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Why PayFac? Maybe You Shouldn't
Episode 310th January 2024 • Fintech Confidential • DD3, Media
00:00:00 01:05:32

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Join host Tedd Huff in an enlightening episode of UNCUT by FinTech Confidential, featuring special guests Ashley Eisenberg and Alena Smith. Together, they provide a comprehensive analysis of the payment facilitation landscape. The episode concludes that key factors for success in this field include a seamless user experience, understanding the different types of payment facilitators, the importance of verticalization, robust fraud, and risk management strategies, and the necessity of strong customer support systems. This discussion is a must-listen for anyone in the FinTech industry, offering invaluable insights into the complexities of payment facilitation.

In-Depth Discussion:

  1. Exploring Types of Payment Facilitators: Tedd Huff, along with Ashley Eisenberg and Alena Smith, dive into retail, wholesale, and hybrid models in payment facilitation.
  2. Challenges and Alternatives: The team discusses the hurdles in payment facilitation and explores alternative models like managed payback or traditional ISOs.
  3. User Experience in Payment Facilitation: Emphasizing the critical role of user experience in ensuring efficient payment processes.
  4. The Importance of Verticalization: The guests highlight how specializing in specific industries can lead to more effective PayFac solutions.
  5. Confronting Fraud and Risk Management: Strategies for combating fraud in payment systems, including the use of AI and machine learning, are thoroughly examined.
  6. AI's Role in Enhancing Risk Management: The transformative impact of AI technologies in risk management within the payment industry is a key focus.
  7. Improving Customer Support: The importance of customer support in maintaining positive merchant relationships and smooth payment experiences is discussed.
  8. Key Considerations for PayFac Adoption: The episode provides insights into the infrastructure, tools, and expertise needed for effective payment management.

Conclusion:

  • This episode of UNCUT by FinTech Confidential with Tedd Huff, featuring Ashley Eisenberg and Alena Smith, is essential listening for understanding the dynamic and intricate world of payment facilitation. It offers valuable perspectives and strategies for anyone looking to navigate this crucial aspect of the FinTech industry.

WATCH ON YOUTUBE

Links:

Secure Bancard Website: https://securebancard.com/

Secure Bancard Linkedin: https://www.linkedin.com/company/secure-bancard-llc-/

Eliana Smith LinkedIn: https://www.linkedin.com/in/elainademezasmith/

Ashley Isenberg LinkedIn: https://www.linkedin.com/in/ashley-isenberg/

Tedd Huff Linkedin: https://www.linkedin.com/in/teddhuff/

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Supporters

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Time Stamps:

00:02:12 | Payment Facilitation Demystified!

Discover what payment facilitation really means and why it's all about keeping users happy and risks low!

00:03:46 | The Real Deal on Payment Facilitation!

Dive into the tough stuff and sweet perks of payment facilitation – it's all about balancing risks and owning it!

00:09:57 | Payment Facilitation: What's Your Style?

Retail, wholesale, or hybrid? Get the scoop on different payment facilitation models and the role of big money players!

00:13:11 | Niche Pay Solutions Taking Over!

Check out how pay-as-a-service is getting all vertical and why industries need their own financial swag!


00:15:00 | Payment Facilitation 3.0: Total Takeover!

The future is now with end-to-end payment control – but hey, with great power comes great responsibility!


00:19:14 | New Kids on the Payment Block!

The market's shifting gears towards fresh processors – find out how they're changing the payment game!


00:19:47 | ISOs vs. PayFacs: Who's Who?

Get the lowdown on ISOs and payment facilitators – what's the diff and how do they run the show?


00:20:09 | Grab the Reins on Payment Experience!

Why settle for less control? Learn why peeps are ditching external processors for a hands-on payment vibe!


00:21:31 | Outage Meltdown? Keep It Cool!

How to handle payment outages like a boss – it's all about being clear, quick, and keeping customers in the loop!


00:22:53 | Why Payment Facilitation Rocks!

Uncover the top reasons businesses are jumping on the payment facilitation bandwagon – hello, better user experience!


00:25:06 | Pick Your Payment Facilitator Flavor!

Managed payback or full stack pull risk? We're breaking down payment facilitator models to find your perfect match!


00:27:03 | To Be or Not to Be a PayFac?

Is payment facilitation your destiny? We're weighing in on when it makes sense to jump in, based on your biz's size and focus!


00:33:07 | Control Freaks Win in Payment Facilitation!

More control in payment facilitation means you're the boss of funding, reconciling, and keeping customers smiling!


00:35:28 | Customer is King!

Why a customer-centric approach in payment facilitation is the secret ingredient to success, no matter your model!


00:36:33 | Going Vertical in Payments!

Is specializing the way to go in the payment world? We're tackling the pros and cons of verticalization!


00:39:32 | Niche It Up in Payment Facilitation!

Why zeroing in on niche markets could be your golden ticket in the world of payment facilitation!


00:39:50 | Software Devs Get UX Better Than Payment Pros?

Find out why software developers might just have the upper hand in understanding what users really want!


00:40:14 | Payment Facilitation Models Unpacked!

We're exploring all the ways payment facilitation can be tailored to give merchants more than just a way to get paid!


00:42:07 | The Verticalization Vortex!

Is there enough dough in specialized markets? We're discussing the risks and rewards of going all-in on a niche!


00:43:28 | Selling to Vertical Markets: A Wild Ride!

Strategies, challenges, and how one bad apple merchant can spoil the bunch – it's a vertical market showdown!


00:45:34 | Fraud Busters in Action!

The skinny on how fraud prevention and risk management are saving the day and keeping your cash safe!


00:50:40 | Risky Business: Stories from the Trenches!

Hear jaw-dropping tales from the risk management frontlines and why staying proactive is your best defense!


00:56:00 | AI: The New Risk Management Superhero?

Get excited about how AI and machine learning are changing the game in spotting trends and dodging risks!


00:56:50 | AI to the Customer Support Rescue!

Imagine customer support that's faster and smarter, thanks to AI – we're discussing the future of help!


00:58:41 | The Real-Time Communication Conundrum!

Tackling the tough stuff about real-time chats, customer expectations, and how it all affects your rep!


00:59:36 | Controlling the Payment Facilitation Message!

The importance of nailing real-time communication and picking partners wisely in the payment facilitation dance!


01:00:16 | Start Small or Go Big in Payment Facilitation?

The debate is on: is it better to kick things off early or scale up big-time when it comes to payment facilitation?


01:01:34 | Marketing as a Service: The Next Big Thing?

"Everything as a service" is taking over, and we're diving into what this means in the payment facilitation world!


01:03:59 | To PayFac or Not to PayFac?

Breaking down the big question: should your biz jump on the payment facilitation train or pump the brakes?


This is a Production of Diamond D3, Media

ABOUT:

Tedd Huff: Tedd Huff is the Founder of Volayre, a FinTech-focused management consulting firm, providing expertise in Banking-as-a-Service, Payment Facilitation, and a range of services for banks, merchants, and tech companies in areas like partnership strategy, product management, and digital asset transfer. He is also the Founder of DD3 Media & executive producer and host of Fintech Confidential, a DD3 media production.

Over the past 24 years, he has contributed to FinTech startups as an Advisory Board Member, Co-Founder, and Chief Experience Officer, providing strategic and tactical direction for Global Payments OpenEdge, Heartland Payments, Nuvei, and TSYS, among others, focusing on growth while delivering innovation, process improvements and user experience-driven value to simplify the complexity of payments.

DD3, Media: A multimedia creation, management, production & marketing firm delivering engaging content primarily serving Fintech and technology companies globally.

Transcripts

Ashley Isenberg:

At the end of the day, I don't think the

Ashley Isenberg:

merchant or the card holder care

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): they only care about one thing.

Ashley Isenberg:

All they care about is that it's an easy user experience,

Ashley Isenberg:

they're not spending hours at the end of every month reconciling that

Ashley Isenberg:

they're not losing money because of outages, that it's easy to consume.

Ashley Isenberg:

And I think it's just come down to what's the customer experience.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1: Hey, Ted Huff here.

Ashley Isenberg:

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Ashley Isenberg:

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Ashley Isenberg:

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Ashley Isenberg:

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Ashley Isenberg:

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Ashley Isenberg:

Are you curious about how to make that happen?

Ashley Isenberg:

Head over to under.

Ashley Isenberg:

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Ashley Isenberg:

It's really that simple.

Ashley Isenberg:

Tedd Huff - Fintech Confidential, Host: Welcome to Fintech Confidential, bringing

Ashley Isenberg:

you the people, tech, and companies that change how you pay and get paid.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential (Detached audio): Welcome to another episode of

Ashley Isenberg:

FinTech Confidentials Uncut.

Ashley Isenberg:

This is where we go deep into it, exposing all of our opinions and all

Ashley Isenberg:

of the things that we think about without cutting a single word out.

Ashley Isenberg:

Today we're gonna be talking about payment facilitation, what it means, who should

Ashley Isenberg:

do it, who shouldn't do it, why does it even exist in a lot of cases, and

Ashley Isenberg:

I.

Ashley Isenberg:

Being joined by two fabulous ladies.

Ashley Isenberg:

We have Ashley Eisenberg and Elena Smith joining us.

Ashley Isenberg:

Ashley is, oh see, and now this is the part that sucks about uncut

Ashley Isenberg:

is . Is from fractional FinTech.

Ashley Isenberg:

I wanted to throw like a title in there and I just stuck.

Ashley Isenberg:

Um, Ashley talk told me earlier as we were getting started, Hey, don't, don't throw

Ashley Isenberg:

the CEO founder, all that stuff in there.

Ashley Isenberg:

Um, so I got stuck.

Ashley Isenberg:

But we also have Elena Smith on, and she is the CFO at Secure Card.

Ashley Isenberg:

And so we are going to be talking about.

Ashley Isenberg:

All the different things around payment facilitation.

Ashley Isenberg:

Um, you know, for me it means a lot of different things and I've been

Ashley Isenberg:

very vocal about it over the years.

Ashley Isenberg:

But Ashley, I'd like to start with you.

Ashley Isenberg:

Just kind of give a little bit of background.

Ashley Isenberg:

Don't go too deep, uh, but also give your perspective on what payment

Ashley Isenberg:

facilitation is in the first place.

Ashley Isenberg:

Yeah, so, uh, we'll call, we'll call me an advisor in this space.

Ashley Isenberg:

We'll use that title for now.

Ashley Isenberg:

Um, so I've been supporting a few folks as kind of their fractional

Ashley Isenberg:

chief revenue officer, Fractional chief payments officer and kind of

Ashley Isenberg:

helping them navigate through payments.

