SmartTab’s nuanced approach to chargebacks, one of the leading financial insecurities of the multi-billion-dollar adult nightclub industry, is just one of the ways the company is showcasing the POS system of the future.
(Note: This story appears in the September 2023 issue of ED Magazine)
F
raud: it’s the plight of all marketplaces, which afflicts the adult industry most effectively in a form known as “chargebacks.” Whether it’s embarrassment, regret or an outright intent to steal, customer chargebacks have long been the scourge of the adult nightclub operator.
Daniel Baron, CEO & Founder of industry POS system SmartTab, is also an industry veteran who witnessed the ransacking first-hand when, early in his career as a club operator, he redeemed a failing nightclub with the earliest predecessor to his now well-established POS system. According to Baron, fraudulent or opportunist consumers anticipate their success in chargebacks because most clubs lack the adequate systems of defense in place. Baron therefore designed a two-part bastion against chargeback attacks which he believes will save the adult nightclub from this common enemy.
The two-part method with which SmartTab tackles chargebacks is a fortified measure unlike any other system in place so far, according to Baron. SmartTab’s POS secures clubs both in defense and in prevention against chargebacks.
In a chargeback defense, the club typically has very little time to provide the necessary documentation to challenge the chargeback. Some don’t take the claims seriously enough, or they don’t have the administrative support, and are hit with the loss. And according to Baron, “If you don’t know who’s walking through the door, you’re already in trouble.”
That’s where the second part of the SmartTab chargeback bastion comes in — prevention from the chargeback — which Baron claims is a unique feature which SmartTab alone is currently providing. In a defense, the club has already been hit, and now hopes to reclaim that hard-earned money through captured and retained data files in a format readily available in case of a chargeback. This includes an itemized receipt, a copy of the customer ID, photos taken of the customer at tip entry and signature.
With SmartTab’s chargeback prevention service, each time a customer visits a club that customer’s activity and behavior is gathered in the background and aggregated into a single unique customer profile, otherwise known as SmartTab’s “identity-based profile.” That identity-based profile provides a complete snapshot of the customer’s past and gives the club knowledge of who they are letting in through the door. This can begin as early as prior to admission when the club scans a customer’s ID utilizing SmartTab’s admission application. The ID is scanned with some proprietary checks to verify its authenticity while additionally recalling the customer’s identity-based profile, which, along with past patronage, may include a history of chargebacks. The patron’s identity based-profile develops over the course of regular service and provides individualized insight on the customer and their status at the club. If it’s a recurring customer, the club operator will be able to see the regularity of visits, average ticket spend, lifetime spend, drink preferences, preferred entertainers and any notes entered from prior visits. If not, they’d still have all the basic information necessary for a defense against a potential chargeback fraud.
Baron asserts confidently that there will be a day when club owners will wonder how they admitted people in their clubs to charge thousands of dollars without knowing who they were. If a bank won’t extend that sort of credit, why should a club?
Let’s say the new customer orders an expensive item and the club wants to protect itself from a later dispute arising. That item is rung up on the POS and then served, and servers can even capture an image of the patron with the item they ordered associated with the product rung in on the POS, along with a timestamp authenticated by SmartTab. Should said customer dispute that they never received the goods or services, or that they were inadequate — which are regular chargeback reasons — the merchant is immediately able to provide documented evidence to the contrary. The chargeback protection will then become the chargeback defense.
To take things one step further, the ID-based profiles have a customer component that includes a one-time verification of the customer’s mobile number, allowing a virtual check to be recalled at any time by the customer. The club can request the customer register their phone number anytime when starting a tab all the way through the onscreen checkout, after which the customer’s phone number is then associated with the ID-based profile, and a text message will provide their virtual check, available for review at any time during or after service. That virtual check is both the club’s and the patron’s mutual agreement to the activities that occurred throughout the night.
Baron asserts confidently that there will be a day when club owners will wonder how they admitted people in their clubs to charge thousands of dollars without knowing who they were. If a bank wouldn’t extend that sort of loan, why should a club?
“The future, when it’s here, will seem so obvious, people will question how they ever did things before,” muses Baron. “Until then we’re making the most progress, and it’s exciting people.”
Protecting the identity of the patron
A good club manager knows that a certain amount of discretion is necessary to the business, especially in managing a club frequented by high-profile customers.
SmartTab, designed and operated by industry veterans, understands that value, which is why the patron’s identities in SmartTab’s ID-based profiles are encrypted and therefore protected from any undue exposure. SmartTab software has the capacity to mask everything to the club owner’s preference, so that not even the venue staff has means to access any private or personal patron information during service operation, and the details can only be exposed upon a chargeback.
