Credit Card Interchange – VISA MC Settlement

credit card interchange

Credit Card Interchange Post VISA/MC Agreement

We all heard about the settlement with VISA and Mastercard and how consumers would see benefit.  Unfortunately that is only a headline, not a fact.  Once again Jordan with Reforming Retail breaks the settlement down, and what we find is same old same old (increasing rates).  I like his cookies analogy where there are three ingredients: eggs, flour and sugar.  After much discussion the cookie manufacturers agree to lower the cost of eggs.  But guess what — the flour and sugar are going up.

Get a subscription to Reforming Retail to stay in the know is our advice.

Here’s a Pilot summary of the key points:

  • 20-Year Litigation: discusses a lengthy legal battle involving Visa and Mastercard, accused of operating a duopoly and imposing excessive fees
  • Settlement Outcome: It highlights that the settlement benefits lawyers more than merchants, with no significant changes for small businesses.
  • Swipe Fees Data: The article provides data showing a record $160 billion in swipe fees paid by U.S. merchants in 2022, a 16.7% increase from 2021
  • Fundamental Change Needed: The text argues that without a fundamental restructuring of the payment system, merchants will continue to face unfair fees

The article is critical of the current payment system and suggests that real change is necessary for merchants to benefit.

Here’s your Chat GPT summary of the Visa, Mastercard settlement:

  • After 20 years of litigation there’s no practical change and merchants will continue to get screwed
  • The lawyers are the real winners, reaping billions of dollars despite a useless outcome
  • Visa and Mastercard will continue making unlimited money via non-Interchange fees (i.e. dues and assessments)
  • Small merchants on flat-rate pricing will see any potential benefit accrue to their processors
  • Zero practical changes to surcharging despite the lip service

The Visa, Mastercard Settlement Is A Massive Joke And A Waste of Everyone’s Time

After 20 years of litigation, where merchants (rightly) accused Visa and Mastercard of operating a duopoly and extracting limitless fees as they sought fit, a settlement has finally been reached.

The winners?

The lawyers.

In fact, in reading the outcome of the settlement we’re convinced that the plaintiffs’ lawyers knew that their clients weren’t actually going to receive any benefit.

That’s right merchants: after this settlement you can… keep bending over and taking even more from the payments ecosystem.

In no way, shape, or form do merchants win, particularly the “small business” variety for which Visa and Mastercard so arduously fight to protect from… themselves? We never understood their positioning, frankly.

And nor will merchants ever win without a fundamental restructuring of payments as we know it.

Some data:

FACT: Per Nilson Report, in 2022, U.S. merchants paid a record $160 billion in swipe fees. This represents a 16.7% increase in fees from 2021.

FACT: Despite the pandemic and inflationary pressures, swipe fees continue to rise. The average rate of YoY costs rose from 7% between 2013 and 2020, to 21% afterwards. Initial estimates suggest card fee hikes could cost U.S. retailers over $500 million

FACT: American merchants—retailers, restaurants, contractors and anyone that accept credit cards—pay five times more in swipe fees for the exact same transaction than VISA and Mastercard charge businesses in other countries.

Note that this growth in fees generally tracks the growth in US credit card volume:

But that, even normalizing for volume, card fees increase regardless:

That’s because Visa and Mastercard (and to lesser extent Amex) are utilities, protected by banking and finance laws that ensure that utilities continue to reap tens of billions a year in what is tantamount to EBITDA (the card schemes have no real costs and one only need examine Pix to quantify the expense of both building and maintaining a real-time payment network supporting trillions of dollars in volume; hint, it’s a few million dollars).

Let’s break our discussion/analysis into three buckets.

Interchange “Cap” Does Not Equal Lower Processing Costs

Talk about a con job.

What great collusion from the attorneys on this one.

Plaintiff Attorneys: Okay, so our law firm can’t make billions without something to show for it. What can you offer us?

Defendant Attorneys: Hmm… what if we agree that our clients will lower “Interchange”?

Plaintiff Attorneys: Wait: won’t that affect your client’s revenues? I own a lot of their stock since they’re duopolies with infinite pricing power and I need that to pay from my wife’s 9th rhinoplasty.

Defendant Attorneys: LOLz. Bro, do you even litigate? “Interchange” caps mean nothing! Our clients have dues, assessments, and other fees that they can add to their hearts’ desire to ensure that they keep crushing the quarter so your wife won’t look a day over 77.

Plaintiff Attorneys: Thank you, Jesus!

Defendant Attorneys: Just remember who did you a solid when your firm takes your $2B payday.

Plaintiff Attorneys: Oh, don’t you worry: I’ll definitely be calling my wife’s plastic surgeon to tell him that your wife’s next boob job is on me.

Defendant Attorneys: Perfect. See at our 8 AM tee time tomorrow.

Let’s see if we can’t put this into an easier analogy to follow.

Imagine that you belong to a race of people that must eat cookies to survive.

Cookies have three ingredients: eggs, flour, and sugar.

There are only two cookie manufacturers, and they are very aware that your entice race of people will die without cookies.

And they keep increasing the price of cookies.

Well, some of you cookie-eaters band together and sue the cookie manufacturers.

After much hemming and hawing, the two cookie manufacturers agree to lower the price of eggs.

Your lawyers pat themselves on the back.

But you’re no fool.

You know that there are two other ingredients in the cookies.

Without a guarantee that the flour and sugar will also come down in cost, the cookies might be more expensive.

Not only might, but with near certainty will be more expensive given the history of the cookie manufacturers.

WTF?

Note: we are not anti-capitalists by any stretch of the imagination. Indeed, we are about as pro free-market as one can get. But Visa and Mastercard do NOT operate in a free market, and that is the delusion here.

Visa and Mastercard are free to change non-Interchange fees as they see fit, and we guarantee that they will.

Watch.

There will be no missing earnings despite the optics this settlement might have you believe.

SMB Merchants Get Hosed

Let us tell you a story from 9 years ago.

