Full Interview Transcription
Hello and welcome. I'm Steven. And today we'll be talking with Scott Morley, managing partner at Xcel partners. Scott, it's great to have you on how are you?
Scott Morley @ Xcel Partners (00:08):
I'm doing great. How are you?
You? I'm doing well. Thank you. Well, I, I wanna hear about Xcel partners. I wanna hear about what you guys are up to you right now, but first can I just get a little bit about your background and, and how you got to this space?
Scott Morley @ Xcel Partners (00:21):
Sure. I was a, I've been a serial entrepreneur my entire life actually. So from after graduating college in 1990, all the way through the current current year, I've basically owned and operated several companies. And my previous career, I was dealing with a lot of inventory and selling and, and working with a lot of big, big clients. It was very stressful and I wanted to get into a career that allowed me to consult with businesses, not have inventory, and you have the opportunity to earn income that is a residual base and hopefully removing some stress from my career. And that's where, what got me into the payment space, because that's how income is earned. We, we, if our clients are making money, we're making money as well.
Gotcha. So can, can you tell me a little bit about Excel? Like what do you guys do? And how would you describe the business model?
Scott Morley @ Xcel Partners (01:28):
Yeah, so Excel partners is a consultative business that helps any business that is looking to accept payments digitally, meaning typically a credit card payment or a ACH payment, or even cryptocurrency today. Those payments are done online in most cases for, for the clients that we work with. But of course, just like you can go to the grocery store and use your credit card. We work with those businesses as well.
So you know, I mean, it's, it's a big space from, from my understanding. Well, would you say sets Excel apart from its competitors?
Scott Morley @ Xcel Partners (02:06):
Yeah, so it's a, it, the space is actually as, you know, almost every business in this world, right. Seems to take credit card payments and it's a very large space and it's, and it's, it has become a bit of a commodity because it's necessary to take payments and some can, the pricing has been very compressed and, and very competitive, which is great. But what we did, what we kind of evolved to into was a business that again, was more consultative and we helped small businesses to medium size businesses, primarily with problems that they were having in the payments space. And that led us to where we are today, where we're working primarily with businesses that are considered high risk by banks. And high risk is a, is a, it's a loose term, but it, it means in from the bank terminology, it means businesses that they're not necessarily comfortable with working with. And it doesn't mean that they're doing anything wrong or illegal or anything like that. But what it does mean is they could, they could have more disputed transactions, they could have reputation the bank, maybe doesn't feel comfortable, the type of business that they are to have on their portfolio. And what we have done is we've cultivated about 15 relationships with different banks so that we can place businesses with the proper bank that will accept their types of transactions.
Yeah. So I guess like why that focus, like I I'm curious, like how Excel sort of identified that need and what it took for you guys to take that on. I mean, I know what you're saying is like, you know, it's not that these companies are all really like risky to, to be dealing with, but but why that focus for Xcel?
Scott Morley @ Xcel Partners (03:58):
One the selfish manner, it was, it was a feel good thing to be able to help these businesses get over a hurdle and, and be able to overcome problems. Whereas on the other side of the business, if you're working with, with more simple approvals like businesses to approve for processing, such as say a, a grocery store or restaurant or a typical retail store, those are, you know, complete, they can complete paperwork and be approved in an hour. Mm-Hmm <affirmative> these businesses that we're working with present a much higher challenge. And then when you, when you, we do get them approved in a certain bank, number one, they stay with us for a very long period of time, much longer than the industry average. And number two, it's not a commodity because they're grateful just to be able to get an account established for themselves.
Scott Morley @ Xcel Partners (04:54):
And then thirdly, the profitability on those accounts can be much higher because of the risk that it's entailed. So it's, I, I always, when people ask me what it's like, it's sort of, it's similar to people that are applying for a loan and their FICO score isn't the best and the rate, they might get a loan, but the rate is much higher and some banks love it because instead of charging, you know, say 3% for a car loan, they're charging them six or 7%. You know, if it doesn't default, it's worked out great for the bank and that's very similar to us. We, you know, approve people, but they're paying, they are paying a higher rate. It's more in accordance to what type of business they operate.
Right. and I'm curious what types of high risk customers get the most benefit from your service? And I mean, I don't know, are there any interesting case studies that, that you could give us?
Scott Morley @ Xcel Partners (05:51):
It, it's very interesting because, because some businesses that you would not expect to be high risk are for an example, debt collection, debt collection is considered high risk by, by most. Again, there's, we have, we have bank partners that work with that category and debt collection is considered by by many. They they're are not always obviously legal. They sometimes make phone calls to you, you know, during hours you're not supposed to, and they don't follow the proper guidelines, but the companies that do unfortunately get caught in this big, you know, this big net in this net tells you tells the banks, oh no, we don't work with debt collection because they're, you know, generally bad operators mm-hmm <affirmative>, and that's not really the case. I mean, quite honestly, it's a very regulated business, more than I would say the, the 90% of these are good operators and they, and they follow the rules to a T and thirdly, they never have any chargebacks if they do, if they're operating a good business because people pay their debt and they move on.