Baron also explains that the ID-based profiles leave plenty of room for managerial discretion. They’re a line of protection against those unknown liability customers, not necessarily for every patron who walks through the door, especially not already vetted and loyal customers.
SmartTab’s POS is highly functional as a loyalty program, as well. For instance, as that new customer returns for more visits, the club may not need to capture as much precautionary information to protect against chargebacks. But at this point, the club has a valuable record for serving the now-regular, such as their preferred entertainer history and all of their prior transaction history. To Baron’s point, the club is protected and the customer is better served when the staff knows who they’re serving.
A passionate entrepreneur from California
As important as it is for club owners to know who their customers are, it’s important that they know who Daniel Baron is — the head and heart of SmartTab.
SmartTab is undeniably Baron’s passion project, a company he left for an early career in law and invested not just his money into, but his entire career, his time, his life.
“I say it all the time: I don’t just give a fuck, I give multiple fucks,” Baron asserts humorously.
Baron shares that as his business continues to grow, he receives increasingly bona-fide offers, from large publicly traded companies, to private, to investor groups, and he informs every last one of them that he has no interest in being bought out.
“The money that I would receive today on an exit would vastly exceed what I could probably take out of this business for myself during the rest of my life,” he explains. “It’s actually the least desired outcome — it’s the one that would shatter me most — is to step away and let an entity with purely capital motivation take control of what I’ve built with passion.”
“I’m studying all the systems out there, gathering all the business requirements in detail, so I can develop my system to allow for the complexity that these clubs desire — based on the nuances of their market or just their historical business operations — and to optimize for greater efficiency for a diversity of clubs.”
– Daniel Baron
Baron is adamant that he wants to build an “illustrious career” with his company and with the industry. That’s why he readily acknowledges that his product is not suited for every single club in the business. Almost like a chargeback vetting, Baron shares that SmartTab actually performs a “suitability assessment” on all of their merchants, in order to determine if a long-term relationship is possible.
“If our product’s not right for you, or it’s not right today, we can’t sell it to you,” he says. “We care too much. Our goal is not growth above all else, it’s to service our industry and to have healthy working relationships with partners. Some people have a larger appetite for watching features get built or have greater patience, and others don’t. And we have to assess all of this. But we put our money where our mouth is by providing every customer the opportunity to abandon our partnership in 60 days.”
SmartTab insures that they won’t even issue their first billing until after they’ve completed their install in full, the system goes live and the establishment’s staff has been trained to operate to one hundred percent of the client’s satisfaction.
Baron’s feedback loop
SmartTab currently has about 50 clubs running on its software, including club chains like Peppermint Hippo, the Library Group of clubs and the Massachusetts group which owns the Ten’s Show Club, Golden Banana and the Squire Lounge. There are also independents across the country such as Honey’s and LVLV, one of the latest clubs to open in Vegas, as well as 11:11 and Explicit, both of which are in Arizona.
To ensure that he’s serving all of his partnered clubs adequately, and to better build his system for the future, over the last few months Baron has personally visited several adult clubs operating on SmartTab to review how they are adjusting to the software and gather their feedback.
“I’m studying all the systems out there, gathering all the business requirements in detail, so I can develop my system to allow for the complexity that these clubs desire — based on the nuances of their market or just their historical business operations — and to optimize for greater efficiency for a diversity of clubs.”
This is true of everyone who works with SmartTab, according to Baron: all possible modifications are based on a firm notion of open engagement and fairness. The relationships which develop out of the feedback loop between merchant and software developer, or even within the walls of the SmartTab office, he calls a “gestalt,” in which the organized whole is greater than the value of the sum of its parts.
SmartTab’s sponsorship of the ED EXPO
SmartTab, a Title Sponsor for the 30th Anniversary EXPO, is looking forward to convening with their current and future partners at this year’s show, as well as sharing some of the latest technological advancements in development with this year’s attendees.
“My energy is best spent creatively, staring at a white screen and dreaming up ghosts, which is how I describe creating features,” Baron adds poetically.
Among the ghosts of SmartTab’s future are expansions of features that already exist, such as an added chargeback management feed, and further admission features, including ticketing.
“We built our own custom admission module for the opportunity to specialize its functions, because there are more enhanced features that we’re going to deliver,” says Baron, noting that additional features to look for are advanced loyalty and membership features, as well as admission and ticketing from the patron’s own device. “Look for these new functions around the end of summer, possibly in time for the convention itself.”
For more information, please call (888) 612-1309, email info@smarttab.com or visit SmartTab.com.