In a far away land called Europa, the governing bodies looked at the costs of payment acceptance and viewed them as a tax on their constituents (never mind that Europa had a seemingly endless number of other taxes that drove many businesses to establish operations elsewhere).

In 2015 these governing bodies passed a law called PSD2 that included provisions to lower the cost of payments acceptance.

How?

By reducing the cost of interchange, or the amount that the card issuing banks and card schemes take from each card transaction.

But the people working in those governing bodies had never actually had a real job, or they would know better.

Just because one decrees something doesn’t make it so.

The governing bodies had clearly forgotten about mercedem fratibus, colloquially known as merchant acquirers, or to all our readers, payment bros.

This particular group of individuals believe it their God-given responsibility to ensure that merchants receive no such savings from any decree, and that instead those savings end up in their own pockets.

And that’s precisely what transpired.

A European Commission study in 2020 found that the interchange caps redistributed revenues from interchange: merchants saved $1.2B Euros annually, and then merchant acquirers gained $1.2B Euros annually.

The merchants who recognized the savings?

Large, tier 1 merchants that hired their own payment bro consultants.

Back to the US settlement…

Under the agreed-upon guidelines, Visa and Mastercard would reduce swipe rates by at least four basis points (0.04 percentage points) for three years and ensure an average rate that is seven basis points below the current average for five years.

These savings will not reach SMB merchants because their processors are nearly exclusively flat-rate their processing pricing. So instead of their merchants seeing the benefit on an interchange plus pricing model, their merchants are paying a flat, fixed percentage on each transaction, with savings accreting to the processor.

Just like in that magical land of Europa, these processors will see a 7 bps increase in EBITDA.

Not revenue: EBITDA.

As far as this blog’s coverage is concerned, here’s who stands to benefit:

  • Toast
  • Square
  • Shopify
  • Lightspeed

The math for these guys will be quite compelling. Toast for example, does $126B of GPV. 7 bps on this is $88M.

Of free money.

The Surcharging Changes Do Nothing

There’s a lot of indigestion over surcharging.

Smart consumers hate it. The average consumer who thinks that they’re earning 1% cash back by paying via card is actually losing 3% to pay via card as processors convince more merchants to surcharge.

The card schemes hate it because the above math should, at some point, lead consumers to use alternative payment methods (but Americans are nearly as financially illiterate as merchants).

Payment bros love it. What easier way to make free money than to surcharge?

But those asshole card schemes are capping my surcharge income by decreasing the surcharge limits to 3%. It should be a much more reasonable cap of 3,000,000%. That feels fair for the value I provide.

No shortage of animosity.

And confusion.

That’s because if you actually read the surcharging language in the merchant rules for Visa, Mastercard, and Amex, you’ll find discordance that makes it impermissible to surcharge.

Since this settlement pertains to Visa and Mastercard we need to read the Amex rules:

3.2. Treatment of the American Express Brand

Merchants must not… impose any restrictions, conditions, disadvantages, or fees when the Card is accepted that are not imposed equally on all Other Payment Products, except for electronic funds transfer, or cash and check,

https://www.americanexpress.com/content/dam/amex/us/merchant/new-merchant-regulations/Reference-Guide_EN_US.pdf

FIS does a great job producing collateral that explains the discordance:

Amex has a non-discrimination policy, but their regulations require imposing equal treatment across all Other Payment products. A payment product is defined as any charge, credit, debit, stored value, prepaid, smart card, account access devices or other payment cards, services or products other than the Card. Since the Amex requirement includes debit and prepaid products and it is against Visa and Mastercard rules to surcharge debit and prepaid products, merchants wishing to charge a surcharge would be considered non-compliant (from an Amex rules perspective) in certain scenarios.

https://empower2.fisglobal.com/rs/092-EMI-875/images/Merchant%20Surcharging%20Guide%20External%2001132023.pdf

Embedding below for convenient reading.

None of the merchant rules make sense because none of the card schemes actually want merchants to surcharge.

In comes this VIsa, Mastercard settlement to confuse surcharging even more… but it’s for absolutely nothing.

Motion for the sake of motion with nothing substantive accomplished.

At least the proposed surcharging language is consistent with the rest of the settlement and is, in itself, a huge joke and waste of everyone’s time.

Borrowing from TSG’s analysis, here are the four main points as the settlement pertains to surcharging:

  • Brand Level Surcharge Rules on Credit (not Debit) Cards: A brand-level surcharge is one in which the merchant imposes the same surcharge on all of a particular network’s (e.g., Visa’s) credit cards regardless of the issuing bank (e.g., Chase) or the product (e.g., Visa Signature card). Under the Settlement Agreement, a merchant can surcharge all Visa-Branded Credit Cards up to 1% regardless of whether the merchant also surcharges other comparator credit cards that it accepts, e.g., American Express or Discover. Under the Settlement Agreement, a merchant can surcharge all Visa-Branded Credit Cards up to 3% (or the merchant’s cost of acceptance if it is less than 3%), if the merchant either (a) does not accept other comparator credit cards (e.g., American Express or Discover) or (b) does accept those comparator credit cards but also surcharges them in at least the same amount. The same rules apply to surcharging Mastercard-Branded Credit Cards at the brand level.
  • Product Level Surcharge Rules on Credit (not Debit) Cards: A product-level surcharge is one in which the merchant imposes the same surcharge on all of the network’s (e.g., Visa’s) credit cards of a specific product type, e.g., Visa Signature credit cards, regardless of the issuing bank (e.g., Chase). Under the Settlement Agreement, a merchant can surcharge a particular Visa-Branded Credit Card product up to 1% regardless of whether the merchant also surcharges the comparable products of other comparator credit cards that it accepts (e.g., American Expressor Discover). Under the Settlement Agreement, a merchant can surcharge a particular Visa-Branded Credit Card product up to 3% (or the merchant’s cost of acceptance if it is less than 3%), if the merchant either (a) does not accept other comparator credit cards (e.g., American Express or Discover) or (b) does accept those comparator credit cards but also surcharges their comparable products in at least the same amount. If the merchant cannot readily determine its cost of acceptance of the Visa product at the point-of-sale, before authorization using electronic data, the merchant can consider its cost of acceptance to be 3%. The same rules apply to surcharging Mastercard-Branded Credit Cards at the product level.
  • Surcharging Visa but not Mastercard, and Vice-Versa: The Settlement Agreement provides that, subject to the rules described above, a merchant may surcharge Visa-Branded Credit Cards (at the brand or product level) but not Mastercard-Branded Credit Cards (at the brand or product level), or surcharge Visa-Branded Credit Cards at one level (brand or product) and surcharge Mastercard-Branded Credit Cards at a different level (brand or product), and vice versa, in any combination.
  • No-Discounting and Non-Discrimination Rules: Visa and Mastercard will modify their “no discounting” and “non-discrimination” rules to clarify that merchants may offer discounts to their customers at the issuer level, i.e. discounts that vary by the issuing financial institution of the credit or debit card.

