Our guest, Kevin Burke of VetPay, introduces us to the payment processing industry and how it has evolved over time. We’ve touched on why consolidators should be looking at their payment processing statements every month and how VetPay has made sure to keep up with the changes, while at the same time providing their customers with lower prices, a high degree of transparency, and personal customer service.
Welcome back to Consolidate That! Ivan, really glad to see you again this week and excited for our guest.
Hi, I am Ivan Zak. So happy to introduce our guest today. We have Kevin Burke; he is coming from VetPay. VetPay is a Credit Card Processing Company. We are going to talk about how he started this in our domain and all the details about it because it’s an important topic when you are acquiring practices to figure out that aspect. Kevin, welcome to the show, thank you for finding a time.
Thank you guys for having me. Happy to be here.
Just for a little more extended introduction that I have done for your job there. Could you tell us about how did you start in the Vet Payment Industry? Specifically, Payment Processing Industry and then how do you choose Vet as a domain?
Absolutely, I have been working in and around the payments industry since I was a kid. My dad started a Credit Card Processing Company in Houston back in 1989. Just like most processors, we would call on different types of businesses and all different types of industries and rather than take a shotgun spread type of an approach, myself being an animal lover, if you want to be in the Vet industry, you gotta be an animal lover, I decided to call on veterinarian’s specifically.
We actually bought the VetPay.com URL back in 1999, I was in eighth grade at the time. We didn’t actually start promoting VetPay until about 2019. A ton has changed in the payments industry since the 90’s. One thing is still pretty consistent and that is Veterinarians and Practice managers, they do not love getting cold calls from credit card reps.
If you can unwrap that for me. So, I am a Vet and I just know that from what I have seen at the trade shows, for the last sort of six, eight years being Smartflow CEO, I have seen tons of Credit Card Processing Companies that come into the market. It felt to me, again without knowing much about it, that it is a pretty cut throat business and you really have to stand out.
Can you please start us maybe with explaining, what is the business of credit card processing? What is the competition? When one chooses to go with one or another, why would they even want to pick up the phone and say, “This is a pain point for me right now. Right now, I am thinking I need to change Credit Card processing,” what are those pain points that you address? How do they say, “Oh we want to go with Kevin”?
Of course. I mean typically there is a ton of competition in our industry. When you go to these shows, you do see a lot of credit card processors there. When we do talk to consolidators or standalone Vet practices, the majority of them are either with their bank for processing or they are restricted to using an endorsed credit card vendor for their software or their PIMS provider.
The first thing’s first, when practices are looking to switch, it is usually a cost saving thing in our industry. It is a race to the bottom when it comes to credit card processing and rates. Whether it is VetPay or Square or Stripe or any of the banks or other processors, we do all compete on a level playing field. We all have access to direct costs from MasterCard/Visa. All we do is take that cost, we mark it up by percentage, add a transaction key, and we provide them with equipment. Hopefully the equipment that we are providing to these Vets is modern and it is taking Apple Pay and contactless payments but also you want to be with someone that is not going to increase your rates over time.
When it comes to us differentiating ourselves from our competition, besides having a lower price and not being so greedy in the amount of money that we make, and also being very transparent in the rates and fees that we do charge, you get personal service from us. You are not dealing with 1-800 number, although we do have 24/7 tech support, you are dealing with someone who knows you, knows your business is kind of aware and in line with what your strategic business vision is for the business and also your objectives for the business as well.
I want to ask you some questions about the negotiation side of things and how consolidators can look at it at scale. Coming from the PIMS background, I was consistently pushing the integrated payment processor that Hippo, which was the company I was with, that we had. We would switch someone from a different PIMS, we would always say, “Great well and now you should switch over to this one.” The conversation was always batch or beat the rates and let’s try and get the business moved over and all of that.
How important do you think that integration should be? Especially thinking of consolidators, whether they are using Unified PIMS or independent ones across the board. I guess it is part negotiation at scale and the part how important that integration be?
I mean there is a ton that goes into actually knowing what to do and what to say when negotiating a merchant contract. But when it comes to integrated versus non integrated, whether you are with that ISP or PIMS, like Hippo Manager or any of the other ones, the biggest drawback to being integrated is usually always cost.
The oldest, most tenured software players in the vet space, they make you go with their processor and they charge you a fortune to be integrated. There is a good give and take with that. When you are integrated there is, I mean we always recommend that a practice is integrated if the cost makes sense. It eliminates human error, you are able to use one dashboard and that PIMS kind of do everything.
What we do at Vetpay is, we give a very unbiased approach. If a consolidator or veterinarian is integrated to that software, the last thing we want to do is convince them to go nonintegrated. But at times it makes financial sense because they are getting charged so much to go nonintegrated.