Ashley Isenberg:

But, um, just a little background, I have spent, uh, probably the

Ashley Isenberg:

last seven years of my career specifically in payment facilitation.

Ashley Isenberg:

Prior to that was a, a wholesale iso myself.

Ashley Isenberg:

Um, so little bit experience.

Ashley Isenberg:

I think when you think about what a PayFac is, it's really what

Ashley Isenberg:

is the user experience, right?

Ashley Isenberg:

For the merchant and the cardholder and in most cases the merchant.

Ashley Isenberg:

And so when I think about PayFac, I think about embedded, right?

Ashley Isenberg:

I think about seamless onboarding, seamless user experience

Ashley Isenberg:

within a software product.

Ashley Isenberg:

So that's where I think about it.

Ashley Isenberg:

And I know part of this conversation got started on onboarding, right?

Ashley Isenberg:

Onboarding

Ashley Isenberg:

is not the big thing of PayFac, right?

Ashley Isenberg:

Yes.

Ashley Isenberg:

It offers an embedded experience.

Ashley Isenberg:

It removes the, we'll call it pinging pong of the customer,

Ashley Isenberg:

you know, user experience.

Ashley Isenberg:

But pay is much bigger, right?

Ashley Isenberg:

Pay is the ability for a company to take on all of the risk and ownership of an

Ashley Isenberg:

agreement, which while that sounds great because maybe you can monetize more, it is

Ashley Isenberg:

also very scary, um, and a lot to take on.

Ashley Isenberg:

So.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential (Detached audio): And, and Ashley, you bring up

Ashley Isenberg:

a really, really good point.

Ashley Isenberg:

Is this all started.

Ashley Isenberg:

Elena made an amazing post on LinkedIn, which just drew me in

Ashley Isenberg:

to feel like I had to answer it.

Ashley Isenberg:

I couldn't go without answering it, and really just turned into a

Ashley Isenberg:

conversation between us and a handful of other experts in the industry.

Ashley Isenberg:

So, Elena, I, I would love to get your perspective on . What PayFacck is and,

Ashley Isenberg:

and why you, you actually made that post

Elaina Smith:

I will start with why I made the post, I think, uh,

Elaina Smith:

makes the most sense, so, What I'm seeing from, we have a wholesale ISO

Elaina Smith:

and we do it a little differently.

Elaina Smith:

I'll, I'll get into that a little later.

Elaina Smith:

But, um, what I'm seeing is this flocking to the pay fac model and

Elaina Smith:

acting like it's this panacea and the cure-all for everything when

Elaina Smith:

it's not necessarily the best model.

Elaina Smith:

I think that what happened was the ISO model was very broken and

Elaina Smith:

instead of trying to fix that.

Elaina Smith:

We are heading in this other direction.

Elaina Smith:

All of a sudden it became the cure all for everything.

Elaina Smith:

So when I think about pay fac, I think about someone who wants to take

Elaina Smith:

ownership of the payment relationship.

Elaina Smith:

I think about someone who wants to control the payment experience for

Elaina Smith:

the merchant and its customers.

Elaina Smith:

So if the, or the software vendor and its customers, uh, a lot of the things that

Elaina Smith:

Ashley said, controlling that overall customer experience are so important.

Elaina Smith:

But I do think a lot of that is possible with an ISO model.

Elaina Smith:

Um, if you go about the ISO model differently, I think the thing with

Elaina Smith:

the, with the ISO model is that so many of them are just stacked

Elaina Smith:

on top of legacy processors and using all the legacy processor

Elaina Smith:

services and they haven't done anything to innovate.

Elaina Smith:

So they're stuck within that box.

Elaina Smith:

Uh, and so my experience with, we have a wholesale ISO secure bank card.

Elaina Smith:

We've tried to break the ISO model and build it from the ground up.

Elaina Smith:

Built our own platform to be able to do our own billing, uh, merchant

Elaina Smith:

funding, those kind of things so we can control more of that

Elaina Smith:

merchant and customer experience.

Elaina Smith:

Tedd Huff- Host, Fintech Confidential (Detached audio): Uh, and, and you, you, you hit

Elaina Smith:

the, you both hit on the two things that for me, really, really.

Elaina Smith:

Are the key pieces.

Elaina Smith:

One is the onboarding and how seamless and

Elaina Smith:

easy to use.

Elaina Smith:

You can make it.

Elaina Smith:

How good can you make that user experience, that customer

Elaina Smith:

experience really draw in?

Elaina Smith:

And then on the other side of it, how can you best manage the funds?

Elaina Smith:

And Elena, you'd mentioned that legacy providers have a lot of restrictions

Elaina Smith:

on, on how to manage the funds and so.

Elaina Smith:

PayFacs seem to be and, and still today, I, I, I still lean a little bit

Elaina Smith:

towards PayFacs, still being a good way to go to control a lot of that.

Elaina Smith:

But my main concern is, is the idea of having so many.

Elaina Smith:

Retail style payment facilitators.

Elaina Smith:

And let me kind of break down from my perspective.

Elaina Smith:

I've got three little, little pieces as, as I've, as I've built out a

Elaina Smith:

handful of these PayFac programs is that you've got the retail side,

Elaina Smith:

which everything is done for them.

Elaina Smith:

All they do is focus in on making sure that it's embedded properly.

Elaina Smith:

So think like Stripe.

Elaina Smith:

Or Square, uh, I shouldn't say square, but Stripe is a good one, right?

Elaina Smith:

So Stripe allows you to, to embed it relatively quickly and gives

Elaina Smith:

you that whole experience upfront.

Elaina Smith:

That's really that retail side of the model where you don't take any

Elaina Smith:

of the risk, you don't do any of the ui, you just get the benefit

Elaina Smith:

from the fact that it was a fast onboarding and you get the movement.

Elaina Smith:

And then I move into the wholesale side of the house, which is .Where

Elaina Smith:

you take on everything, right?

Elaina Smith:

So the bookend is the other.

Elaina Smith:

You take on everything.

Elaina Smith:

So you're basically acting like an iso.

Elaina Smith:

But the main difference really comes into the funding side of the house is slightly

Elaina Smith:

different than what you would use with a traditional processor or platform.

Elaina Smith:

And then of course, we always have these fun things that are in the middle

Elaina Smith:

because obviously we gotta have the banks approve all of this fun stuff.

Elaina Smith:

And you guys know how much fun.

Elaina Smith:

You're back.

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): I apologize.

Elaina Smith:

Look, so this, so this is gonna be fun technology not working with me.

Elaina Smith:

So, um, we'll, we'll go ahead and, and pick up where, where I left off.

Elaina Smith:

And I guess

Elaina Smith:

where I was going at is, is the, the financial institutions have the final say.

Elaina Smith:

I.

Elaina Smith:

Really on, at least in the us, on who can and cannot be a payment facilitator.

Elaina Smith:

And so the rules change based upon the risk profiles.

Elaina Smith:

And that brings me to the other pieces that risk profiles mean

Elaina Smith:

a bunch of different things.

Elaina Smith:

And I, I guess I would like for you guys to just kind of play off or, or what do

Elaina Smith:

you think about how I po position that?

Ashley Isenberg:

About the banks having control and there being

Ashley Isenberg:

different types of risk profiles.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): I think, I think it's more of the,

Ashley Isenberg:

starting with the different types.

Ashley Isenberg:

Do, do you agree with the three different types that I, that I talked about?

Ashley Isenberg:

If not, how not,

Ashley Isenberg:

If so, why?

Elaina Smith:

with the three different types.

Elaina Smith:

So can you start there with where you went over the three different types?

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Yeah.

Elaina Smith:

So.

Elaina Smith:

I don't know where I cut, where I dropped off.

Elaina Smith:

Um,

Elaina Smith:

were launching right into that, you were, you were about to

Elaina Smith:

tell us the three different, you had some three different, you had three

Elaina Smith:

different types that you were going to

Elaina Smith:

share.

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Alright.

Elaina Smith:

Well, hey, I don't know how much of that.

Elaina Smith:

Okay.

Elaina Smith:

Well, so I guess where I was going is the three different types is the retail

Elaina Smith:

side, which is very Stripe esque.

Elaina Smith:

Um, it could be something like a tilled or a pay rick that really

Elaina Smith:

falls into the retail side of the house, which means that it's

Elaina Smith:

They bring the tech, they bring the risk, they bring the

Elaina Smith:

underwriting, they bring everything.

Elaina Smith:

And you as the software service provider, you get the benefit of

Elaina Smith:

all of that without any of the risk.

Elaina Smith:

Then I go to the complete other side of the house, which is the

Elaina Smith:

wholesale, which is number two.

Elaina Smith:

I go bookends first.

Elaina Smith:

Number two is, is the one where they do everything.

Elaina Smith:

They do the underwriting, they do the onboarding, they, they

Elaina Smith:

have the authorization, they have the capture, they have the

Elaina Smith:

settlement, they have the funding.

Elaina Smith:

They have all of the things that if you didn't know any

Elaina Smith:

better, would be a wholesale iso.

Elaina Smith:

And then you have the ones in the middle where the bank says, Hey, I

Elaina Smith:

feel kind of comfortable with you doing these things, but I want you

Elaina Smith:

to have this company do these things.

Elaina Smith:

And typically that's around risk monitoring or A-M-L-K-Y-C.

Elaina Smith:

If you're not well versed in, in the risk and underwriting piece of it, they may

Elaina Smith:

ask you to outsource that to a company.

Elaina Smith:

A lot of times it ends up being an iso.

Elaina Smith:

Um, I mean, I've,

Elaina Smith:

I've launched a couple of those programs to to really take that on and, and

Elaina Smith:

I think Incept just launched another program recently that that dives directly

Elaina Smith:

into the retail side of it as well.

Elaina Smith:

So those are the three pieces that I see happening in the marketplace.

Elaina Smith:

Did I leave anything out that I missed?

Elaina Smith:

Is there something you don't agree with?

Elaina Smith:

I'm really curious.

Ashley Isenberg:

Yeah, I, I'll say this, I think I look at the, the

Ashley Isenberg:

industry through a different lens.

Ashley Isenberg:

Um, and so I kind of look at, we have legacy processors, right?

Ashley Isenberg:

So I'm gonna take PayFac outta the scenario for a moment.

Ashley Isenberg:

We have kind of our legacy processors, right?

Ashley Isenberg:

The staples the world pays.

Ashley Isenberg:

The Pfizers originally for datas ubs, right?

Ashley Isenberg:

That have been in the space for many years.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Mm-Hmm.

Ashley Isenberg:

Um, and then we have kind of the.

