Product Manager VS Payments Manager

When a business experiences a need with payments, they open it in the product department. In reality, this role is not only product. It oversees multiple domain areas such as compliance, vendor management, risks, business development, and many more.

I noticed that the role is very different depending if it is in enterprise company or a startup.

Payments PM role in large companies

Enterprises or companies operating with an Amazon-style working framework usually hire based on aligning with their values and work principles. They are less focused on domain expertise. It is more important for them to hire a person who will fit with their culture and will be a successful part of the team. In this case, the payments PM can even be without payments expertise and still be successful in the role.

During the interview, they will be asking how you solved problems in the past. They will not be asking about your knowledge of fraud, chargebacks, payment networks, etc.

The questions you get in the interview are product questions:

• Tell me how you made a tradeoff

• Tell me how you made a hard prioritization decision

• Tell me how you disagreed with a leader

However, this may really differ from what a typical payments PM does in real life.

Payments PM role in startups

In smaller companies, the payments product manager is usually a payments expert. It happens that this person also manages the payments team and the roadmap. In this case, the payments PM also owns payments compliance, authorization rate metrics, payments analysis, risks, onboarding, vendor relationships, and many more.

What are the payments PM skills?

Regardless of the approach, the payments product manager is a combination of payments and product management skills.

As a payments PM, you should be a very strong PM, and here is why:

1. Stakeholder manager. As a payments PM, you need to work with a lot of stakeholders and strong leaders. Internal stakeholders include risks, compliance, accounting, revenue, and finance teams. So your stakeholder management should be top notch.

2. Defending your strategy. Because everybody has an opinion on payments. Sometimes the company CEO brings ideas to the table. A strong PM can’t be reactive to every new insight and should have a strong, defensible strategy.

3. Data driven. Payments have a lot of data. A payments PM should understand what the key challenges are and how certain payment metrics affect business KPIs.

4. Business oriented. Payments directly affect business revenue. A payments PM should be able to create a business case and understand the impact of opportunities.

Payments expertise

Depending on the business model, the payments expertise required and the level of depth can be quite different. Let me outline some key areas that are usually required:

1. Transaction lifecycle. Understanding how a payment moves from authorization to capture, refund, and payout and what can go wrong at each step.

2. Payments compliance. Navigating requirements like PCI DSS, SCA, and regional regulations that directly shape what you can and cannot build.

3. Vendor management. Evaluating, integrating, and maintaining relationships with payment providers, including commercial negotiations and technical partnerships.

4. Payments metrics and analysis. Tracking authorization rates, decline reasons, chargebacks rate, and cost per transaction to identify optimization opportunities and measure business impact.

5. Fraud and risk management. Balancing fraud prevention with customer experience, knowing that every friction point you add to stop bad actors also affects good ones.

Soft skills

Payments PMs are often ICs, which means they don’t have direct authority over the teams they depend on. They need to be able to lead through influence and aligning stakeholders around a shared priority without owning the reporting line.

Payments work items are usually quite complex and span multiple systems. Being able to effectively partner with engineering for understanding technical constraints, speaking their language, and earning their trust is key to delivering reliably.

Bottom line

The payments PM role is quite interesting and challenging at the same time. To be successful in this role you need to excel in both product skills and payments knowledge. However, what will be a balance of one or another will depend on where you work.

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We covered

• The real blocker: messy merchant data and product availability

• Embedded checkout vs “true agents transacting on your behalf”

• Why virtual cards would be a bad end-state for the ecosystem

• ACP (Agentic Commerce Protocol), platform incentives, and “who owns the customer?”

• Where agentic payments may show real near-term value (hint: not the sexy B2C stuff)

Chapters

01:36 Welcome Colin Luce (Basis Theory)
02:23 FOMO, hype, and incentives driving adoption
06:04 What merchants should do first (traffic, data, readiness)
12:36 Payments realities: embedded checkout vs true agent payments
19:37 Are today’s demos “magic”? (disappointing discovery, data quality)
23:50 Best use cases + where agentic commerce really helps
34:26 Protocols, ACP momentum, and merchant voice
41:31 Who should store the payment credential? (trust + tokenization)
44:59 Chargebacks & liability in an agent-driven world
46:23 Cybersecurity risks in the rush to ship
49:49 Biggest blocker in payments: behavior change
54:01 One elevator tip to improve payment performance

Full transcription

Nikita

Agentic commerce was one of the loudest trends in 2025. I was very interested in this topic and today we talk with Colin Luce, who is the founder and the CEO of Basis Theory. Basis Theory is one of the leading platforms in the payments tokenization space and they are not a stranger to agentic commerce. Basis Theory founded a consortium for agentic commerce with some of the big players.

In this conversation, I asked Colin about: is agentic commerce a real thing, or is it just a form of what merchants and businesses should do today to enable this channel? What’s the future of agentic commerce?

But before we start, first of all, please subscribe to the show on the platform you’re listening to. If you are on YouTube, Spotify, or Apple Podcasts, please subscribe on the platform — or best, just go to the payments.fm website and subscribe to future episodes right there. And the second announcement: we started our payments community Slack group.

The goal is to have the largest payments community where we have very pragmatic conversations about payments without any influencers or sales pitches. If you’re interested, go to payments.fm/slack and you can join the community from there.

And with this, please welcome Colin.

Nikita (01:36):

Hi Colin, and thank you so much for joining Payments FM.

Colin Luce (01:40):

Yeah, thanks for having me on this cold Monday morning.

Nikita (01:44):

Yeah, absolutely. Super excited. So let’s maybe start with that. Agentic commerce today — I would imagine a lot of merchants, they’re reading blogs, listening to podcasts, and they have some very severe FOMO, right? That something’s going on, something’s happening, and maybe they’re not part of the trend.

So how do you feel about this today, right at this moment? Should they already start implementing something — researching, discovering, talking to vendors — or where are we today, and what should merchants start doing today?

Colin Luce (02:23):

Yeah. So I think it’s a mix of FOMO and the associated hype around it, but also incentives candidly, right? I think on the FOMO and hype side, there’s this inherent kind of EV (enterprise value) or multiple bump that we’re seeing publicly traded companies receive from the market. And I think we’re seeing the same thing on the private side.

And so there’s just this inherent low-hanging fruit, so to speak, opportunity to talk about all of the things you’re doing with agentic commerce and seeing the market reward that. So I think that’s one side of it.

I think the other side of it is just incentives, right? I think those of us in the payments ecosystem have seen this play out time and time again as the networks and various different constituents bring new products and services to market. They often incentivize folks for adopting those things, and we’re seeing that as well.

And so it’s this mix of FOMO and hype and incentives that are driving folks to do things. And so I think the inherent risk there is: are they adopting agentic commerce strategies for the right reasons or not?

Now, I don’t think they would do it if they didn’t believe there was at least some sort of positive benefit to their business — or at a minimum, no downside in doing so. But I don’t think people are rushing out to do stuff because they’re seeing the traffic and volume explode. I don’t think that’s what we’re seeing.

Nikita (04:06):

Hmm, yeah, it’s very interesting. And by incentives — if I try to explain it to myself like a five-year-old — so there are vendors approaching big players in the market and they offer some sort of discounts, right? Like in the processing fees or maybe other forms of what you mentioned — incentives — for them to adopt this new technology. So maybe the market is a little bit skeptical, but there are additional programs that can motivate them to start adopting.

Colin Luce (04:37):

Yeah.

Yeah, and look, I don’t think it’s necessarily a nefarious thing or a bad thing either. I think it’s just the reality that sometimes you have to incentivize people to move.

I hate to name names, but I’m pretty confident PayPal is notorious for having done a lot of different incentive-laden strategies throughout their time, right? I think in the very early days, they gave every PayPal user five bucks in their wallet to start using it, right? And that’s how they drove the consumer side of the equation.

And I think they’ve done the same thing on the merchant side over time. I think there were monetary benefits being given to merchants to adopt accepting PayPal. And so again, I don’t think it’s a bad thing. I think it’s just important that we acknowledge it and that it’s transparent.

Nikita (05:38):

Yeah, that’s very interesting. So if I’m a big merchant — like a big marketplace, e-commerce store — and I’m thinking that agentic commerce, that something will work for me, what are the next steps for me? Like, who should I talk to? Talk to my payment service provider? I’m not sure that’s the right path. Talk to ChatGPT? Who is the single-window approach here?

Colin Luce (06:04):

Yeah, I mean, look, I think it depends on how you think about building the internal business case to do this. And so that’s some of what we just talked about around the FOMO and hype and incentives.

I think once you get comfortable with that and decide you want to do something, to your point, step one is probably understanding where the potential volume or traffic of users are going to come from and ensure that you are set up to receive that traffic in a very seamless way.

And that’s where there seems to be this bifurcation in the market as it relates to these different agentic commerce protocols and the associated distribution channels of those protocols, right?

To your point, OpenAI and ChatGPT are positioning themselves as a driver of traffic to merchant sites. I remember it was probably a month or two ago now when OpenAI released this report around how users were interacting with the service in ChatGPT. And there was something in there about, I want to say, 2% to 3% of those interactions were commerce related, right?

And so you can extrapolate: of all the activity happening in ChatGPT, some percentage of that is commerce related — and how can I interact with that traffic? And that might lead you down this path of, okay, well then do I have to go interact with ACP or how do I want to receive this traffic?

So that is one side of the equation: just understanding or ensuring that you are set up technologically or otherwise to receive that traffic.

There’s probably some associated strategies there for your marketing team to ensure not only are you set up to receive that traffic, but that you are optimizing your placement within those queries and stuff, so you’re maximizing the amount of potential volume and traffic you can get.

But I think the other side of this is the internal abilities or capabilities to surface the right data externally to enable those optimized flows, right? And that’s where it’s things like exposing product catalogs, exposing SKU-level details, exposing your ability to tie an existing rewards program together with a user who’s purchasing through one of these agentic channels, and all these different things.

And I think one of the biggest questions that I and the broader industry get asked when we sit down with all these different analysts and journalists who are tracking this is this question of: should merchants expose this data outwards? Like what sort of risk are they introducing to their business by opening up their kimono, so to speak?

And the pushback they always give is like: okay, well, now your competitors have access to somewhat of a real-time feed of your availability of a product catalog and things like that.

And I think that’s the right question in a lot of ways. But I also think they’re missing a big piece of it, which is: it’s less about should they expose that data externally, and it’s more about can they expose that data externally?

A lot of the merchants we talk to behind closed doors will admit that their data is a mess, right? It is just not set up in a structured, updated, easily accessible way where you could expose this as some sort of API or MCP server. They just don’t have that.

I also think it’s why Shopify continues to be kind of the initial test case for a lot of this stuff, because it’s the rare case where inventory fulfillment, payments, hosting, security — all of that happens in one platform. And so it’s almost like by default, the data is structured and organized in a way where it can easily be exposed.

I think the minute you leave the Shopify ecosystem, that changes a lot.

And look, I think there are some merchants who, whether intentionally or fortuitously over the past several years, have built internal systems and services to set themselves up for this moment. But I think a lot of them haven’t necessarily.

Nikita (11:10):

Yeah, that’s very interesting. One thing I want to double click a bit: I think you’re referring to like catalog feed, right? Fulfillment information, maybe marketing things like promo codes, discounts, and this kind of secret sauce that businesses may have.

And I think some of it was already exposed for Google feed or Amazon feed or other marketplace feeds, right? Maybe that’s not exactly 100% new and maybe they can build on top.

But here with agentic commerce, as I imagine it will be working, suddenly they also need to somehow start accepting payments from a new source.

So how should this be working? I think there was a big announcement with OpenAI and Stripe, right? So maybe when you’re Stripe, you already have your account, and maybe somehow you can marry this with OpenAI. So that’s where you’ll be receiving the payments.

What if you’re not on Stripe? Can you give me a kind of “what should be the merchant next steps to actually start accepting payments”? Because it’s not just the traffic, right? It’s new transactions. I don’t know — reconciliation, fraud — there are tons of questions. Who manages refunds? How does this all happen?

Colin Luce (12:36):

Yeah. No, look, you’re right — the payments aspect of this is interesting because it’s this binary component whereby if payment is not possible, then you just inherently don’t have a transaction, right?

But at the same time, it’s kind of the last piece in the puzzle. And so that’s why I naturally default to talking about all of these upstream problems around product availability, discoverability, comparison shopping — all of that stuff — because I think we have to solve all of those problems before we can focus on the payments piece.

But I also acknowledge that we’re all in the payments and fintech ecosystem. We live and breathe payments. And so that’s where we all want to talk about some of the interesting aspects. Totally get it.

I think this is where the definition of agentic commerce really starts to matter. The reality is there is no agreed-upon definition here. When people hear agentic commerce or agentic payments, there’s a lot of different potential contexts that people are coming at it from — or assumptions they’re making as to what it is.

A first-principles definition of agentic payments to me means this idea of empowering an agent with a payment credential to go and transact on your behalf. And the reality is that’s not what we’re contemplating today. I think we’re a ways away from that becoming a reality.

If you look at what Perplexity is doing, if you look at what OpenAI is doing with ChatGPT commerce, what we’re really talking about is an embedded checkout experience inside of this new agentic ecosystem, which is just a natural extension of all of the social shopping trends we’ve been seeing over the past five to seven to ten years, right?

It’s the natural extension from Instagram links and TikTok shopping to agentic shopping — because ChatGPT and Perplexity are just the new attention ecosystems, right? ChatGPT has what, 800 million active users? That’s where attention lives.

And the way they’re thinking about rolling out their commerce efforts, at least today — absent of whatever happens post this code red moment from last week — is about in-app buying experiences, which is just embedded checkout.

From that aspect, I think there’s a lot of stuff we don’t necessarily need to solve for yet, until we have this world where agents are truly out executing payments and transactions on our behalf.

I also think a lot of the FUD in the market around fraud and risk and chargebacks and returns and stuff are somewhat moot, because the reality is we’re still talking about human-in-the-loop transactions here, right?

