Because if you didn’t already know, money and power make the rules.<\/p>\n\n\n\n
Elon Musk has violated a seemingly endless number of securities rules<\/a>.<\/p>\n\n\n\n As far as we know, he’s walking around without any consequence for his actions.<\/p>\n\n\n\n Bill Clinton perjured under oath<\/a>.<\/p>\n\n\n\n Never served a day in prison.<\/p>\n\n\n\n Those with money and power write history to their liking, vanquishing the minority that have no means to tell their story.<\/p>\n\n\n\n The same will happen – and is happening – to softwares that serve SMB merchants that do not force payments on their customers:<\/p>\n\n\n\n This is because by and large SMB merchants are poster children for the Dunning-Kruger effect<\/a>.<\/p>\n\n\n\n In fact, we recall talking with a veterinary software CEO who said something to the following effect:<\/p>\n\n\n\n I’ve never met a veterinarian who didn’t know payments better than I did.<\/p>\n<\/blockquote>\n\n\n\n This wasn’t a flippant comment: this person had decades of high-level software and payments experience.<\/p>\n\n\n\n It didn’t mean that veterinarians were incapable physicians.<\/p>\n\n\n\n But it did mean that these SMB merchants neatly fit the Dunning-Kruger pattern of being overconfident on matters that are completely foreign.<\/p>\n\n\n\n But at least veterinarians probably have an average IQ of 110, which implies that, on the aggregate, they are undoubtedly better at solving foreign problems than those with lower IQs.<\/p>\n\n\n\n Because what’s more likely to complete an unknown task: a dog, or a literal pile of shit?<\/p>\n\n\n\n But you know who’s even<\/em> smarter than veterinarians on all matters of life?<\/p>\n\n\n\n Retailers.<\/strong><\/p>\n\n\n\n And here comes that inconvenient correlation between IQ and overconfidence: <\/p>\n\n\n\n Retailers are the best super-genius negotiators in the universe.<\/a><\/p>\n\n\n\n All of them pay less for card processing than Walmart, Costco, and Amazon.<\/p>\n\n\n\n Of course their payments vendors are public, disclose their take rates (i.e. payments margins) on earnings calls, and are audited to such a degree that any variance from the truth results in prison time.<\/p>\n\n\n\n But yea, SMB merchant, you’re a savant.<\/strong><\/p>\n\n\n\n SMB merchants wouldn’t even know a fair rate if they could read a payment statement.<\/p>\n\n\n\n This graphic, which we think comes from UBS, shows what fair rates should be.<\/p>\n\n\n\n If you’re serving these merchants you win no awards for not<\/em> cramming payment fees on them.<\/p>\n\n\n\n In fact, it’s the opposite: you make much less than your competition.<\/p>\n\n\n\n Shopify, Toast, Square: SMB softwares make more on payments than they do on software.<\/p>\n\n\n\n If you’re not willing to monetize the payments, you have less margin to play with.<\/strong><\/p>\n\n\n\n An SMB deal coming down to the wire? <\/p>\n\n\n\n Your competitor with embedded payments can lower upfront costs to win the deal knowing full well that the SMB merchant has no idea how to read a payment agreement, allowing the embedded software provider to recoup any “discount” through the payments stream nearly immediately.<\/p>\n\n\n\n You, on the other hand, are screwed.<\/p>\n\n\n\n Meanwhile your competitor has access to lower costs of capital by virtue of being larger, can spend more on marketing, sales, product, and any aspect of the sale decision that the SMB merchant deems important.<\/p>\n\n\n\n It’s not even a small difference: it’s the lion’s share of SMB software-company revenue anymore.<\/p>\n\n\n\n 60%.<\/p>\n\n\n\n 70%<\/p>\n\n\n\n Sometimes 80%.<\/p>\n\n\n\n So instead of making $4K on software, your competitor is making $10K, $12K, $15K. <\/p>\n\n\n\n This plays out over and over again until you’re out of business.<\/p>\n\n\n\n Sure, you were honest, but you’re lucky if you’re even a footnote in history.<\/p>\n\n\n\n Which is why SMB softwares have to monetize payments.<\/p>\n\n\n\n Hell, even larger merchants are payments-illiterate.<\/p>\n\n\n\n Let us show you the level of stupid we’re talking about here.<\/p>\n\n\n\nThey become the undeniable economic losers whose tales are lost to antiquity.<\/h4>\n\n\n\n
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