Scott Morley @ Xcel Partners (07:00):
One of the other risk reasons for that business though, would be that you're paying, you're paying a debt and you're incurring a debt in some cases, because you're paying a credit card with a credit card for a debt that you owe. But if you have that credit established with your bank, that's issued that card. It, it should never be a pop anyway, because it's really, you know, it's, that's also a means for you to make a payment on the phone without having to find your checkbook and find out what your routing number and account number is. So it's a, it's a, also in a convenience factor. So that's one category, but we have lots of other ones credit repairs, another where old promise to fix people's if their credit FICO score is not great, they want to get a buy, get a mortgage or something, or they wanna buy a car and they they're on the low end of the range to qualify.
Scott Morley @ Xcel Partners (07:52):
Sometimes they'll go to a credit pair company. They will help them improve their credit score reason. You know, again, this is kind of the same, same as the other. Sometimes banks don't like them because some of 'em do not operate in a manner that's really above board. They promise that they will improve their score, you know, by a hundred points in 60 days when they can't make those promises or commitments. So it just depends on the operator. And we, you know, we, we don't work with once we find companies that are doing that, you know, we will often turn them down before we even go to a bank with them, if they're operating in such a manner. And then probably one of the more unique ones that we have is a clothing optional cruise line <laugh>, and that we that's considered rep well, it's a couple things, it's a cruise line. And as we know with what happened with COVID, there was a lot of cancellations and travel. So there's a risk there, of course, but in a normal environment when there's not that risk of COVID and other problems, just having a clothing, optional cruise line to a bank can be considered a reputational risk, right. It's unsavory in their mind, but you know, to other banks, you know, if they're operating within the laws, then they have no problem with it. And we were able to approve that account.
You mention you know, like that, that you enjoy working with with these clients and, and helping them even though they are considered high risk by, by some standards. I also understand that you have a very impressive client retention rate. So yeah. Could you tell me, you know, could you tell me what that is and then tell me how you guys achieve that?
Scott Morley @ Xcel Partners (09:32):
Yeah. Well, one is when you're in the high risk space, the merchants that we work with our clients do really don't have a lot of choice. So once they're, once we approve them for an account, it's very difficult for them to go to other places, to find, to get another account opened up, because they're because of the risk that their account is in the, the category they're under. And so the, the Avan, that's just a purely by an advance. We like to think that we're good at what we do. And that's, you know, part of it, we answer the phones when people call and we, we deal with problems. We work with them. Like I, like I stated earlier in a consultative way. So we think our clients like us for that, but it, at the same time, just being able to have an account that's open where they can process payments and get paid on time is number one.
Scott Morley @ Xcel Partners (10:26):
And because of that, our retention rates tend to be five years or more on clients that we have. I mean, once we establish, once we put in a client on board, it's not unusual for us to have 'em on board for as long as they're in business. And we've started in 2010, we have clients that are on board since that original inception date. So it it's, which is the industry average runs probably right now around 24 months. So two years. And we, we average closer to, you know, five plus is what it really adds right now.
Yeah. That's, that's very impressive. And I'm sure it feels good to be able to say that.
Scott Morley @ Xcel Partners (11:05):
Yeah, it, it, it's good for, I mean, it's good for business. It's good for quite honestly, for our clients as well, because they don't have to worry about being in most cases terminated or shut down when they establish an account with us. And that's part of the problem with high risk that people run into is they can go to a, a bigger company that approves accounts without really looking at all their paperwork that, that clearly, and then after they've been operating for a month, two months, sometimes there's arbitrarily shut them down. And those companies that do that are often really technical, they're really technologically based companies where they, they, you know, AI driven, you know, they're not focused on the, the client itself in terms of like interpersonal communication and, and, and trying to work through problems. They just, they just have computer log rhythms that decide what to do and when to do it. And, and if you have a problem, you know, you're dealing with either a chat screen or an email thread, right. But you're not, do you not dealing to human contact. And it's really pretty tough for people when, because their livelihood entails getting paid and getting their, you know, payments processed online. That's what we feel pretty good about what we do, because in our, our case, we don't do that to our clients or our merchants.
Yeah. I'm sure that makes a huge difference. I I wanted to ask about you know, your marketing and specifically how are Paul Kleen And Pitchit, helping your team?
Scott Morley @ Xcel Partners (12:42):
Up until really even working with Paul, we've been pretty much organically grown. All of our business has come from word to mouth. It's come from ironically, some banks that don't work with some clientele. They send 'em to us. They send their declined applications to us because they don't have the ability to work with them. And because we're unlike some people they're in this business, they have, they have one bank that they work with. You know, if it's say, if it's a bank, they don't have any other options, they have their bank. And if you apply for an account there, you don't get approved. You that's where you stop. In our case, we have, like I said, we have about 15 different bank partners we work with. So we're not more than a one stop shop, but we wanted to take our business really to the next level and be able to grow. And we went to Paul to, to see if there was a, a way that we could target specific types of merchants that fit our profile and fit our high risk categories and target those clients on a way that would be effective versus, you know, versus Facebook or other types of advertising you can do. And, and that's what we decided to work with Paul and, and grow our business and take a leap.