It’s still: I confirm that yes, I want to buy this sweater or this pair of shoes. And I’m attesting to that.

Depending on the mechanism by which the payment’s getting executed — if I’m using one of these agentic credentials from Visa or Mastercard — I’m going through step-up authorization out to the issuer. I am doing a device binding passkey. There’s a lot of steps in the way that just enable existing fraud rules and infrastructure to take place. I think that’s critically important.

Now, if we want to talk about the future where agents are actually transacting on our behalf, we need to think about a lot of the stuff you mentioned. We also need to think about authority around delegating access to these agents and what that truly means.

I remember super early on this year when people first started to contemplate what agentic commerce could be or look like. There were people talking about giving their agents power of attorney to transact on their behalf. That just seems utterly ridiculous. So I hope we don’t go down that path.

Ultimately — and look, I’m biased in this — but I think the reality is it’s all going to come down to tokens. Tokenization has been this technology that the payments ecosystem has increasingly adopted as we move more online from the offline world, as we move more to distributed embedded agentic payment flows, as we move more from web-based e-commerce to mobile shopping.

If you think about the underlying infrastructure behind Google Pay and Apple Pay, that’s all tokens, right? So I think tokens are going to be the critical component in all of this on the agentic side.

And then outside of that, from a protocol layer and stuff, all of that’s going to be about trust. And you’re starting to see that play out with how Visa is talking about their stuff now, what ACP is doing. All of that is going to come down to trust, because the reality is, absent blockchain running all of this, we can’t replace trust with truth just yet. So we need that trusted intermediary to help facilitate a lot of this.

Nikita (18:47):

Maybe I would really love to talk about protocols and tokens and what you mentioned. I think as payments geeks, right, we’re probably all fascinated about this.

But before that, maybe on some demos that are available today. I heard that Etsy is already available, right? In ChatGPT, probably with Stripe. And there are some other examples where you’re able to test.

Have you taken a look at any of them? What’s your experience? How do you feel about what we have today? Is it working as expected — is it magic — or the opposite, like it takes five minutes to complete the checkout and didn’t do what I wanted to do?

Colin Luce (19:37):

Yeah, I mean, far from magic from my perspective. I think it’s the opposite. I’ve been pretty disappointed in what’s been out there.

And not to knock the payment side of it — although we can talk about that — I’m not sure the Etsy example is actually fully leveraging the ACP protocol that OpenAI and Stripe put out there. I’m pretty sure those transactions are still just getting facilitated using virtual cards.

Which — look — I think we as a payments industry would be failing our duties if we ended up enabling all of this agentic infrastructure by using virtual cards. I think no one wants that to happen. We’ve seen the pitfalls with the virtual card approach. I think the issuers hate it. I don’t think the networks like it. The merchants don’t like it. No one wins if that’s how this all ends up playing out.

But I think the reality is that’s how a lot of this is getting done today while these protocols get ironed out and shipped off to market.

My experience both with Perplexity — who was probably the earliest to this game — and with some of the other examples out there: the dissatisfaction lies in some of those upstream problems I talked about earlier around the quality of product availability and the SKU-level stuff.

Like you go through this entire flow looking for that brown cashmere sweater, and right before you buy it, you realize it’s navy blue. That is not the experience we want or expect.

You touched on it earlier that Google Shopping does exist and they’re pulling some of these feeds in — but show me someone who’s in love with Google Shopping. Show me someone who’s like, “Wow, they really did a good job curating my search.”

I just think about how many times I’ve found something through a Google search and then I get ported over to the merchant’s website and it’s a different item. It’s out of stock. It’s not available. The quality of that data is just so poor.

So if we’re just going to be repurposing those existing data feeds, I think we’re going to lose all of the momentum that we’ve built talking about agentic commerce. And I think that would be a shame.

My experience hasn’t been great, but that’s mostly on the discovery side.

The other side of this is: two months ago, the industry would have anointed OpenAI king and said all of this is going to happen through this chat interface, which is ChatGPT. But since then, we’ve seen Perplexity launch their Comet browser. I think OpenAI is still rumored to — if they haven’t already — launch their own browser. Obviously, The Browser Company has their agentic…

I will say those experiences for me have actually been pretty awesome. The ability to have five different tabs open in a single browser session and ask the agent to help me compare across those five different tabs is actually pretty awesome. It’s almost like the New York Times Wirecutter getting agentified in a much more comprehensive and broader way. And I’ve been pleasantly surprised with that experience.

So I think there’s a question here of how much of our agentic interactions are going to be through chat versus search versus standalone apps versus browsers. There’s a lot of platform considerations still being contemplated here.

Nikita (23:50):

That’s very interesting. You’re giving me answers I did not expect to hear this morning.

If we zoom out a little bit: you mentioned New York Times Wirecutter when you’re comparing multiple items. If we look at agentic commerce, what problem does it solve actually?

Because I don’t know — from my own experience, sometimes I’m really picky and I’m not sure I’m picking something I really want. I’m reading descriptions carefully and I’m in this shopping experience and I’m not sure I see anything to change it.

But maybe in some cases — when you’re buying a TV, you already chose the model and you just want the cheapest or with better shipping. Or maybe travel can be a good experience.

So how do you think about it? What are good verticals and use cases for agentic commerce? Who should jump into this first, and where can you see the good application of this?

Colin Luce (25:00):

Totally.

The industry has defaulted to this binary view of commodity purchases versus impulse buys and the trade-offs associated with those, as it relates to where the most likely adoption is. And I can buy that.

But I think you can uplevel it a little bit and think: are we talking about B2C e-commerce? Are we talking about back office B2B transactions and associated settlements? Are we talking about agents paying agents for B2B services — API consumption stuff? Are we talking about treasury management?

All of those things are vastly different as it relates to behaviors, payment methods, timing, speed, efficiency, et cetera.

I don’t have a perfect view other than to say: B2C e-commerce is the sexiest thing to talk about. That’s why everyone’s defaulting to ChatGPT e-commerce and Perplexity.

I actually think the treasury management side of all of this makes the most sense to me, at least today — although it’s the least likely to get adopted. If you’re running a large treasury department inside a Fortune 100 company, imagine being able to build an agent where you feed it context associated with your treasury goals, provide it with all the different tools and payment rails, and say, “Go execute this strategy for me.”

That’s super interesting: “I’m trying to maximize float,” or “maximize cash on balance sheet for X days,” and here’s my AP data, here’s my AR data, and you have access to FedNow and RTP and push-to-card and all these different tools — go execute that.

I think that makes the most sense, but those organizations are the least likely to outsource that treasury strategy to some AI agent.

Nikita (27:50):

Yeah, and it sounds a little bit scary to give OpenAI access to like a FedNow account…

Colin Luce (27:53):

Totally.

If we take it from the B2C lens: discretionary versus non-discretionary commodity purchases is a reasonable lens.

That said, I’m going to default to: context is king. Why has Instagram shopping proliferated as much as it has? It’s because Meta has so much context on us.

We all have those experiences where we joke about our phones listening, and then the next day you get an ad. I don’t want to go conspiracy theory corner here, but the reality is: these companies get a lot of context and data on us. Context is king.

So whoever is able to acquire the most data and context is going to enable the most interesting agentic commerce and buying experiences.

This is where chat is potentially a super interesting medium: it’s the first time you can propose a comparison shopping endeavor to your agent with context like, “I’m looking for the cheapest, good, highest quality. I want the merchant to accept this specific payment credential that I’m optimizing for points. All else equal, do they have a rewards program?”

You can give it all these filters. And that’s super interesting.

So the real value of agentic commerce, at least today, resides in discovery, comparison, and efficiency more so than the payment — at least today. Payment is the final execution layer.

Nikita (30:24):

Right. Small thing: I still remember this product from Amazon — I don’t remember the name — but there were buttons with brands that you could put around your house. Like a button with dishwasher detergent under your sink, you press it and it’s a one-click purchase on Amazon.

It didn’t work out for some reason, but I thought it was really good: a contextual one-click purchase button.

And I was thinking maybe for things like this, ChatGPT can be great. Like if you have ChatGPT as a voice assistant, you can be like, “I’m out of detergent, can you please buy one?” and it will go and find and buy something for me.

Colin Luce (31:18):

But to your point, that exists today with Alexa, right?

A lot of people come up with these examples — toilet paper, toothpaste, dish… Yeah, but you can set those rules in Amazon today and sign up for subscriptions. You can talk to your Alexa. A lot of that exists today.

The question goes back to: most of these experiences are siloed within individual ecosystems — Shopify, Stripe, Amazon.

The opportunity here is to drive cross-platform experiences or bring these siloed ecosystems together in a more comprehensive way. That’s the real opportunity.

If behavior today is: I go to Amazon and look for product X, I don’t know how much I care about brand. I might use brand as a lazy proxy for quality, but I don’t really care.

The opportunity is: can AI either improve that within Amazon — exposing products that aren’t surfaced because they’re sponsored or have bots providing reviews — or can it bring me outside the platform and show me something I never would have found, but is as good or better? That’s super interesting.

Nikita (33:22):

Sounds like discovery is the main problem we’re solving.

Outside of discovery, that’s a good segue to talk about how it’s all going to work. With Perplexity, I assume it’s automation inside the browser that goes to your website and clicks buttons for you.

But also there was a wave where multiple companies introduced different protocols, and Basis Theory is one of them.

So I’m super interested: how do you think it should work? How do you think it will work in the future? What are the differences between these protocols, and why is it important to own the protocol? Why did you prioritize it, and what’s going on there?

Colin Luce (34:26):

When we launched our protocol and our agentic commerce consortium, it was driven by the fact that we felt one of the most important players was getting the least attention — merchants.

This was coming off the heels of Stripe and OpenAI launching ACP, right on the heels of Google launching… whatever it is. This was right off the heels of Visa’s announcement, Mastercard, et cetera.

The intent from our perspective was to give merchants a voice.

My sense here on December 8th is that of all these different protocols, ACP has bubbled up to be the dominant one most merchants are starting to think about.

That said, when this launched there was buzz around Etsy and other merchants coming. I haven’t seen other announcements, so I wonder how much adoption is really taking place and what roadblocks there are.

But the buzz from my perspective is there’s a rallying cry around ACP. No surprise — no one’s getting more airtime than OpenAI, and if it’s anyone, it’s Stripe. Bring those together, and of course they get airtime.

Nikita (36:47):

Maybe before it — for those not super familiar — can you cover a little bit: what problem do these protocols solve? Because if we’re talking about browser automation, maybe it’s already there and merchants don’t need to do anything. So what are we solving?

Colin Luce (37:02):

Yeah. And sorry — I was ranting — but it’s ACP, not APC. So there’s the Agentic Commerce Protocol from OpenAI and Stripe.

The idea was to put out a protocol that covers at a high level how to interact with agentic commerce. It touches on trust, discoverability, payments.

There’s a lot of devil in the details under the hood that isn’t exposed today, but it’s a high-level take.

The reality is it works pretty well today within the Stripe ecosystem. And as much as they talk about it being an open protocol and a shared payment token, there’s a lot of inherent distrust or questioning of incentives that merchants are rightfully asking.

Merchants question how “open” open-network approaches are. They question how “open” a protocol is when it’s owned by two companies, Stripe and OpenAI. So there are questions about how this plays out.

Nikita (38:44):

Just for broader understanding: from the payments perspective, the fundamental problem these protocols solve is to store payment information across different merchants — that wasn’t solved before. Is that the right problem?

Colin Luce (39:09):

I think it’s attempting to solve or address the reality that not every merchant uses Stripe and they still want them to participate. So it has to be PSP-agnostic.

Two: from a distribution perspective, both OpenAI and Stripe know the best way to get distribution is to go platform by platform and enable this layer, then bring merchants on board. But then there has to be an explicit conversation: Adyen isn’t going to do something that inherently benefits Stripe.

The last piece: OpenAI isn’t doing this out of kindness. They’re not doing it for free — this is a monetization effort. They want their pound of flesh too. So how does OpenAI receive their tax or commission in a world where the merchant uses a different PSP than Stripe?

Now you’re talking split payments, and OpenAI doesn’t want to be in the flow of funds because they don’t want to be a payment facilitator. So there’s a lot of “I want my cake and eat it too.” And a lot of friction is introduced.

Nikita (41:31):

From your perspective: I’m using ChatGPT, I want to buy the sweater. Two websites — one WooCommerce, one Shopify — different payment providers.

Who should store my card information to make the payment? Should I trust ChatGPT with my card info and they’ll tokenize it? What if I use another cloud tomorrow?

Is there a way for an open vault? Where should we start?

Colin Luce (42:17):

Another way to ask the question is: whose customer is it?

OpenAI would say: our customer. WooCommerce might say: our customer. The merchant might say: our customer.

If they each take that approach, they’ll each try to store that credential themselves.

In a perfect world, this is an open vault, a truly agnostic protocol, or a self-custody wallet storing it.

That’s not how it’s going to play out. If I had to bet: OpenAI stores a copy, the platform stores a copy, the PSP stores a copy, the merchant does.

And what’s interesting: that’s counter to the whole point of tokenization early on. Tokenization is a data security mechanism, but it’s been weaponized into a business lock-in mechanism.

Attempts at tokenizing at a higher level have gotten pushback. Network tokens are the prime example. These agentic credentials are really just network tokens with additional rules.

When networks pushed network tokenization, one requirement for interchange benefits was purging the underlying PAN. Merchants pushed back hard.

That comes down to trust: there’s distrust in letting networks be the single source of truth — despite what they say about 100% tokenization by 2030 and getting rid of PANs. They’ll get pushback.

Nikita (44:59):

We got a couple of questions from our Slack channel. Should we expect an increase in chargebacks as agents make purchases? Will there be a new category, and who will be responsible?

Colin Luce (45:15):

In the future, where we’re truly empowering agents to transact on our behalf — maybe.

But not today. It’s human-in-the-loop. I’m confirming that I want to make the purchase. So I don’t think more or less chargebacks than traditional e-commerce today.