Ashley Isenberg:

Processor 2.0.

Ashley Isenberg:

Right.

Ashley Isenberg:

And the Processor 2.0 owes the stripes and the Atian, right?

Ashley Isenberg:

They were purpose-built.

Ashley Isenberg:

They started as payment facilitators, maybe the squares, um, and really gave

Ashley Isenberg:

tech a more financial services to folks.

Ashley Isenberg:

And that model, right, made sense.

Ashley Isenberg:

It opened some people's eyes to a different way to handle payments

Ashley Isenberg:

and really embed that experience.

Ashley Isenberg:

And then I think we have the kind of 2.0 of the stripe in the ion, right?

Ashley Isenberg:

The pay Ricks and the Phoenixes of the world that came out and helped

Ashley Isenberg:

with everything you just talked about on the wholesale model, right?

Ashley Isenberg:

How can we, from an infrastructure perspective, support you

Ashley Isenberg:

as a payment facilitator?

Ashley Isenberg:

But then how can we also give you kind of that managed PayFac experience where

Ashley Isenberg:

you can take on some of the risks, you can take on some of the portability,

Ashley Isenberg:

ownership you can get almost there, right?

Ashley Isenberg:

But we can give you right, everything you need from a modular

Ashley Isenberg:

perspective to support that.

Ashley Isenberg:

Now I think we're seeing 3.0.

Ashley Isenberg:

3.0 is the payables and pay engines and rainforest and folks coming out

Ashley Isenberg:

with what I'm seeing more verticalized

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1: Mm-Hmm.

Ashley Isenberg:

PayFac as a service solutions.

Ashley Isenberg:

Right.

Ashley Isenberg:

And when you think about the complexity we're seeing in kind of the 2.0 and

Ashley Isenberg:

you know the, the 1.0 version of embedded payments, you can't build

Ashley Isenberg:

everything for every use case.

Ashley Isenberg:

And when you're supporting a vertical use case, you either have to allow

Ashley Isenberg:

people to build that functionality.

Ashley Isenberg:

If they're working with a legacy processor, and a lot of the

Ashley Isenberg:

times, even if they build it, it doesn't mean that they can do it.

Ashley Isenberg:

Right?

Ashley Isenberg:

You can build split funding, doesn't mean the legacy processor's

Ashley Isenberg:

going to allow you to split funds.

Ashley Isenberg:

And so I think we're seeing folks go deep into these verticals and build the feature

Ashley Isenberg:

sets on payments and more importantly, financial services that a lot of the

Ashley Isenberg:

software companies that are bringing payments in house are going to need.

Ashley Isenberg:

Right.

Ashley Isenberg:

And those software companies, the ISVs, the SaaS companies are primed, right?

Ashley Isenberg:

They are primed in market right now to bring a diverse set of financial

Ashley Isenberg:

services to merchants, but they also have to have those two point

Ashley Isenberg:

ohss and those three point ohs.

Ashley Isenberg:

They're developing the tech in the verticals that they serve that benefit

Ashley Isenberg:

their customers and their card holders.

Ashley Isenberg:

Right?

Ashley Isenberg:

And I think

Ashley Isenberg:

I'll see even vertical enough to say there's B two, B2B and B2B two C, but then

Ashley Isenberg:

there's card, present, card net present.

Ashley Isenberg:

Then there's actually specific.

Ashley Isenberg:

Must pay industries, right?

Ashley Isenberg:

The must pay industries like insurance and healthcare need much different

Ashley Isenberg:

services than a typical e-comm provider.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Yeah, and I think it's interesting

Ashley Isenberg:

as you, you break it down into the verticals, um, I, I've always

Ashley Isenberg:

looked at it from functionality,

Ashley Isenberg:

um, and that's my product brain kicking in, right?

Ashley Isenberg:

So those are personas of a particular need and I.

Ashley Isenberg:

Really the, the verticalization really from my perspective, has more to do

Ashley Isenberg:

with the labels and the process flow versus the actual functionality.

Ashley Isenberg:

But Elena, I'd love to get your perspective.

Ashley Isenberg:

Uh, I know that we, we, we kind of pushed back and forth a little bit on it.

Ashley Isenberg:

I know that you guys, uh, over a secure bank card have have done some really cool

Ashley Isenberg:

stuff on the back end, but how, how are you seeing it from your perspective on

Ashley Isenberg:

Why people are using payment facilitators or using the payment facilitation

Ashley Isenberg:

model is a better way to word it.

Elaina Smith:

I think that they're wanting to have more control over

Elaina Smith:

the experience, but what they don't understand is that more control

Elaina Smith:

comes with more responsibility.

Elaina Smith:

But I like what Ashley said about these different levels of, you know, these,

Elaina Smith:

these hybrid models where you can, you can hand over some of that responsibility.

Elaina Smith:

If you don't, if you can't manage the risk and the underwriting on your own, then

Elaina Smith:

you can have this kind of hybrid model.

Elaina Smith:

And that I can see working, um, a little bit better.

Elaina Smith:

But I, I just, you see so many players want to get into and monetize payments

Elaina Smith:

and then they get in and it's too late and they've, you know, lost the farm because

Elaina Smith:

, there's so much that they don't know.

Elaina Smith:

And they don't know what they don't know.

Elaina Smith:

So

Elaina Smith:

. They have to have a basic understanding or at least hire those roles in so that

Elaina Smith:

somebody can manage those pieces for them.

Elaina Smith:

And I think also to Ashley's point, she's, we're seeing this 3.0 version.

Elaina Smith:

I think in that 3.0 version, my perception at least, because we don't

Elaina Smith:

do a lot in the pay space, but I think in that 3.0 version, there's a complete

Elaina Smith:

ownership of end-to-end payments.

Elaina Smith:

Whereas before we were maybe, you know, outsourcing the gateway, but,

Elaina Smith:

you know, managing the funding and the billing and that kind of thing.

Elaina Smith:

Um, so in the 3.0 version, it seems like people are building the gateway.

Elaina Smith:

They might be piggybacking on a processor, but they're, you know,

Elaina Smith:

doing all the other things in-house.

Elaina Smith:

So they're taking more control of the overall process so that they

Elaina Smith:

can deliver a better experience in a seamless transaction from end to

Elaina Smith:

end to their customers as a result.

Ashley Isenberg:

Yeah.

Ashley Isenberg:

I mean you're even seeing, right, the the one point ohs and the two

Ashley Isenberg:

point OHS all went direct, right?

Ashley Isenberg:

I mean if you look at pays and FinTech, stripe add, and they're

Ashley Isenberg:

all processors add, and I think at this point is a bank, right?

Ashley Isenberg:

And so they've all gone to that

Ashley Isenberg:

point, right?

Ashley Isenberg:

They're, yeah.

Ashley Isenberg:

Correct, correct.

Ashley Isenberg:

Right.

Ashley Isenberg:

So they've all come in and said, you know, we're gonna

Ashley Isenberg:

take ownership over this, right?

Ashley Isenberg:

We've built the tech.

Ashley Isenberg:

Why are we gonna rely on somebody else when we can just

Ashley Isenberg:

go straight to the networks?

Ashley Isenberg:

Right?

Ashley Isenberg:

And you're seeing things like, uh, VPC, right?

Ashley Isenberg:

I think it's been called VPP in the past, now VPC, but you're even seeing

Ashley Isenberg:

the networks Visa and specific be more

Ashley Isenberg:

open.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): are you, are you talking about Visa?

Ashley Isenberg:

Visa payment Connect.

Ashley Isenberg:

yes.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Okay.

Ashley Isenberg:

All right.

Ashley Isenberg:

Well, I still, I still remember way back in the day when it first

Ashley Isenberg:

launched, where it was visa.

Ashley Isenberg:

Visa Visa Connect, fast Connect, I think is what it was like Visa, fast Connect.

Ashley Isenberg:

It was pretty crazy.

Ashley Isenberg:

But sorry, I didn't mean, I, I

Ashley Isenberg:

I just wanna make sure that we were talking about,

Ashley Isenberg:

we, we already have enough

Ashley Isenberg:

Are we right?

Ashley Isenberg:

Don't we

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): so

Ashley Isenberg:

just gonna say,

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): let's at least break

Ashley Isenberg:

some of this stuff up.

Ashley Isenberg:

So continue.

Ashley Isenberg:

Um, you know, I,

Ashley Isenberg:

I agree that people are, are looking to figure out how can they be more

Ashley Isenberg:

direct and how many pieces of the supply chain can they cut out.

Ashley Isenberg:

Do you think it is more in the areas of I want to control my own

Ashley Isenberg:

destiny, or is it more of, I don't know, any other way to do it?

Ashley Isenberg:

And I'll start with you, Ashley, on that one.

Ashley Isenberg:

Well, I, I mean, I, I think, you know, Elena kind

Ashley Isenberg:

of alluded to in the beginning of the conversation, right?

Ashley Isenberg:

There wasn't another way to do it because the ISO model was broken.

Ashley Isenberg:

Right.

Ashley Isenberg:

There hadn't been a lot of development in the ISO model and so I, I think

Ashley Isenberg:

pay fac became synonymous with tech.

Ashley Isenberg:

Right?

Ashley Isenberg:

And the two terms kind of got put together.

Ashley Isenberg:

So folks struggle 'cause they didn't know another model.

Ashley Isenberg:

Right.

Ashley Isenberg:

And I think if we were to go through the pay list today, we'd probably see a good

Ashley Isenberg:

10 to 20%, this is just my guess, right?

Ashley Isenberg:

Not data-driven that are now removing away from the PayFac model and

Ashley Isenberg:

going under a managed solution.

Ashley Isenberg:

Right?

Ashley Isenberg:

So I think tech started to come to the forefront.

Ashley Isenberg:

Folks wanted a way to do what Toast and Uber and others had done.

Ashley Isenberg:

And Sofac was the only way to do it.

Ashley Isenberg:

Folks got in way over their skis, right?

Ashley Isenberg:

They didn't have the people, as Elena mentioned, that were there

Ashley Isenberg:

to actually understand payments.

Ashley Isenberg:

And so.

Ashley Isenberg:

You saw these kind of managed solutions come out as a re resolution to that.

Ashley Isenberg:

And so I would 100% say there wasn't another way to do it.

Ashley Isenberg:

And I think we're seeing a lot, right?

Ashley Isenberg:

We're seeing the new wave of processors come to the market.

Ashley Isenberg:

We see those three point ohs who I think are gonna leverage

Ashley Isenberg:

those processors in some cases.

Ashley Isenberg:

And so I think there's easier ways to do it.