In plain English:

  • You still can’t surcharge more than 3% even if your cost of acceptance is higher than 3% (it happens)
  • You can’t practically surcharge any card brand (e.g. Visa) more than any other card brand (e.g. Mastercard)
  • Technically any surcharging is still impermissible if the merchant accepts Amex

So, in effect, no actual benefit to merchants.

Shocker.

This is how absurd this whole thing is.

Imagine you’re in the market to buy a car and you want a lower price.

You: What’s the best you can do on price?

Car dealer: How about I call a random person in India?

You: Huh? What’s that have to do with anything?

Car dealer: I know: I’ll eat a salad for lunch tomorrow!

You: Are you f*cking high? What is wrong with you?

This conversation, in essence, summarizes the entirety of this settlement.

Here’s your Chat GPT summary of the Visa, Mastercard settlement:

  • After 20 years of litigation there’s no practical change and merchants will continue to get screwed
  • The lawyers are the real winners, reaping billions of dollars despite a useless outcome
  • Visa and Mastercard will continue making unlimited money via non-Interchange fees (i.e. dues and assessments)
  • Small merchants on flat-rate pricing will see any potential benefit accrue to their processors
  • Zero practical changes to surcharging despite the lip service

Payments: Infinity.

Merchants: Zero.

Related Credit Card Interchange Posts

Olo Restaurant – Reforming Retail

olo restaurant

Exposing Olo Part 1: Introduction

Note: One of our favorite writers is Jordan Thaeler of Reforming Retail. Anybody who is anybody in restaurants reads Jordan and while a subscription is not free, there is a very good reason for that.
Olo has been an industry leader insofar as they are one of the very, very few companies to cross $100M in revenues. Because despite representing over a $T in US spend, restaurants spend mere basis points on technology, yielding few companies of scale to influence the market.

Note: if restaurants spent even 1% of their revenues on technology that would be $10B in annual revenues, or enough for 100 companies to make $100M in revenue, but of course there are only 5-8 companies in the US restaurant market that collect > $100M in sales (the variance depends how you define delivery companies like Doordash or Uber Eats).

After going public in 2021, Olo opened itself to public market investors. This brought in new lines of discourse and examination.

And this is precisely how we became involved.

While we generally stay away from following the public markets with any concerted effort, several of Olo’s investors were dogged in their requests that we look more closely at the company.

Our expertise and background were called into demand as sufficiently specific to help these investors sort out what was really happening with Olo.

And as we dug we found a consistent and troubling pattern of behavior.

Some of the behavior is actively under litigation, whether it’s the class action securities claim, or the three derivative cases (Floyd v. Glass, et al., Case No. 1:23-cv-03770 (S.D.N.Y.), Floyd v. Glass, et al., C.A. No. 2023-0560 (Del. Ch.), Balleh v. Glass, et al., C.A. No. 2023-1165 (Del. Ch.), and Giuda v. Glass, et al., C.A. No. 2024-0025 (Del. Ch.)).

But our research has led to a different, upstream culprit that we think all of Olo’s current plaintiffs have entirely missed.

This upcoming series represents the culmination of hundreds of hours of investigative journalism.

We spent time with current and former Olo executives, Olo investors, global private equity practices, potential acquirers of Olo, litigators, and experts on case law.

Our findings point to clear breaches of fiduciary, self-dealing, and alarming behavior from Raine Capital, one of Olo’s early financial backers, that would make any reasonable party wonder how there have been no criminal convictions.

Olo is on the record with the following:

The factual statements and legal conclusions in [Reformingretail’s] post are baseless and misleading. As we have previously disclosed, we have settled the securities class action lawsuit on favorable terms. Your unsupported assertion that there has been criminal activity has no basis in fact and is wrongful.

Olo

We’ll let the evidence speak for itself.

More Olo Background with Toast and PAR

Olo

Olo, founded almost 18 years ago as Go Mobo, was the first real phone ordering attempt for restaurants. After an absolutely painful stretch of time spent convincing restaurants that customer technology matters, they finally reached IPO status with a favorable COVID tailwind that literally made it illegal for some restaurants to conduct business any other way than online.

Now counting 83,000 restaurant rooftops as customers, Olo inarguably represents only chain locations. That’s because for the longest time Olo had a price minimum, and only larger groups could justify the cost. The reason for that was pretty simple: the cost to ingest menu data for a restaurant was the same whether you were 1 location or 100.

Olo acquired Omnivore as a way to start its move into POS and in-store commerce. They further acquired Wisely to offer marketing automation and CDP, and launched Olo Pay for online and instore commerce.

Olo’s biggest challenge is TAM.

SMB merchants are getting online ordering from their POS company, larger enterprise merchants build Olo internally (think Subway booting Olo), and as enterprise POS companies mature (see PAR above), online ordering is natively coming with the POS.

Because, truth be told, online ordering is not that hard to do.

It was 20 years ago, but today it’s not very complicated with cloud POS systems.

Now what?

