.22-AM.png?resize=530%2C277&#038;ssl=1\" alt=\"\" class=\"wp-image-12533\" width=\"530\" height=\"277\" srcset=\"https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.48.22-AM.png?w=818&amp;ssl=1 818w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.48.22-AM.png?resize=300%2C157&amp;ssl=1 300w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.48.22-AM.png?resize=768%2C402&amp;ssl=1 768w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.48.22-AM.png?resize=370%2C194&amp;ssl=1 370w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.48.22-AM.png?resize=270%2C141&amp;ssl=1 270w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.48.22-AM.png?resize=570%2C298&amp;ssl=1 570w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.48.22-AM.png?resize=740%2C387&amp;ssl=1 740w\" sizes=\"auto, (max-width: 530px) 100vw, 530px\" \/><\/figure><\/div>\n\n\n\n<p><\/p>\n\n\n\n<p>The way to read the table above is like this.<\/p>\n\n\n\n<p>If you&#8217;re a Shift4 reseller with a merchant doing $600,000 in annual processing volume and a $20 average check (so like a limited service restaurant), your effective buy rate is somewhere between 7.8 &#8211; 14.2 cents.<\/p>\n\n\n\n<p>Average check goes up, your buy rate goes up pretty drastically, too.<\/p>\n\n\n\n<p>Anything in margin over 7.8 &#8211; 14.2 cents? <\/p>\n\n\n\n<p>Well, you need to give Shift4 half of that.<\/p>\n\n\n\n<p>Soooo how the hell are Shift4 resellers supposed to be competitive on payments?<\/p>\n\n\n\n<p>Maybe they&#8217;re not . Maybe Shift is just hoping that they can&#8217;t do the math.<\/p>\n\n\n\n<p>Becuase you have to ask yourself: if resellers can&#8217;t be competitive on payments rates, can they be competitive on product?<\/p>\n\n\n\n<p>You think Shift4&#8217;s paltry R&amp;D spend is going to produce a product anywhere close to what Square, Toast, and Spoton are putting out there? Companies that are individually spending 5-15x as much as Shift4?<\/p>\n\n\n\n<p>Of course not.<\/p>\n\n\n\n<p>A pretty standard reseller buy rate would be about 4 cents per transaction (which includes most of the bullshit fees) and 65% revenue share above this.<\/p>\n\n\n\n<p>It looks to us like Shift4 is desperate, and that they&#8217;re hoping their resellers can&#8217;t run the numbers.<\/p>\n\n\n\n<p>We honestly have no idea why a Shift4 reseller would stay a reseller.<\/p>\n\n\n\n<p>What are they getting?<\/p>\n\n\n\n<p>They&#8217;re not getting good economics.<\/p>\n\n\n\n<p>They&#8217;re not getting relevant product.<\/p>\n\n\n\n<p>Maybe they&#8217;re getting &#8220;free POS&#8221; as a consequence of their ridiculously high buy rates?<\/p>\n\n\n\n<p>Even then, how much longer will the &#8220;free POS&#8221; ruse last?<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Honestly, Shift4 resellers would receive <strong>better<\/strong> economics by referring all their customers to Toast and taking half the savings.<\/h4>\n\n\n\n<p>Hate to tell you we said so, but when you don&#8217;t invest in R&#038;D and by consequence your products are feeble, this is what you do to make numbers. Anyone want to guess how sustainable this will be?<\/p>\n<script async=\"\" src=\"https:\/\/widget.websitevoice.com\/UMwLESBjj1uq-UOHwOeBBw\"><\/script>\n<script>\n  window.wvData=window.wvData||{};function wvtag(a,b){wvData[a]=b;}\n  wvtag('id', 'UMwLESBjj1uq-UOHwOeBBw');\n  wvtag('widget-style', {\n    backgroundColor: '#F5953E',\n    contrast: 'wv-contrast-dark'\n  });\n<\/script><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Statement Simple gave us notice that many Shift4 resellers received a letter delivered via certified mail. Hmm, okay? The letter explains the fee increases these resellers will be seeing in their Schedule A (their effective buy rates) that were going into effect in 30 days. By reading the letter &#8211; certified with delivery confirmation &#8211; [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":12533,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"image","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[5,4,3],"tags":[],"class_list":["post-12493","post","type-post","status-publish","format-image","has-post-thumbnail","hentry","category-solutions","category-merchants","category-pos","post_format-post-format-image"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2022\/02\/Screen-Shot-2022-02-12-at-5.48.22-AM.png?fit=818%2C428&ssl=1","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p81nA2-3fv","_links":{"self":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts\/12493","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/comments?post=12493"}],"version-history":[{"count":18,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts\/12493\/revisions"}],"predecessor-version":[{"id":12576,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts\/12493\/revisions\/12576"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/media\/12533"}],"wp:attachment":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/media?parent=12493"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/categories?post=12493"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/tags?post=12493"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}