When we look at a consolidator or a veterinarian’s monthly processing statement, we can show them to the penny what they would save with Vetpay potentially, but also we can even show them what they would save per swipe every time they check out a client or a pet parent we can tell them, “You will save $3.20 per swipe on average,” or, maybe, “You will save $1.50 on average.” There is a lot of give and take with going integrated versus non. But at the end of the day it is usually more efficient and proficient for a practice to be integrated.
Just following up on that, would you look at that or have you looked at that for a consolidator sort of at scale and say, “Let us look at your last quarter worth of credit card fees, or your last month of credit card fees across your 10,15, 200 clinics, and really show you what the savings could look like?”
That is exactly what we do. So most of the consolidators that we do work with, whether it’s in the vet space or other healthcare spaces, we actually do not even get them to switch if they are integrated. We work with them more on a consultative basis. Like I said, we take a deep dive into the processing statement per location. We can look at quarter, six months, a year and we can show them per each location that they do have a fair deal with their processor, or will usually find that, we looked at this in January, you know, MasterCard and Visa, they typically do their increases every April and October to appease their shareholders and increase their share price, and we typically find that consolidators, even though they think they have a good deal with their processor at scale, they are not keeping an eye on it usually and they are increasing their rates over time.
It is super important for a consolidator or the CFO or the control or whoever is looking at the finances, they need to look at those statements every month. They need to make sure that there is uniform pricing for each location, that they’re uniform and they are the same at each location or equally as low. But look at the front page of each statement and you will see that most processor that we complete on the vet space, they are giving you 30 days notice and if you do not opt out or if you do not call them to say something, they are going to increase your rates by a few basis points here or a transaction fee there. There are a lot of increases that we see.
For a newbie, I know that Brian jumped into integrated/nonintegrated. Let’s pull us back into, let’s say I’m a new consolidator. I know how to acquire practices, I know what I want to do with them operationally because I presumably know what is going on in the veterinary clinics and veterinary domain.
Then there is this side of business which is credit card processing. When I am buying a clinic, when is the good time to connect with someone like yourself and say, “Okay, this is what we are trying to do, we are buying these type of practices, this is what we are doing,” and obviously consolidations are a business of sort of saving cost because that is what you get when you are combining the clinics.
Now we also have a barrage of different software products that are in these clinics and let us say we are not planning to replace this software on day one. What would be your recommendation? When do people need to talk to you? What are those things that we need to find out from the clinic before? This is where I am going to with this, in terms of the acquisition timing. So prior to acquisition, during the due diligence process, post acquisition and then further deciding, “Should I use the —?” Because all of these clinics come with a different credit card processing, with a different length of contract and expiry date. How would you ideally optimize someone who has minimal understanding in this? How would you optimize someone who comes to you with, “We have 30 practices and want to buy another 20 next year and we are now starting to pay attention to our fees and we are thinking they are too high?”
Typically, when a practice is being acquired from a group or a new ownership, they are going to look at their numbers, they are going to look at their financials and see what their bottom line is and what they are paying for credit card processing. They are going to look at their effective rate. They are going to look at what they spent across those 10 or 12 practices that they are acquiring, what they spent in credit card fees, and divide that by the amount that they processed. They are going to have to switch providers whether they end up staying with that same merchant account provider that the old owner was with or whether they go into a new one.
What they need to do is take those statements that they received from the old one and shop them across a few different providers. Shop them with the software vendor that they might be going with to be integrated, shop them with someone like VetPay, shop them with the bank they want. Take three or four different quotes and try to make sense of them all.
What we do at VetPay, is we do give a very unbiased approach and we educate the person who is looking at those numbers on if they are comparing apples to oranges because there are three or four different pricing methods, if not more, in the credit card space. And so they might be comparing apples to oranges. What we do at VetPay, we lay it out on a very, very detailed spreadsheet, the spreadsheet could be 100 lines long but it is very easy to read and will show them what this company is offering versus VetPay versus this company, and will give them a very good financial analysis as to if it makes sense to go with someone like VetPay or go with their software provider.
That is interesting.
I will say, as far as getting up and running, we do act as a pay fact model, kind of like a Square or PayPal or Stripe. Getting on-boarded with VetPay, we can have someone up and running the next day with card not present, or they can electronically send out invoices or key-in payments. Then it takes one to two days to actually get them a machine where they are doing chip cards and that kind of stuff.
Getting up and running with the new provider, you should give yourself some time so you can train your staff and all that good stuff but it is pretty quick as far as it is if you do decide to switch to a different provider.
