How Licensing and Regulation Impact Payments in the Firearm Industry with Bill Glass of AltruPay

About This Episode

Are you interested in understanding the Unique Challenges of the Firearm Industry and Payments? In this episode of Tactical Business, host Tony Smith sits down with Bill Glass of AltruPay to discuss streamlining the approval process for firearm merchants. AltruPay empowers merchants worldwide, from low to High risk merchant accounts and ACH processing for Retail & eCommerce merchants. Watch this episode for an interesting dive into this latest development in payments and fintech.

Insights In This Episode

  • Firearms present higher risks in payment processing due to regulatory requirements and reputational risks.
  • Licensing and federal/state regulations play a crucial role in the underwriting process for firearm merchants.
  • The verification of an FFL license and adherence to specific regulations are part of the due diligence process.
  • Proof of inventory and manufacturing processes assists in establishing legitimacy and compliance in underwriting.
  • In-house and bank concurrence reviews determine approval speed, based on transaction types and merchant types.
  • Altrupay actively supports the firearms industry and participates in events to better understand the regulatory landscape.
  • And SO much more!

About Tactical Business

Tactical Business is the weekly business show for the firearms industry. The podcast features in-depth interviews with the entrepreneurs, professionals and technologists who are enabling the next generation of firearms businesses to innovate and grow.

Episode Transcript

Tony: Welcome to the Tactical Business Show. I’m your host, Austin based firearms entrepreneur Tony Smith. In each episode, we’ll be exploring what it takes to thrive as a business owner in the firearms industry. We’ll speak with successful firearms industry entrepreneurs about their experiences building their companies. We’ll also speak with leaders and legislators for shaping the industry, as well as tech executives whose innovations will reshape the future of the firearms industry. Welcome back to another episode of Tactical Business. My name is Tony Smith, and on the show today, we have Bill Glass of AltruPay, and he’s going to fill us in on some of the details that’s happening in the credit card space, the impacts to FFL, how they fit in, and a little bit of background on the services they provide. So Bill, give a quick introduction and tell us a little bit about AltruPay and the solutions that you offer.

Bill: Yeah, thanks for having us on. I can definitely tell you that our focus, especially in the firearms space, is we’re a full risk processor offering multiple different types of payment methodologies from traditional ACH more to RTP type products and credit card processing. But AltruPay was built on the foundation of altruism. So our focus and our goal is to bring altruism back to payments and really try to make a difficult process really simple while staying compliant and helping our customers stay compliant. So we fit in that firearm space. We do a lot of firearms business and it’s one of my near and dear to my heart type industry.

Tony: So yeah, if you could explain a little bit why the firearms industry is considered high risk and why that’s a space that you guys focus on and why you’re relevant to the firearms space.

Bill: Yeah, those are all great questions. So firearm industry, like anything else that follows, we’re going to call it the banking world when it’s a regulated product, typically carries more risk associated with it. Easy explanation is due diligence. There’s more due diligence to do more regulatory items to keep up with, etcetera. On the firearm side of stuff, we classify things into regulated versus non regulated product types, especially on the regulated side. You run into a lot of reputational risk items, especially just what we’re going through in society today and and everything else. So from keeping it real high level, that is really why there’s more risk associated with firearms. Why we like firearms is because we don’t see that. We don’t see it being this huge regulatory fight that we’re seeing in society right now. There’s a purpose for it. And as long as you’re utilizing a firearm and it’s legal, lawful and appropriate way, we don’t see it as a reputational risk, especially when our merchants are licensed correctly and they follow the rules and regulations we provide.

Tony: Got it. Now, when you say merchants, are you referring to the mom and pop sort of gun dealer shop, or are you referring to the Shopify store When you say merchants, maybe elaborate and expand a little bit about the category and type of merchants that fit into that bucket?

Bill: Yeah. So a merchant is just a term that we use to talk about a credit card processing account, right? The individual or individuals that make up a board of directors or whatever that are selling goods within that industry. That could be Bill and Bob outside the back of their house in a steel building. We see tons of those guys in rural America and then we have a bunch of the really large manufacturers, both domestic and international, that sell domestically. So the top line revenue number can range anywhere from ten, 20,000 a month to we’ve got merchants that are doing millions and millions a month. That part is explains the size of customers we do, but that’s kind of what we’re talking about. A merchant we’re looking for.

Tony: I think that makes sense and that for someone that may not have a strong background, just elaborating and expanding on some of that terminology will help them better understand who we’re talking about and who your services are fit for. So I think that answers it perfectly in terms of giving sort of a monthly revenue range. You talked a lot about regulation. You as a credit card processor, do you need to go in and do due diligence to make sure the FFL has all of their paperwork in order? Maybe if you could just expand a little bit on some of the regulation as far as NFA or FFL that you guys need to look at or be aware of or take into consideration from a credit card processing standpoint?

Bill: Yeah. So there’s really three things we look at licensing wise. FFl any of their NFA items do they have, are they registered and licensed to sell whatever the level is? And then also federal and state regulations or laws. Those are changing a little bit up and down. Right now, for example, Oregon is limited to the number of guns that can hold how large their magazine side size is, etcetera. So there’s different things like that. But without getting super crazy about it, our FFL, we’re just looking for it to be current that they have one. And one of the things that we do, which I think we’ll get to in a. A little bit on the underwriting side is we’ll request inventory pictures. And that’s something as simple as a picture inside the shop. We just want to make sure that they have an FFL license and they’re selling the type of firearms that they say that they’re selling. And then obviously, in regards to the special occupational taxes, like the SOT stuff, I know you and I had a chance to briefly talk before we we jumped on here. And you’re very familiar with that. So, I mean, making sure that their classifications for the NFA standards and all of that stuff is in place, which is very important depending on what they’re selling. And then the federal and state regulation laws, we really rely on a team of lobbyists, lawyers, and we have a few third party, we’ll call them companies. That’s what they do. They focus on the low level areas. Are there changes or there stuff that we need to be aware of? You brought up Shopify. If I’m making this up, if there’s 20 ammo limit and a semiautomatic weapon in a certain state or county or region, we need to make sure that someone in Shopify is not selling unlimited rounds or something like that.

Tony: That makes sense. Yeah. So you’re, I guess, responsible for some of that due diligence. You mentioned a picture of inventory. Is that sort of up front? You’ve got to provide that as part of the underwriting process or do you have sort of a responsibility ongoing to audit check and look into the inventory picture?

Bill: That’s really what we were talking about in the beginning is we really want to trust our merchant, right? We have rules and regulations we have to follow. So in the beginning of underwriting the account, we follow our KYC process and part of that is inventory. We want a picture of of inventory. If they’re a manufacturer, we want a picture of inside the manufacturing plant or seeing the manufacturing process. We want to be able to see that firearms are built or constructed in a way that they are ready to ship. If it’s an ammunition dealer, we want to make sure that we see their press process and stuff like that. We’re not sitting here auditing their process. We’re not sitting here saying they’re doing it right or wrong. We just want to be able to prove that what they’re selling is what they’re selling. Makes sense. Process is functional.

Tony: Got it. So say someone comes to you, they think, Oh, this is great. I have this store, this item that I want to sell. I have a storefront, but I need to be able to take credit card payments. They reach out to you to start that process. Maybe if you could just elaborate a little bit on what that process looks like to get started and what somebody needs to expect to bring to you as part of that underwriting process, how long it takes and from the time they reach out and say, hey, I want to start selling this regulated widget until they’re able to take a credit card payment from someone either online or in person. How long is that timeline look like?

Bill: So typically 24 hours quicker. We had one this morning that we put in underwriting. I want to say probably about 9 or 10:00 Central time. And we had an approval by, I want to say about 30 minutes ago. So again, it goes back to what we said. This is not even though it’s a regulated market, it shouldn’t be seen as a black eye. And these business owners should not be dragged through the mud. So we’re looking for some simple stuff. We want to prove that their business is legit and real. So we’re going to ask for a copy of their corporate articles. Potentially they’re a copy of their S-4, which is their letter. And then we’re going to ask for last month’s bank statement and last month’s processing statement if they have one. Obviously, we support start up companies as well. So once we have those items right there, we’re able to do enough KYC and due diligence. Now, obviously, we’re asking for things like copier, driver’s license, voided check. These are simple little business things that we know where to put your money and we’ve got to do some authentication stuff on you on the back end. But it’s really simple stuff that’s readily available. I think The merchant this morning got it over to us in five minutes. We’re very big on electronic efficiency, so we send over a quick link. They completed everything from a business perspective. They were able to review it and electronically sign it and it went into underwriting. And I think that whole process lasted 15 minutes.

Tony: Wow. And is that underwriting done? That’s much faster than I would have expected. And that has to be a differentiator for you. Are you able to do that so quickly because you’re doing that underwriting in house or do you need to go out to, let’s call it one of the big banks or something and say, is this okay? I think to most people that that quote unquote underwriting is a bit of a black box. So if you could maybe just expand a little bit on what that is that in house is that you got to go. Yeah. Yeah.

Bill: So a majority of it’s in house and then concurrence is done at the bank because it’s a regulated item. But we know what our bank is going to push back on concurrent. So typically when it goes to the bank for that concurrence final review, our approval is within an hour if not quicker. And it all is also going to determine on what type of transaction there is. If it’s a retail card, present type store, those happen. Those are very quick if it’s online. Those are fairly just as quick, but we typically need to do just a little bit more checking on the back end for it. And then we support gun brokers. So there’s we don’t want to limit our business owners, our firearm merchants. So we support their sales on, which is an eBay style firearms only type environment.

Tony: This episode is brought to you by Every few years it seems large banks and national credit card processors suddenly decide that they no longer want to process payments for firearms and firearms related businesses. So they drop these businesses with almost no notice, freezing tens of thousands of dollars in payments for months on end. If you want to ensure your partnered with a payments provider that’s dedicated to supporting the firearms industry or you just want to find out if you could be paying less for your ACH debit and credit card processing, visit Tactical Paycom today. We talked quite a bit about the regulated space. I gather and understand, but correct me if I’m wrong, that you also support non-regulated but Gun affiliated items. So like holsters or red dots or scopes or whatever it is. Is that correct that you support those items as well?

Bill: Absolutely. We actually have the same approval, if not an instant approval process for those. We internally, we always say can’t can it create a firing event? Meaning is there a pin striking something that’s going to fire something or explode something or create a detonation? If it doesn’t do any of that, then we treat it the same as if Bill wanted to go on line and create a t shirt website. Right? We look at the product itself as the same, given that it’s not something that cannot be sold into like that local environment or Oregon selling a massive magazine or something. Yeah, yeah.

Tony: I guess that’s the benefit of having somebody that’s well versed in the firearms industry and a gun owner themselves that they’re able to make that distinction. I know from personal experience, the e-commerce store that I have doesn’t sell regulated items, but it sells basically a gun storage device. Right? And the big marketing channels, I won’t name them by name, lump everything into one bucket and say, you can advertise this. So it’s always good to be able to work with industry professionals such as yourself that are in the gun space, the gun owners that are able to make those sort of nuanced distinctions around what should be approved and what should not. So that’s fantastic. Merchant comes on firearms. Let’s assume it’s a regulated firearms merchant. What do they need to do to make sure or to ensure or increase the likelihood that they’re accepted via ultra replay?

Bill: Yeah, great question. One of the things that helps us speed our approval process up and be so efficient is we have dedicated individuals on our team both on the front and back end, meaning sales and operations that are specific to industries. So if someone’s going to call in or say someone goes online and fills something out and they start that process, someone on that sales team that is specific to firearms is going to give them a call. The reason we do that is because we want to be able to hold their hand through the entire process. And any answer, any of the difficult questions or alarming questions that they may have and make sure that they are just they’re there for exactly what it is. Right. To get a merchant account. Our job is to make it as easy as possible and be compliant. So during that process, our team will go through everything with them. They ask a bunch of questions of how you’re transacting, what are you transacting? We’ll even ask some questions that we get all the time where merchants don’t think that they need to. Don’t know why, but they don’t think that they need to explain to us that they sell silencers and stuff like that. So it’s just getting through that process that can create all these little hiccups along the way. Our team is really efficient at understanding their business model, how they transact, what they’re transacting and everything. So when we start that, get the bank agreement over to them to sign that bank agreement reads exactly how their business transacts. So that’s really it.

Tony: Okay. That makes complete sense. And then there are other payment processors that are out there. It sounds like you guys are great in terms of being very knowledgeable in the firearm space, being able to give approvals really quickly as a strong differentiator. Is there anything else that maybe you want to add that that I’m missing? Those are two really big key elements, but anything else that you want the audience to be aware of about Ultra pay and why you’re such a good fit in that firearm space?