Five years from now, when I give an autonomous agent access to my payment credentials to transact on my behalf — it’s possible, but it should be addressed in advance.

We need guard rules. It will be a legal question, a compliance question, and then a technological question.

Nikita (46:23):

Another question: in the rush to stand up AI, firms seem not to be focused on cybersecurity. Do you see risks? Because we’re FOMO-driven right now, maybe we cut corners.

Colin Luce (46:48):

Totally. Yes.

I think we’re already seeing that — less in the agentic commerce side because not enough is happening there yet — but yes, cybersecurity has taken a backseat as everyone rushes to deliver on FOMO and hype.

For merchants that have never exposed product catalogs and SKU-level data externally before: could they rush out and do it in a not secure or less secure way? Absolutely. That has to be addressed. Huge risk.

I would also say: in the near term, some of the most interesting agentic commerce / agentic payments use cases will be the not obvious, not sexy B2C ones.

It’ll be more about managing spend as agents interact with third-party services — through vibe coding or increased agent adoption for building software.

Example: I’m building an app that needs SMS verification, I use Twilio. How do I put guardrails so my agent doesn’t rack up a $50,000 Twilio bill?

Those use cases are most practical near-term, even if not exciting.

Nikita (49:11):

Yeah, that’s interesting — an agent could go to the Twilio API and check usage today compared with rules you set up.

Colin Luce (49:26):

Yeah. The one place in this AI world where no one can argue product-market fit is coding. Extrapolate from there and those use cases make the most sense.

Nikita (49:49):

Final part — a couple of payments questions I ask everybody.

From your payments experience: what’s the big problem in payments today that blocks us from cheap, fast, secure payments for everybody? Is it technology, regulation, something else?

Colin Luce (50:24):

Behavior change is really hard to incentivize or enact.

People say the reason U.S. consumers aren’t shifting to pay-by-bank is because they love credit card rewards. That’s true for some, but for most it’s just habit — they’re used to paying with credit cards.

It’s a behavioral change question more than an incentive or technological one. Changing behavior requires a driving force, and we’re still waiting for that.

If the goal is to shift people to cheaper methods and off credit cards — same thing.

Younger demographics don’t like credit… maybe. I don’t know. I think it comes down to behavior.

And I’m not sure the onus is on us as an industry to convert those people unless it’s a byproduct of another offering.

Nikita (51:59):

I heard stories — and I’m guilty — of keeping a bank account open because one service still charges it and I’m too lazy to change the payment method. I know many people like that. It’s hard to prioritize.

Colin Luce (52:26):

Exactly.

The least-friction ways to do that are counter to incentives of the people who can pull it off.

There is an incentive challenge. Show me the incentives, I’ll show you the outcome.

For a recurring subscription business, moving users from credit card to pay-by-bank could be a big cost unlock.

But asking users to enroll in open banking flows is too much friction.

The ideal way would be if some lookup table existed — likely at the bank level — that associates a debit card PAN with a DDA and routing number.

Then you could say: “Colin, I see you’ve been paying with your Bank of America debit card. We matched it to your bank account. Click here to opt into ACH and save five bucks.” I’d probably do that.

But if it said: “Go link your bank account,” I probably wouldn’t.

The bank has no incentive to offer that lookup table because they monetize debit interchange.

Nikita (54:01):

Final question: you meet a merchant in an elevator and they say, “You’re a payments guy — how can I make payments better and improve performance?” What’s one piece of advice?

Colin Luce (54:21):

I’m biased — I have my Basis Theory sweatshirt on. But I’d tell them: don’t be beholden or reliant on a single payment service provider. Ensure you have redundancy and can work with multiple providers.

Each merchant and customer base is a snowflake, and no PSP is set up or incentivized to maximize performance for any single merchant.

Stripe, for example — I heard Will Gaybrick on a podcast recently talking about their internal neural net that powers Radar. They look at billions of signals across the ecosystem. That’s awesome and a great network effect.

But the output isn’t designed to optimize for a single merchant individually. It’s a broad offering for many merchants.

Nikita (55:54):

That makes a lot of sense. Colin, it was an absolute pleasure. Thank you for sharing your wisdom. Maybe we can sync in several months and see where we are with agentic commerce.

Colin Luce (56:12):

Yeah, this stuff’s changing very rapidly. I’d love to do that. Thanks for having me.

Dan sheds light on the common financial headaches like cashflow volatility, lack of control and confidence, and how Gusto Money aims to solve these through innovative solutions.

We explore the challenges small businesses face such as managing payables, accelerating receivables, and the unique issues arising from bill payments and invoicing.

Listen on all platforms:

• Youtube

• Apple Podcasts

• Spotify

Dan also discusses the new integrations and features of Gusto Money, including the Payroll Bridge, financing options, and using stable coins for international payments. Learn how Gusto is transforming payroll management and providing flexible financial solutions to help small businesses thrive.

00:38 Guest Introduction: Dan Loomis from Gusto

01:12 Common Payroll Challenges for Small Businesses

05:02 Gusto Money: Addressing Payroll Pain Points

08:11 Invoicing Solutions and Market Competition

14:11 Bill Pay Solutions and Payment Methods

19:45 Same Day Payroll: How It Works

25:19 Financing Solutions: Payroll Bridge

35:04 Stable Coins for International Payments

38:26 Future of Payments and Final Thoughts

Full Transcript

Nikita: Let’s maybe start with a high-level question. So, with Gusto managing payouts for 400,000 businesses, which is an enormous number, you probably hear a lot from your customers about their payments and payroll experience.

So maybe you can highlight a little bit: what are the main pain points that small businesses experience with payments and payouts?

Dan: First of all, I just want to thank you for having me on and allowing me to help share how Gusto solves problems for small businesses.

We have the privilege of serving several hundred thousand of them, like you just mentioned, and we talk to our customers repeatedly. It’s critically important for us to all [00:02:00] understand exactly the pain points that they’re facing.

Most commonly, there are a few acute financial headaches that small businesses face today. They feel a lack of control. They feel a lack of confidence. There’s constant cash-flow volatility and challenges, and they cascade.

When businesses can’t reliably manage payments, employees can feel the stress directly in their paychecks, and both sides are stuck in a cycle of instability that the organization I help run — Gusto Money — is designed to break, by automating processes, improving visibility, and providing flexible access to capital and wages.

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Nikita: Right. That makes a lot of sense.

I think there are a lot of analysts who are saying the economy is not doing super well right now in the US. Are you seeing any trends or signals from your customers, and do you think there is a demand for certain [00:03:00] products?

Dan: What’s incredible about the US small-business economy is that it’s very vibrant and very much alive.

That’s not to say there aren’t financial headwinds and macro-environment considerations that we have to think through in partnership with our small businesses, but there’s a lot of opportunity when we look at the acute pain that they face.

There’s a clear lack of control that small-business owners face. Their financial centers of gravity can feel manual or disconnected. There’s commonly poor visibility into cash flow.

There’s a resulting lack of confidence. Small businesses often lack real-time insight into cash positions. It limits their access to capital. Inefficient AR and AP systems leave owners guessing about whether they can meet payroll, pay bills, or invest in growth. The uncertainty really makes it hard to run a stable [00:04:00] operation.

And then you have this cash-flow volatility — the “who do I pay?” dilemma. Late customer payments coming in, and scarce credit options, can at times force owners to make some painful trade-offs: choosing which vendors or service providers to pay, or even the unconscionable question: “Do I pay or delay paying my employees on time?”

These decisions can damage relationships with suppliers, vendors, and employees. They create a vicious cycle of distrust.

So there are a few areas that are pain points. And to touch on your broader point about the macro environment and what our customers desire: they’re really looking for control, they’re looking for confidence, and they’re looking for cash-flow-smoothing solutions. That’s what Gusto Money is here to deliver.

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Nikita: Right. Exactly. And I think it’s a great segue to my next question — Gusto Money. Big announcement.

So, you just listed the pain points and problems. I would imagine that, with the product you’re building, you’re trying to address some of them. But if you can provide a little bit more specifics on what exactly the pain points and solutions are that you’re bringing to the market with Gusto Money and what you’re trying to solve.

Dan: Totally. Gusto Money is solving kind of a dual story of time and cash-flow control, confidence, and “more money.”

On one end, we help provide financial solutions for millions of employees that small businesses bring. We help them with control, confidence, and more money through great financial solutions delivered for the employees of our employers.

We help them get paid early, get paid on time, understand their earnings, have fluid access to cash in [00:06:00] moments when they might be lacking confidence or control.

I think for the purpose of this conversation, we’ll spend the lion’s share of our time talking about what we’re doing for our employers — what we’re doing for our small businesses.

When we think about the challenges that we’re helping to solve for small business: cash flow is extraordinarily stressful.

Small businesses struggle with balancing money in versus money out. Gusto Money is solving for this by helping to accelerate receivables — by having an invoicing product in market that helps reduce the days-to-paid with automated reminders and payment flexibility that allows money to move faster into bank accounts.

We also help solve for managing payables with confidence. We give one integrated view of your cash position that helps you see what money is going out to your employees through payroll, what you’re doing with vendor and bill payments, and how you’re handling expenses.

When we consolidate this single view of money out, it helps provide a [00:07:00] lot of comfort and confidence around cash flow.

And the last critical area that we’re delivering now is providing working-capital backstops. The goal is to provide fair and affordable access to credit that employers can lean on to help pay their team.

The thing that keeps small businesses up at night, largely, is: “I feel comfort and confidence around building my product or service, but can I pay my employees?”

When we pull all this together and help produce a better view of cash flow and backstop it with working capital, it helps all of our small businesses win.

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Nikita: Thank you for this overview. You just listed a set of products, and I believe the key for success is going deep into each of them — to think not just that you delivered them as a checkbox, right, but that you’re actually delivering value and that the product works for employers.

Let’s maybe unpack each of them in a little bit more detail, in the order you [00:08:00] listed them.

Maybe let’s start with invoicing. I believe there are certain solutions on the market today, and I’m actually not sure if invoicing is part of the announcement or if it’s been with the product for a while. Are you competing with other invoicing platforms — I don’t know, like QuickBooks, or maybe someone can just go into Stripe and create an invoice there?

Do you see it as competition, or do you provide more of a niche solution specifically for a certain type of employers?

Dan: I don’t see Gusto invoicing as a head-to-head competitor with standalone invoicing tools like some that you just mentioned.

Instead, I think our strategy is to actually solve a more fundamental problem around cash-flow and workflow fragmentation for small businesses.

When you integrate with payroll, Gusto has the unique opportunity to sit at the intersection of money in (invoicing and payments received) and money out (payroll and bill payment and vendor payments).

When an invoice is paid, that money can be made immediately visible in the same place where a business is deciding how and when to pay their people and suppliers.

That closed loop that we can support is unique, and we really want to solve core problems in this space for small businesses.

When you have invoicing integrated into a workflow that a small business is already in regularly, we can help reduce days-to-paid, which helps you accelerate payroll. We can provide better cash-flow confidence.

Gusto almost uniquely has full visibility into both inflows and outflows in a way that other companies might not have. We can help owners prioritize payments, avoid shortfalls, and provide working-capital backstops.

We’re trying to attack this by really holistically solving the workflow of getting paid and paying others, given our position in the ecosystem.

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Nikita: Right. I have some follow-up questions about that.

I believe invoicing can be paid in different ways, right? So you probably support online payment methods that your employer will accept from regular customers, and also there could be some B2B payments.

I’m a little bit curious how you manage B2B payments. Is it that the employer sends an invoice, but funds arrive directly in their bank account — is that the traditional flow? Because I believe that’s usually how it works: you send an invoice, there are your bank details, and someone pays your bank account.

But you’re saying you’re in the middle of the funds. How does that actually work?

Dan: Yeah, I don’t necessarily know that we’re in the middle of the funds flow.

What we’re able to do is — when you’re thinking about disparate pieces of financial information and financial artifacts — reconciliation of this, and truly understanding “How much money do I have in this moment?” We’re really trying to begin to crack this problem of expressing cash flow, answering very clear and simple questions like: “What do I have available today?”

By integrating ourselves into the flow, into an invoicing flow — we’re partnered with a company called Melio to help bring AR and AP solutions to market — we can, by partnering closely with them, leverage some of their payments layer, some of the workflow around actually creating a bill or creating an [00:12:00] invoice, and then listening for that information and pairing it with what we know to be true around relationships with employees, with time and hours worked at hourly rates.

That combination gives us a richer perspective on cash flow, and we’re trying to solve that problem.

When it’s Wednesday afternoon and I need to think about running payroll, or it’s Friday morning and I need to think about running payroll, I don’t want to go to multiple sources of truth to actually understand, “Can I make this happen?” Gusto, we’re trying to very clearly solve that problem for small businesses because it’s a leading pain point.

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Nikita: I believe you also mentioned you can expedite an invoice, right, and help an invoice get paid quicker. Can you tell me more about that?

Dan: Yeah, we want small businesses to get paid as fast as possible.

One of the ways that we can help accelerate days-to-paid is by providing payer and payee flexibility in how you’re getting paid and how you’re paying others — looking to optimize for tender types around, again, paying in or getting paid out.

Tender-type maximization is really important, because you give people that are going to be paying your invoice a lot of choice. If they don’t see their preferred way to pay listed, it’s probably going to take them a few more days to pay.

So providing tender-type flexibility, having automated follow-ups and reminders — that helps salvage the relationship between a small business and their customer.

The customer doesn’t want Dan of Dan’s Donuts to be pestering them to pay the invoice. If the system can help automate this, if Gusto can help create that relationship with an end individual who is perhaps late on an invoice, that helps salvage the relationship between the small-business owner and the customer.

These are [00:14:00] the ways that we’re helping to accelerate days-to-paid: great user experience and providing maximum flexibility in payment-rail choice.

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Nikita: Right. Is the situation similar with bill pay, when a company wants to pay their vendors? So you’re providing an additional layer of information and insights compared to just going to their bank and initiating the payment from there.

