- Key insight: Pepper Pay recently filed for bankruptcy to liquidate its $665,000 in assets against over $3.4 million in debts.
- What’s at stake: The competitive market can be stiff, and risky, for payment processing ISOs.
- Expert quote: “There is a lot of churn and merchants tend to switch payment processing providers fairly frequently.” —Don Apgar of Javelin Research
A Miami-based payments fintech has filed for Chapter 7 bankruptcy.
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Pepper Pay, an independent sales organization, or ISO, selling payment processing services to small businesses that accept credit and debit cards, voluntarily filed for Chapter 7 liquidation on March 31 in the U.S. Bankruptcy Court of Southern Florida.
Court records published this week reveal a stark financial imbalance in the firm that could be a cause, or consequence, of its bankruptcy in a steeply competitive payments market.
Pepper Pay’s initial bankruptcy documents, filed by manager and CEO Eric Hannelius, show Pepper Pay holding just over $665,000 in assets while carrying more than $3.4 million in liabilities on its balance sheet.
The company’s cash reserves, which total just over $600,000, are held across several bank partners including Evolve Bank, Esquire Bank, Bluevine and Truist Bank. Additional assets include approximately $40,000 in accounts receivable and about $20,000 in equipment.
Most of the payment fintech’s liability is sourced from a single creditor: Approximately $2.9 million of Pepper Pay’s liability is owed to TSYS Acquiring Solutions, a branch of Global Payments. The figure is, however, under dispute in the filing.
Global Payments did not respond to a request for comment from American Banker in time for publication.
Don Apgar, director of merchant payments for Javelin Strategy and Research, told American Banker that a single-provider business model is commonplace for payments processing ISOs.
In this case, Global Payments, through TSYS, provided data processing services under contract to Pepper Pay to provide network connectivity and transaction processing services for small businesses. Pepper Pay then resold those services at a profit to their merchants.
“For example, if TSYS/Global charged $0.20 for a service, Pepper Pay would sell it to their client at $0.25 and profit by $0.05,” Apgar said. “Pepper Pay was responsible for collecting the $0.25 from the merchant and remitting the $0.20 cost to TSYS/Global, and in the process retaining their $0.05 profit. The $2.9 million owed to TSYS/Global was clearly the result of unpaid invoices for services rendered.”
Whether funds were fully collected from Pepper Pay’s merchant customers is unclear from the initial bankruptcy filing. The exact terms of the contract between Pepper Pay and TSYS/Global Payments were also not disclosed.
Legal representatives for Pepper Pay and Hannelius did not respond to a request for comment from American Banker by time of publication.
Payments processing is a highly competitive market, with hundreds if not thousands of small companies like Pepper Pay all across the country, according to Apgar.
“There is a lot of churn, and merchants tend to switch payment processing providers fairly frequently,” he said.
Under Visa/Mastercard rules, the settlement banks are responsible for paying Pepper Pay’s merchant clients directly for the value of the card purchase transactions submitted for processing. It is unlikely that any of Pepper Pay’s business clients lost any money as a result of its bankruptcy filing, Apgar said.
Pepper Pay reported $103,000 in revenue so far this year, according to court filings, as well as nearly $1.4 million in 2025 and around $1.3 million in 2024.
“The big asset for the ISO is the residual stream that the merchants generate,” Apgar said. “Selling payment services is like selling insurance. When you go to your insurance agent, and they write you a life insurance or homeowners or auto policy, they’re earning a residual income as a percentage of that premium every month. Payment services for merchants operate the same way.”
An eventual settlement, according to Apgar, could include reassigning Pepper Pay’s merchant clients to Global Payments so the creditor can recoup its losses through Pepper Pay’s existing residual income streams.
What caused the payments fintech to voluntarily declare bankruptcy is still unclear, but the ISO payments space can be a high-risk market overall.
Local connection to communities and small business is the unique market value of any small ISO payments processor, according to Apgar. If that connection is broken, fraud risk can destabilize a company and create unexpected losses.
“The other thing that has killed more than one ISO is saying, ‘This is going really well, I want to expand. I’m going to put up a website and try to attract merchants to my website,'” he said. “Once you break that connection of actually seeing the business, you get a lot of fraud applications coming in through the website. If you’re not really good at your underwriting and due diligence, it’s so easy to board one of these merchants, light them up and incur a huge loss.”