Olo and PAR are on a collision course.

More Posts

Video

Robotic Restaurant News – AI Robotics

robotic restaurant

Robotic Restaurant News

We just got back from NRF and robotic restaurant stuff was all over the show floor. Robotic pizza for example.  One of our favorite aspects of AI is overhead cameras in the kitchen to monitor food preparation. Also table usage. Here is our wrap on recent robotic restaurant news

  • See our NRF 2024 review and writeup.  The show was terrific. Check out our photo gallery. The line at the pizza ordering kiosk to order the robotic pizza was very long.
  • From Tim Tang — “The most impressive thing that I saw at NRF 2024 for restaurants was the bartaco dine-in restaurant experience with Amazon Pay and OneDine.  This initiative demonstrated an intimate understanding and sensitivity to the guest experience while creatively solving a common industry tech debt challenge of legacy POS through an innovative collaboration with market leading technologies. With rising operational costs, an ongoing labor shortage and shrinking customer wallet, the restaurant industry will need  this type of thoughtful operational execution to thrive.”
  • Craig K — Robotics were something to see though the details are still being worked out (food source, etc).  On the kiosk side it was good to see Samsung kiosks adding accessibility finally. POS and mobile POS for employees and customers was EVERYWHERE.  Payment systems as well. AI was overblown and almost trite.  theroboburger.com
  • Recommended – Angela Diffly on Hospitality Technology wrapup. We contributed images and content.
  • Adam your robotic bartender — A dozen Adam robots have been deployed nationwide so far, in venues such as the Courtyard by Marriott in downtown Los Angeles, the Cloutea boba shop at Caesar’s Palace in Las Vegas, and the Botbar Coffee chain. Adam also gets rented out for parties and conferences.A complete Adam with a custom setup table and equipment sells for $180,000, though Casella says they’re experimenting with other pricing models and partnerships.
  • How Restaurants Are Embracing Robots — All the big chain restaurants are testing and installing AI-infused robotics — mainly in the back of the house, but also in customer-facing roles, both tableside and at the drive-thru.  We tend to think a lot of testing is going on, but that is about it.
  • Aniai is bringing a burger-cooking robot to restaurants with $12M — Aniai, a startup that has built a burger-grilling robot, Alpha Grill, said today it has raised $12 million, bringing its total raise to $15 million. The money will go toward launching its first manufacturing facility, Factory One, in South Korea. The firm will also be deploying a cloud-based AI software platform for the robot called Alpha Cloud. Robot adoption in the restaurant business is becoming popular as it can help restaurants address their high pain points like labor shortages, and rising wage issues. Robotics enables restaurants to save 30% to 70% of labor costs, and restaurants could replace more than 80% of restaurant positions with robots, according to a research report. 

Statistics for Restaurant Robotics and AI Robotics

Robotic Restaurant Examples

there are some good examples of robotics being used by restaurants. Here are a few:

ecoATM Kiosk Funding

ecoatm kiosks outerwall

ecoatm kiosks outerwall

ecoATM Kiosk by Outerwall

EcoATM, a maker of in-store kiosks where shoppers buy used phones, tablets and other electronics, is a failure, according to an analyst who tracks the comp. From kioskindustry.org — ecoATM Kiosk Review – Analyst calls failure

Source: www.geekwire.com

2015 —  Outerwall, the parent company of Coinstar and Redbox, purchased ecoATM in 2013 for $350 million in cash.

In its earnings report Thursday, Outerwall announced an $85.9 million impairment charge related to the ecoATM business, driven by what it called “competitive pressures on ecoATM and lowered expectations for future revenue growth.”

“The impairment charge reflects an honest assessment that the company overpaid for the business, and continuing losses two years after acquisition make us question whether the segment will ever be profitable,” wrote Michael Pachter, an analyst with Wedbush Securities.

Outerwall obviously disagrees with that assessment.

EcoATM News April 2023

  • EcoATM “snags” another $50M –In January, ecoATM reached 38 million smartphones and other mobile devices recycled through its kiosks and Gazelle online marketplace — up from 28 million as of June 2021. It operates about 5,000 kiosks nationwide at grocery stores, shopping malls and other locations.The company declined to say who led this latest funding round, which was announced last week, saying only that it involved existing investors. EcoATM employs 374 workers worldwide, including 178 in San Diego, according to a spokesman.

About EcoATM

  • ecoATM is a service that allows you to sell your old or broken devices for cash at one of its 5,000 kiosks across the U.S. You can find an ecoATM kiosk near you at your local Walmart, Kroger, mall or other location1. ecoATM is a leader in reducing electronic waste and helping the environment by recycling or refurbishing your devices2. To sell your device, you need to prepare it, find a kiosk, and get an instant price offer. If you accept the offer, you receive cash on the spot

EcoATM Statistics

  • Approximately 40 million smartphones recycled
  • 5000 kiosks nationwide
  • Employs 380 workers
  • Estimated revenue $500M
  • Raised almost $400M over 9 rounds
  • Sustainability – saved 3,000 tons of waste

References

ecoATM – Funding, Financials, Valuation & Investors – Crunchbase : ecoATM’s Competitors, Revenue, Number of Employees, Funding … – Owler 3: Our Story | ecoATM – EcoATM 4: ecoATM Gazelle Announces Release of Inaugural ESG Report 5: ECOATM Revenue, Growth & Competitor Profile – IncFact.com

Aldi Produce Scanner Speeds Up Self-Checkout

Produce Scanning at SCO

Aldi Süd is testing fruit and vegetable recognition technology at its self-checkout systems to help customers register non-scannable items without barcodes. The system uses computer vision and artificial intelligence to identify products through a camera attached to the side of the touchscreen, displaying a selection list or even the exact item in three seconds per item. The solution comes from Diebold Nixdorf, and Aldi Süd’s POS software provider, Gebit, integrated it into the existing systems. The self-learning algorithm requires no additional hardware installation and connects to the provider’s AI platform in the cloud, enabling continuous improvement of the model.