Dan: We think we have a far richer set of features and centralized capabilities that we offer to our small businesses.

When we centralize accounts payable next to payroll — which would not be the case in a couple of examples you just mentioned — and we express what “money-out” position you have in totality (payroll, expenses, bill pay), it helps small businesses mentally centralize all that information.

They can see obligations, view their cash position, understand upcoming payroll, and know who to pay when, all in one spot.

Again, we’re partnered with Melio to help bring this kind of bill-pay solution primitive into our product, and then we deeply integrate it with the rest of Gusto.

The experience for a user feels like: add a bill, upload a bill or email it in, or manually create it. You can review and schedule; if there’s an approval route that needs to go from an individual entering the bill to maybe the business owner because it’s over a certain dollar amount, that approval workflow exists.

You want to be able to confirm and select payment types — pay via ACH, pay via card, how you want to pay. When somebody receives that bill payment, how do they get paid? And critically, how do you reconcile all of this within [00:16:00] your accounting stacks?

So this is the kind of bill-payment offering that we provide to small businesses. And again, by pairing it next to payroll information and expense information, you start to have a more complete picture of your money-out exposure. We think there’s a very clear pain point we’re solving there.

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Nikita: You mentioned different payment methods. I saw recently that America’s payments are still running a lot on checks. Is that something you also help automate? Do you see check volume as still a real volume that small businesses are using to receive and send payments?

Dan: Sometimes there’s a necessity for a check, and for various reasons checks still exist.

Our goal is to provide maximum flexibility in how people want to pay and get paid. When you offer choice, the whole solution works better.

So how do we offer payment methods like bank transfers or ACH? How do we, if somebody wants to mail a check, enable that and make it easy for them? How can they fund bill payments with a card, if they want to use a credit card, for example, to pay bills?

We see that flexibility and choice — how you pay and how you get paid — as really important for adoption and engagement.

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Nikita: Just from the employer perspective, having all this information together makes a lot of sense, and you have a partnership. Can you walk me through how it actually works?

I would imagine that through this partnership a small business can connect their bank account, where you’ll get more visibility on their transactions. Is this the flow? Is there a Plaid somewhere in this chain that helps you connect to bank accounts? What are the rails that you’re using?

Dan: Great question. In order to really harness the total power of what Gusto offers, typically a bank connection is important.

Today we do have a couple of different ways to connect bank accounts. One of them is with Plaid. We grab that information of a connected bank account; it helps us be able to run payroll, it helps us facilitate bill payment.

So we definitely want a connected bank account.

Then with the example I think you’re asking about around bill pay: yes, let’s connect a bank account. If you want to pay a bill, typically you need to add a bill, and manual entry is kind of a pain. So how do you upload a PDF, take a picture, or email it in? We need to ingest the bill, and there’s a lot of flexibility in how we do that.

Once the bill is in, it’s not just automatically paid. We want to help you review and schedule when that takes place. Is it the right vendor? Is it the right due date? Do you want to adjust [00:19:00] the payment date that is right for you, in the context of the information that Gusto provides?

If it’s a large bill, do you need an approval route from the small-business owner, for example? And ultimately, how do you want to pay this? We may have connected your bank account and that might be your preferred method of payment…

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Nikita: Do you actually want to pay that using maybe your credit card? And then that last, transparent step that just kind of needs to work: how do we sync and reconcile these types of payments with your ERP and your accounting platform?

So this is the flow that we help provide, and we’re super excited about the visibility it offers small businesses.

Yeah, absolutely, that makes a lot of sense. Let’s talk about the core of Gusto — the payroll itself.

One of the features that is very requested is same-day payroll. Can you walk me through how this [00:20:00] is structured and what rails you’re using to run same-day payroll?

Dan: I think, if you’d allow me, I’d start with the customer problem that we’re solving.

Small businesses, as we’ve been talking about, have a lot of hats that owners wear. Typically, time is at a premium. There are a lot of jobs to be done in the day of a small-business owner, and payroll should just work for them when they need it to work.

Sometimes you might need it to work a little bit closer to payday and may not have gotten to that job on Monday or Wednesday or Thursday in service of a Friday payroll. So we want to make sure that we have a lot of flexibility in how employers and administrators of payroll can actually run payroll.

So in the instance of same-day payroll, at a surface layer the flow is very easy to express. There are a lot of mechanics and core capabilities that Gusto brings to bear that allow what sounds like a relatively simple use case to [00:21:00] actually pay people efficiently and on time.

At the end of the day, we debit the employer on payday, and then we credit the employee using same-day ACH. Again, at the surface layer, it sounds very simple, but there are a lot of mechanics that sit underneath that.

For instance, how does it work behind the scenes? Domestically, we use a combination of FedNow, Clearing House real-time payments, and FedACH through our banking partners to help. Internationally, we use leading FX and stablecoin partners to move money across borders.

We stitch all of this together and present it in a clean and simple user interface for payroll admins to understand what they’re doing, know who they need to pay, how much they’re paying them, using what speed — and either have that on autopilot or manually submit payroll and get those employees paid very rapidly.

We’re super pleased with how this launch has taken flight, and it’s just one in a series of steps we’re taking to make the payroll experience better for employers in the United States.

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Nikita: I am very excited to hear that you’re adopting the latest solutions, including FedNow. That’s relatively new, and it’s something that you’re utilizing today.

I don’t have much experience in payroll-type payments, but I have more on platform solutions. Usually, when you want to speed up the payout to, say, sellers on a marketplace or service providers, there is an extra fee that comes with this.

If you want an instant payout, there’s an extra fee to send money in real time, which sounds a little [00:23:00] extreme in 2025.

Do you see it as a premium service — like, “If you want same-day payroll there’s an extra fee or you should be on an extra plan”? Or do you think that’s something everyone should have access to?

Dan: That’s a great question. Again, my standpoint is that offering maximum choice allows all sides of the network to be optimized.

An employer can choose to run payroll earlier in the week, and there are certain processes and mechanics that allow us to bring that solution to market. Or employers can choose to run payroll a little bit closer to the actual pay date.

Broadly speaking in the industry, when there’s accelerated speed or some sense of urgency around moving money quickly, typically there’s a different price point for that. There are a whole host of reasons: when you move money quickly, risk and fraud rates can go up, and you need to be able to absorb that in the process of running your business.

What we’ve done is look for a fair and affordable price that allows small businesses an incredible amount of choice. We solve their problem if they need to run payroll urgently — we have that solution for them at a fair and affordable price that helps them maintain the relationship with their employees.

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Nikita: That makes a lot of sense.

The product from your announcement that I’m particularly excited about is financing. To what you mentioned, there is a big problem with cash flow, and I would imagine that financing is here to address it.

Can you tell me more about this? How does it work, and what’s the business experience?

Dan: How it works is we’re solving a clear need. Payroll is one of the largest non-negotiable recurring small-business expenses, and managing that cash flow is an extraordinarily stressful pain point for SMBs.

We’ve worked to integrate a product offering called Payroll Bridge. We’re partnered with a company called Parafin to [00:26:00] bring this to market. Payroll Bridge is embedded in the Gusto ecosystem and is an extraordinarily convenient option designed specifically to meet the need of payroll.

When I’m in the “run payroll” flow as a small-business owner, I have an option. I can see what my bank balance is, and I can see an option to use Payroll Bridge — receive a draw and fill that gap in cash flow in that moment, in the job-to-be-done of running payroll, in the context of the payroll engine.

That’s, at a surface layer, what we wanted: it’s deeply integrated so that you’re not going to point solutions or going outside to attempt to fill this problem. We’ve got your back in-flow with fair and affordable [00:27:00] access to working capital.

Together with us and Parafin, we create the conditions where small businesses can defer payroll expenses at or before running payroll. To my knowledge, Payroll Bridge is the first and only solution of its kind, and we’re super proud to bring that to market with Parafin.

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Nikita: Yeah, that sounds very exciting.

I have a couple of questions about the details. I’m not very familiar with the partner you mentioned. I’ve explored other solutions for embedded financing, and a lot of them are very expensive.

Maybe it doesn’t look that expensive if, as a business, you’re financing for a short amount of time — you’re expecting an invoice next month, you take a certain amount for a short period. But if you recalculate to the annual percentage, it’s kind of double-digit interest.

How do you think about this? Is it the case with Gusto? And do you see that convenience and the extra layer on top justify the extra cost of money?

Dan: Small-business owners regularly face decisions involving their workforce — the people that help their business operate. These are very sensitive, and we want to pay those relationships the right amount of respect.

How we’ve thought about this is: a small-business owner is confronted with a very challenging moment. “I owe my employees $12,000 and I have $7,000 in the bank.” Again, hypothetical situation.

A small-business owner can do one of many things. They can go out to a myriad of point solutions, attempt to aggregate their assets, move their assets into one place and run payroll. This is common; this happens.

It’s also common that a small-business owner may not have received that payment on that invoice, or may not have had the sales volume they were expecting. They’re running short on budgets, trying to compress lots of moments into a narrow timeframe to run payroll. Sometimes things don’t perfectly line up.

So in these moments, there are choices. It is an option to not run payroll — and we are here to help prevent that, number one, through our cash-flow solutions that we’re stitching together around receivables, payables, understanding assets, and understanding working-capital situation.

We hope to prevent the moment where you’re unclear on how much money you have in the bank and whether you can run payroll. We’re solving that problem.

But in the moment when you need to fund payroll, we have a deeply integrated solution that we believe is very fair and affordably priced for what it offers small businesses.

There are flexible repayment options of four, eight, or twelve installments, which gives merchants flexibility and choice: do they want this offering, and how do they want to repay the use of credit — all while retaining the relationship with employees who were paid on time.

So yes, there is a cost to the product, but we believe it’s not required for everybody, it’s not recommended for everybody. It’s an option available for moments of extreme pain, and at Gusto we just want to have our small businesses’ back. We make that [00:31:00] possible through our partnership with Parafin.

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Nikita: I appreciate the transparency. Thank you for this answer.

Just one more question on financing — I’m very curious myself.

You obviously have tons of data, and probably, to underwrite the loan, you can utilize all this data that you aggregate on your platform. Did you run any estimations of how many businesses on your platform qualify for this product? Is it like 10%, or 100%?

Dan: Our goal is to make sure that a “right-for-me” product is available for the right people.

Did we look at our back-book portfolio and see how many small businesses this product might be eligible for? Absolutely — just like we would with any product development effort. For any feature X, Y, or Z, you want to look at the eligible audience.

Beyond that, I think you might be asking how we assess how many small businesses would be eligible, how many could potentially be underwritten, etc. There are a lot of “it depends” moments there, and ultimately that decision is determined by our lending partner, Parafin, using their underwriting criteria and credit-worthiness assessment.

What I can say is that customers who are approved and use the solution absolutely love it. It provides them with the flexibility, control, and confidence that they can run their business and meet payroll even when challenges are present. That’s the power we’re working to bring to market.

⸻

Nikita: Right. Yeah, I think it makes a lot of sense.

Did you consider repayment of the loan as an automatic deduction from their future invoices or anything like this — integrations like that?

Dan: Yeah, when it comes to repayment, we’re trying to optimize the entire experience.

The experience isn’t just “Can I be underwritten?” and “Can I access money?” but also “Do I have a fair, affordable, and clearly understood repayment plan that I’m able to meet?”

So there’s a responsibility at the top of the funnel to make sure eligibility checks and credit limits are designed not to put SMBs in an awkward position or in trouble. We address this upfront.

In the edge case where they get a bit lower in the funnel and have challenges repaying — which is not the majority of our customer base, to be clear — that’s where the flexible repayment options come in.

And again, in partnership with Parafin, when businesses experience demonstrated financial hardship, we’re looking to offer repayment pauses or other repayment arrangements on a case-by-case basis that meet the needs of the small business.

This is something that should work for a small business, not be a detractor to them running their business.

⸻

Nikita: As part of this announcement, I also saw a feature around payouts using stablecoins. It feels like stablecoins are the theme of 2025 — there have been multiple launches and products, which is very exciting.

The particular use case you’re implementing makes a lot of sense: it’s for international payments, and it’s part of payouts. I see it as a real solution, not just hype.

Can you provide more context about what pain point you’re solving and what the employee experience looks like when they’re receiving this type of payment?

Dan: Using stablecoins is particularly valuable in these use cases, so we’re super excited to bring this to market.

⸻

Nikita: Right. I would love to hear more about how it actually works. Are there popular stablecoin wallets that employees can use? What’s their experience — do they receive an email and need to do something from it, or…?

Dan: Yeah, we are working on shoring up the final details of a couple of large announcements, and I think if we were to have this conversation again in a couple of weeks, I could provide you a lot more clarity on this front.

Right now we’re in the final moment of putting a bow on this, so it might be worth revisiting in the next couple of weeks.

⸻

Nikita: Maybe, if you can share something because you’re already working on it: did you see any interesting challenges from a regulatory perspective by opening up stablecoins?

I think it’s getting popular, but it’s still maybe in some sort of grey area, and in some countries regulations are not there yet. What was your experience working with this?

Dan: Yeah. Number one, it’s great to see guidance and a framework here. The Genius Act that recently came out — guiding and establishing national innovation for US stablecoins — is broadly speaking a landmark piece of legislation.

It establishes a pretty comprehensive framework for regulating stablecoins and digital tokens, etc. This provides clear guidance for how we should think about building products, how we should evaluate partners that can enable certain capabilities, and how we should think about a compliance framework for governing this feature not just in US markets but internationally as well.

We’re resolute that stablecoins enable faster money movement. Businesses can pay employees or contractors faster. We can enable better cash flow. We can create more transparency that can be evaluated more thoroughly through the lens of compliance and regulation.

We see this as an evolving space — as I’m sure you do too — but we’re excited there’s governance, guidance, and a path forward for our industry.

⸻

Nikita: You obviously have a lot of payments experience and have been in payments for quite a while.