Ashley Isenberg:

And I

Ashley Isenberg:

manage PayFac or sell ISO or retail iso, right?

Ashley Isenberg:

They're all the same thing.

Ashley Isenberg:

They're just different user experiences, right?

Ashley Isenberg:

Both on how you accept the payment and how you settle the payment.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Alina,

Ashley Isenberg:

how, how do you feel about that comment?

Ashley Isenberg:

Because

Ashley Isenberg:

that, I think this is one of the things that sparked the whole post

Ashley Isenberg:

was, was this specific

Elaina Smith:

Hey, we, I, tell me what an ISO is.

Elaina Smith:

You know, everybody calls themselves an iso.

Elaina Smith:

It means so many different things to so many different people.

Elaina Smith:

Um, so you're right.

Elaina Smith:

I mean, you can use some of these terms.

Elaina Smith:

Interchangeably because they're acting in the same way.

Elaina Smith:

I think the big difference for us is we just never operate as that

Elaina Smith:

master merchant with the Ts under it, like a PFAC would operate.

Elaina Smith:

Everyone has a unique MID and there's pros and cons to that in doing it that way.

Elaina Smith:

But to your earlier point, I would just say that, um, I think that these

Elaina Smith:

companies in going this direction, do need, they wanted to have more

Elaina Smith:

control over the experience because when I think about our scenario, I'm

Elaina Smith:

only as strong as my weakest link.

Elaina Smith:

I can do all the things right.

Elaina Smith:

I can have everything in place that I need to, but if the

Elaina Smith:

processor drops a transaction on the floor and doesn't clear it.

Elaina Smith:

That ends up reflecting poorly on me.

Elaina Smith:

Or if the gateway goes down, that ends up reflecting poorly on me.

Elaina Smith:

So I think that's why we're seeing this movement towards people wanting

Elaina Smith:

to build the entire chain, um, of services so that they can take ownership.

Elaina Smith:

I would rather, I would love to build a gateway.

Elaina Smith:

Do I, you know, wanna put the funds toward building a gateway?

Elaina Smith:

No, that's a huge spend.

Elaina Smith:

But I would love to build and own a gateway, because then I can

Elaina Smith:

control that and I can build it the way that I wanna build it.

Elaina Smith:

I can integrate it fully with my product.

Elaina Smith:

It's seamless to the end user.

Elaina Smith:

It all ties together.

Elaina Smith:

But you ha, at the end of the day, I don't wanna raise any outside funds.

Elaina Smith:

I want to use our own funds, and that's just not a viable option right now.

Elaina Smith:

So instead we do the best we can with what we've got.

Elaina Smith:

I think we're just trying to eliminate as many of those

Elaina Smith:

weak links as we possibly can.

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Well, Elaine, based upon what you

Elaina Smith:

just said, it takes me back and I can't remember, maybe it's been a

Elaina Smith:

couple weeks ago, um, the CEO of Rainforest made a post and really

Elaina Smith:

talked about, Hey, our stuff went down.

Elaina Smith:

But we let everybody know that it went down, not only to let 'em know that it

Elaina Smith:

went down, we had all hands on deck and it was solved within, I think it was

Elaina Smith:

minutes, maybe an hour versus Hunting down to find out who was the real

Elaina Smith:

cause, where did it really come from?

Elaina Smith:

And they were able to communicate to the client that they're able, they were, they

Elaina Smith:

were fixing and they were on the solution, which gave a a little bit of air coverage

Elaina Smith:

for them for that particular issue.

Elaina Smith:

And I think that is a big piece that we're starting to see in these folks

Elaina Smith:

that decide to go the full value chain.

Elaina Smith:

But what that brings me into the next is

Elaina Smith:

Why a pfac?

Elaina Smith:

Right?

Elaina Smith:

So we, we talked about what it is.

Elaina Smith:

We've talked about all the different ways it's laid out.

Elaina Smith:

We've talked about a bunch of the different parts in

Elaina Smith:

a couple different areas.

Elaina Smith:

why would you want to go, why, why should someone go PFAC versus

Elaina Smith:

just doing a traditional merchant services that they could have?

Elaina Smith:

Branding and full control over.

Elaina Smith:

And Ashley, I'll start with you again on this one.

Elaina Smith:

Sorry, Elena.

Elaina Smith:

I just, I wanna get her perspective 'cause I,

Elaina Smith:

No, she's the one to answer that question.

Elaina Smith:

She's going to know the PayFacs side.

Ashley Isenberg:

Yeah, I think it's, it's interesting though, just

Ashley Isenberg:

going back to what we were just saying about user experience, right?

Ashley Isenberg:

I think That's the biggest shift that's happening right now with, call

Ashley Isenberg:

it a managed PayFac or a full payment facilitator, is folks aren't recognizing

Ashley Isenberg:

you may, you may hire a whole team of people, right, who understand how to

Ashley Isenberg:

build a solution for healthcare, right?

Ashley Isenberg:

And they know exactly what the customer is looking for, whether that be the card

Ashley Isenberg:

holder, the patient, or the actual medical facility that's serving those patients.

Ashley Isenberg:

They know what those customers are looking for.

Ashley Isenberg:

What they don't know, what their experience is, is with

Ashley Isenberg:

their current payment processor.

Ashley Isenberg:

Right?

Ashley Isenberg:

And it may be very disjointed, but when you take that on, you have to

Ashley Isenberg:

also understand how to be upfront and answer those questions, right?

Ashley Isenberg:

Outages happen.

Ashley Isenberg:

The biggest guys have 'em, the smallest guys have 'em while

Ashley Isenberg:

you're in development, right?

Ashley Isenberg:

Being open and honest about it, but helping your customers understand

Ashley Isenberg:

how to actually service that is where I see the biggest breakdown.

Ashley Isenberg:

Everybody gets into this space, but then they're not actually helping.

Ashley Isenberg:

Those companies who are embedding payments serve their customers.

Ashley Isenberg:

And it's the biggest thing that I'm doing right now is helping folks who

Ashley Isenberg:

are saying, we made the decision.

Ashley Isenberg:

We picked a partner.

Ashley Isenberg:

We're fairly early stage.

Ashley Isenberg:

Who do we actually hire on right now to help us understand

Ashley Isenberg:

how to serve our customers?

Ashley Isenberg:

Right?

Ashley Isenberg:

How to actually communicate outages or something with billing was incorrect, or

Ashley Isenberg:

a transaction failed or a refund got lost.

Ashley Isenberg:

How do we answer those questions?

Ashley Isenberg:

That's two different products, right?

Ashley Isenberg:

It's two completely different products than what they may have initially

Ashley Isenberg:

built for with a SaaS product.

Ashley Isenberg:

Um, so I think just helping with that terminology and how to support that has

Ashley Isenberg:

been an interesting transition, right?

Ashley Isenberg:

A lot of resources for how to get payments in.

Ashley Isenberg:

Not a lot of payment resources out there for how to scale it and grow it.

Ashley Isenberg:

But back to your original question.

Ashley Isenberg:

Sorry, I went off on a little tangent there.

Ashley Isenberg:

Um,

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): It's okay.

Ashley Isenberg:

It's okay.

Ashley Isenberg:

I are, when you say PayFac, right?

Ashley Isenberg:

I just wanna make sure we're speaking the same language back to my prior point.

Ashley Isenberg:

Do you mean full stack?

Ashley Isenberg:

Whole risk.

Ashley Isenberg:

Well, we'll use the ISO model.

Ashley Isenberg:

I am the registered payment facilitator.

Ashley Isenberg:

Or do you mean a MA?

Ashley Isenberg:

Managed PayFac experience.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): so that's a good point.

Ashley Isenberg:

The way I look at it is that.

Ashley Isenberg:

If I am not doing a one-to-one ratio for, for merchant ID to the card

Ashley Isenberg:

brands, like one merchant gets one id, the card brand gets that one id.

Ashley Isenberg:

If you're not doing

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1: that, it's PayFac.

Ashley Isenberg:

The other

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): side of the house is it, it is

Ashley Isenberg:

traditional processing to be one mid, one person registered with a card brand.

Ashley Isenberg:

That's what I mean by pay fact.

Ashley Isenberg:

It could be registered, it could be Uh, it could be like the, the managed, it

Ashley Isenberg:

could be the, the wholesale unmanaged.

Ashley Isenberg:

It could be somewhere in the middle.

Ashley Isenberg:

But really it's, it's really like looking at, because there are people and there

Ashley Isenberg:

are companies, and there are softwares that have absolutely no business, and

Ashley Isenberg:

there've been many that I've told just.

Ashley Isenberg:

Go the traditional route, find a good partner that has a great

Ashley Isenberg:

onboarding process that has the support because give an example.

Ashley Isenberg:

They do 10 accounts a year that are extremely large volume, but

Ashley Isenberg:

they're broken up into different

Ashley Isenberg:

locations, is the best way to describe it.

Ashley Isenberg:

They're doing underwriting one time and then they're just

Ashley Isenberg:

adding additional locations.

Ashley Isenberg:

It really doesn't make sense for them

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1: to go the PayFac route.

Ashley Isenberg:

But

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): their main concern had nothing to do with

Ashley Isenberg:

really being a pay fac, but they were told by a provider, a legacy provider

Ashley Isenberg:

that offers a managed service pay fac that that was their best route to go.

Ashley Isenberg:

So now trying to undo all of the craziness that that provider

Ashley Isenberg:

has put bestowed upon them.

Ashley Isenberg:

Um, now making sure that they don't hire the people in the risk and the support

Ashley Isenberg:

and all these other different things and making like there's so much stuff.

Ashley Isenberg:

And that's kinda of when I look at who doesn't make sense

Ashley Isenberg:

to be a payment facilitator.

Ashley Isenberg:

Yeah, so I'll say this.

Ashley Isenberg:

I'll start registered payment facilitator very often.

Ashley Isenberg:

I don't think it makes sense, right?

Ashley Isenberg:

Where I see, hey, I'm gonna go be a registered payment facilitator, is maybe

Ashley Isenberg:

the three point OHS that are building I.

Ashley Isenberg:

A much more robust solution, right?

Ashley Isenberg:

Everything from the gateway and they're selling into an entire

Ashley Isenberg:

industry, or two or three.

Ashley Isenberg:

Um, someone who's processing well over a billion to 2 billion, right?

Ashley Isenberg:

But also has strong m and a plans, right?

Ashley Isenberg:

So they might be acquiring folks that are whole risk, whole risk ISOs.

Ashley Isenberg:

They might be acquiring payment facilitators, right?

Ashley Isenberg:

Taking those clients in, merging that business is going to be much easier when

Ashley Isenberg:

they're a registered payment facilitator.