So what, what kind of changes and you know, I'm hoping improvements <laugh> have you seen from that that sort of change in approach?
Scott Morley @ Xcel Partners (14:06):
Well, we've seen so far, you know, we we've been doing it for a short time, but we've seen, you know, a lot of, a lot of people raising their hand to get more information and take the next step. So hopefully that trend continues. And what I like is being able to drill down to specific types of merchants that we know that we've been successful with in the past and be a, to help them. And that that's critical because, you know, we tried previously, we only did one, we tried one other marketing campaign and we did, we did that on Facebook. And many of the responses we got were businesses that, that say they processed, they, they processed payments, but it might be a thousand dollars a month in payments. And there's, we work off a very small margin. So someone that does a thousand dollars a month, we'd be lucky to make, make $10 a month on that client.
Scott Morley @ Xcel Partners (15:09):
Mm-Hmm <affirmative>. And it's just not someone that's really suitable for us because at the end of the day, setting up an account like that costs more time and money than you're gonna make on that account. Yeah. Whereas with Paul, we will take, go through our, our current client list and just determine some of our higher profit sectors, choose those in target to those via LinkedIn and start communicating with the, with the appropriate people, you know, at the C level, basically mostly the owners and CEOs or these companies, and take it from there. The fortunate thing is in our business, it do, we're, we're fairly small because we're, we're a small niche. We do not need thousands and thousands of clients every single month to be able to be profitable and new clients, I should say, you know, so over time, if we're just building our client base and it looks like we can do that with, with Paul's system. For sure.
Cool. So, I mean, if, sounds like Paul has helped you identify, you know, where what's really making money and, and kind of how it go after more clients that are, that are going to be profitable for your business.
Scott Morley @ Xcel Partners (16:23):
Yeah, exactly. Cause we, we took, you know, through our conversations, our initial conversations with Paul, we went through our database of some of our most profitable merchants and ones that we feel that need the most help in terms of just their, whether difficult to find. They have difficulty finding relationships with banks to build, to process payments. We found those sectors within LinkedIn drill down and they are working those, those databases right now.
Cool. Well I mean, yeah, that, that certainly sounds like an exciting an exciting set of opportunities hopefully that's that are opening up. But yeah, my, my last last question is just, you know, what, what else is exciting? What's coming up on the horizon. What are you really looking forward to in terms of the future of Excel,
Scott Morley @ Xcel Partners (17:14):
The payment space is ever evolving. I mean, it, it, it's rapidly evolving from a standpoint that businesses like Stripe and PayPal and square, and which are, you know, we'll say Silicon valley based type companies where they're very technologically oriented. They have been big disruptors in the space. And the advantage for us though. And I think what's exciting for us is there is, there is still a huge opportunity in the area of high risk and that's because those businesses, although they may approve an account that we approve, they do not keep them up and operating for very long. Once they find out what they're doing, they, like I said, they approve accounts based on very limited information. And then once they start seeing payments come through and they, they do a deeper dive into what that, what that business is doing. They more often than not will shut that type of business down if it falls within a, within a high risk category.
Scott Morley @ Xcel Partners (18:19):
And then the other thing is we, as you probably are aware, cryptocurrency is becoming much more of a, you know, of a viable method of payments. And we stay on top of anything that, that revolves around payments and crypto is, is one of our more recent addition that we offer now. And we have about 15 currencies that we allow payment processing for. And the great thing about it is we don't charge our merchant single dollar to process a cryptocurrency payment. So that's great news for them, if they can shift some of their payments from credit card processing to cryptocurrency field, save them a lot of money.
Yeah. Wow. Thank you so much for coming on and you know, explaining a little bit about what you guys do and and where this industry before we wrap up I just wanted to see you know, if anyone wants to learn anything else anything more about Excel or, or, you know, get in touch with you how might they do that
Scott Morley @ Xcel Partners (19:20):
Best way would be to go right to our website, which is www dot Excel, ps.com and spelled X, C E L P s.com.
All right. Is there anything else that you would like us to cover that we haven't covered yet?
Scott Morley @ Xcel Partners (19:38):
One thing and, and it's just something we don't, we we're, we don't do as much with high risk, but it's worthwhile probably mentioning mm-hmm <affirmative> some high risk businesses will qualify now for what's called a cash discount program and what that is. It's a, it's a newer trend in the industry where you may have seen it when you're using your cards in places, but they charge a lot of businesses now will charge you a fee to use your card. And that fee, that fee generally runs between 3.5 and 4% typically that's I mean, that's ballpark and that shift is becoming really big. The problem with doing that in high risk though, is that in high risk, sometimes that fee's not enough to cover all the costs. In other words, we charge a lot of times our risk clients are paying five or 6% in processing fees, and that if they were only charging, if we were only charging them 4%, it wouldn't cover, you know, our risk tolerance for that account, but it would save them. It would save them though 4%, you know, so their fees, instead of let's say they're paying 5% instead of paying five, they'd only pay 1% a month, which is a big savings. Absolutely. Yeah. And so that, that's kinda a that's, that is a new, kind of a new trend. That's, that's making its way towards the high risk area as well.