What do you think is the biggest problem with payments that businesses — and maybe even consumers — experience today? What is the big blocker for the industry and for all of us in experiencing fast, seamless, secure, convenient, and cheap payments?

Dan: It’s a very broad question, and I don’t, for a nanosecond, attempt to speak on behalf of a very smart and competent industry.

I think when we look ahead in payments, transparency, speed, and reconciliation are extraordinarily important. These are areas that aren’t always that interesting to talk about. Everyone wants money faster, but how that works, how it is cost-optimized, is critical.

We just talked about stablecoins — I think there’s a very clear future for optimizing payer and payee experiences around speed of money, cost of money, transparency of money movement, and the reconciliation of that movement with what that payment was representing: an invoice, a bill payment, a contract.

Being able to communicate not just that a dollar moved from point A to point B, but that it moved immediately, that you can exit it in whatever tender type or fiat currency you want — and, by the way, here is the information that was part of that payment.

The industry is recognizing this and realizing it through technology.

What I’ve learned across my career is that things are relatively slow to be adopted and then they’re adopted very rapidly.

Another example from payments: early in my career I worked on NFC, tap-and-pay, contactless payments. We seeded the globe with infrastructure to accept this. There was adoption in various markets and growing adoption in core markets; then overnight, in 2020, there was this moment that basically catapulted the acceptance of contactless and NFC payments and mobile wallets across a variety of industries, verticals, and use cases.

Things happened very slowly, and then they very quickly. I think we are seeing relatively slow adoption of capabilities like stablecoins. I don’t know what the specific moment will be, but I have a sneaking suspicion that in the next few years there’s going to be one of those moments where it’s just everywhere, and it reinforces why we do what we do.

FinTech and payments — it’s nerdy but fun.

⸻

Nikita: That’s very exciting.

Okay, my final question. Again, considering your experience in payments: if you met someone in the elevator and they ran a small business — let’s say an e-commerce store — and they said, “Oh Dan, you have a lot of payments experience. Tell me, how can I improve my payments performance and make my payments better?”

What would be the single piece of advice you’d give them to significantly elevate their payments experience?

Dan: Most small businesses use multiple tools from the time they have an idea, to when they get started, to when they mature, and then when they need to professionalize.

The better you are at centralizing your tool set — looking at receivables, payables, banking, accounting, payroll, expenses, how you consolidate these — you’re going to save yourself time, you’re going to improve control, increase confidence, and critically you’re going to understand your cash flow.

When you understand your cash flow, you understand your profitability. You’re better prepared to run your small business and thrive.

⸻

Nikita: I love it. “The Cash Flow” will be the name of this episode. Thank you so much, Dan. It was absolutely a pleasure, and I hope our listeners will enjoy this conversation as much as I did.

Dan: Hey, [00:43:00] thanks so much for having me today, and nice chatting with you.

We covered these topics:

• banking rails for global payments

• high risk or misclassified merchants

• payments for gaming and gambling

• offshore entities

• crypto for international payments

Watch on other platforms:

• Apple Podcasts

• Youtube

• Spotify

Victoria shares her mission to create a more ethical and transparent payment industry, emphasizing the need for proper education and strategic planning.

Learn practical advice on streamlining your payment processes, understanding the latest in FinTech, and optimizing your fees and customer journey.

Timestamps:

01:59 Understanding International Payments

11:36 High-Risk Merchants Explained

16:34 Negotiating with Financial Institutions

21:34 Crypto in Payments: Trends and Realities

22:23 The Evolution of Crypto Terminology

22:47 Crypto’s Early Opportunities and Misuse

23:16 Challenges with Crypto in Traditional Banking

23:41 The Rise of Crypto Payment Options

25:38 Stablecoins and Tokenization

27:33 The Complexities of iGaming Payments

33:29 Offshore Entities and Tax Optimization

39:57 Navigating Payment Systems and Banking

42:39 The Future of Payments and Banking

We talk about how businesses can leverage payment data to optimize their transaction processes, reveal hidden issues, and enhance overall performance.

This episode is a must watch for anyone who is working with payments data or looking for different ways to optimize their payments performance.

Through real-life examples and advanced monitoring strategies, Albert explains the transformative potential of data enrichment and AI in the payments landscape.

Key topics include anomaly detection, benchmarking, and AI in payments.

Other platforms

• Spotify

• Apple Podcasts

Timestamps

00:47 Case Study: Subscription Merchant Migration

02:01 Monitoring Payments

04:28 Understanding Payment Methods

06:42 Merchant Expectations

10:04 Challenges in Payment Data Reliability

18:03 Impact of Payment Data on Company Performance

37:39 Payment Analysis vs. Payment Monitoring

46:08 Understanding Processor and Segment Selection

46:36 Challenges in Monitoring and Setting Baselines

47:02 Machine Learning and Segment Selection

47:19 Anomaly Detection and Implementation

48:28 Building Bespoke Models for Metrics

50:40 Fraud Detection and Bin Spikes

53:37 Trends in Alternative Payment Methods

01:00:07 AI and Machine Learning in Payments

01:01:50 Future of AI in Payments

01:14:18 Benchmarking in Payments

01:22:12 Biggest Problems in Payments Today

01:27:01 Practical Advice for Merchants

Stripe and Ebanx announced a partnership to enable the Pix payment method in Brazil for Stripe merchants.

The bigger picture

Stripe says that their merchants can accept Pix from Brazilian customers with settlement in the merchant’s domestic currency. This is very useful if you are not set up locally in Brazil.

This is aimed at businesses expanding internationally and looking for growth in Latin America. Pix is a super-popular way to pay in Brazil.

Why this matters

In one of my previous roles, I did deep research on payment methods in Latin America and Brazil in particular. Boleto is still widely used, but Pix growth has been extraordinary and now leads the market.

• EBANX is a merchant-of-record partner that helps companies accept local payment methods in Latin America and other regions without opening local entities.

• A year ago, I already wrote that Zuora, one of the leading subscription platforms, enabled EBANX.

With the recent announcement, Stripe merchants get access to the most popular payment method in Brazil, and EBANX gets access to Stripe’s merchant base. Win-win.

What’s next

Stripe’s documentation highlights a few limitations to keep in mind:

• Pix only. Even though EBANX can enable multiple local methods (including local card schemes), Stripe has enabled only Pix in this partnership. Merchants can still use the Forward API to process cards with EBANX.

• No recurring payments (yet). Stripe is explicit that recurring flow isn’t supported right now.

• Statement descriptor nuance. Stripe indicates EBANX appears as the recipient in customer bank statements for Pix.

I would love to see Stripe expand these partner-powered local methods beyond Pix (think local cards and other APMs in LATAM).

Other reads

• Watch our latest interview with Michael Taylor (Checkout.com) on how to integrate payment processor without a headache

• Read our evergreen post on how to save on processing fees

Michael emphasizes the need to engage all relevant stakeholders early in the process to avoid friction and ensure a smooth integration.

We also explore the evolving landscape of e-commerce payments, the role of AI in certification processes, and the critical metrics for monitoring performance post-launch.

Watch full episode:

• Youtube

• Spotify

Timestamps:

00:00 Introduction to Payment Service Providers

00:05 The Importance of Pre-Mortem Analysis

01:34 Key Steps After Choosing a Payment Provider

02:05 Effective Communication and Documentation

05:09 Engaging Cross-Functional Teams

07:37 Certification and AI in Payment Integration

09:34 Phased Approach to Go-Live

11:44 Considerations for Different Payment Types

15:02 Pre-Built Components: Pros and Cons

20:25 Operational Preparedness

24:51 Staying Updated on Payment Regulations

28:47 Key Metrics and KPIs for Payment Performance

32:26 Successful Integration Examples

35:38 Current Challenges in the Payments Industry

38:54 Practical Advice for Merchants

40:33 Conclusion and Final Thoughts

Why churn is a critical problem, the difference between voluntary and involuntary churn, and the need for intelligent retry logic to reduce churn rates.

We dive into various retry strategies, the impact of new technologies like network tokens, and other methods to optimize payment recoveries.

Additionally, Philip shares practical advice for merchants to improve their payments performance and underlines the significance of focusing on involuntary churn for exponential business growth.

00:00 The Power of 0% Churn Rate
00:48 Understanding Involuntary Churn
02:12 Deep Dive into Subscription Churn
04:40 Voluntary vs. Involuntary Churn
08:16 The Financial Impact of Reducing Churn
12:51 Technological Solutions to Churn
18:41 Customer Experience and Retry Logic
24:15 Maintaining Customer Trust
24:49 Intelligent Retry Strategies
25:53 Involuntary Churn Insights
28:58 AI-Powered Payment Recovery
29:50 Beyond Retries: Other Recovery Mechanisms
33:52 Personalized Payment Solutions
36:18 Optimizing Payment Recovery
42:22 Exciting Trends in Subscription Payments
44:32 Practical Advice for Merchants

My callouts

What is Involuntary Churn?

Churn is often divided into two main categories: voluntary and involuntary. Involuntary churn happens due to payment failures or technical issues, where the customer intended to maintain their subscription but is forced out prematurely. This type of churn can represent 20-50% of overall churn and, interestingly, is often overlooked by many businesses.

What is the most important when creating a retry strategy?

For instance, retrying a transaction following an "Insufficient Funds" error should coincide with typical pay cycles, while other codes may require different strategies. By intelligently targeting these retries, businesses can maximize recovery rates and minimize the number of unsuccessful attempts.

What about account updater and network tokens?

While we see an increase in solutions like account updater or network tokens, the decline rate for card and other payment methods is still high. The preventative tools are not fully replacing personalized retry strategies.

Retries are good. What else?

While retries are crucial, they aren't the only tool at a business's disposal. Communications like emails or SMS tailored to specific error codes can effectively prompt customers to update their payment details. Additionally, payment orchestration and diversification of processing accounts can increase approval rates and recover more revenue. The recent ability to route transactions across different processors, such as through Stripe's new open orchestration capabilities, represents a promising advancement in this area.

Where to start?

For businesses looking to improve their payments performance, Philip advises firstly understanding their failed payment recovery rates. Implementing silent recovery methods can significantly reduce churn without customer intervention. Once optimized, additional layers like customer communication should be introduced, tailored to the context of the payment error.

Listen on any platform

• Youtube

• Spotify

• Apple Podcasts

Don’t Miss Previous episodes

• Payments For Platforms: Joshua Silver (Rainforrest)

• Benefits of Payment Orchestration: Zubin Vandrevala (Gr4vy)

• Optimizing Payment Performance with AI: Anantharaman Pattabiraman (Inai)

We discuss the two primary models: the integrated referral model and the embedded payments model. Joshua highlights the advantages and disadvantages of each approach and emphasizes the importance of service, technology, and commercials in selecting a payment provider.

We also touch on the challenges of fraud and compliance, and how Rainforest's unique approach mitigates these risks while offering a seamless user experience.

Tune in for actionable insights on improving your platform's payment performance and understanding the evolving landscape of the payments industry.

00:00 Introduction to Payment Models

01:58 Options for Integrating Payments into Software Platforms

03:15 Understanding Embedded Payments

05:15 The Role of Payment Facilitators

08:44 Balancing Risk for software platforms

16:06 Enhancing Platform and Merchant Experience

23:42 Competing in the Payment Platform Market

26:46 Challenges and Future of the Payments Industry

Full Transcript

Joshua Silver: I think broadly speaking, when you look at the market, there are really two ways to do it. There is what we call an integrated referral model where software platforms integrate into some technology stack, and then refer their merchants over to a payments processor who's going to handle all the sales, billing, and customer service.

There's really no industry that's immune these days from fraud. What we do to try to strike a good balance is to be smarter about it than the other payment providers.

Service is one of those areas that's not talked about very often, but in my almost 20 years of experience doing payments, it’s actually the most important thing. It should be talked about the most because, at the end of the day, it's really important to have a payments partner like Rainforest that is not only providing great service—I dare even say fanatical about service—but is being proactive about it.

Nikita Skitev: Today my guest is Joshua Silver, the CEO of Rainforest. Rainforest is a payment provider designed specifically for software platforms.

In this conversation, we talked about many interesting topics related to payments for platforms:

• What are the different options that platforms can choose to enable payments?

• Who manages the risk and owns the financial liability when it comes to payments?

• How we can improve the buyer and seller experience on platforms from the payments perspective.

And of course, as usual, you’ll get actionable insights on how to improve your payments performance if you represent a platform or are just interested in payments.

With that, please welcome Joshua Silver.

Hi Joshua, thank you so much for joining Payments.FM.

Joshua Silver: Thanks for having me. Really great to be on the show.

Nikita Skitev: Let's start with a basic question. Let's say someone owns a software platform, like scheduling software for plumbers, and they think it would be great to add payments capabilities to their platform. So, service providers could not only use the platform for scheduling and billing but also to accept payments.

What are the options that exist today to enable payments?

Joshua Silver: Absolutely, happy to dive into that. I'm the founder of Rainforest, and we provide embedded payments processing services for software platforms specifically to enable that use case of paying the plumbers.

Broadly speaking, there are two ways to do it. First, the integrated referral model: the platform integrates into a technology stack and refers their merchants over to a payments processor who handles everything.

Second, the embedded payments model: the platform partners with a vendor like Rainforest to offer the payments product themselves. They handle all the sales, service, and billing—it’s fully embedded and fully native.

About 15 years ago, integrated referral models were the standard. But the downside is that the platform is sending its valuable customer to a third party. I encourage platforms—whether using Rainforest or another vendor—to move to an embedded model. That's what the most innovative companies are doing.

The key question: does the merchant know they're signing up with a payments company or think they're just signing up with your platform? You want it to feel fully integrated.

Nikita Skitev: If you're interested in payments content, please subscribe to Payments.FM on any platform you like. We’re publishing on YouTube, Spotify, Apple Podcasts, and more. Even better, you can go to Payments.FM and subscribe to our newsletter to ensure you don't miss any episodes.