Except:

A camera attached to the side of the touchscreen uses computer vision and artificial intelligence to identify types of fruit or vegetables presented. If several items are eligible, the screen displays a short list for selection. Professor Rüschen confirms in his posting that the system worked well for all chosen products. He also described the process as better and faster than with other self-scanning checkouts.

Full article on retail-optimiser

About Aldi

Aldi is a global discount supermarket chain with two main branches: Aldi Nord and Aldi Süd, both owned by the Albrecht family. Here’s a quick rundown in under 300 words:

Origins and reach:

  • Founded in Germany in 1961, Aldi revolutionized grocery shopping with its no-frills approach and focus on low prices.
    Image of Aldi supermarket exteriorOpens in a new windowwww.wmar2news.com
  • Today, it operates over 12,000 stores in 19 countries, including a strong presence in the US with over 2,000 stores across 36 states.

Shopping experience:

  • Get ready for a unique experience! Aldi stores are smaller and have a limited selection of private-label products, often alongside a few name brands.
    Image of Aldi supermarket interiorOpens in a new windowcorporate.aldi.us
  • Expect to bag your own groceries (bring reusable bags or buy them there) and pay a quarter deposit for shopping carts (returned upon return).
  • But the payoff is significant savings! Aldi is known for offering up to 50% lower prices compared to traditional grocery stores.

What to expect:

  • Aldi’s own brands have gained a loyal following for their quality and affordability. From award-winning cheeses and wines to organic produce and innovative snacks, there’s something for everyone.

Overall, Aldi is a great option for budget-conscious shoppers who value quality and don’t mind a streamlined shopping experience. Give it a try and see why it has become a cult favorite for many!

NCR Aloha Update – Legacy of Mike Hayford

NCR “Voyix” Update

Article from Reforming Retail (which we highly recommend subscribing to). So basically, Mike Hayford was able to dissolve a 139-year-old institution which is something only a special person can do. His predecessor, Bill Nutti, was just as bad.

The Legacy of Mike Hayford: Destroyed NCR while Underperforming Peers by 95% and Raking 140% Higher Compensation

7 hours ago
5 min read

As NCR splits from one turd into two, the king turd-maker is stepping down.

From the first experiences we had with Mike Hayford in 2018, this is exactly how we would have told you the story would end.

It truly takes a special kind of person to dissolve a 139-year-old institution, and that’s just the kind of guy Mike Hayford is.

In some small fairness to Mike, he wasn’t put in the best position: his predecessor, Bill Nutti, was a near equivalent defecator-in-charge.

But good operators know how to turn around a business.

Unfortunately for NCR employees, partners, and shareholders, Mike Hayford is not a good operator.

From taking the helm to splitting the company, NCR’s share price was down 19% under Hayford’s tenure: $32 when he took over in April 2018 and $26 right before the split in October 2023.

Meanwhile, the Dow was up 40% and Nasdaq 65% over the same period of time.

Here are all the reasons we knew Mike Hayford would gut NCR.

Already Knows Everything

We offered to help Hayford, no strings attached, but he already knew everything.

This was only further reinforced when talking with customers and resellers, who left with nothing but shock and contempt.

“THIS guy is the CEO?! He’s making how much?!”

You’d think this character flaw would be immediately outed during a screening process but guess who benefits from hiring a turd?

The board of directors.

The board gets six figure annual compensation to work < 10 hours a year.

And half of those hours are probably travel time.

$60,000 an hour to rubberstamp incompetence and fleece shareholders?

So the less competent the CEO, the better.

The board served themselves excellently.

Me Before You

Hayford was the epitome of bilking shareholders.

And NCR’s board was behind it from day 1.

Here’s Harvard’s assessment of median CEO compensation by company revenue.

NCR does $7B in revenue. You’d anticipate CEO compensation of $7M based on these metrics. And by the way, these compensation data were gathered from companies in the S&P 500 and Russell 3000, two indices that ROSE by 105% and 50% respectively in the five years Hayford sunk NCR’s share price by 19%.

So basically the CEOs in this study, on average, created 95% MORE value for their shareholders than Mike Hayford over the same time period.

(Note that because Hayford delivered negative returns the mathematical underperformance is technically infinity, so we found the difference between -19% and 76%).

And you know how NCR handled it?

They paid Hayford $14.2M in 2018, $12.8M in 2019, $28.3M in 2020, $14.8M in 2021, and $12.7M in 2022.

Hayford made $82.8M dollars while the median CEO of a public company with NCR’s revenues would have made $35M.

Hayford made 140% MORE than the expected CEO while underperforming by 95%!

A fair, performance-adjusted compensation package for Hayford should have been $1.75M over that same 5-year period – that’s 5% of the median $35M compensation for underperforming the median by 95%.

You achieve 5% of the performance of the average, you deserve 5% of the pay.

In classic do-as-I-say-not-as-I-do, the entire lot of NCR leadership decided that they couldn’t find someone to crash the company as eloquently as Mike Hayford, so they had to “pay up” for that level of ineptitude.

A Suit, Not A Founder

One of Hayford’s requirements was use of the private jet for him and family.

You will have access to NCR’s planes for business use and for up to 100 hours of personal use per year. In the event NCR sells its aircraft, you will have access to private air travel through Net Jets or equivalent.

https://www.sec.gov/Archives/edgar/data/70866/000007086618000024/exhibit104employmentagreem.htm

Hayford: Look guys, if you want me to underperform my peers by 95% AND make 140% more than they do I need full disposal of company aircraft.

Shareholders: Hmm, this seems really irresponsible. You’re already making materially more than unobjectionably better executi-

NCR Board: This is totally justified. None of us have built fuck-all and we couldn’t start a lemonade stand to save our lives. But we’ll be goddamned if we’re not going to keep collecting $60,000 an hour for doing nothing, and the weaker and more mentally challenged our CEO the better our lives will be. Fuck you, shareholders. We’re in charge.

