Pepper Pay: A Payment Fintech’s Downfall
In recent news, Miami-based payments fintech, Pepper Pay, has filed for Chapter 7 bankruptcy. The independent sales organization or ISO, which specializes in providing payment processing services to small businesses, made the voluntary filing on March 31 in the U.S. Bankruptcy Court of Southern Florida.
As an ISO, Pepper Pay operated in a competitive payments market, selling payment processing services to small businesses that accept credit and debit cards. This recent development sheds light on the precarious financial standing of the company, with court records revealing a significant financial imbalance that may have led to or resulted from its bankruptcy.
Pepper Pay’s Bankruptcy Filing: A Closer Look
According to initial bankruptcy documents filed by Pepper Pay’s manager and CEO Eric Hannelius, the company had assets amounting to slightly over $665,000 while its liabilities exceeded $3.4 million. The company’s cash reserves, totaling just over $600,000, are spread across multiple bank partners including Evolve Bank, Esquire Bank, Bluevine, and Truist Bank. Additional assets included around $40,000 in accounts receivable and about $20,000 in equipment.
The lion’s share of Pepper Pay’s liability is sourced from a single creditor: TSYS Acquiring Solutions, a subsidiary of Global Payments, to which Pepper Pay owes approximately $2.9 million. This figure is, however, under dispute in the filing. Global Payments did not respond to requests for comment.
Understanding the Business Model
Don Apgar, director of merchant payments for Javelin Strategy and Research, explains that a single-provider business model is typical for payments processing ISOs. In the case of Pepper Pay, the company contracted Global Payments, via TSYS, for data processing services, which included network connectivity and transaction processing services for small businesses. Pepper Pay then resold these services to their merchants at a profit.
“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 explained. “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.”
The Competitive Payments Processing Market
Payments processing is a highly competitive market, with hundreds, if not thousands, of small companies like Pepper Pay operating across the country. According to Apgar, “There is a lot of churn, and merchants tend to switch payment processing providers fairly frequently.”
Under Visa/Mastercard rules, the settlement banks are responsible for directly paying Pepper Pay’s merchant clients for the value of the card purchase transactions submitted for processing. Therefore, it is unlikely that any of Pepper Pay’s business clients lost money as a result of its bankruptcy filing.
What’s Next for Pepper Pay?
Despite its current predicament, 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. Apgar suggests that an eventual settlement could include reassigning Pepper Pay’s merchant clients to Global Payments, allowing the creditor to recoup its losses through Pepper Pay’s existing residual income streams.
The exact cause of Pepper Pay’s voluntary bankruptcy remains unclear, but it’s evident that the ISO payments space can be a high-risk market overall. Apgar advises other ISOs to maintain their local connection to communities and small businesses, as it is this unique market value that can help prevent fraud risk and unexpected losses.
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