Now, back to the topic. It’s maybe an outdated idea, but if a platform provides payments between buyers and sellers, do they need some kind of license because they're handling funds? Is that the case today?

Joshua Silver: Today, most of the payment volume going through software platforms is handled through what's called a payment facilitator, or PayFac. In the US, there are about 250–300 companies licensed by the card brands to provide payment services.

About 5-7 years ago, there was a belief that every vertical SaaS company would become a PayFac. But it’s incredibly difficult—you need licensing, sponsor banks, compliance programs, PCI Level 1 certification, and more.

Very few software companies pursue becoming a PayFac unless they process multiple billions of dollars annually. For everyone else, partnering with a PayFac-as-a-Service provider like Rainforest or Stripe Connect is the way to go.

Nikita Skitev: So, just to double-check: Rainforest is the PayFac, and that's what the software platforms use to offer payments?

Joshua Silver: Correct. Rainforest handles all the risk, compliance, money movement, and relationships with banks and card networks. Our platforms don't have to get licensed—they operate under our license.

And it's all fully white-labeled: the end merchant thinks they're signing up with the platform, not Rainforest.

Nikita Skitev: Let's dig deeper into the referral model versus embedded model. I'd imagine the referral model is less work for the platform—they refer customers and maybe have a revenue share agreement.

Embedded sounds like more effort but greater control and bigger benefits. Can we talk about obligations and benefits for platforms in the embedded model you provide?

Joshua Silver: Your intuition is right. Historically, embedded payments required a lot more technical work and program management: merchant onboarding, reporting, sales, and service.

At Rainforest, we’ve built embeddable components that make it almost as easy as a referral model, but you keep the benefits of embedded. Platforms can go live in under two weeks.

Additionally, we’ve simplified program management. We often hear from platforms that their support burden actually decreases after moving to embedded payments, because the payments product "just works."

Nikita Skitev: If we're talking about embedded payments, there are different flavors depending on who controls the risk, right? How do you handle that?

Joshua Silver: Great question. Who bears the risk if there's fraud? That's the key question every platform should ask—but many don't.

Sadly, most payments providers put the liability back on the platform—and often bury it in the contract. Platforms only realize the problem when they get a big bill.

At Rainforest, we do the opposite. If we’re handling onboarding and underwriting, we also take the risk. If there's a loss, we pay. Our incentives are aligned with our platform partners.

Nikita Skitev: So basically, you work on it together, but Rainforest owns the ultimate risk?

Joshua Silver: Exactly. It's definitely a joint effort, but Rainforest owns the risk responsibility.

Nikita Skitev: If you're controlling the risk, do some platforms complain that onboarding is too strict?

Joshua Silver: Absolutely. There's an old joke among risk professionals: "I can have zero losses if I don't approve anyone."

There’s a balance between high approval rates and low fraud. We’ve built vertical-specific and platform-specific risk rules to optimize both. We can approve more good merchants without exposing ourselves to more fraud.

We also use more data—platforms share richer data with Rainforest compared to others like Stripe, and we make smarter decisions as a result.

Nikita Skitev: I actually found you on LinkedIn because of a post you wrote—about Rainforest proactively identifying an integration issue for a platform. It feels like a great example of platform-focused service.

What, in your opinion, separates a good payment provider from a regular one?

Joshua Silver: Three pillars: product and technology, service, and commercials.

Everyone talks about pricing, but service is usually the biggest differentiator. We focus heavily on proactive service: monitoring integration errors, optimizing interchange costs, maximizing adoption rates, and offering strategic advice.

Payments is complex. It's not just "here's our API, good luck." You need a strategic partner.

Nikita Skitev: Let's switch gears and talk about the buyer and seller experience. If the platform provides payments, but options like Zelle, Venmo, Cash App, and Apple Pay exist—why would users choose the platform payments?

Joshua Silver: Great point. Some consumers prefer alternatives, but many transactions—especially in field services—still happen via checks and cash.

More payment options are better. Rainforest provides a standard platform that offers multiple rails—cards, ACH, instant payments—so platforms don't have to build multiple integrations.

Nikita Skitev: For sellers, what else can platforms do to motivate them to accept payments through the platform?

Joshua Silver: Focus on user experience: make it frictionless.

Also, offering features like instant payouts or integrated financing options can be really attractive. A plumber might close a bigger job faster if the customer can finance it on the spot.

Nikita Skitev: Now about Rainforest itself. Stripe and others already offer solutions for platforms. How do you see Rainforest competing in this space?

Joshua Silver: Great question. First, the US payments market is massive—90% of payment volume still goes through legacy banks and processors.

Stripe only has about 2-3% market share. There’s room for 50 companies like Stripe. We can win without it being a zero-sum game.

Rainforest wins by:

• Having product and technology purpose-built for vertical SaaS.

• Providing phenomenal service.

• Offering platform-friendly commercial terms.

Platforms often have to compromise with other providers—with us, they don't.

Nikita Skitev: What's the most overlooked problem that merchants experience when starting to accept payments?

Joshua Silver: Risk and fraud. With AI-powered fraud rising, merchants need strong protection.

Also, user experience. Consumers today expect fast, seamless digital experiences—whether they’re buying an HVAC repair or a haircut.

Nikita Skitev: Broadly speaking, what's the biggest problem holding back payments from being safer, cheaper, and faster?

Joshua Silver: Again, risk and fraud.

Everyone talks about faster payments (FedNow, ACH innovations), but risk management is what drives the costs.

Think about wire transfers: they cost $30-$50, but the underlying transaction costs mere cents. It's the fraud prevention and risk mitigation that make it expensive.

The same dynamic applies across all payment rails.

Join us in this insightful episode as we delve into the world of payment orchestration with Zubin Vandrevala, VP Commercial at Gr4vy. Learn about the evolving needs of merchants in payment processing, the complexities they face, and how orchestration platforms can provide strategic advantages. Zubin shares his experiences and case studies, including a detailed look at how key merchants successfully integrated payments orchestration solutions.

This episode is packed with valuable insights for any merchant or business looking to understand the potential of payment orchestration in simplifying and optimizing their payment infrastructure.

Timestamps

• 00:00 Introduction to Payment Orchestration

• 01:42 Meet Zubin Vandrevala: Background and Experience

• 02:50 The Need for Payment Orchestration

• 05:59 Case Study

• 07:46 Complexity and Growth in Payment Systems

• 09:34 Build vs. Buy: Strategic Considerations

• 10:05 Merchant Profiles and Benefits

• 17:22 Addressing Common Objections

• 43:14 Industry Trends and Future Outlook

• 46:56 Practical Advice for Merchants

• 48:46 Conclusion and Final Thoughts

Transcript

Nikita: Today my guest is Zubin Vandervala, the Vice President of Gr4vy, one of the leading payment orchestration platforms.

In this episode, we talked about everything payment orchestration: what type of merchants benefit the most, where it is required, and where it may be less required. Should small merchants, when they just start accepting payments, start with payment orchestration platforms?

My favorite part of this episode was when we simulated the conversation between a customer and the vendor. I brought all the objections and hesitation, and Zubin provided context and explained the benefits of the payment orchestration platform. I hope you'll enjoy this conversation as much as I did. With this, please welcome Zubin Vandervala.

Nikita: Hi Zubin, and thank you for joining our podcast today.

Zubin: Thanks, Nikita, a pleasure to be here.

Nikita: Tell me about why most merchants today prefer payment orchestration or maybe even need payment orchestration to process payments efficiently.

Zubin: I want to acknowledge and thank you for giving me the opportunity to be on this forum. A little background about myself: I'm Zubin, I lead our global commercial team here at Gr4vy. I was the first business hire and have been here for the last four years. Prior to Gr4vy, I spent a little over seven years working in various capacities within Google's consumer payments organization. Before that, I spent about four years at Visa as Visa transitioned from 16-digit card numbers to digital tokens, and everything we know Visa for today.

I started my career in financial services, working at a bank, HSBC, doing credit card origination. Ironically, I have a mechanical engineering degree and spent the first couple of years working in the automotive industry. Somehow, that translated into a career in payments, but I'll save that story for another time.

Addressing your question: If you go back to the thesis of why Gr4vy was created, it really comes from this notion that businesses around the world are creating payments teams. It typically starts with wanting to start accepting payments. If you look at the innovation that has happened over the last 10 to 15 years, companies like Stripe, Adyen, Braintree, and others have made it really simple to start accepting payments.

With just 10 lines of code, you're off to the races. The growth we've seen in e-commerce over the last 10 to 15 years is directly attributed to innovation in this space. That's fantastic for an entrepreneur or small business looking to accept payments, but as a business grows, the complexity increases. You need redundancy, international support, local payment methods, and local acquiring. You need to manage risk. All of this complexity translates into APIs, and what started as 10 lines of code quickly becomes a spaghetti of APIs that a payment engineering team must manage.

That is the challenge that Gr4vy and other payment orchestration players are attempting to solve. How do you enable an infrastructure layer that helps you deploy, manage, customize, optimize, aka orchestrate your payments with ease? Hopefully, that gives you a little background on why orchestration exists in the market today.

Nikita: Can you share a story - your favorite case study or your favorite merchant - when they were struggling without payment orchestration and the results they saw with payment orchestration?

Zubin: This one's dear to my heart because it's one of the early adopters of Gr4vy technology. They eventually became an investor and are all in on the Gr4vy strategy. When I think back to the origins of Gr4vy, one of the key aspects was really talking to merchants and businesses to see if they would adopt our platform. Our founding members – John Lund, Ali, and Cristiano – spoke to a large number of companies. The resounding answer was yes from a technical perspective, but there were concerns.

The first concern was ensuring Gr4vy would not become a single point of failure. The second concern was how we would not add to the payment stack's complexity. What we've created at Gr4vy is a cloud-native company. For every customer that joins our platform, we deploy a dedicated instance of Gr4vy configured for the capabilities, performance, redundancy, and requirements tailored to that customer.

An early example is Woolworths Group, the largest retail group out of Australia. Think Walmart of Australia. They had an internal payments team with a cost center structure, but they strategically decided to spin out their payments team into a separate entity called WPay, around the same time Gr4vy was created. They realized they required an orchestration layer and conducted a build versus buy assessment, ultimately adopting Gr4vy all in.

One of the main values for them was the ability to decouple the front end from the back end, which made it easy for them, especially with consistent M&A activities. They are one of our top customers and investors in Gr4vy. This use case extends beyond just a merchant use case; it's also a PSP use case.

Nikita: When I'm thinking about payment orchestration, it feels like it's for bigger merchants. When a company is just starting, they sign a contract with a payment service provider and start working with them. As they grow, they face challenges of migration from a single provider to multiple providers, which can be smooth and easy for growing merchants.

Is that what you're seeing? How can smaller merchants avoid this transition? Would you recommend starting with an orchestration platform?

Zubin: A fantastic question. Our initial hypothesis was that larger businesses would have more complexity. But it's not necessarily size but the complexity of the business that defines whether you need orchestration. For instance, mid-sized merchants expanding internationally or managing multiple sub-brands start encountering complexity.

It's complexity in business operations that necessitates orchestration. So, should all small merchants start accepting orchestration? It comes down to how big the pain is or the pain you anticipate as you grow. On that pain basis, the cost of enabling an orchestration platform becomes worth it. We talked about this build versus buy decision; sometimes it's more pragmatic to build in-house. Understanding and doing a thorough build versus buy analysis is crucial.

Nikita: When you talk about complexity, let's delve into profiles. What merchant profiles benefit the most from payment orchestration? Is it merchants processing high volume, internationally, or needing specific payment methods?

Zubin: We definitely see segments within the market: single merchants expanding globally with multiple brands, or platforms with multiple sub-merchants. Aggregators like ISOs or PSPs also find value in orchestration. While it's often associated with large merchants, we've seen great use cases across various business types, including operating companies managing diverse use cases within their remit.

Nikita: You also mentioned the build versus buy discussion. Building an orchestration platform in-house almost necessarily involves going through PCI certification, which is a significant value proposition for many payment orchestration platforms. Has this changed, or is it still the main value proposition?

Zubin: Really good question. It depends on the incumbency and legacy of your platform. Large organizations with existing teams may choose to partner with a platform like Gr4vy rather than building in-house to amplify and accelerate growth and innovation.

On the payment stack in totality, orchestration players cover vaulting, tokenization, and pay-in. Yet, further downstream activities like enrollment, onboarding, settlement, reconciliation, and dispute management are areas needing more innovation. Merchants need to understand where they fit within this journey and the right combination of build versus buy to manage costs effectively.

Nikita: Is there anything else you want to add on values?

Zubin: Understanding the return on investment, or rather the reason for investment, is crucial. Gr4vy's value impacts four levels: revenue (driving more conversion, enabling new payment options), cost (optimizing payment costs), operating expenses (maintaining compliance like PCI), and strategic future-proofing. Having a clear picture of these impacts is essential for adopting orchestration.

Nikita: I collected some objections or hesitations from the market about payment orchestration platforms. Let's address them one by one.

Zubin: I'm excited! Ready for rapid fire.

Nikita: First, multi-processor orchestration requires merchants to sign new contracts with providers, managing operational tasks and negotiations, which can slow down adoption.

Zubin: Yes, traditional gateways consolidated multiple acquirers under one contract. However, Gr4vy focuses on technical aspects rather than contracting. We enable merchants to control relationships with multiple PSPs without needing extensive tech capabilities. We've seen benefits by creating layered connections with primary and backup PSPs to ensure redundancy and optimize performance.

Nikita: Second, adding an orchestration layer introduces another point of failure. Redundant systems already exist with top PSPs through high performance and stability.

Zubin: Excellent point. At Gr4vy, we provide multi-zone failover options, replicating traffic easily. We also deploy separate instances for merchants, ensuring code is verified before going live. This modular architecture enables redundancy and minimizes single points of failure.

Nikita: Third, with orchestration platforms, data control remains with the merchant. But some claim it leads to proprietary tokens, limiting flexibility similar to PSP-specific tokens.