Hayford: That’s what I thought. Now warm up that fucking Gulfstream.

Here’s a video to show you how it went down, but replace K Swiss with NCR.

No founder we can think of – you know, the people who actually build products and move society forward – would ever consider private business flight anything but profligate. Especially as the company bled market share and the stock price tanked.

Even a venture investor would question the use of funds.

But who needs fiduciary responsibility?

Not NCR, baby.

Contrast that with how PAR won Burger King.

Gee, we wonder why NCR didn’t win…

This is why life isn’t fair: NCR employees and shareholders get holed out while NCR’s leadership gets fat.

There are supposed to be protections against this kids of racketeering but what happens when the police – ie the board of directors – are in on the take?

NCR has been operating no better than a banana republic.

NCR will now dither as two companies, with one (Atleos) gobbled by competitors in different geographies as the ATM market flames out due to modernization, and the other (Voyix) on the march to zero as it loses share to POS and banking competitors.

Toast is worth more than twice as much as Atleos ($1.6B) and Voyix ($2.2B) combined… and Toast was founded in 2011.

And is just a single solution company as far as NCR would view it (i.e. no ATM, banking, etc. – just POS product).

That should underscore the magnitude of financial destruction wrought by Mike Hayford and his cronies.

Now you see why activists exist.

Automated Retail Industry News

Automated Retail News

Future Retail and Smart Mirrors

Smart Mirrors Reflect the Future of Retail

Published Date on Intel Insight Tech AUGUST 16, 2023

Typically, when your customers walk into a dressing room to try on a new outfit, they end up bringing an armful of options—different styles, colors, and sizes. What if they could avoid the hassle of searching the racks and having to try on all these choices? With a smart, interactive mirror they can. Powered by AI, a smart mirror solution can be another layer of customer service virtually by coordinating items, different sizes, and colors from real-time inventory. And shoppers can find out if the outfits they want are in stock or available online.

This kind of solution—like the Polytouch Magic Mirror from Pyramid Computer, a full-service hardware solutions provider—is available today. The platform helps retailers offer a unique experience for customer engagement with the benefits of online shopping, combined with the ability to see and touch the items up close and personal.

Personalized Experiences for In-Store Retail Goes Virtual

Case in point is a large sport fashion retailer, which created a smart fitting room using the Polytouch Magic Mirror. The retail chain deployed the solution—a mirror equipped with an HD display, 10-point touchscreen, and antenna for RFID-based item recognition—all powered by a small form factor PC—in its fitting rooms.

smart mirror retail

smart mirror retail

The solution uses RFID scanning technology rather than a camera, which clearly customers don’t want in their dressing room for privacy reasons.

The scanner senses which items are brought into the space, using the data to suggest coordinating accessories and inform the customer if and where alternate options are available. The seamless link between in-store and online stock information provides an “endless aisle” customer experience. At the same time, it allows the retailer to draw more traffic to their stores, gain new insights, overcome staff shortages, and lower operating costs.

“The retailer can optimize tasks given to store clerks, instead of having to send them to the fitting room to consult with customers and find items,” says Anthony Hunckler, Head of Marketing & Design at Pyramid Computer.

“The #software and #hardware elements must work together to provide this flexibility and fluidity on UI and #UX.” – Anthony Hunckler, @polytouch_de via @insightdottech

The RFID reader communicates with back-end software, providing customers with information—and retailers with valuable data. “The software is the element that gives the final brand engagement with the customer, such as high-quality product pictures and media. The software and hardware elements must work together to provide this flexibility and fluidity on UI and UX,” explains Hunckler.

Retailers that already have RFID systems in place for stock management will find it easy to implement the Magic Mirror. In that case, their back end is ready to add this mirror to scan the product. For maintenance, Pyramid includes a warranty with a high level of service. “If you have a problem, we can switch out the system and display very easily. From that perspective, there’s almost no risk for our partners,” says Hunckler. The solution’s Intel-based PC provides rugged 24/7 dependability, important for deployment in a retail setting.

Insights on Sales, Customer Preferences, and Logistics

Because it interacts with customers and collects data about their choices and preferences, the Magic Mirror solution offers a chance to gain valuable in-store retail insights.

Depending on the software retailers choose or develop, they can gather and analyze in-depth sales data, discern customer preferences, optimize logistics and inventory management, and cross-sell related items. “Analytics are very important for retailers to optimize their stock based on real-time data about customer habits,” says Hunckler. “For example, if you see that 80% of the t-shirts you sell are white, you’ll know that you need more white shirts in stock and fewer of the other colors.”

Using that data, traditional retailers can make accurate predictions about how many items they need to have in stock, when, and where, helping to inform logistical decisions and keep up with demand.

Granular-level insights will help retailers prepare for the rapidly changing future of the brick-and-mortar retail industry. “The retail structure we’ve known in the past is not as relevant today,” says Hunckler. Some customers still arrive at a store to browse, try on clothes, and make decisions in the traditional way—but many others come to a physical store only to pick up items they have pre-ordered online. If retailers can foster a link with their online customers through enhancing shopping experiences available only in-person, like special offers and perks, those customers will perceive value in visiting physical stores, and retail stores can gain brand loyalty.

Noting customers’ individual preferences and needs is a crucial element to success, Hunckler says. “Customers are unique. Some like to have support from a clerk, while others don’t want that attention. Retailers need to concentrate on providing plenty of digital support and personalizing the entire experience.”
Edited by Georganne Benesch, Associate Editorial Director for insight.tech.

About the Author

Jessica Leigh Brown is a writer focused on applications of IoT and emerging technologies in education. As a freelance journalist, her work has appeared in more than a dozen trade and consumer magazines, and she enjoys working with top technology companies to create content such as white papers and case studies.

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From Kiosk Industry

Smart mirrors are a new technology that is revolutionizing the retail industry. These mirrors are equipped with cameras and sensors that allow customers to try on clothes virtually without having to physically change into them. They are also capable of displaying product information, news headlines, and wayfinding functionality. Smart mirrors are becoming increasingly popular in the fashion industry, as they provide a unique and interactive shopping experience for customers.

One of the main benefits of smart mirrors is that they eliminate the need for customers to visit fitting rooms. Research shows that customers who use a store’s fitting room are seven times more likely to make a purchase than those who don’t 1. By displaying clothing pieces on a person virtually, smart mirrors eliminate the need for customers to go into small, cramped changing rooms. This provides a faster and more convenient shopping experience for customers.

Smart mirrors can also help retailers increase brand visibility and customer engagement. By incorporating augmented reality (AR) technology into their stores, retailers can create an immersive shopping experience that is both fun and informative. AR technology allows customers to interact with products in-store and online, which can lead to increased sales and customer loyalty 1.

In addition to these benefits, smart mirrors can also help retailers reduce costs associated with staffing and inventory management. By automating many common tasks such as check-in, print boarding passes, check bags, and request seating changes, smart mirrors can help reduce wait times and put less strain on airport staff 1.

Overall, smart mirrors are an exciting new technology that is transforming the retail industry. They provide a unique and interactive shopping experience for customers while also helping retailers increase sales and reduce costs.

Quest Diagnostic Found Guilty – Loses Suit

Accessibility Kiosks Legal News

October 26th 10am – The courts find for ACB in suit against Quest.  The case involved injunctive relief. So, that means an order telling quest to fix it and attorney fees for the plaintiff. We are checking with ACB to make sure we are identifying the correct unit (aka unit violating ADA). As for an appeal, it would go to the Ninth Circuit, which tends to be more on the side of persons with disabilities than not. We imagine there could be post verdict motions. As far as cost goes, plaintiffs would be entitled to their attorney fees and the defendant would of course have to pay their own attorney fees as well. A relevant blog entry is here. Just What Is a Sales Establishment Anyway per Title III of the ADA?

Thanks to Bill for alerting us. He is a great and recommended resource.  William D. Goren, Esq., J.D., LL.M., Attorney and Consultant, Americans with Disabilities Act (ADA), https://www.understandingtheada.com/

ALEXANDRIA, Va., Oct. 25, 2023 /PRNewswire/ — Following a week-long bench trial in Los Angeles, a federal court in California found Quest Diagnostics in violation of the Americans with Disabilities Act and permanently enjoined Quest from continuing to violate the ADA.

Beginning in 2016, Quest Diagnostics began to install self-service kiosks at its Patient Service Centers, which allow patients to, among other things, check in for phlebotomy appointments in a private and independent manner. Following complaints from ACB’s members that these kiosks as designed prevent people who are blind from accessing their services, ACB joined a civil rights complaint in federal court alleging that Quest’s kiosks deprived members of the blind community full and equal enjoyment of Quest’s services and failed to provide effective communication.

quest kiosk

quest kiosk

The Court ruled in favor of ACB and a nationwide class of blind and low-vision Quest patients. The court found that Quest violated Title III of the ADA in that Quest failed to provide people who are blind with full and equal enjoyment of Quest’s services and facilities because of their disability.

“Self-service kiosks are being used more and more in many aspects of daily public life,” said Dan Spoone, Executive Director for the American Council of the Blind. “The Court’s decision that Quest violated the ADA and that the check-in services of these kiosks must be accessible to people who are blind is a significant step towards ensuring that the rights to full and equal enjoyment and effective communication are protected.”

Deb Cook Lewis, ACB’s president, added, “Although the ADA is more than 30 years old, people who are blind are still forced to fight for full and equal access to healthcare. This judgment sends a clear message that full and equal enjoyment is required by law, and health care providers must ensure access for people with disabilities.”

This litigation has been led by ACB’s counsel at Nye Sterling Hale Miller and Sweet and at Handley Farah & Anderson.

Matthew Handley, one of ACB’s attorneys in the litigation, added, “Touchscreen kiosks are an ever-increasing aspect of our daily lives – this decision ensures that accessibility of those kiosks will need to be front and center in the minds of every company wishing to make use of self-service technology.”

About the American Council of the Blind

The American Council of the Blind is a national member-driven consumer organization representing Americans who are blind and visually impaired. During the organization’s 60-year history, ACB has become a leader in national, state, local, and even international advocacy efforts. With 66 affiliates, ACB strives to increase independence, security, equality of opportunity, and to improve the quality of life for all people who are blind and visually impaired. For more information, visit ACB’s website.

About Handley Farah & Anderson

Handley Farah & Anderson are lawyers who seek to improve the world. Based in Washington, D.C., they fight for: workers deprived of wages, consumers deceived about products, tenants denied access to housing, parents deprived of adequate parental leave, persons with disabilities denied access, and women and communities of color subject to discrimination.

SOURCE American Council of the Blind

More Background

ID Card Scanning

Always a pain here is a video on how Acuant used in Quest kiosk

Quest Diagnostics Streamlines Patient Check-in with Aila’s Interactive Kiosk

Quest Diagnostics selected Aila’s Interactive Kiosk as a rugged, adaptable self-service platform to create its next-generation patient check-in experience. Aila’s expertise in patient check-in for enterprise healthcare providers gave Quest the confidence that Aila could provide the technology and support to deploy a major new experience in its patient service centers. “Aila was a known solution that would work for us,” said Congersky, “this helped us avoid a lengthy product exploration process.”

The Interactive Kiosk was able to save phlebotomists’ time by automating a range of customer experiences that previously required face-to-face interaction:

  • ID and insurance card scanning
  • Smartphone scanning for pre-registered patients
  • Digital check-in and wait list queuing

The Interactive Kiosk also provided a platform that was adaptable for Quest’s evolving check-in experience. This includes, a way for patients to check in for someone else, such as a child or parent, schedule service times on-site, and give patients the option to wait in their vehicle after checking in where they’ll receive a text message when it’s their turn.