Ashley Isenberg:

Occasionally you see some folks that depending on their investors,

Ashley Isenberg:

right, their financial model requires them to take that ownership and for

Ashley Isenberg:

some reason, simple portability in the contract's not getting it done.

Ashley Isenberg:

So most cases, I don't think it makes sense to become a registered

Ashley Isenberg:

payment facilitator, um, when it comes to, to embedding payments, right?

Ashley Isenberg:

A managed PayFac solution.

Ashley Isenberg:

It depends.

Ashley Isenberg:

Every company's so different, right?

Ashley Isenberg:

And so I don't wanna go into the like startup later stage, Right.

Ashley Isenberg:

I think it makes sense at any point is as long as you have a product, right, that

Ashley Isenberg:

naturally receives or pays out, right?

Ashley Isenberg:

So if you think about how you move money, if there's any complexity to

Ashley Isenberg:

how that money moves, maybe there's a trust account involved or there's

Ashley Isenberg:

two or three vendors involved, you see it a lot in legal or insurance.

Ashley Isenberg:

I think that's absolutely when it makes sense to become a

Ashley Isenberg:

payment facilitator, right?

Ashley Isenberg:

When you're having to control the way or split the way that those funds settle.

Ashley Isenberg:

I think anytime that you're vertically focused, it makes

Ashley Isenberg:

sense to bring payments in house.

Ashley Isenberg:

Where I don't see it making sense is folks that are super horizontal,

Ashley Isenberg:

they do B two B2C, they do B2B two B, they serve, um, just small

Ashley Isenberg:

merchants in general in most cases.

Ashley Isenberg:

I don't see it making sense, right?

Ashley Isenberg:

Because you're not building a repeatable underwriting and risk model, and

Ashley Isenberg:

that's the biggest thing that you're taking in-house, right, is how do we

Ashley Isenberg:

pick up the consistencies and even friendly fraud and prevent friendly

Ashley Isenberg:

fraud, but also on the backend.

Ashley Isenberg:

So when you start to get very horizontal, I don't think the payment facilitator

Ashley Isenberg:

model makes sense because you don't understand the risk you're taking on.

Ashley Isenberg:

So if you're not evaluating every merchant and setting up rules for those

Ashley Isenberg:

merchants on their own, oftentimes you're probably walking into some

Ashley Isenberg:

pretty mucky waters and you may not have the team or the resources for that.

Ashley Isenberg:

So why not leverage somebody else?

Ashley Isenberg:

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Tedd Huff- Host, Fintech Confidential-1 (Detached audio): So the other place, um, that I, that I

Ashley Isenberg:

see, and I, and I gave you an example of one, it's a high dollar, very, not

Ashley Isenberg:

complex, but unique use case, right?

Ashley Isenberg:

The other place where I start to see it is where the

Ashley Isenberg:

Documentation, whether it be regulatory documentation, whether it be something

Ashley Isenberg:

that requires a more hands-on approach that may take a day or two

Ashley Isenberg:

to really dive into it, and the, the.

Ashley Isenberg:

Financial institution that is being the sponsor, the bin sponsor for that

Ashley Isenberg:

doesn't feel comfortable with doing a exposure based underwriting process.

Ashley Isenberg:

So really it comes into that piece of it where if the bank isn't comfortable

Ashley Isenberg:

saying, go ahead and sign them up, finish the due diligence, and then

Ashley Isenberg:

complete the process, then that's another one that doesn't fit very well.

Ashley Isenberg:

But one of the things that you hit on was the money in, money out

Ashley Isenberg:

and controlling that, and I think that is more of a side effect.

Ashley Isenberg:

Of the lack of flexibility from the traditional processors, because

Ashley Isenberg:

I know a lot of folks have taken on that backend piece of it, that

Ashley Isenberg:

clearing, that settlement, that money split, that money movement.

Ashley Isenberg:

And you know, that has been a nice way to get the control they're

Ashley Isenberg:

looking for without having to go and choose a fully managed solution.

Ashley Isenberg:

Um, Elena, I, I.

Ashley Isenberg:

I know you spent a lot of time on reconciliation.

Ashley Isenberg:

I think that was our entire conversation the last time you and I sat down.

Ashley Isenberg:

Help us understand, like from your perspective, a secure bank card.

Ashley Isenberg:

Like what are some of the ways of reconciling and managing that you're

Ashley Isenberg:

seeing within your organization as a traditional ISO model?

Ashley Isenberg:

That sounds like it could be a good fit.

Ashley Isenberg:

When we start to talk about the the payment facilitator edge cases.

Elaina Smith:

So, Ashley alluded to this with merchant funding and being able to

Elaina Smith:

do creative things with merchant funding,

Elaina Smith:

and that is exactly why we built what we built, is to be

Elaina Smith:

able to have that flexibility.

Elaina Smith:

So just to give you a little background on.

Elaina Smith:

On the way that we operate, we only have the processors

Elaina Smith:

authorized and clear for us.

Elaina Smith:

We do everything after that point.

Elaina Smith:

So we receive all these transactions in.

Elaina Smith:

So the point of card acceptance to the point that we fund it out to the

Elaina Smith:

merchant, we do everything in between.

Elaina Smith:

So we built our own platforms so that we can handle all the

Elaina Smith:

merchant billing, we handle all the merchant risk on that platform.

Elaina Smith:

We handle all the merchant funding.

Elaina Smith:

So if someone says, Hey, we wanna split, you know, 90% over it here, 10% over

Elaina Smith:

here, whatever kind of funding arrangement that they have, we can accommodate that

Elaina Smith:

because we're not relying on the processors funding and

Elaina Smith:

outsourcing that from them.

Elaina Smith:

We control that ourselves.

Elaina Smith:

Um, and you also mentioned reconciliation.

Elaina Smith:

There's this whole, you know, now that we're managing the funding,

Elaina Smith:

we're getting all the funds in from the card associations and

Elaina Smith:

having to balance and manage that

Elaina Smith:

. And we're in control of, you know, if there's an outage and we

Elaina Smith:

don't get all of the funding and it, it doesn't all get cleared.

Elaina Smith:

Then we're on the hook for that.

Elaina Smith:

So again, it's a lot more responsibility, but we're also very much in control.

Elaina Smith:

If we have any kind of issue, we're the one going back to

Elaina Smith:

the processor and saying,

Elaina Smith:

Hey, you didn't gimme all my transactions.

Elaina Smith:

You sent this much to Visa.

Elaina Smith:

You only sent this much to me.

Elaina Smith:

And they still don't understand how we can, how we know that as quickly

Elaina Smith:

as we do because the, the platform is doing all the reconciliation for that.

Elaina Smith:

But that's kind of, we talk about customer experience, that's

Elaina Smith:

how you stay ahead of issues.

Elaina Smith:

I know that there's an issue before the card holder or the merchant is any of the

Elaina Smith:

wiser, and I'm chasing down that issue to fix it before it ever gets to that point.

Elaina Smith:

So we talk about, you know, breaking the ISO model and rebuilding it.

Elaina Smith:

That's what we've tried to do.

Elaina Smith:

I wanna take ownership as much as I can over that process, but again, it

Elaina Smith:

comes with a lot of responsibility.

Elaina Smith:

So if we miss a new assessment that comes out.

Elaina Smith:

That's on us.

Elaina Smith:

We end up eating that.

Elaina Smith:

Um, so it's the control you get, but the trade off is the responsibility and you

Elaina Smith:

might be on the bad side of that where

Elaina Smith:

you, you know, do something wrong and you mess up.

Ashley Isenberg:

I, I think we're all hitting on something interesting here.

Ashley Isenberg:

At the end of the day, I don't think the merchant or the card holder

Ashley Isenberg:

care if we're PayFacs processors, ISOs, they don't care, right?

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): They only care

Ashley Isenberg:

about one thing.

Ashley Isenberg:

All they care about is that it's an easy user experience,

Ashley Isenberg:

that they're not spending hours at the end of every month reconciling that

Ashley Isenberg:

they're not losing money because of outages, that it's easy to consume.

Ashley Isenberg:

And it's not the traditional legacy relationship it used to be, right?

Ashley Isenberg:

I think I got into payments in 2010, 2011.

Ashley Isenberg:

And you know, the perception of what I did for work is that I sold credit card

Ashley Isenberg:

machines to C-store and stole a bunch of money from 'em, essentially, right?

Ashley Isenberg:

I mean, we were everybody's least favorite person.

Ashley Isenberg:

And I think it's just come down to what's the customer experience.

Ashley Isenberg:

I mean,

Ashley Isenberg:

a lot of where I'm spending my time right now is with the customer.

Ashley Isenberg:

'cause I felt like I sat on the other side of this world for so long.

Ashley Isenberg:

We're all out here trying to solve problems for these customers,

Ashley Isenberg:

whether it be the merchant or the cardholder experience.

Ashley Isenberg:

None of us are sitting in the customer's seat, right?

Ashley Isenberg:

We don't actually know what they need.

Ashley Isenberg:

That they don't care, right?

Ashley Isenberg:

They don't care who we are, how we did it.

Ashley Isenberg:

They just wanna know that it's an easy consumable process and that

Ashley Isenberg:

reconciliation's gonna be accurate.

Ashley Isenberg:

Funds are gonna hit on time, they're not gonna have outages, right?

Ashley Isenberg:

So I think no matter whether you're a processor, a wholesale,

Ashley Isenberg:

ISO, or afac is the tech good.

Ashley Isenberg:

Does it serve the, the feature functionality that that vertical needs?

Ashley Isenberg:

At the end of the day, I think that's really what matters, and that's why I

Ashley Isenberg:

think we'll start to see some, some, hopefully some verticalization in this

Ashley Isenberg:

industry where certain verticals are going to go to certain providers to

Ashley Isenberg:

solve the needs of of their customers.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): So what that brings me to

Ashley Isenberg:

really think about is going so vertical specific, is that.

Ashley Isenberg:

Can it support that?

Ashley Isenberg:

Because these are very, in a lot of cases, to maintain compliance, to continue with

Ashley Isenberg:

roadmaps, to keep up with the changes.

Ashley Isenberg:

And in the ever-changing needs and desires of, of your customer,

Ashley Isenberg:

in this case, whether it's a a

Ashley Isenberg:

merchant or a technology provider, you really start to get into

Ashley Isenberg:

All of these different pieces.

Ashley Isenberg:

Like an example would be are a number of folks that will offer

Ashley Isenberg:

a prepaid debit card as part of the program and then, or they'll do a

Ashley Isenberg:

credit card as part of the program.

