To Catch A Predator: Shift4 Likely Engaging in Full-on Fraud, Any Buyer Better Lawyer Up

There’s a playbook out there for how to be a payments bro.

And it looks like this.

Step 1: launch a marketing campaign to show you’re utterly indignant over how potential customers are being treated by your competition.

Let everyone know.

Get on camera.

Have a press team schedule endless interviews about how it’s not fair.

Have your CEO and founder say how,

“This is really about trust”

Step 2: Offer the absurd knowing that customers can’t do math.

Offer something that makes zero mathematical sense – and would get you fired by an impartial board of directors – if it were actually true.

Like paying customers $5,000 to switch to your product (that’s half of Toast’s CAC, which is already being criticized as much too high) and then $1 per digital order.

So that CAC math would be $5,000 + $3,000 = $8,000 for the type of customer you’re targeting, which is 80% of Toast’s CAC.

On a customer that does less than half the revenue the average Toast customer does…

How on earth could you ever make money on that CAC when your product “is uniquely priced with no upfront costs and an all-in-one monthly fee – starting at $29.99 – that covers best-in-class hardware, state-of-the-art software, 24/7 support, and local service. This includes integrated online ordering and reservations, contactless/QR code ordering and payment, built-in marketing tools and loyalty program, mobile devices for tableside ordering and payment, eGift cards, and much more,”?

Gee willikers batman, how can all that be free?!

What suspense!

How will it end?!

Step 3: the entire time you’re on this dog-and-pony, condemning how your competitors are committing genocide with fake fees… you add more make-believe-money-grabs than your competitors could ever fathom.

Look at these Shift4 statements.

This looks to us like outright fraud.

Why would we say something so strong?

Aside from the glaring fictitious fees, reconciliation is nearly impossible unless you are capable of reading hieroglyphics.

Most statements lump volume by card scheme.

Shift4 randomly sprinkles line items from different card schemes to make reconciliation challenging – see the below example.

In addition to scheme commingling, Shift4 is Interchange Commingling ™ (this is the first time we’ve seen this specific shenanigan in our history doing payments analysis, so Shift4 is probably trademarking this maneuver just like they did with Simplechange).

Some line items are marked up, some are not, roll a magic eight ball to figure out why.

This is a glaring red flag that someone’s ass is about to bleed out.

When someone is going through this much trouble just to report fees you can reasonably assume it’s because they don’t want you to catch them fleecing you.

Next, this merchant’s contract is set for 10 bps above interchange.

Soooo why do we see all these non-trivial markups on random volume?

Could the 295 bps on VISA Travel be tiered or flat rate within or on top of IC+? Could it be straight margin for the down payment towards the next space trip? 

Only a spaceman would know. 

Next, there’s no transparency into how the fees are calculated, in particular this nasty GLOBAL WHOLESALE PROGRAM TRAVEL B2B.

This fee is reserved for reservations made by travel agents (think Expedia, et al.). There’s a good explanation of this Mastercard fee here.

You can see from Mastercard’s fee tables that the B2B Wholesale program is assessed on total volume of that card type and it’s pricey: 1.57%

But it’s not like Shift4 is only pummeling the rectum of a single merchant.

We have a large number of statements where we just see these random B2B Wholesale fees with literally zero ability to reconcile.

See the following example where we just get this random fee for $1,714.20.

Where’s the volume associated with it?

There’s no line item for Mastercard B2B Wholesale volume anywhere in the statement.

And in fact, if you try to back into the Mastercard volume that is represented it’s impossible to identify where the B2B volume is.

And don’t get us started on AMEX Opt Blue, which is deserving of a whole other article.

And if all this isn’t working to make numbers?

You buy some software to plug your revenue hole and then then pray for a sale.

Buyer beware.

Note: Shift4 was given three months to comment on this and they did not.

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