Zubin: Great question. We allow merchants to choose, providing Gr4vy tokens or PSP tokens. Network tokens generated with merchant's token requester IDs ensure full control and portability across PSPs. The industry is moving towards flexible, controllable network tokens.

Nikita: Fourth, optimization and cost reduction are often highlighted, but is this only for high volume merchants?

Zubin: Optimizations need to outweigh the cost. Small merchants optimizing for specific needs like high-risk profiles or seeking low-cost PSPs with higher authorization rates may benefit significantly. A build versus buy analysis considering pain versus cost is crucial.

Nikita: Fifth, managing API integrations for critical business functions depends heavily on vendor support and prioritization.

Zubin: Absolutely, it's not just technical but a collaboration. We work with clients understanding their specific requirements, ensuring live traffic, and partnerships to address unhappy parts and manage updates effectively.

Nikita: Sixth, marketplace operations face challenges with pay-in/pay-out orchestration, requiring complex compliance handling not covered by orchestration platforms.

Zubin: Managing KYC, KYB compliance is a major challenge. While we support settlements and payouts, the broader compliance layer still requires innovation in KYC and risk management.

Nikita: Lastly, troubleshooting declines gets complicated with multiple parties involved. How does Gr4vy handle this?

Zubin: Providing transparent data and actionable insights is key. We're early in this journey but aim to offer self-service capabilities for merchants to diagnose and manage complexities directly, minimizing finger-pointing and resolving issues seamlessly.

Nikita: Thank you, Zubin. Let's switch gears and talk about the industry. Some vendors claim we're moving to a new era of open payments where merchants have more control. Do you see this happening?

Zubin: Yes, the trend of merchants seeking control and choosing best-in-class providers is evident. This unbundling trend means increased flexibility and orchestration players like Gr4vy are addressing this need.

Nikita: What's the biggest problem or blocker limiting payments industry improvements?

Zubin: The industry faces complexity due to global market exposure and varied consumer needs. Managing this complexity effectively and innovatively is the biggest challenge and opportunity.

Nikita: What's the most practical yet impactful advice you can give merchants for the biggest bang for their buck?

Zubin: Go back to basics. Understand your baseline metrics and prioritize low-hanging fruits based on resources and capabilities. Not every solution fits all; tailoring based on your specific business needs ensures the best outcomes.

Nikita: Thank you so much, Zubin. It's been an absolute pleasure. I hope our listeners enjoy this conversation as much as I did.

Zubin: Thank you, Nikita. I appreciate the opportunity to share this discussion with a broader audience.

Anta provides actionable insights on optimizing authorization rates, reducing costs, and minimizing involuntary churn. He also explores the future of payment technologies and the importance of viewing payments as a revenue driver rather than just a cost center.

Interview callouts

Understanding Payment Metrics

Anta highlights the complexity involved in tracking payments metrics – it's not just about a couple of numbers, but a comprehensive view that varies based on industry type, transaction volume, and geographical presence.

Key metrics include authorization rates, decline reasons, and cost of accepting payments. Particularly for e-commerce businesses, customer drop-offs and decline codes are critical metrics, while subscription companies focus on churn rates and retry strategies.

Challenges in Payment Tracking

One significant challenge mentioned is the lack of standardization in payment reporting across different service providers. This inconsistency requires merchants to build substantial internal data and developer teams to clean, standardize, and derive actionable insights from the data.

Anta emphasizes the necessity for merchants to take proactive measures, exploring options with current payment service providers to leverage all available information and improve payment performance.

Optimizing Through Payment Experiments

A/B testing in payments is a common recommendation, albeit a challenging one due to the operational and integration requirements involved. However, by identifying areas of underperformance with current providers, merchants can strategically choose new providers or improve existing processes.

Successful experiments have led to improvements in retry strategies, fraud reduction, and cost optimization by addressing decline reasons with more targeted responses.

The Promise of Gen AI and Future Innovations

The advent of Gen AI presents exciting opportunities for payments analysis, although Anta suggests that the industry is about 70-80% there. Prediction and solution models for fine-tuning payment strategies are still evolving. However, ongoing advancements in AI are expected to facilitate more proactive and precise interventions, significantly enhancing payment reliability and efficiency.

The Role of Merchant Mentality and Regulation

A key insight is the mindset shift required for merchants to view payments as a revenue driver rather than just a cost center. This perspective opens up opportunities to optimize transactions, improve metrics, and ultimately increase revenue. Furthermore, regulation and global expansion bring additional layers of complexity and opportunity, requiring merchants to stay informed and compliant while capitalizing on emerging payment strategies.

Final Thoughts

Anta concludes by encouraging merchants to engage with their payment data actively – extracting value from existing integrations and enhancing them where necessary—to improve performance and profitability. As the payments landscape continues to evolve with technology and regulation, staying informed and adaptable remains crucial.

For a deeper dive into these insights, the full conversation with Anta, full of practical examples and advice, is accessible through his LinkedIn or via direct contact.

Interview Timestamps

00:00 Introduction to Payment Success Rates

00:20 Actionable Insights from Payment Data

00:52 Guest Introduction: CEO of InEye

01:56 Key Payment Metrics for Merchants

04:32 Metrics for Different Business Models

08:55 Challenges in Payment Performance Tracking

11:20 The Role of Data in Payment Optimization

18:32 A/B Testing and Orchestration in Payments

25:15 Future of Payments: AI and Account-to-Account

33:19 Common Advice for Merchants

37:31 Conclusion and Contact Information

I always wanted to speak to someone who had already achieved some significant scale and success while operating in these markets. This is why, for today's interview, our guest is Alina Zavorokhina, who is the Head of Product and Business at inDrive Money. If you are not familiar with inDrive, inDrive is a global mobility and urban services platform.

In today's conversation, we'll be taking a deep dive into some specific and unique challenges that inDrive navigates while processing payments across the geographies they operate in. We'll also discuss inDrive’s innovative financial services offerings.

Can you give us a high-level description of what inDrive is and what role payments play in inDrive's success?

I think that actually not so many people know about inDrive, because usually when I travel somewhere, for example, to Europe or the US, everybody asks me, "inDrive? So what is it?" We are a mobility company. We run an app that allows users to hail rides, order courier or cargo deliveries, and we primarily operate in emerging and developing markets. And that's also kind of our mission. We know that in developed countries, there are already so many services, and there is no challenge, you know, just to order a taxi or, for example, order some food. But in developing countries, the challenge lies in how to provide these services to a wider population and do so on equitable terms.

inDrive is originally from a city called Yakutsk, which is the coldest city in the world. The origin story is that one day the temperature dropped to negative 40, and there was actually a problem ordering a regular taxi because taxi operators doubled their prices, and many were stranded in the cold and could not get where they were going. That’s when one of our colleagues, who still works at inDrive, created a social media group to connect people. So, if, for example, you wanted to go somewhere and you had some space in your car, you could pick up this person and go somewhere together. And that's actually how inDrive, with the 48 countries where we operate now, was born.

Regarding payments, that's a super interesting topic. If you order a car with inDrive, you, as a passenger, usually pay directly to your driver. In most cases, inDrive does not handle this transaction. Usually, people pay cash, as we know that cash is still the most used form of payment in many countries where we operate. They can also just transfer money online to the driver's bank account or pay with any popular electronic wallet available in the country. That’s how we can provide freedom to both drivers and passengers, as they actually decide both the price and the method of payment.

You mentioned that inDrive operates in emerging markets. So I would imagine there are lots of interesting challenges. Can you tell me a little bit more about your payment strategy in these markets and what's your recipe for success in accepting payments in all these different countries?

The main challenge is providing the most convenient payment methods for our users, and understanding what those methods will be in all of the countries where we operate and then keeping them stable. We do have a kind of internal wallet, and if you are a driver, you need to top up this wallet in advance to be able to later get some orders from passengers. We, as inDrive, will charge a commission from this wallet at the end of the ride. The commission is not high; usually, we charge just around ten percent, while, for example, our competitors may charge up to 50% of the transaction. And that means also for us that we can't afford a high commission when we pay for payments from providers.

The challenge is finding payment providers that allow us to offer convenient payment methods to drivers while maintaining low commissions. Drivers usually top up their wallets at the beginning of their day. They may have a bank card, but usually, they have cash. That means for us that we also need to provide cash payment methods for them. As a result, we have different payment methods and partners in all of the countries and also manage the commission to keep it at the same 10% level everywhere.

Global payment methods like Visa, MasterCard, and PayPal are all trying to cover as many markets as possible. But local payment methods are also very popular. What trends do you see? Do you see that domestic payment methods are growing even faster?

Definitely, we have different scenarios in different countries, but I think in general we have 30% of transactions made by a bank card like Visa or MasterCard, 30% in cash, and 30% by some local payment methods. But there are some differences. For example, Mexico is one of our biggest markets, but the payment trends there differ from what we see in other LATAM countries. Despite efforts to introduce local payment methods (SPEI, CoDi), they haven't gained significant traction yet. Instead, Mexico seems to be following a similar path to the US, where cards gain popularity. But when we, for example, go to Brazil, there is PIX, which is already a world-known success. They provided the payment rails so that with PIX, you can transfer money instantly from one bank account to another in one second without any additional commission for the people making the transaction. And in Brazil, 90 percent of our drivers top up their wallets with PIX.

So, there are many cases in the world, and definitely, local payment methods are booming, but it also depends on the government strategy and how they help local payment methods grow.

You mentioned that the payment landscape in emerging markets is very fragmented, and you need many providers. Are there any other challenges you're facing when operating in these emerging markets from a payments perspective?

I think stability is also a problem. To ensure payments are consistently available for our drivers without interruptions, we always need strong backup options. For example, last year, we had a big project building backups in different countries for other payment providers and payment methods.

Another thing that we're doing is integrating with payment orchestrators, which help us manage the payment flows between different providers and methods. I may say that it's a real success case for us because we’ve managed to reduce costs significantly while improving the product funnel, leading to a much better user experience and more efficient payment processing overall.

When you talk about the savings opportunity, do you mean mostly on the fees that payment orchestrators allow you to route transactions more efficiently, or do you mean more on the integration side that they can save you hours of work in building integrations with different gateways?

Actually, that's a good question because as of now we calculated only the savings on the cost for the fees, but I like your idea to also calculate the savings on the integration side. I think we did save on the integration because usually, they provide the payment methods included. We still need to, for example, sign contracts with the payment providers, but regarding the integration, it's already included.

You said that inDrive treats drivers as entrepreneurs, and I believe you recently launched a couple of new products for drivers on the fintech side. Can you tell us a little bit more about these products?

Two years ago, we created an internal startup, now called inDrive.Money, and the aim of this team was to find out what kind of financial products we may provide to our millions of users. We found that there are no big challenges among our passengers and there are many other financial products in the market they can use. But there is a huge injustice when we speak about drivers. These are people who work for themselves as gig-economy workers. They choose to spend their time, energy, and car earning money for themselves and their families, and usually, they work with some platforms, and they earn enough. But usually, traditional banks and financial organizations don't know about this income, and even if they do, they don't find it valid and reliable enough to provide any financial services to drivers, such as loans or credits. We spent one month traveling across Latin America, talking with our drivers, and we found how difficult it is for them to get credit when they need it.

When they go to the bank asking for a loan, they get declined, and they need to go to microfinancial organizations that don't decline but provide inadequate interest rates. It's just impossible for them to pay on time, and in the end, they ruin their credit history. That's super sad, listening to these stories.

And what we did was the launch of a new product – cash loans for the drivers. The advantage is that we know how much they earn, and there is no other company in the world that knows that as well as inDrive. We then partner with a financial institution that scores the data and provides the loans, and we enable the whole process for drivers through our inDrive app. That's how we built a credit product customized for them. Drivers loan the exact amount of money with an adequate interest rate so that they can get cash, pay for whatever they want, and then repay the loan by continuing to make rides with us. We not only provide the cash, but we also help them repay the loan on time thanks to seamless integration of repayment into the inDrive app. This is the exact moment when they build their credit history for the future. That's how, in the future, they can get a loan for a car or a bigger amount of money.

We launched this product last year. First, we launched in Mexico, then we scaled to Colombia, and now we have two more countries to launch this year.

So, I would imagine if you're scaling this product, you consider it a success. Do you measure success for this? Is it more about the value you bring to your drivers and increasing the value of your platform, or do you also see this as a revenue opportunity for inDrive?

Actually, both. When we started this project, we were focusing on the users. That's how we found this issue, that's how we found the partner who helped us build this customized product. It was just a test. First, we tested the demand. Then, we found that, first, our drivers love this product. We did NPS surveys, and we know that the probability that they will recommend this product to their friends and colleagues is 75%, which is amazing for a credit product. Second, we know that the drivers who took a loan started making more rides with us, which is exactly the benefit for the main business because that's how we increase loyalty and retention. Drivers trust us, and they see that we trust them too, which makes our connection with them even stronger. And number three, we also earn on that. We earn some revenue share. That's why I would say it's definitely a success because all of the three stakeholders – users, the main ride-hailing business, and us as a financial startup – all have some success here.

Yeah, that's great to hear. You mentioned that you also help drivers repay the loan. So, I would imagine that's how this financial product is integrated with the global inDrive system and platform. Can you tell me a little more about how you actually help them do this, and what's the experience like?

The magic here is that we just added an additional commission for them as a repayment for the loan. As I mentioned, we charge a commission as a fee for using the inDrive app, and now we’ve included an extra, small percentage after the ride is completed specifically for loan repayment. That means that drivers still need to top up the wallet, but then, when the ride is finished, they pay the commission for inDrive and also pay for the loan repayment. In the end, we found that drivers were pretty happy with that. One of the reasons why they said they would recommend this product to their friends and colleagues was the repayment with rides. From their perspective, they don’t need to do anything additional to repay the loan. For them, it's all about convenience and building their credit history, as people in Mexico, for example, understand how important that is for their future.