Ashley Isenberg:

And then you've got, you've got digital wallets to be able to, to

Ashley Isenberg:

transfer funds internally between other folks that are on the same platform.

Ashley Isenberg:

And you've got all of these things that are going on out on the periphery.

Ashley Isenberg:

Not to mention when we start to get into cryptocurrencies and other digital

Ashley Isenberg:

assets that start to happen and it just starts to fragment to a point.

Ashley Isenberg:

But ev, most of the, I shouldn't say most, I almost said every, but there

Ashley Isenberg:

are a lot of very curious people

Ashley Isenberg:

trying to understand how to stay ahead of the curve.

Ashley Isenberg:

A lot of them don't even go into the granularity of where their

Ashley Isenberg:

customers are spending their money and they're just throwing things at it.

Ashley Isenberg:

So I don't know really where I was going with that other than the fact I said

Ashley Isenberg:

It can, can, you build a product roadmap right?

Ashley Isenberg:

Is it scalable?

Ashley Isenberg:

Right?

Ashley Isenberg:

To build a product roadmap for, for one vertical, I think is what you're asking.

Ashley Isenberg:

Is there enough?

Ashley Isenberg:

Is there enough to monetize there for the business?

Ashley Isenberg:

Does it actually stand on its own two feet?

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Are there enough, like getting an

Ashley Isenberg:

example, like are there enough local law firms to use a law firm product, or are

Ashley Isenberg:

you looking at a professional services product that covers a whole bunch?

Ashley Isenberg:

Of of different verticals that have similar needs.

Ashley Isenberg:

Maybe not exactly to the label level, but across the board.

Ashley Isenberg:

Their workflow's the same, their

Elaina Smith:

I think it's best to focus on a niche and really serve that niche

Elaina Smith:

and then you figure out how do I go rinse and repeat this niche to some other,

Elaina Smith:

get that right because like Ashley said, it's all about the customer experience.

Elaina Smith:

And I love how she said, you know, pay fac equals tech and tech people

Elaina Smith:

software development especially understands the user experience better

Elaina Smith:

than payments people ever have or will.

Elaina Smith:

I hate to say that, but they're all about that and that's why they're flocking in

Elaina Smith:

this direction because it's all about the user experience as it should be.

Elaina Smith:

And we've kind of neglected that on the ISO side, and we have to

Elaina Smith:

make up for it and figure it out or else we're gonna be dinosaurs.

Ashley Isenberg:

Right?

Ashley Isenberg:

And we have all these models, right?

Ashley Isenberg:

Because payments is a compliance and regulatory industry, and we have to

Ashley Isenberg:

figure out how to help these companies

Ashley Isenberg:

move the money in a way that they're obviously not walking

Ashley Isenberg:

into money transmission or other, um, regulatory issues.

Ashley Isenberg:

But I, I completely agree with, you know, verticalization.

Ashley Isenberg:

I don't know how you build a product roadmap, right?

Ashley Isenberg:

For horizontal.

Ashley Isenberg:

If you wanna start to think beyond just payments.

Ashley Isenberg:

If everybody just wanted payments, right?

Ashley Isenberg:

This conversation's pretty short.

Ashley Isenberg:

I don't know how much time we'd fill up, right?

Ashley Isenberg:

But if you're actually thinking about

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Yeah.

Ashley Isenberg:

what the merchants are looking for today, they're

Ashley Isenberg:

looking for faster funding, right?

Ashley Isenberg:

So now you're getting into disbursements products.

Ashley Isenberg:

They're looking in maybe a must pay industry, right?

Ashley Isenberg:

To accept multiple different types of modalities, right?

Ashley Isenberg:

We, if we don't think about just the 10 or the 20% of uh, users, especially

Ashley Isenberg:

in the us, there's a whole lot of users out there that are underbanked,

Ashley Isenberg:

unbankable, or in rural areas where they don't have access to certain things.

Ashley Isenberg:

And they need multiple ways to make payments, especially right

Ashley Isenberg:

in the must pay industries.

Ashley Isenberg:

They need multiple ways to fund those, right?

Ashley Isenberg:

Whether it's to a card or to support issuing or lending in

Ashley Isenberg:

some cases for small businesses.

Ashley Isenberg:

And so

Ashley Isenberg:

if you can't offer those other feature functionalities is

Ashley Isenberg:

payments on its own two fee.

Ashley Isenberg:

Big enough business right now if you're vertically focused, and I think the

Ashley Isenberg:

answer is no, but if you are looking at a vertical focus and you're expanding

Ashley Isenberg:

out into other financial services that may have higher or equal margins,

Ashley Isenberg:

that starts to become an affordable, scalable business

Ashley Isenberg:

that stands on its own two feet.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): I think where I was

Ashley Isenberg:

was headed with that is

Ashley Isenberg:

make sure that when you choose the vertical that you're going into, that it

Ashley Isenberg:

has enough Of a critical mass to be able to support the ongoing business case.

Ashley Isenberg:

Uh, because I've seen way too many times where there's a software

Ashley Isenberg:

provider that says, I want to be the, the provider for dry cleaners.

Ashley Isenberg:

I'll just throw one out.

Ashley Isenberg:

Right.

Ashley Isenberg:

So dry cleaners.

Ashley Isenberg:

They, they look at it and they're like, well, there's not enough

Ashley Isenberg:

margin in the dry cleaner.

Ashley Isenberg:

And on top of that, there's some additional risk around charging for things

Ashley Isenberg:

if it's a subscription based and like they go on all these different things

Ashley Isenberg:

and then you realize that even to do

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1: a managed PayFac, it doesn't

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): make sense for them to do it

Ashley Isenberg:

because there's just not enough revenue in it to be able to

Ashley Isenberg:

support all the different pieces.

Ashley Isenberg:

And so then they fall back on the traditional.

Ashley Isenberg:

ISO route, and then in a lot of cases they're stuck with

Ashley Isenberg:

really, really bad experiences.

Ashley Isenberg:

And I guess it's kind of where I was going with that is

Ashley Isenberg:

it has to be a market of a certain size in order to be specialized and verticalized

Ashley Isenberg:

into it well enough to turn a profit.

Elaina Smith:

And how are you going to sell into that market?

Elaina Smith:

Are you as a software going to be the one selling into that market?

Elaina Smith:

Are you gonna rely on someone else to sell into that market?

Elaina Smith:

Um, you see some interesting hybrid kind of things going on in the ISO

Elaina Smith:

market where they rely on the ISOs and agents to sell into these opportunities

Elaina Smith:

and say it's, oh, it's agnostic.

Elaina Smith:

It's, and then once it gets to critical mass.

Elaina Smith:

They take it all back and they, you know, charge a, an

Elaina Smith:

extra fee to take the processing and all that.

Elaina Smith:

So that's an interesting thing that we see on our side too.

Elaina Smith:

I'm also curious from your perspective, when we're talking about verticalizing

Elaina Smith:

for pay fax, what happens when one goes bad and it affects the whole chain?

Elaina Smith:

Have you seen that?

Elaina Smith:

Uh, because we hear the stories from the other side of, you know, , they wanna get

Elaina Smith:

away from the pay fac for that reason.

Elaina Smith:

Um, I'm just curious if you have experience with that, um, where

Elaina Smith:

there's one bad egg in the bunch and it spoils the whole basket kind of thing.

Ashley Isenberg:

I think my question, are you talking Well, I wanna make sure

Ashley Isenberg:

we're talking about the same people or, you know, use cases here more importantly.

Ashley Isenberg:

So are you thinking A, you know, SaaS company who has now brought payments

Ashley Isenberg:

through a managed payment facilitator or a provider out there that is

Ashley Isenberg:

offering A

Elaina Smith:

A SaaS company who has TDS under them, basically,

Elaina Smith:

that are all customers of theirs, and they have one customer that's

Elaina Smith:

boarded that says, you know, Hey, I'm a gym just like everybody else.

Elaina Smith:

But really they're accepting payments for, I don't know, C, b, D or something that

Elaina Smith:

they shouldn't be accepting payments for.

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): It's a good old crate.

Elaina Smith:

Yes.

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): No

Ashley Isenberg:

Well, I mean, listen, fraud is fraud, right?

Ashley Isenberg:

And this is the whole point on do you actually become a payment facilitator?

Ashley Isenberg:

And most of the time, I'm gonna tell you no, right?

Ashley Isenberg:

The hopes is that if you're working with a managed provider, they not only

Ashley Isenberg:

have a risk team that is evaluating and looking for these trends in setting

Ashley Isenberg:

up product and people to do that,

Ashley Isenberg:

um, but that you also have functionality, right?

Ashley Isenberg:

To then set up another tier of risk rules, right?

Ashley Isenberg:

So.

Ashley Isenberg:

If we could catch all fraud, right.

Ashley Isenberg:

Fraud, I think in June of this year was already at 40 billion in 2023

Ashley Isenberg:

in fraud in the industry, and that was doubled from the year before.

Ashley Isenberg:

So if we could prevent all

Ashley Isenberg:

fraud,

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): double again in 2024.

Ashley Isenberg:

By the way.

Ashley Isenberg:

I, I'm, I would assume it will, right?

Ashley Isenberg:

I mean, I agree with you.

Ashley Isenberg:

So like you can't prevent all fraud.

Ashley Isenberg:

Right.

Ashley Isenberg:

I think the hopes here though, is

Ashley Isenberg:

a compliance team within your provider should be able to

Ashley Isenberg:

help you define rules, right?

Ashley Isenberg:

Should understand your merchants and know what things to look like.

Ashley Isenberg:

And then because you serve a certain segmentation of customers,

Ashley Isenberg:

you should also know things

Ashley Isenberg:

that don't look right and have those tools and controls to set up

Ashley Isenberg:

another layer of prevention there.

Ashley Isenberg:

Right?

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Right.

Ashley Isenberg:

And even to go in, I'll, I'll use an example, right, so Caleb over it till

Ashley Isenberg:

You know, I know him real really well.

Ashley Isenberg:

We've worked on a couple different things, but the, he

Ashley Isenberg:

just recently post on LinkedIn.

Ashley Isenberg:

Yes, I probably spend way too much time on LinkedIn, but he recently

Ashley Isenberg:

post, he goes, am I that a-hole?

Ashley Isenberg:

Because he had a merchant reach out that, said, Hey, you held my money.

Ashley Isenberg:

You have no right to hold my money, blah, blah, blah, blah.

Ashley Isenberg:

And come to find out the merchant.

Ashley Isenberg:

Wasn't truthful.

Ashley Isenberg:

they they didn't do what they said they were going to do.

