Announcer: Welcome to Cents Chat, the podcast where payments meet personality. From tech trends to legal twists, compliance quirks to marketplace moves, let's dive in and make payments make sense.

Kitty: Welcome back to Cents Chat, the show where payments meet personality, operations meet reality, and every simple checkout feature eventually becomes a compliance question with a support queue. I'm Kitty, Steve is here with me, and a little later we are bringing in Kyle Hatfield from Centsless to talk about the payment method everyone forgot to productize: cash.

Cards got APIs. ACH got rules. BNPL got buttons. Crypto got conference panels. Stablecoins got frameworks. Cash got a drawer, a shrug, and maybe a spreadsheet named final_final_cash_recon_v9.

But now the penny is going away, rounding is showing up, and ISVs may need to treat cash like the newest alternative payment method hiding in plain sight. Today we're going to say something that sounds ridiculous until you look at how software platforms actually handle the cash drawer. Cash might be the new APM.

And yes, I know, cash is not new. Cash is aggressively not new. Cash predates APIs, hosted checkout, embedded payments, stablecoins, and every fintech panel where someone says programmable money with a straight face.

But for ISVs and vertical software companies, alternative payment method does not just mean the newest thing with a logo and a launch deck. It means any payment workflow that does not fit cleanly inside the card and ACH rails the platform already understands.

Steve: Exactly. And this is where cash gets really interesting because a lot of platforms technically support cash, but only in the same way a notes field technically supports enterprise workflow. There is a button, there is a tender label, maybe there is a cash drawer, but the controls around it are often pretty thin.

Kitty: Meanwhile, the APM conversation keeps getting bigger. Buy now, pay later, wallets, crypto, ACH upgrades, real-time payments, stablecoins, and now we have OpenUSD entering the conversation. Open Standard announced OpenUSD, and stablecoins are being talked about less like a crypto side quest and more like payment infrastructure: governance, operating rules, reliability, and trust.

Steve: And this is the piece I really care about. Every payment method starts with the exciting part: reach, access, cost, and optionality. Then the operating model shows up. Who reconciles it? Who monitors it? Who handles refunds? Who owns customer support? Who can prove the controls work when volume shows up?

Kitty: Steve actually wrote about that last week in the OpenUSD article on Cents Chat. So if the OpenUSD announcement has you thinking about stablecoins as another APM, go read that article next. It is a good reminder that a new rail is not the same thing as a clean operating model.

Steve: And that is the bridge to today's episode, because the exact same operating model problem exists with the least glamorous APM in the room.

Kitty: Cash has been treated like the exception. The thing that happens outside the payment stack. The merchant handles it, the cashier counts it, the back office reconciles it, and the platform moves on.

That was already a weak assumption. Now it is getting more complicated because the U.S. has stopped producing new pennies. Existing pennies are still legal tender. Electronic payments can still settle to the exact cent. Prices can still be set to the cent. But when the drawer does not have pennies, cash payments may need rounding.

Steve: And once rounding enters the workflow, this stops being cute. You have to know whether rounding happens before or after tax. You have to know whether it applies only to cash. You have to show the exact sale amount, the tax amount, the cash rounding adjustment, and the final cash collected or paid out. Then you have to reconcile the drawer and answer the questions later.

Kitty: Which brings us to one of my favorite real-world examples: the Home Depot exact-change sign. A major retailer telling customers, essentially, please pay exact change because pennies are becoming a problem.

That is not just a sign. That is a product requirement document taped to the checkout lane.

Steve: Right. Exact change might be a permissible short-term workaround in some places, and Kyle can walk us through the Florida angle, but it does not solve the software problem.

If the platform owns the sale, tax, receipt, tender record, drawer close, refund, and accounting export, the platform is in the cash workflow, whether it likes it or not.

Kitty: So today we're talking about cash as the APM software teams forgot. Not because cash is new, but because cash is about to require the same product discipline we already expect from every other payment method: rules, records, reconciliation, transparency, and proof.

And that brings us to Centsless.

Kyle Hatfield is the Co-Founder and CEO of Centsless, which is building cash rounding compliance infrastructure for merchants, POS vendors, and financial institutions navigating the post-penny economy.