What is the technology stack looking like right now for people? Obviously we talked about the CFO side of things or the controller or the accounting side of it or the dollars. You just said your team trained and up to date on those sort of things. What are the technologies that people should be expecting or comparing or what are people having to learn? I mean on my side, I think, “Okay hand me the card or touch it or swipe it and then push couple computer buttons it should work,” but it sounds like there is more to it.
It has definitely evolved. Since I have been watching the payment flow and the checkout process for veterinarians since the 90’s, it is no longer for a modern tech savvy vet. They are not just swiping a credit card and stapling the invoice to a receipt and giving it to the pet parent across a plexiglass facade that they have these days. The checkout experience with pet parents is the last interaction with the practice unless they’re doing a survey or something.
These days, in modern days, they are giving the pet parent options to pay. Like I said, contactless payments like Apple Pay, Google Pay, Samsung Pay, Tap to Pay. They are up 250 percent since March of 2020 and for good reason. The contactless payments have become huge.
The majority of our last year, we spent the majority of our time technically outfitting our existing practices with wireless credit card terminals so they can go curbside with those terminals or it is also very popular to take a wireless credit card machine to the exam room, maybe it’s for you know euthanasia or something like that.
Besides the tap-to-pay, contactless and wireless, more and more vets are starting to store their pet parents card, they store them in a secure vault for future billing. It also allows them to set up payment subscriptions for recurring billing, if they are doing wellness plans perhaps. There’s been a lot more functions and features that have been added to payments for vet practices in recent years for sure.
One thing that, in the conversation with Sebastian, he mentioned that they are doing, I think is innovative, maybe others are doing and I am just not up to speed, but they are offering to pay for the exam either before or after the visit without even that sort of cash register interaction. When you are going to the appointment, you can sort of process that.
How common is that? Is this unique to Digitail’s workflow? And what is the success rate that you are seeing, or Sebastian, or do you guys together are seeing with it? That is sort of a three questions. How popular is that software and what is the success rate?
Talking about Sebastian Kapoor from Digitail.
Shout out to him.
Shout out to Sebastian and to his team. They have been awesome to work with. They have an extremely slick PIMS product and it has been a ton of fun rolling this out, switching practices from these old school PIMS to something like Digitail that is cloud based. With them, we are still doing the give the practice a free cloud based credit card machine where you can do all those types of old school payments but Doc Ivan, like you are saying, what becomes super popular is from the PIMS is creating more of a frictionless kind of like an Uber-like check out, where with Digitail, and there are other providers that do this too, you can electronically SMS text an invoice or you can email an invoice to a pet parent so they can pay it before they even come to pick up the pet. But also with Digitail they have a really awesome pet parent app that all of their practices are promoting and they are enabling their pet parents to download this app to book their appointments. I mean the text app with Digitail is extremely vast but the pet parents can pay directly through the app before they come pick up their pet from the practice. It is seamless and it works well and they are able to do Apple Pay from their phone, or if they are using a Macbook, and it syncs directly with their PIMS and before they come pick up their pet it is already marked as paid in their software. It is catching on for sure.
We are doing metrics, I do not have the numbers on me right here, but the amount of pet parents that are starting to use the app and the amount of veterinarian and the practice managers that are starting to push these electronic invoices for remote payments, it is making for a much more seamless and an easier checkout process.
One other thing that is quite painful for practices, and I don’t know if you’ve faced that with your customers, is the wellness plans. This is something that a lot of groups and veterinary hospitals adopted because it just makes sense. Are you involved at all in the processing of those payments for wellness plans in the clinics?
Because I will tell you why I am interested from what angle. Basically it is really hard to reconcile the revenue that comes from the wellness plans and then match that with the compensation of the doctors, especially if they are on commission based, because then reconciling the revenue that comes from one side and then saying that, “Yes this appointment that was done is a part of that Wellness plan and the compensation should be calculated for the veterinarians,” my personal opinion there should not be a compensation based on the commission. But if there is, do you work at all with that particular workflow and is there something that you helped to solve for veterinarians in that area?
For us in the wellness plans, it is mostly on the technical side. We provide a payment gateway to be able to securely store that pet parent’s card on file and set up the payment subscription. For us in wellness plans it is usually up to the ISP or into the PIMS provider to attach it to a pet parent or to attach it to a profile to actually, you know, run KPI’s and data as far as profitability and other things. So from VetPay’s perspective for wellness plans we pretty much just provide them with the tools to process the payment and set up the payment amount for how long and when to bill.