Ashley Isenberg:

Now there's some nuances in there that, that are in there, but when you

Ashley Isenberg:

start to look at a pay fact model,

Ashley Isenberg:

does that one spoil the entire Basket the egg.

Ashley Isenberg:

That one egg.

Ashley Isenberg:

You spoil the whole basket.

Ashley Isenberg:

No, because a lot of times when you have a crew like Caleb does on his risk

Ashley Isenberg:

team, they're watching for that stuff.

Ashley Isenberg:

So as soon as something happens.

Ashley Isenberg:

If they're paying attention, they're going to take action.

Ashley Isenberg:

The same action, Elena, that you would take as being a traditional iso.

Ashley Isenberg:

And so it really comes down to you can't be hands off.

Ashley Isenberg:

And if you are hands off or you're turning a blind eye to it, that's

Ashley Isenberg:

when everything goes upside down.

Ashley Isenberg:

And I have seen it where they're like, oh, you know, one person

Ashley Isenberg:

in here isn't gonna be that big of a deal because this is there.

Ashley Isenberg:

Well, that one person is never one person.

Elaina Smith:

Right.

Elaina Smith:

Yeah.

Elaina Smith:

If they're using,

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): you let one

Elaina Smith:

to hide things, then that's not a good model,

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Right.

Elaina Smith:

And, and there are a number, actually, there's, there's three

Elaina Smith:

that, that came to me asking for help because they were put on match

Elaina Smith:

and they were put on match because they were doing things

Elaina Smith:

that were too gray area without.

Elaina Smith:

Asking or asking for clarity or working through it now, what they

Elaina Smith:

were, what they were doing, was it outside of the brand regulations?

Elaina Smith:

No, it wasn't,

Elaina Smith:

but it was close enough that the processing entity felt that it was

Elaina Smith:

so they made the judgment call.

Elaina Smith:

that's, that's what happens.

Ashley Isenberg:

That's exactly what happens.

Ashley Isenberg:

I think there's two, two different things I think about as we talk

Ashley Isenberg:

about this one in Caleb's situation.

Ashley Isenberg:

There's always going to be a merchant that's upset.

Ashley Isenberg:

Like I don't, there's always going to be somebody in any industry,

Ashley Isenberg:

in anything that you do, right?

Ashley Isenberg:

You're going to have people who get frustrated and you can do your best

Ashley Isenberg:

and say, Hey, Caleb was obviously operating within the bounds of a contract

Ashley Isenberg:

within the bounds of, you know, visa, MasterCard rules and fin send rules.

Ashley Isenberg:

And he's saying, I'm doing everything I need to do to protect the business and not

Ashley Isenberg:

just my business, but my clients using it.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Yep.

Ashley Isenberg:

I think where we don't see enough in our industry

Ashley Isenberg:

is communication to that merchant.

Ashley Isenberg:

Here's how long the funds are gonna be held for.

Ashley Isenberg:

Here's the process.

Ashley Isenberg:

I don't know if that's the case with Caleb, right?

Ashley Isenberg:

I didn't read through the whole post, but I think that's

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Anything go into details on that piece of

Ashley Isenberg:

it

Ashley Isenberg:

but I think that's where things break down.

Ashley Isenberg:

It's like, were you in, were you, were you using your contract?

Ashley Isenberg:

Were you in bounds of your contract?

Ashley Isenberg:

How do you explain that to the customer though?

Ashley Isenberg:

And was it in terms that they could actually consume.

Ashley Isenberg:

I think we see this whole other side of, of this fraud conversation we're

Ashley Isenberg:

having where I think there's some folks who have gotten too big too quick, who

Ashley Isenberg:

have taken a very horizontal approach,

Ashley Isenberg:

maybe didn't build the fraud tools or automate the things

Ashley Isenberg:

that they needed to do.

Ashley Isenberg:

Took too much of a people approach and have seen some pretty significant losses.

Ashley Isenberg:

And my question is, are they ruining it for new members or new entry points

Ashley Isenberg:

from the bank perspective, right?

Ashley Isenberg:

Are the banks going to continue to and are Visa and MasterCard and these

Ashley Isenberg:

networks gonna continue to allow folks to go direct if there is folks out

Ashley Isenberg:

there who aren't building the right tools, you can put your procedures

Ashley Isenberg:

down on any piece of paper you want,

Ashley Isenberg:

but if you don't have the automation and you're not using the right set of tools

Ashley Isenberg:

and and mix between product and people, you're gonna see big losses and that's

Ashley Isenberg:

gonna screw it up for everybody else.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Well, you know, with you bringing

Ashley Isenberg:

that up and two stories from the past.

Ashley Isenberg:

That come to mind.

Ashley Isenberg:

One is, do you remember back, God, it's been probably 10 years in the annual

Ashley Isenberg:

report for Square, they had an enormous loss that was front and center on

Ashley Isenberg:

their, on their, on their annual report.

Ashley Isenberg:

And it was because they had approved a woman to be a and and should a

Ashley Isenberg:

person, it doesn't matter, it was a woman, but approved a person.

Ashley Isenberg:

To sell services for wedding planning.

Ashley Isenberg:

So wedding planning services, she was able to do that

Ashley Isenberg:

well.

Ashley Isenberg:

She wasn't getting as much revenue she wanted.

Ashley Isenberg:

She looked for all these different ways.

Ashley Isenberg:

So she started selling travel vouchers as part of her wedding planning.

Ashley Isenberg:

Come to find out that the wedding vouchers she was selling weren't actually real, so.

Ashley Isenberg:

Boom, but Square knew nothing of her selling wedding

Ashley Isenberg:

voucher or travel vouchers.

Ashley Isenberg:

And so they took the entire loss out of all of that.

Ashley Isenberg:

So that is a place where you know, when you have the risk, you're gonna get hit,

Ashley Isenberg:

especially if you're not checking in and looking at things and

Ashley Isenberg:

taking that proactive approach.

Ashley Isenberg:

And there are plenty of softwares.

Ashley Isenberg:

I mean that's, that's one of the things I spend a lot of time doing is

Ashley Isenberg:

I look at situations, problems that people have and instead of having

Ashley Isenberg:

to build it, 'cause you don't always have to build it, actually most

Ashley Isenberg:

of the time you shouldn't build it because it's not your core competency.

Ashley Isenberg:

But looking at the products in the marketplace that you can bring in,

Ashley Isenberg:

you can plug in that give you enough visibility or enough information

Ashley Isenberg:

to be able to move forward.

Ashley Isenberg:

And then the other one that comes to mind, as you were talking about

Ashley Isenberg:

now, on the other side of the house, you gotta have systems that

Ashley Isenberg:

when the alerts get thrown up.

Ashley Isenberg:

You're not looking at hundreds of thousands of alerts because it is little

Ashley Isenberg:

bits and pieces because Coinbase, why did they lose a bunch of money in their

Ashley Isenberg:

annual report two years ago is because they had a hundred thousand, I believe

Ashley Isenberg:

it was a hundred thousand alerts a day,

Ashley Isenberg:

and all their risk people were doing were going in and just all they had

Ashley Isenberg:

time to do was just clear 'em out.

Ashley Isenberg:

They didn't even have time to actually look at them.

Ashley Isenberg:

Now they fixed it since then, but that's a big issue now.

Ashley Isenberg:

What's really cool is that I've started to, to work with a handful of companies

Ashley Isenberg:

that are leveraging, um, generative AI and a handful of other things to really look

Ashley Isenberg:

at this stuff, to bring the items that are

Ashley Isenberg:

most important or the most egregious, or the most likely to

Ashley Isenberg:

become a loss to the forefront.

Ashley Isenberg:

But those are the two pieces that, as you're talking about it, like these are

Ashley Isenberg:

things that happen that a lot of people

Ashley Isenberg:

if they're not from payments.

Ashley Isenberg:

Don't really think about

Elaina Smith:

There's only one way to learn that lesson with

Elaina Smith:

risk, and that is to get burned, you have to take the big loss

Ashley Isenberg:

Right to figure it out.

Ashley Isenberg:

We've all had 'em,

Ashley Isenberg:

right?

Ashley Isenberg:

I definitely had 'em as, as a, as a owner in the payment space myself.

Ashley Isenberg:

Like they happen, right?

Ashley Isenberg:

And it's never the way you think it's going to, but what I think about is

Ashley Isenberg:

as we have this PFAC conversation, if that woman was processing right with

Ashley Isenberg:

a SaaS provider, I think there's like perfect venue in triple C, right?

Ashley Isenberg:

In that space.

Ashley Isenberg:

Who specifically serve that industry?

Ashley Isenberg:

If they had the right fraud tools in the right partner, right processing partner,

Ashley Isenberg:

we'll use processing partner broadly.

Ashley Isenberg:

Take ISO PayFac, whatever it may be, right?

Ashley Isenberg:

If they

Ashley Isenberg:

have the right

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Oh, I can accept

Ashley Isenberg:

that.

Ashley Isenberg:

and they have the right tools, would they have

Ashley Isenberg:

maybe looked at those alerts differently than somebody sitting in

Ashley Isenberg:

a horizontal team looking at fraud?

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Oh, I I fully agree with that.

Ashley Isenberg:

Yeah.

Ashley Isenberg:

I, I think totally, and that's, that's the big piece that

Ashley Isenberg:

some of the technologies that

Ashley Isenberg:

I'm working with really help in the Review allow companies that have been

Ashley Isenberg:

very vertically focused to start to go horizontal, because you can have one that

Ashley Isenberg:

looks very very similar, but there are a couple outliers, but you're not quite

Ashley Isenberg:

sure what they are until they happen.

Ashley Isenberg:

So, but we, using that Generat AI technology, they're able to see

Ashley Isenberg:

that those patterns, they're able to see the behaviors, they're able

Ashley Isenberg:

to look into these, um, .You know, one early, early adopter that

Ashley Isenberg:

is, is still one of my favorites.

Ashley Isenberg:

Um, and I'm gonna, it's gonna be hard for me, but you know, the David

Ashley Isenberg:

and the team over at Feature Space,

Ashley Isenberg:

like they are, they were one of the first people to really look at the

Ashley Isenberg:

behavioral side of the house, and they've been doing it for over 10

Ashley Isenberg:

years, but now the level of data that we have access to and the processing

Ashley Isenberg:

power and all these different things.

Ashley Isenberg:

Now, or lending itself to other ways of using it versus

Ashley Isenberg:

just transaction monitoring.

Ashley Isenberg:

So I could geek out about this all day long.

Ashley Isenberg:

I mean, generative AI and machine learning, that's,

Ashley Isenberg:

that's a place that I, I'm a,

Ashley Isenberg:

I'm a data geek that happens to like pretty stuff.