Centsless is not trying to be the POS. It is not trying to be the processor. It is the compliance engine that fits into the stack after sales tax is calculated, applies the right cash rounding logic, and creates the audit trail behind the scenes.

Kyle, welcome to Cents Chat.

Kyle Hatfield: Hi, everyone. Thank you for having me. Again, this is Kyle Hatfield, CEO and Co-Founder of Centsless. My co-founders are Daniel Hoban and Alex Ortega, and we are Centsless, the cash rounding jurisdiction-awareness compliance engine, the solution to every operator's concern for how to properly round in today's environment without a penny. We're excited to be able to talk about this topic today.

Kitty: All right, Kyle, let's start simple. What does Centsless do in plain English? Pretend the listener is an ISV product leader who thinks they already support cash because there is a cash button in their POS.

Kyle Hatfield: POS providers are providing a toggle switch to turn on cash rounding for cash going out. Right now, that solves one part of the many complexities when it comes to cash transactions.

Centsless, in basic layman terms, is the engine that operates after sales tax is calculated on a cash transaction. It correctly rounds that transaction based on the legislation enacted in that state. Therefore, the customer gets the right cash amount at the end, and the business has an audit trail behind it so they know operationally that they have correctly implemented their cash rounding procedure.

Steve: I want to underline the after-tax piece because this is where a lot of people get sloppy. If the sale is $10.52 and the cash collected is $10.50 because of rounding, the sale did not become $10.50. The tax did not magically recalculate itself. The system needs to preserve the exact sale, exact tax, tender type, rounding adjustment, and final cash movement.

Where exactly does Centsless sit in that transaction flow? And what does the POS need to send you?

Kyle Hatfield: Great question. Thankfully, the 18 states that have enacted cash rounding laws all agree on one thing, and that is cash rounding needs to happen after sales tax is calculated. Therefore, it is essential that the tax is calculated and cash rounding happens after that calculation.

That is when our engine kicks in via an API call and ensures that the tax is preserved for collection purposes, and then the cash rounding takes effect afterwards in order for the consumer to get the correct cash received at the end of the transaction. It also creates the operational trail behind it so the business has a way to reconcile their accounting books at the end of the year and ensure there are no cash variances to handle.

Kitty: Kyle, it looks like Centsless is tracking 18 states with cash rounding laws, 14 that apply broadly to retail, and four that are a little bit narrower, like alcohol and government tax collection. The common thread is that rounding happens after sales tax. After that, the rules diverge. Give us that landscape. What is actually happening with legislation, and why does it get dangerous for multi-state merchants or POS providers using simple toggle settings?

Kyle Hatfield: Starting from the top down, what I have been able to learn from the federal level is that the Common Cents Act federal legislation is on hold or stalled, mainly due to preemption language and both parties not being able to come to terms or agreement on that implementation because 18 states have enacted their own cash rounding laws.

At the state level, what that looks like is, for example, if somebody was to pay $7.23 at the register in cash, it is going to look different in a number of states. In Arizona, it is going to round up with mandatory Swedish rounding. In Indiana, it is going to round down to $7.20. Here in Florida, it is permissive. It is either to the exact penny or Swedish rounding.

So if you are a multi-state operator operating in those three states, and you simply turn on your POS provider's toggle switch rounding to the nearest nickel, you are already out of compliance between those three states.

Steve: Yeah, and you can clearly see this is the kind of issue that looks small until someone asks for proof. It is not just, did you round? It is which rule did you apply, in which jurisdiction, on which effective date, to which tender type, and can you prove that was the rule at that time? That is a very different requirement from flipping a rounding setting in a POS admin screen.

Kitty: Now let's bring in the real-world example. Home Depot asking for exact change rather than rounding. I love this example because it makes the whole thing visible. The software problem is now a sign at checkout. What is going on there, and what should ISVs learn from an exact-change sign?

Kyle Hatfield: This is a perfect example. A large company such as Home Depot would have the resources to implement cash rounding, but instead they are passing off the problem to the consumer at the register. They are saying, please provide us exact change or use another form of payment to complete your transaction. That is a temporary Band-Aid to a much growing problem.

