The Future Of The Payments Industry | S2E2

Speaker A: Financial Technology or fintech for short. We're going to be doing a short deep dive into this space and how it has changed very quickly over the past decade. Whether you realize it or not, payments are all around us. From buying something from your favorite website to grabbing lunch with a friend whenever you send money digitally, that's where fintech really comes into play.

Speaker B: Um, the payments industry before Finexio started was more commoditized and I think very narrowly focused what was best for the payment provider, really prioritizing only the payment products that might make uh, the payments company the most money. And I think what's really evolved over the last few years in the payments industry is a broader sense that more payment options, even ones with lower margins or different profiles of operations need to be offered to customers because they have a broader need and uh, they have uh, to maximize choice to get the best outcomes. Um, because one payment method is not going to work for all folks that need to be paid or want to be paid.

Speaker A: That was Ernest from Finexio. And I think this is one of the huge benefits of the payments space as a whole. Although making payments easier typically means you and I spend more money. Fintech is allowing companies like Finexio, Stacks and View Post to thrive because unlike um, old payment companies, they put their customers first. Again. Payments isn't something on top of everyone's mind. But why should it?

Speaker C: I think when people think about payments they just look at it as a means to end. There's so much data in payments. When you think about all the transactions that are coming through, what are your customers buying, who's buying more from you, what's the CAC to ltv of those customers, what's your neighbor doing, what's your competitor doing? When you start to think about all of these, they're just like a full report about your business. It's actually the heart of a small business to truly understand all of the things that are happening within their business. And there's a single point of truth and that's payments. And bringing and utilizing that data together can be very, very powerful.

Speaker A: You just heard from Sal who is the president and co founder of Stacks Data is king. And if you can understand how your customer acts, your business will win. Now Sal and Ernest both came from the perspective of uh, how payments is seen by customers. But what about all the fintech startups popping up? What advice is out there for those companies?

Speaker D: Business models and go to market approach taken by most B2B payment companies erects material barriers to widespread adoption. For instance Many fintechs and banks sell complex procure to pay solutions in the hope that they will capture the last mile of the payment. While procure to pay solutions are needed by many, requiring complex business process, change of, uh, every single new customer does not lead to a steep growth curve. The model of pursuing the sale of one product as a backdoor to another is simply too indirect and rife with adoption limitations. Beyond customer acquisition, payment firms generally assist their customers with the electronication of their payments in what amounts to campaigns once or twice, twice a year. During these campaigns, efforts are made to reach payment recipients and whoever is missed is missed until the next campaign, which often amounts to a year. Periodic calling campaigns is no way to scale the electronification of payments.

Speaker A: Max is the founder and CEO of viewpost, and out of all of the companies featured in this episode, his is the oldest. He has seen companies come and go. So that advice is something I would pay attention to if I was thinking of starting a payments company. And if you are thinking of starting one, you probably want some thoughts as to where the payments industry goes from here.

Speaker C: The fact that consumers want control of their money, they want to pay how they want to pay, they want to be able to understand what's happening for themselves. But there's one key thing that everyone's looking for, and that's being frictionless. And for stacks, we're here to remove that friction out of transactions. Because the best payment interactions you have are, are the ones you don't even know about. Many of you that are probably watching this today may have taken an Uber, um, you know, as part of your journey. What you forget is that's actually a payment experience. It's actually calculating where you started, where you ended. It's a mathematical formula and your credit card was charged. I think that's the, uh, relationship we want nowadays when it comes to payments, which is something that's happening in the background, but really focusing on our user experience. And that's really where we believe that payments is going next.

Speaker A: I mean, how much money have you spent from the Amazon one click Buy option? Don't worry, I won't answer that either. But seriously, that user experience is something to think about when it comes to payments. Square bought Afterpay for 21 billion and PayPal just bought Payday for 2.7 billion. Both of those companies are part of a new sector in fintech called Buy Now, Pay Later. To Sal's point, these companies make the user experience frictionless, allowing fintech companies to gain more users easily and in turn increasing their Overall enterprise value, the business

Speaker D: to business payments base is a $25 trillion a year domestic business that's growing quickly. There are enormous investments being made by banks, the government, card networks and fintechs alike. In the last eight years we've seen Visa and MasterCard Solutions power the creation of Venmo and Square Cash which have begun to transform the consumer payment space. And in response the banking sector created Zelle, which is an excellent solution of dramatically greater scale and adoption in the business phase. The clearinghouse conceived and rolled out real time payments and now the Federal Reserve in Response has created FedNow, a uh, direct competitor to RTP. Beyond that, digital currencies are beginning to become more widespread out of dark shadows of online communities. And new payment use cases are being conceived of on a near daily basis. The road to better, faster and fully electronic payments is becoming less steep. And with that uh, accelerating change before us digital payments.

Speaker A: I know there were a lot of names thrown at you in that clip from Max, but that's the fintech space in general. It's so fast moving that it's really tough to keep up with if you aren't getting updates on a regular basis. Venmo, Zelle, Klarna, Bitcoin, Ethereum, and of course Doge. Partially joking about Doge. Do you know what all of those mean if you don't? Well that's probably a great place to get started in the world of fintech and payments because those are the future when it comes to moving to the digital world.

Speaker B: I think one trend I've already mentioned is that payments will continue to uh, go behind the scenes, become embedded in software. Software is leading the world, not payments. Payments can help make software richer, stronger, uh, more effective for customers. Um, so I do see that software development will continue to drive payments and I do think that payments will become uh, again less of a, um, commodity and more of an enabling function to drive growth and improve outcomes, um, led by software developers. Um, and that's something uh, that we're certainly taking advantage of now.

Speaker A: This is an interesting perspective from Ernest Payments itself. Moving to the background would be interesting to see. And speaking of the background, something to mention about all of these companies is that they're all building in Central Florida, the newest hub for fintech, Orlando has a special place in its heart for the payment industry. But why is that?

Speaker C: I think the city has really embraced us to provide us a platform to speak. Uh, I think the evolution of stacks has been a great win for the community to bring in great talent, recruit great executives and frankly, we're proud to be a beacon of success to really show not only Orlando or Central Florida, but hopefully the US and maybe even globally that there is more to technology than just Silicon Valley and that Orlando is here to stay. And with things happening in the short order such as synapse, I really believe that Central Florida and the entire community and how they've supported not only our journey are continuously going to make a big dent in making Orlando the technology hub.

Speaker A: Uh, it's been amazing to see not just Stack's growth over these past years, but also View Post and Finexio. Orlando is becoming a larger name in the overall tech ecosystem in the US and it'll be exciting to see where we're headed in the future. And for those of you who may still believe that Silicon Valley is where you need to be.

Speaker B: As the first company to ever move to Central Florida from Silicon Valley, Finexio, um, was successful in raising funds from the Central Florida community on a number of occasions. Um, Florida, um, specifically Orlando gave us uh, immeasurable uh, cost advantage over um, Silicon Valley, uh, where the company was started, um, that has allowed us to survive and not only thrive, particularly during times of COVID um, where things are tough, um, and then there's just a great um, source of employees and talent in Central Florida. There's I think the largest university in the country at ucf. And that's been a very fertile uh, recruiting ground for us as we've grown hundreds of percent a year every single year since we've moved to Central Florida.

Speaker A: Talent, tax friendly, ability to raise capital and sun. What else could you ask for? Orlando is growing and we hope to see you grow with us. If you'd like to learn more about any of the companies or individuals featured in this episode, please check out the links in our show notes. And please don't forget to subscribe because our next episode will be all about the computer engineering talent available in Central Florida.