Ashley Isenberg:

Um, A-K-A-U-I, uh, so.

Elaina Smith:

I am with you though,

Elaina Smith:

Ted, as far as the ai.

Elaina Smith:

You know, everybody loves to throw out that buzz.

Elaina Smith:

Word or term.

Elaina Smith:

And I think ai, when you pair it with risk, is the most exciting to me.

Elaina Smith:

Um, there's so much opportunity there to help us understand the trends and

Elaina Smith:

have it do the work that we're doing.

Elaina Smith:

Um, I just think there's a ton of opportunity there, so I get

Elaina Smith:

as excited as you do about that particular use case with ai.

Ashley Isenberg:

I think the other use case I get excited

Ashley Isenberg:

about is support, right?

Ashley Isenberg:

I think there is going to be a lot of progress in support and I probably

Ashley Isenberg:

beat on the customer experience too much, but I hate to see,

Ashley Isenberg:

I hate when you see a phenomenal SaaS company or ISV come to market and their

Ashley Isenberg:

payments partner screws it up for 'em.

Ashley Isenberg:

Like

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): yeah.

Ashley Isenberg:

That's the hardest thing to watch

Ashley Isenberg:

It's heartbreaking, right?

Ashley Isenberg:

It's like this whole all everything we're trying to do is

Ashley Isenberg:

kind of step back in those moments and I think we're gonna see a lot of

Ashley Isenberg:

progress in how Support can be integrated into, you know, AI and machine learning

Ashley Isenberg:

and, and responding to things quicker and helping customers in the moment

Ashley Isenberg:

when sometimes it's hard to put a person in that situation all the time.

Ashley Isenberg:

24 7.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Well, and I think one of the, and I,

Ashley Isenberg:

last night I was, I was with Integra Bank here in, in Phoenix, and we,

Ashley Isenberg:

we had a long discussion about ai.

Ashley Isenberg:

So it was, it was a group of people we got together really talking about how is

Ashley Isenberg:

AI affecting not only small businesses, but financial technologies in general.

Ashley Isenberg:

And, and looking at it, the piece that seemed to be a theme

Ashley Isenberg:

was that the AI that's being used today, let's just use chat.

Ashley Isenberg:

GPT, the, the the downside to that is it, it's able to, to give you an answer.

Ashley Isenberg:

But is it the right answer?

Ashley Isenberg:

Is it the right answer at the right time?

Ashley Isenberg:

Is it formatted right?

Ashley Isenberg:

And I think where

Ashley Isenberg:

the customer service or the customer experience is really gonna come

Ashley Isenberg:

in, I, I don't think it's ready yet, but I think it's on its way.

Ashley Isenberg:

But being able to

Ashley Isenberg:

create the message in the way that that particular customer is expecting it to be.

Ashley Isenberg:

And not only that is the timing that goes along with it.

Ashley Isenberg:

Because if, if I'm a business that works from nine to five, Monday through Friday

Ashley Isenberg:

the East coast, if there's an outage on Saturday at 9:00 PM do I really

Ashley Isenberg:

need to be no notified about it?

Ashley Isenberg:

And right now it's just blanket, blanket piece that says, any merchants

Ashley Isenberg:

tell them all, Hey, these all we,

Ashley Isenberg:

there might be a transaction that was affected by an outage.

Elaina Smith:

And that's a bad

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): This is.

Elaina Smith:

Yeah.

Elaina Smith:

and

Elaina Smith:

don't wanna deliver that

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): could really dive into.

Elaina Smith:

Nobody wants to deliver the message, but you could

Elaina Smith:

but it come, you do.

Elaina Smith:

I guess we were talking about communication earlier, and

Elaina Smith:

I would always rather be on the right side of over communicating, but like you said,

Elaina Smith:

if they're, if it doesn't affect them, then it does, it's just a bad look because

Elaina Smith:

how many of those are you sending out?

Elaina Smith:

I don't wanna have to send out these things that I have

Elaina Smith:

problems over and over again.

Elaina Smith:

And maybe it doesn't affect you every single time, but it's just not a

Elaina Smith:

good

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): the perception.

Elaina Smith:

of your quality, the perception of everything just dramatically drops.

Elaina Smith:

And now with, with the expectation of realtime, realtime everything,

Elaina Smith:

it doesn't even have to just, everything has to be realtime.

Elaina Smith:

That isn't always good.

Elaina Smith:

And I think when you start to look at the payment facilitation perspective,

Elaina Smith:

that that was one of the first things that everybody was trying to get to.

Elaina Smith:

How do I, how do I control the message?

Elaina Smith:

How do I do it in real time?

Elaina Smith:

How do I make sure that they know what's going on?

Elaina Smith:

I, I I agree with you, Ashley, is that I'm telling more people

Elaina Smith:

more often now to not, not do

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1: any sort of PayFac.

Elaina Smith:

Just take

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): your time, find the right partner.

Elaina Smith:

Don't rush into it.

Elaina Smith:

Make sure that everything's in place because.

Elaina Smith:

It's really hard to unwind something once you've got it in place.

Elaina Smith:

Maybe that isn't how you're looking at it, but that's how, how I

Elaina Smith:

interpreted your, your, your, your

Ashley Isenberg:

we'll agree on part of that and disagree on,

Ashley Isenberg:

so sometimes I think it's better to start right if that's

Ashley Isenberg:

the end game for the product.

Ashley Isenberg:

Sometimes I think it's better to start early.

Ashley Isenberg:

Um, I, I guess for a lack of better way to say it, there's some forgiveness

Ashley Isenberg:

when you're an early product, right?

Ashley Isenberg:

And people know if you're communicating where you are in your growth

Ashley Isenberg:

stage, people know they're working with an earlier stage product.

Ashley Isenberg:

And I would rather solve the problem for two merchants than solve the

Ashley Isenberg:

problem for a thousand merchants.

Ashley Isenberg:

And so I do think there's something to starting early or scaling into it,

Ashley Isenberg:

whatever model you pick that works for you, it's how you implement it

Ashley Isenberg:

and how you roll it out that matters.

Ashley Isenberg:

So anything solvable if you don't just switch it over one day and fundamentally

Ashley Isenberg:

change the entire model of your business.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Cross your fingers.

Ashley Isenberg:

Hope that it works.

Ashley Isenberg:

Hey, let's do this.

Ashley Isenberg:

We're payments company now, right?

Ashley Isenberg:

Uh, we were a SaaS company yesterday.

Ashley Isenberg:

We're a payments company today.

Ashley Isenberg:

That has to happen over time.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Yeah.

Ashley Isenberg:

Well, ladies, we've covered a lot of stuff today.

Ashley Isenberg:

Is there anything that, that comes to mind that maybe we haven't

Ashley Isenberg:

hit on, or just something that's burning in the back of your mind

Ashley Isenberg:

that, that you wanted to, to share?

Ashley Isenberg:

Um, on today's episode,

Elaina Smith:

I have a question for the two of you actually.

Elaina Smith:

Um, I'm curious, I'm curious, we seem to be seeing everything

Elaina Smith:

as a service, and it's the same way with PayFac as a service.

Elaina Smith:

It seems like everyone is calling themselves that.

Elaina Smith:

Now.

Elaina Smith:

they justified in calling themselves that are, is it just the new buzz

Elaina Smith:

term that they're calling it, that are, you know, are there people in the

Elaina Smith:

space that shouldn't be in that space?

Elaina Smith:

I'm just curious your thoughts on that side of it.

Elaina Smith:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): I think it's some great marketing.

Elaina Smith:

Um, it's a really good way to say we, we bill you for

Elaina Smith:

everything at small increments.

Elaina Smith:

Um, and I'm, I'm being a bit facetious in that, but I think I.

Elaina Smith:

We saw software as a service, meaning things were delivered as

Elaina Smith:

they were used at increments that were billed as they were used.

Elaina Smith:

So the old adage of pay by the drink, that's really where the

Elaina Smith:

software as a service and or as a service model really was, was put at.

Elaina Smith:

But it's a nice and easy way for these companies to say you're just renting it.

Ashley Isenberg:

Yeah,

Ashley Isenberg:

I think it's consumable.

Elaina Smith:

it.

Ashley Isenberg:

Yep.

Ashley Isenberg:

I, I, I think it's consumable, right?

Ashley Isenberg:

When we're speaking to folks across many different industries that aren't

Ashley Isenberg:

payments experts, it's a way to alleviate all of the, the complexity.

Ashley Isenberg:

It's payments as a service or it's issuing as a service.

Ashley Isenberg:

And so I agree.

Ashley Isenberg:

It's great marketing.

Ashley Isenberg:

Do I think there's some folks out there that are using that term that shouldn't?

Ashley Isenberg:

Yes, but that's through my lens, again, as a payments nerd and not through the

Ashley Isenberg:

lens of the actual person using it.

Ashley Isenberg:

Don't think they care.

Ashley Isenberg:

As long as they know what that term means is embedded, that's

Ashley Isenberg:

that's all they care about.

Ashley Isenberg:

Tedd Huff- Host, Fintech Confidential-1 (Detached audio): Well, fantastic.

Ashley Isenberg:

Well, I am so happy that we finally got everybody on.

Ashley Isenberg:

Um, I don't think we answered the question of should we, shouldn't we?

Ashley Isenberg:

Who should, who shouldn't.

Ashley Isenberg:

But I think the main reason behind why we weren't able to really pull that out

Ashley Isenberg:

isn't because there's not an answer.

Ashley Isenberg:

It means it's because.

Ashley Isenberg:

The answer is different for every individual company, for

Ashley Isenberg:

every individual use case.

Ashley Isenberg:

If you're thinking about it, you need to take the time to really assess why

Ashley Isenberg:

you're doing it and whether or not you're solving the issue that you're

Ashley Isenberg:

trying to solve by becoming that.

Ashley Isenberg:

And is it really worth holding all of the risk and being the only one that's

Ashley Isenberg:

responsible for protecting that bag?

Ashley Isenberg:

So.

Ashley Isenberg:

Thank you so much for hopping on, and I look forward to many more

Ashley Isenberg:

conversations over time to really dive into some more of these things.

Ashley Isenberg:

But thanks again for hopping on.

Elaina Smith:

Thank you, Ted.

Elaina Smith:

It's been a lot of fun.

Ashley Isenberg:

It's been a lot of fun.

Ashley Isenberg:

Thank you guys.

Ashley Isenberg:

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This is provided for informational purposes only.

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It is not offered or intended to be used as legal, tax, investment,

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We strive to provide accurate and up to date information, but will

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