In a business such as Home Depot operating in many states, they are going to have to come to terms to really implement a correct, fair, and transparent cash rounding procedure. This is something that we are seeing more and more businesses do. They are either providing penny shortage disclosures at the register, letting customers know that there will be rounding, or asking customers to pay with exact change or use another form of payment.

But again, this adds more friction to the consumer who relies on using cash for payment and may not have another payment solution. Nowadays we are so used to card and cashless options as our primary form of payment, and cash is seen as secondary or alternative, where millions of Americans still rely on cash as their primary form of payment. We cannot exclude them from being able to make those payments.

Steve: So the sign is doing what the software did not do. It is telling the customer the cash workflow changed. But a sign does not create an audit trail, close the drawer, connect to the refund, or tell accounting why the amount in the till does not match the exact transaction total.

Kitty: Now, let's say I am a POS vendor and I tell you, we're good, we have a rounding toggle. Why is that not enough?

Kyle Hatfield: For operators that are with POS providers, having that toggle switch for cash rounding is a nice payment feature to have, but it does not provide a defensible trail behind it.

As an operator, I turn on that toggle switch provided by my POS provider. I think I am compliant, everything is good, and at the end of the year I will figure out how to reconcile the books. Then in a year or two, when the auditors come, they are not going to ask if you rounded. They are going to ask you to prove how you rounded. That is where the toggle ends.

The toggle will simply provide the solution to rounding, but it does not give you the defensible trail behind it. That is where Centsless comes into the picture. We are able to provide that complete audit trail, ensuring that the correct cash rounding method was applied, whether it was local, state, or federal jurisdiction requirements.

This way, whether it is an auditor reading through your books or litigation coming your way for cash rounding compliance concerns, our trail will provide interpretive risk protection for an operator.

Steve: We already understand this with card and ACH. The transaction is not just the amount. It is also the authorization, settlement record, return code, dispute trail, effective date, and reporting context. Cash has avoided some of that discipline because it has felt local and physical. But if the software is calculating, displaying, recording, and reporting the cash transaction, the software needs the evidence too.

Kitty: So when you say 44-point audit trail, what are the most important data points for an ISV or POS platform to actually understand? Not all 44, but the ones that make or break defensibility.

Kyle Hatfield: This is where POS providers are more than likely not going to want to build this out. If they were to, companies such as Avalara would not exist today, handling many of the tax compliance complexities that happen in POS environments.

With our trail, the biggest important factors are ensuring that you have cash rounded based on the jurisdiction, whether it is local, state, or federal, ensuring that tax is not tampered with or touched, and that it is preserved. Cash rounding is what is implemented and tracked behind that.

Also, not only cash going out needs to be rounded, but there are operators that are turning off the valve, so to speak, and receiving pennies. If they are not able to give out pennies consistently, then why take in the pennies altogether? Cash rounding is not only happening when cash goes out. Cash rounding is also going to need to happen coming in.

Another factor is refunds. When somebody purchases with cash and goes back to the store to refund that item, there is also the refund dynamic to ensure the consumer does not lose out on two cents twice or the business does not lose out on two cents twice. None of these enacted laws touch on any of those cash rounding transaction types when it comes to cash in or refunds. They are only discussing cash going out.

So again, the POS toggles are only handling one piece of the many complexities when it comes to cash rounding transactions, and ensuring that trail is behind it to defend for auditors and litigation.

Kitty: Every payments topic eventually finds its way to refunds because refunds are where clean diagrams go to die. Now let's talk about edge cases.

First, the baseline. Cash rounding is specific to cash. It does not apply to card, ACH, online payments, or electronic transactions. But the moment the transaction gets more realistic, cash still touches a lot of workflows: split tender, EBT and SNAP, refunds, tips, cash payouts, cash going in, cash going out.

Let's take those one by one. What breaks with refunds if the platform does not track the original rounding event?

Kyle Hatfield: Refunds are probably the most interpretive risk when it comes to cash rounding because no legislation is addressing it. POS toggles are not able to handle it, or at least right now they are not providing that solution.

Refunds, if anything, have the biggest risk when it comes to being out of compliance. If a consumer buys something for $7.23 and it rounded up to $7.25, and they go back to refund that item, but it refunds back to the original price of $7.23 or goes down to $7.20, the consumer can see that tangibly in their hand or on the receipt. Right there, there is litigation to be had.

A business operator is going to be on the hook, essentially, for cash variance laws and litigation, and they could be facing a heavy lawsuit on top of that.

Steve: Yeah, and split tender is the other one I would put near the top. Part cash, part card, maybe a benefit tender in the middle, maybe a refund later. If the system does not isolate the cash portion correctly, you can create a reconciliation issue and a customer fairness issue at the same time.

How should ISVs think about split tender and EBT and SNAP users here?

Kyle Hatfield: Split tender is another dynamic that needs to be addressed completely. Ensuring that EBT/SNAP recipients are not charged differently, as the federal rule requires, and ensuring that purchases through online or using part card and part cash preserve the card from the cash transaction.

This is something that POS toggles I am seeing are not yet building out. This is where having a complete engine ensures that the segmentation is properly maintained, as well as ensuring that trail is behind it.

That is something that Centsless does. It ensures that EBT and SNAP recipients are not going to be charged differently, ensuring that those electronic transactions are preserved. That is all going to be part of that audit trail behind the scenes so that loss prevention teams are able to reconcile the books at the end of the year.

Kitty: Now let's set the cash outside too. Restaurants, salons, service businesses, tip payouts, maybe employee cash payouts. This can become more than a customer checkout issue. It can become a wage issue.

Where does wage theft risk or employee trust come into the story?

Kyle Hatfield: A lot of cash rounding talk has always been about the front of house when it comes to the consumer transaction at the register. There is the back of house, and that is when servers, waiters, and waitresses in that environment, or any other environment that handles cash tips and ensures that they pay their employees at the end of the day via cash, are not going to face concerns of wage theft.

That is another dynamic that is not necessarily fully addressed, and a toggle is not in place to handle that. Thankfully with Centsless, we have that solution in place so that it is going to round in favor of the employee every time to avoid that concern of wage theft litigation for the operator at the same time.

Steve: Okay, Kyle. I would like to bring in casinos and cannabis now because those examples make this bigger than just a penny story. Cannabis can still be very cash heavy, and casinos live in a control-heavy environment where small adjustments need records. Why are those verticals so good early warning examples for ISVs?

Kyle Hatfield: Cannabis is a much heavier cash retail environment, more like 30% to 35%, whereas usual retail environments are around 14% to 16% cash usage. With the cannabis environment, it is certainly one that is already scrutinized, with constant new regulations, and one of the highest usage environments. So it is going to be a vertical that needs to address this early on.

Unfortunately, the conversations I have had with some cannabis operators are that they are going to round to the nearest dollar in some cases. That is going to be wildly out of compliance. There is no need to do that when there are still nickels, dimes, and quarters, and they are going to put themselves at an even bigger risk. Cannabis is certainly one vertical that needs to perhaps address this earlier on than other retail environments.

Then you have casinos. Casinos are getting advice from the casino gaming board that they can round in favor of the consumer. They can also have the ability to write off their taxes for cash rounding as long as they can prove that ability, meaning that they are going to round in favor of the consumer, and as long as they can prove what they did for cash rounding, they can write that off for tax purposes.

That is one thing to be able to do it, and there is another thing to be able to prove it. That is also going to be another environment that needs to have a really defensible trail behind it, and that is where Centsless steps in to be able to provide that solution.

Kitty: One of the juicier parts of this topic is fraud. Most people hear cash rounding and think customer fairness, but there is also tamper-proofing, suspicious price changes, and zapper software. How can a few cents become a fraud and manipulation problem?

Kyle Hatfield: Zapper software, if anyone is aware, is software where an operator can manipulate their cash transaction. They are wanting to wipe out so much cash off the books. They implement the software, they want to scrub $300 cash off the books, and it is going to manipulate the pricing or the transactions of the day to make it look that way.

That software is hard to determine if it was actually used. It has been difficult to prosecute those cases because POS providers are not providing a defensible trail when it comes to cash transactions. When it comes to card transactions, ACH transactions, and electronic transactions, there is a complete fraud system built in around that environment. Whereas cash transactions, unfortunately, what is on the receipt or what has been inputted into the system is only what is being tracked.

With our engine, it has tamper-proof evidence to it, ensuring that the original cash rounding is not tampered with or altered. Our engine, in effect, will also help preserve more of those cash transactions from being manipulated using software such as zapper.