What are your expansion plans with this product? You mentioned that you are in several countries right now. Are you planning to expand to other countries where you operate, or are you planning to add new features to this product?

We plan to scale to more countries. I think this year we will end up in four countries, and during the next year, we plan to launch in an extra four to six countries. That takes time. Every country has a legal scheme that we need to research. An additional integration is sometimes required if we work with a new partner there.

We definitely want to test more ideas about this credit product and repayment with rides. It looks like there is a huge need for credit products among people working in the gig economy, and this repayment with rides is a super convenient method of payment. We also consider some tests with passengers.

When you said the product for riders, do you mean financing for their rides, like "buy now, pay later," or do you mean just if they need to buy something outside of the platform and there will be some sort of financing?

I think we will explore and test different options. Riders trust inDrive, and that's a really nice opportunity for us to test what kind of financial products we can provide to them. Regarding "buy now, pay later" or "ride now, pay later," there's a nice case in India. There's a taxi company called Ola, and they have this "ride now, pay later" feature. Based on comments in the market, that's a pretty interesting idea. I know that Uber also launched this "ride now, pay later" feature in Europe. That's something we want to test first.

Let's talk about the future of payments for inDrive and the future of fintech products. How do you see payments evolving in the next three to five years? Do you see it more on the expansion side, or are you planning any new features on your product for customers?

I think we will discover some methods for how we can still provide online payments for passengers. If we want to gain a new audience, we need to solve this issue with the costs and the convenience of payments.

One idea we have is to keep this convenience of payment directly to drivers but simplify the user experience. For example, enable drivers to suggest the payment methods they want to get payments from passengers. For passengers, automatically provide drivers’ credentials for quick payment through bank services – usually, it's a phone number or a special code when we talk about PIX in Brazil. Another option is payment links. Whatever it is, it is still about connecting passengers and drivers directly, keeping the costs as low as we can, and making the payment process a bit simpler for riders.

The payments industry is more competitive than ever, with merchants taking advantage of the many providers available to get better deals. For payment providers relying only on transaction fees is not enough – they need to offer more services to keep growing.

Stripe has turned itself into the “Amazon of payments” by adding extra services like Connect, Radar, Taxes, Billing, Treasury, Atlas, Issuing, and others. These tools help merchants handle their payments and business needs all in one place.

When was introduced, Stripe Billing was seen as missing some features, but it has improved into a strong solution that now competes with established platforms like Chargebee and Recurly.

Stripe has even created tools to make it easier for businesses to switch from other billing systems.

Stripe Billing vs Competitors

But why haven’t all merchants switched to Stripe Billing? The answer is payment orchestration.

Standalone billing platforms like Zuora, Chargebee, and Recurly, traditionally have payment orchestration modules. This modules allow merchants to use multiple payment providers and optimize transaction success based on routing strategies like geography, currency, volume, card type or others.

Stripe’s answer to this challenge is the Forward API, the tool that lets merchants use Stripe as a vault while sending transactions to other providers like Adyen, Braintree or others.

So what is a blocker?

While Forward API sounds great, it is currently supports only card payments. PayPal is one of the most popular payment methods in the US and they do not let third-party providers, including Stripe, to process PayPal or Venmo payments for US merchants. To accept PayPal, merchants have to work directly with PayPal through PPCP or Braintree.

This forces merchants to make a choice:

• Use Stripe Billing and Forward API for card payments, without accepting PayPal

• Use a 3rd party billing system and manage multiple vendors

• Build own billing solution

What’s next

Stripe is heavily investing in improving the Forward API to handle more payment types, better integrations, and additional providers. Stripe also trying to turn the table by introducing its own proprietary wallet, Stripe Link (see my LI post).

If PayPal opens up its system or Stripe finds a solution, it could significantly boost Stripe’s Billing growth.

For merchants, the takeaway is clear: build a payments strategy that balances your business needs and customer experience while considering the strengths and limitations of each platform.

Jenna shares her insights on the high costs of credit card processing for merchants, the importance of payment orchestration, and the strategies for reducing payment processing costs.

She also explores the potential of generative AI in the payment sector, the rising role of payment consultants, and practical advice for subscription merchants looking to retain and grow their customer base.

The conversation touches on various aspects of the industry, including the adoption of alternative payment methods and the future of payment optimization.

Some of the Jenna’s quotes

• Usage billing: “ Netflix would have never taken off if you were billed for every show you watched, right? The whole point of it is you pay, you get as much as you want. “

• Local payment methods: “They (merchant) were noticing they were not having the conversion that they wanted at checkout and they couldn't understand it at first.

  They thought, well, maybe our offerings not great. Maybe our pricing's not right. But as we kind of dug into the data, what we realized is. They just weren't offering the right payment method.”

• Preferred payment methods: “ I have daughters in their 20s and they use Apple Pay everywhere. That's just how they transact when they're at point of sale, when they're online. It's like, if they don't take Apple Pay, then they're probably not going to buy it.”

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How to find us

• Nikita Skitev: linkedin.com/in/nikitaskitev

• Jenna Wyer: linkedin.com/in/jennawyer

• Jenna’s website: jennawyer.com

• Payments Strategist: linkedin.com/company/paymentsstrategist

Time stamps

00:38 Meet Jenna Wyer: FinTech Veteran and Innovator

01:56 Trends and Observations from Money 2020

03:01 The Challenge of Credit Card Fees

03:39 Account-to-Account Payments: The Future?

06:46 The State of Subscription Businesses

08:33 The Impact of COVID on Subscriptions

12:50 Usage-Based Billing: Pros and Cons

14:15 Cross-Border Payments: Challenges and Strategies

20:43 The Importance of Payment Orchestration

25:59 Stripe's Forward API and Enterprise Focus

28:15 Generative AI in Payments

32:55 Strategies to Reduce Payment Processing Costs

36:11 The Rise of Payment Consultants

43:10 Challenges in the Payments Industry

46:13 How to contact Jenna Wyer

In Payments News Weekly, I read all the payments news and summarize them in one weekly email so you don’t have to.

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If you’re not a subscriber, here’s what you missed in:

• Inside Wise: Cutting Costs and Innovating Payments

• 12 Ways To Optimize Your Payment Processing Costs

Fiserv expanding embedded finance capabilities in Canada by acquiring Payfare

What happened

Fiserv, a leading global provider of payments and financial services technology, has announced its acquisition of Payfare, a Canadian company specializing in earned wage access (EWA) solutions for gig economy workers. The deal is valued at approximately $140 million USD. 

These addition is expected to strengthen Fiserv’s solutions in embedded banking, payments, and lending, particularly for large enterprises and financial institutions. 

Source: Paymentsjournal

What does it mean

Embedded financial services is definitely a hot topic this days. Customers expect to see financial services in place they operate and not to switch to other platforms.

To make financial services successful the key is to provide great customer experience by smoothly integrating it with a platform.

It is ‘exciting Time' for pay by bank and open banking thinks Trustly CPO

What happened

Trustly’s Chief Product Officer, Adam D’arcy, describes the current period as an “exciting time” for the adoption of pay-by-bank technology.

While open banking has gained traction in regions like the United Kingdom and Hong Kong, the United States is beginning to embrace its potential.

Source: PYMNTS

What does it mean

Many expert I was speaking to emphasizes that user experience is what pausing the pay by bank adoption.

Solutions like Apple Pay, Shop Pay, Stripe Link provide the level of confidence and convenience.

I think there should be a significant shift in the industry for pay by bank to expand to a new level. For example if Apple Pay will add pay by bank as a payment method.

There also a need for a customer incentive similar to cards which is absent these days. Customers typically earn 1-5% cashback or miles back on every card purchase.

There are no incentives with pay by bank.

WhatsApp continues their payments expansion in India

What happened

The peer-to-peer payments service integrated within the WhatsApp messaging platform, is now available to all users in India. This expansion follows the National Payments Corporation of India’s (NPCI) decision to remove the previous user cap, which had limited the service to 100 million users. With this change, WhatsApp’s entire Indian user base, estimated at over 500 million, can now access and utilize the payments feature.

Launched in 2020, WhatsApp Pay operates on India’s Unified Payments Interface (UPI), enabling users to send money directly to their contacts from within the app.

This development positions WhatsApp Pay as a significant player in India’s digital payments landscape, offering a convenient and widely accessible option for seamless money transfers among users nationwide.

Source: Finextra

What does it mean

Is WhatsApp becoming a super app? Yes!

WhatsApp payments are also integrated with WhatsApp Business allowing businesses to manage payments together with messages.

This is also a great example of utilizing UPI payment method in India.

I am very curious with WhatsApp expansion to other markets.

X CEO confirming plans to launch payments in 2025

What happened

X announced plans for a payment system called X Money, aiming to enhance user connections on the platform. CEO Linda Yaccarino highlighted the transformative potential of this initiative.

What does it mean

I think an approach of adding payments to the platform doesn’t necessarily result in user adoption.

Personally I still don’t see a use case for payments or money transfers on X in the US. If it is going to compete with Zelle, Venmo, CashApp, what are X’s advantages for customers? Happy to be wrong on this one.

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Thank you for reading!

– Nikita

Expansion Strategy

You’ve already covered many countries. Is your strategy to expand into more regions or deepen your presence in existing ones?

"We currently support more than 40 currencies across over 160 countries," Balázs explained. "For example, the EU has one currency but spans multiple countries. It’s important to differentiate between supporting pay-ins and pay-outs, as they’re not the same. Our priority is to offer both in the regions where we operate."

Wise’s strategy focuses on investing in low-cost, high-quality payment infrastructure. While new markets like the UK and Australia are on the radar, they remain committed to enhancing their operations in existing regions.

"Take England, for example – we gained direct access to the UK Faster Payments System in 2016. This step allowed us to save 20% on fees, and those savings were passed directly to our customers through lower fees," Balázs shared. "Instant payments are also a key focus, as they’re highly valued by customers. We’ve seen significant traction wherever we enable this feature."

Managing Market Depth

How do you manage to establish such a strong presence in each market?

"Wise holds 65 licenses globally, making us one of the most regulated companies in the payments industry," Balázs said. "Compliance is critical. We proactively engage with regulators and aim for complete transparency. This approach fosters trust and collaboration."

By maintaining strong relationships with regulators, Wise ensures its operations remain compliant while delivering high-quality services.

Tackling Fraud

Payments often come with fraud risks. How does Wise handle this?

"Fraud management is a major investment area for us," Balázs emphasized. "We’ve hired hundreds of engineers and developed advanced machine-learning models to combat fraud. Additionally, we work with third-party providers to bolster our defenses."

Wise employs a global fraud detection model, analyzing data to stay ahead of fraudulent activity. "Compliance and fraud prevention go hand in hand. We thoroughly investigate every fraud case to learn and adapt," he added.

Supporting Local Payment Methods

How important is it for Wise to support local payment methods like FedNow or PIX?

"It’s incredibly important," Balázs said. "Customers value the convenience of using local payment methods, and it allows them to choose options they’re most comfortable with."

Wise prioritizes integrating alternative local payment methods to enhance the user experience. "While not all payment networks are open for integration, we actively work with those that are."

Introducing Invoice Solutions

Wise recently launched an invoicing solution for customers. Can you share more about it?

"This is part of our broader strategy," Balázs explained. "Wise is already a great partner for accepting payments due to our low fees. We’ve designed the invoicing solution to be simple and intuitive, which has made it popular among international business owners."

The platform simplifies accepting international invoices, particularly for businesses operating across multiple regions. "For example, if you have businesses in Germany and the U.S., our platform allows seamless international transactions. Features like auto-conversion rules for currencies and interest-earning capabilities across multiple currencies are unique value propositions."

Driving Payment Improvements

What initiatives are you pursuing to further improve payments?

"One of our main goals is investing in more direct integrations with payment networks to lower fees," Balázs said. "We’ve also heavily invested in internal machine-learning tools to streamline payment operations, reducing costs and, ultimately, fees for customers."

Wise remains committed to creating more efficient payment systems that benefit users worldwide. "Operational efficiency and customer affordability drive everything we do," Balázs concluded.

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• Pagos Copilot: Your Payment Analytics Assistant

• Apple required Patreon to use Apple In-App Purchase. Do you have to enable IAP too?

For example, reducing checkout friction could potentially lead to an increase in payment fraud.

That's why it's essential to take a step back and consider the bigger picture by developing a Payments Strategy.

A Payments Strategy is a comprehensive plan that addresses all aspects of payment processing. Typically, a Payments Strategy includes various payment processes.
Here are 10 key components that your payments strategy may include:

1. Checkout flow and user experience

2. Geo strategy and specifics of the local markets

3. Payment methods and supported platforms

4. Vendor management and payment partnerships

5. Compliance and payment regulations

6. Fraud and trust and safety

7. Payment Intelligence, monitoring, and insights

8. Operational processes

9. Accounting and reporting

10. Other components specific to the business model

In the future posts we will discuss each of the components listed above.

In Payments Weekly, I cover the latest news in the payments industry. If you’re not a subscriber, here’s what you missed this month:

• 12 Ways To Optimize Your Payment Processing Costs

• Why Zuora integrated with EBANX in 2024

• Pagos Copilot: Your Payment Analytics Assistant

What's happening

Starting November 2024 Apple is requiring Patreon to use Apple In-App Purchase for creator subscription billing. Let’s discuss what is happening in the Apple In Purchase space and how merchants should identify if they have to use IAP for their apps.

While this demand seems unexpected it is unclear why Patreon was allowed to use direct payments in the first place. Today if any Patreon users create their own iOS application with exclusive content, they will have to use IAP for subscription billing.

To resolve the case Patreon is going to offer two options to its creators. Either creators will pay an extra 30% to existing Patreon fees of 5%-12% or creators will increase the price for their customers.

Patreon did not disclose the number of subscribers from the iOS ecosystem or whether Patreon is contesting this decision with Apple. Patreon’s CEO explained the situation and guided their creators community on how to adapt to the current situation in the Youtube video.

Bigger picture*

Apple IAP rules are not always crystal clear. