Lightspeed POS

Many retailers who use the Lightspeed Point of Sale system woke up to an unpleasant surprise on Monday. Lightspeed was drastically raising credit card processing rates. Every retailer has a negotiated rate, based on volume. In my case, our rates went from a 2.1% to 2.4%, a 14% increase of additional fees of around $375/month. Here's the thing though, although the rate is a shockingly large, this level of increase is not uncommon at the moment. It was Lightspeed's approach that caused a lot of pain. 

Their phone lines were inundated and sales reps were flooded with angry customers. I waited 90 minutes on hold before getting an email of sales rep.  If Lightspeed had been somewhat apologetic, explained costs had gone up, had raised rates to correspond with annual contracts, not mid contract, it wouldn't have been a big deal. That is not Lightspeed's way. 

Lightspeed has onerous contracts when it comes to credit card processing. If you move away from their processing, they impose a monthly penalty, well in excess of any savings. In my case, the penalty would be $680/month, if I didn't keep up the transaction volume on my Lightspeed credit card processing. They gave me one month before the new rates go into effect. So much for partnerships.

What are retailers doing? Contractually, we're obligated to suck it up and pay the higher rate, which will absolutely sink some businesses. If you're on the edge, losing .3% of your net income could tip you right over. Still, contracts are broken all the time, and if you're a large business, a broken contract every decade or so is probably no big deal.

However, to break your contract with a hosted POS system is a bid deal. They will cut you off. You would need to completely change POS providers, migrate data, move DNS to your new host, and completely divest yourself from Lightspeed. Migrating from an older version of Lightspeed to their hosted version during COVID took two months. Afterwards, you'll be disputing charges with your bank, possibly canceling a credit card, but that's all manageable. They'll attempt to collect and eventually ding your credit. Survivable.

What about legal remedies? I contacted my lawyer and his first question, "What does your contract say?" There may be some unfair business practices, laws being violated, but that is something a state attorney general would have to take up. You're not going to be able to start a crusade over this. If you signed a bad contract, you're pretty much stuck, unless you decide to break it. Many judges will let you hang yourself with your own rope, even if you signed something not legal. Legal remedies are off the table.

The other option, and all options are on the table for me, is do the heavy work of researching a new provider and migrating over at the end of the contract. For me, that's accepting Lightspeed dinged me for over $2,600 in extra charges in credit card processing, albeit charges I would have likely paid anyway. That is because my next best option is no better. I shall explain.

My next best option for a POS provider is Shopify. Shopify credit card rates are publicly listed as 2.6%, and from talking with peers, I think I can get that down to no lower than 2.4%, right where Lightspeed is putting me. Shopify does not have a penalty for using third party processors, but neither do they have third party processor integration. Without integration, you end up running credit cards on the side, resolving returns and disputes on the side, and generally having a not great POS experience. But you could cry over complicated processing while leasing a new car with your savings (assuming you can find cheap processing). My peers who use Shopify just pay the money and use Shopify's integrated processing. That's what I've been doing with Lightspeed, but mostly because 2.1% was pretty good at the time and not worth fussing over for a tenth of a point.

So there's no clear option, no cleaner shirt on the floor. If Lightspeed had handled this differently, had they not been, what's the technical term? ... assholes, this could have been avoided. A softer hand explaining rates are going up and competing rates are no better, would have avoided anger and rage quitting. If they had bundled higher rates with new contracts with onerous penalties, this would have been fair. Instead, after 90 minutes on hold trying to talk with someone, I finally had "my" sales rep send me an email saying pay up or eat the penalty, with a helpful link to their website explaining what I had agreed to.

Lightspeed used to be a great company, with fantastic customer service, thoughtful product upgrades, and reasonable pricing. They were a breath of fresh air after feeling abandoned with Microsoft RMS. Lightspeed is now LSPD on the New York Stock Exchange. They report to shareholders, spend their time on acquisitions, and half ass new features nobody asked for, like their awful demand forecasting. Their goal is to compete with their rival on the New York Stock Exchange, SHOP, rather than serving their customers. Lightspeed lost its soul and it's really a shame.