Steve: And this is why “it is only a few cents” is not a control framework. A few cents can be nothing, but a few cents can also be a pattern. If the system cannot tell the difference between fair rounding and systematic manipulation, the platform has a control gap.

Kitty: All right, guys, now let's talk timing. Centsless is early, but early can mean on time. Where are we in the market right now? Are merchants already feeling the pain, or are you building before it hits the accounting books?

Kyle Hatfield: I am glad to say we have definitely built the solution well before the problem has risen to the surface. We are having great conversations with business accounting firms, sales tax auditors, and large corporations that have retail companies under their umbrella. They are all trying to get insight in terms of making sure they execute this correctly to ensure that they are not going to be the scapegoat or the first sensation fallout when it comes to cash rounding implementation.

We are still very much in a new arena, but we are also the only solution that is able to provide this defensible trail that operators are going to need once auditors have the playbook built out to properly audit these cash rounding compliance issues. That could be in a year or two years.

Unfortunately, when that happens, you cannot go back in time and build out how you actually proved your cash rounding. Right now, we are definitely the proactive solution that operators should be looking to. Or if not, they should be asking those questions to their ISV or POS providers: what does your toggle do? Does it provide me a defensible trail, or does it leave me hanging and I have to manage it on my own?

Steve: And that timing really matters. By the time auditors have playbooks and plaintiff attorneys have theories, it is already late. Platforms that wait until a merchant gets questioned are doing emergency compliance roadmap work under pressure. Nobody wants that genre of product management.

Kitty: Now let's make this practical.

Kyle Hatfield: Going back to what I mentioned before, if you are an operator and you are especially a multi-state operator, and assuming your business is operating in many of the 18 states that have enacted their cash rounding legislation, you need to be asking the question: is this POS toggle switch going to keep me compliant with Florida, Arizona, Indiana, and so on? Or is it simply going to just round based on what your solution is providing?

If you find out that they are not providing anything more, then you know you are already out of compliance today and going forward. You are creating thousands of cash variances that you are not able to prove how cash rounding was implemented effectively, and you are going to have a big reconciling issue at the end of the year.

Speaking of the end of the year, November and December are where nearly a fifth of all retail transactions take place. I would imagine many business operators are going to want to really have a grasp on having this solved before then, rather than having to deal with many cash variance issues reconciling their accounting books right after the holidays.

Steve: I would add, do not just ask whether the math works. Ask whether the record works too. A platform can calculate the right number and still fail the audit trail, the customer explanation, the refund workflow, or the reconciliation report.

Kitty: I think that is really the takeaway here. Cash is not becoming new. Cash is becoming software-defined.

The industry loves talking about alternative payment methods when they come with new rails, new logos, new revenue models, and a conference booth. But for a lot of ISVs, cash is the APM hiding in plain sight. It is outside the processor report, outside the neat card flow, outside the e-commerce checkout path. And now it needs rules, records, receipts, refunds, reconciliation, and proof.

Steve: If cash cannot be reconciled, it cannot be controlled. If it cannot be controlled, it eventually becomes support volume, merchant confusion, audit exposure, litigation risk, or fraud exposure. Payments has a real talent for turning small gaps into expensive workflows.

Kitty: Kyle, thank you so much for joining us and for making the cash drawer feel like the payments infrastructure problem it apparently already was.

Kyle Hatfield: Thank you again to Cents Chat for having Centsless on here to talk about this small coin problem that is growing into a bigger non-compliance problem. If you are an operator, ISV, or POS provider and you are getting these questions, or you have these questions and concerns about whether you are correctly and compliantly cash rounding for your business and for the consumer to avoid litigation, fines, and fees down the road, then certainly reach out to us.

Steve: Kyle, thanks so much for coming on the show. Thanks for tackling what you are doing there with Centsless. Obviously, there is a big need for that. We appreciate you. And as always, Kitty, thanks for running this program. You're great.

Kitty: And for everyone listening, go check out Centsless at centsless.org. And if you want the stablecoin side of the APM conversation, read Steve's recent OpenUSD article on Cents Chat. The point is the same in both places: the button is not the operating model. The penny may be going away, but the cents still matter. Thanks for listening.

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