There are also platforms that, and I know really only one, that has the credit card purchasing incorporated into the software as the same business. Rhapsody, I am sure you have heard of them, they have their own proprietary and from the discussions that I had with them, and I do not want to be unfair to them, but it sounded like that might be a little more expensive than traditional credit card processing, which is again given the fact that they build the whole software around it maybe makes sense.
But do you have any comments on that model? How successful you think is? And how do you compete with that?
I mean so Rhapsody is a great product, I know that they build their costs to process credit cards into the cost of the software. I compete with Rhapsody in a similar fashion to the way that we compete with other, I would say, disruptive technology like Square and Stripe.
The flat rate model that is higher is not always more cost effective at the end of the day especially for practices that are at scale, like consolidators. If I look at a Square, and I do not have Rhapsody’s rates off the top of my head, but I think they are similar to a Square or Stripe, where Square charges 2.6 percent and 10 cents if the card is physically present and that the card is not present it is a riskier transaction, more of a chance for fraud or something like that, so they charge a higher rate or a premium and it downgrades to something like 3 ½ percent and 15 cents per transaction.
While the wet practice or the consolidator has peace of mind in knowing they are paying this great, it’s not great, but they are paying this flat rate every single month, they know what they are paying. If they were to switch to a different pricing method like interchange or cost plus pricing, that is what pretty much any consolidator needs to be on in my opinion, is a cost plus pricing model. If I look at VetPay’s portfolio of practices, I mean, our average $30,000 a month practice in credit cards, they are paying around 2 percent. If I look at our average $60,000 a month practice for VetPay, they are paying right around 1.8 percent. That is for a mix of card present versus card not present.
Then if I look at our average, you know, 100,000 a month practice and up, we can get much higher but it is, the lowest we see our month end effective rate for our pricing on interchange plus pricing compared to a flat rate like Rhapsody does, or that Square or Stripe does, is anywhere between 1.25 percent and 1.75 percent.
Can you parse that a little further for us, flat rate versus your rate. What is the name for your rates, other than flat? What is the difference?
It is a very popular pricing method. I would say all of the big, the ban fields of the world and the other big consolidators, they are on interchange plus pricing and every provider, all of our competitors, we are able to provide this pricing. What interchange means effectively, interchange is a fancy word for cost from MasterCard and Visa. What we do as processors at Vetpay and any of our competitors is, we take the cost for that exact card, whether it is a debit card or whether it is a Southwest Airlines Visa card or a Chase Sapphire, there are over 600 costs.
We take the exact cost of that card and we mark it up by a percentage and a transaction fee. For a practice that is taking a little bit more debit maybe because they are in a less affluent area and they are taking less rewards cards, less Amex, their effective rate at the end of the month, we’re able to get them to be well below 2 percent as opposed to this flat rate model which it gives practices the warm and fuzzies to know that they are paying the same flat rate every month but at the end of the month or the end of the year and they are paying a much higher rate, whether it is 2.3 or 2.6 for card present or it’s 3 and a half for card not present.
Interchange plus is a little bit more detailed, a little bit more to wrap your head around. But what we do at VetPay, when we do the cost analysis on a recent processing statement is, we go through their statement line by line, these statements can be 4 to 8 pages long. We look at the exact card types that their patients, or pet parents are paying with. We show them to the penny that, “Hey this is what your effective rate would be with us and if you compare that to a flat rate provider like Rhapsody or someone else it is usually going to be pretty eye opening and significantly lower.”
I think we blew through our 20 minutes.
We definitely did.
Very interesting and educational for me, Kevin. There are two questions that we ask at the end of each episode. One of them is a book, TedTalk, YouTube video, or anything else that inspired you recently that you would like to recommend to our listeners?
A book that I read recently and enjoyed and is pretty timely for what’s going on in our economy today. It is a book called When Money Dies by Adam Ferguson. It’s a pretty dramatic but a true story of what can happen to the value of the dollar and the economy if the government or the central bank started to print more money and ignore its national debt. It’s a very interesting read.
Pretty cool. The second question that we ask is, is there anybody else in our domain that you think would be interesting to invite to this podcast?
I met this lady, her name is Dagmar Sacks and I met her when we were stranded at the Orlando airport last year after the VMX. I got to talk to her when I was still relatively new to being full time in the vet space. I learned a lot from her expertise. She is a business development specialist over at Southern Veterinary Partners and I just thought that her expertise in the vet industry was pretty useful and I think she would be a good guest for the podcast.
She is also probably the most athletic woman I have ever met. She used to work for NWI and that is how I met her. She was one of the territory managers for them. So she is definitely well versed in our domain and the veterinary business. Thank you for that.
Well, Kevin, thank you so much for finding the time to join us. It was a very interesting conversation.
Thank you for having me, I appreciate it.