In combination with Aila’s Interactive Kiosk and floor stand, Quest further improved the check-in experience by developing a welcome center that also included wall-mounted Interactive Kiosks. This helps guide patients to the self-service center and provides a welcoming environment to check in. Having a range of mounting options to choose from further illustrates Aila’s ability to enable ideal solutions across thousands of locations with differing layouts.

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Panera Bread Review 2023 – Is Panera 2.0 Dead

Panera Bread Restaurants 2023 update

October 28, 2023 — This is an opinion review of Panera by Craig Keefner.  Independent consultant and more times wrong than right (but sometimes right!)

I’ve always been a big fan of Panera Bread and in particular Blaine Hurst who led the company for a very long time was CEO.  Great service,  responsible company and relatively good value pricing. According to the Panera Bread website, their mission and purpose is “One Panera for a Healthier and Happier World”. This motto reflects their commitment to using high-quality ingredients while reducing their environmental impact, providing a welcoming space for guests to gather and break bread, and spreading generosity to communities, the planet, and their customers.  Panera Bread – Food as it should be.  Panera Bread. Bakers of bread. Fresh from the oven. A symbol of warmth and welcome.

I remember Panera 2.0 back in 2015.

Seems like things have changed since he left.

We have always gone to Paneras. My wife has very very few restaurants on her “sure, we can go there”.  Paneras is one. Others include Chick-Fil-A and Wendy’s.

I always take my camera phone in case some new technology is being tried. We are north side of Denver in foodie hot spot so we have a choice of anything.

Here is a chronology

  1. We parked. I noticed the three closest pickup spaces. One of which was missing its sign. I thought about parking there but didn’t 🙂
  2. Walked in past the 3 kiosks
  3. Only us at the counter
  4. Noticed pretty messy counter + paper bulletin on lemonade
  5. She took my phone number but unless we use the app the loyalty program or points never work for us. I only use the app to look at the menu when we call in orders for pickup
  6. I ordered and then my wife started her order.
  7. She got halfway thru and then the clerk let us know her NCR terminal was frozen up so we needed to go to different register.
  8. At least NCR wasn’t in the midst of the ransom Aloha situation
  9. Our order total was around $41 for the two of us
  10. We got my wife order in but then clerk informed us they had no baguettes for the sandwich.
  11. We canceled the sandwich in a bit of frustration
  12. Order total went to $33 and I tipped a dollar.
  13. There were of course 4 customers behind us waiting to order by this time + one at one of the kiosks now.
  14. Little things build up you know….
  15. We looked to see if the fireplace was on (big cold front to Denver) but not yet.
  16. My wife got our order corrected at the window. They had it wrong on the receipt.
  17. She noted we didn’t get a buzzer (you can see them stackup up next to the old POS)
  18. No more delivery like 2.0 — these days you go to a rather tall counter and self-serve pickup. Not sure how people wheelchairs manage that or blind people.
  19. She ended up conversing with the customer who was behind us and each noting a bit disorganized
  20. Food was pretty good though my turkey chili had a bit of crunch to it (beans)
  21. Pretty spendy bowl of chili for $10. Didn’t even get saltines with it…
  22. Bags of chips are super small. We got those instead of baguettes.
  23. Reason for no baguettes?  My wife asked the staff and they said the baker had gone home and none left (5:30pm)
  24. We finished eating
  25. I stopped my the counter and asked the clerk nicely if we deserved a treat since our order on our receipt was incorrect (still listed baguette served e.g.). She wavered but then decided to give us a muffin.
  26. We stopped at table for kiosks
  27. In  the car my wife commented “not the best experience and they are getting pretty expensive to eat there”.
  28. I wonder if the kiosks knew about the baguette outage.
  29. The kiosk tablets (iPads) are engineered by Lilitab and Adam Aronson. Very good company (if you like using iPads for kiosks that is)

 

Here are some photos

Conclusions and Thoughts

  • As a preface Panera Bread is a private company so the usual execs angling for investment gains and bonuses is a bit different.
  • How in the world is 400mg of caffeine (Red Bull is 80) considered “Healthier and Happier”.
  • That is the equivalent of six expressos in case you need a reference point.
  • That borders on serving addiction, not health.
  • And they do have a somewhat disorganized coffee club for frequent drinkers
  • Panera Bread is being sued for an alleged death due to “spiked” lemonade
  • NO baguettes. The flagship “mascot” for the chain. Apparently, presumably some “we’ve doing that too” new AI-enhanced inventory systems neglected to update the stock versus usage levels. People like to eat between 5 and 7.
  • Looks like a mess at the counter with wires, separate haphazard components and stylus. Something from 20 years ago.
  • Recommendation — Invest in new and more attractive and efficient technology. It’s there, you just have to change vendors and spend the money. Kmart went out of business for failing to upgrade.
  • ADA — What were they thinking with the squares for pickup?  The marketing whiz people decided to go 19th century here aka cheap.
  • ADA — How high is the kitchen pickup window anyway. I am guessing around 60″
  • Portions have gotten smaller, prices have gotten higher
  • Some other data — I am almost 70 as is my wife — According to a 2018 survey by Statista, 19.17% of Americans aged 18-29 years visited Panera Bread in the past three months. Another source, Business Strategy Hub, states that Panera is perfectly positioned to target consumer demographic ranging from 25 to 44 years, which includes millennials who are the drivers of the consumer market.

Interesting Point of View from Panera’s Founder

Excerpt

Oct 24, 2024 from CNBC — Shaich hasn’t been so complimentary to other recent restaurant IPOs. He said at an Axios event earlier in October that salad chain Sweetgreen shouldn’t have gone public until it was profitable, the outlet reported. (Sweetgreen hasn’t reported a profitable quarter yet, but executives said they think the company could break even for the full year.)

Shaich is less transparent about Panera’s possible IPO. Last year, Panera called off a deal with restaurateur Danny Meyer’s special purpose acquisition company to be publicly traded for the first time since JAB bought the chain. Earlier this year, the company announced it’s preparing for an IPO as it unveiled a CEO succession plan.

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