Bill: Yeah, that’s a great question. So I always try to explain to people that we’re in the same space with them, right? We’re not just a bank or a or an affiliate of a of a bank that’s going to sit here and say we support the firearms industry. Like you said, there are tons of banks out there that do it and some do and some don’t, and some do it and some do it really well. But I can tell you that we are in the trenches with you. We outpace is on the definition of altruism. And one of the things that we do is we support a bunch of events that are based around clay shooting or sporting clays. Et cetera. And our whole focus with that is not only are we gun owners, hunters, enthusiasts as well, but shot show, right? It’s one of the largest shows there are for that industry. We’re there. We’re exhibiting. We’re seeing the regulatory items. We have a direct relationship with the ATF. All of these things allow us to put our merchants in the best position possible. So let’s do it together, right? Our focus is to allow them to do it. Get live processing, live and stay stay growing.

Tony: That’s great to hear. I’ve heard and I don’t know much about in the industry firearms MCC 5723 What is that exactly?

Bill: Man The magic ISO, so in MCC Code is kind of a classification for businesses and the type of business, etcetera and. With everything that’s going on in society. They have been trying to get 5723 launched, which is an NCC classification for those that sell firearms, as well as big box stores that sell firearms. So my interpretation is that this will allow government to oversight legal gun sales versus and try to start to cut out some of the illegal black market, maybe type sells. I don’t see how that’s going to happen because there’s not FFL dealers out there that are selling without an EF, Like there’s no one out there like me that’s reputable that’s going to do it like an outlaw or ban. The other part too, is you’re putting a huge responsibility on to the processor for self auditing procedures and auditing these merchants. I mean, you’re getting huge pushback from the Republican Party and you’re getting a kind of a standard set that we have to govern what can and can’t be sold when in reality law is law and we go off of the black and white of that, right? So when you start creating that gray area, that’s really, in my opinion, where this NCC code is going to lead, that is, and it’s volunteer based, too. So that’s the kind of the crazier part is you don’t have to use it. But to say all of that, the card brands have really I think it was back in February or March put kind of a halt on executing that MCC code. I think something like that’s going to come down the line. I think that I don’t know if I’m going to see it happen in the next couple of years, right?

Tony: It’s the focus in area of where they want to drive it, if I understand that. Right. You’re saying that specific merchants that sell firearms would receive that specific code and that would make tracking of gun sales based on credit card swipes theoretically possible at a much more efficient, larger scale. Is that a correct?

Bill: Yeah. Government oversight.

Tony: Yeah. Got it. And then who theoretically, as it was proposed before, would that who would see that classification? Is that something that was proposed to be sent to regulators or is it just on the banks to just maintain records for those transactions across time?

Bill: So that’s a great question. I think I’m going to start with companies like us. We are able to segment our total portfolio, so all of the merchant types that we underwrite and we approve, we’re able to segment those based off of NCC codes. And obviously the banks audit companies like us all the time and they’re able to audit a portfolio, they’re able to audit specific MCC codes, they’re able to do all of that stuff. So if you’re looking at it traveling uphill to government regulation, technically they would be able to come in and say, all right, we need a list of every single gun merchant that you have. Please pull a record of all 5723 merchants.

Tony: Got it? That makes sense. Yeah, I understand. Certainly the pushback around that is sort of being a backdoor to track and make a gun registry. So this has been great. It’s been very enlightening for me on the credit card merchant side and what you guys do, we’re I know speaking as a merchant myself, we’re grateful for people like you that are out there filling in the gap in this sort of black box of a area and being gun enthusiasts and feeling like we have somebody in our corner. That’s always much appreciated. If somebody wants to connect with you and AltruPay, where can they find you? Anything else that that maybe you want to add about yourself and the brand?

Bill: I think the easiest way if you guys want to track myself or the company is go on LinkedIn and then same thing If you have any inquiries or anything, our contact information is there. We also have a quick contact Us section that you can complete and we’ll reach out and schedule it. And if you’re just you like what you hear and you want to dive right in with us at the very bottom of the website, there’s an apply now, I believe it says Apply now, but apply Now button. You can click it and it starts that application process. And someone from that firearms team, like I was talking about would reach out and kind of go through everything. It’s not committing you to anything, but it is starting that process and it’s a great way to just initiate that conversation and give us full visibility into your business. So there’s a lot of things there on the website, but if you’re just wanting to follow us and our storyline, jump on LinkedIn or just pick up the phone, give us a ring, we love chatting it out.

Tony: Great. Well, that’s been super helpful. I appreciate your time today and we wish you the best of luck.

Bill: Absolutely. Same to you.

Tony: You’ve been listening to the Tactical Business show by TacticalPay. Join us again next episode as we explore what it takes to start, grow and thrive in the firearms industry.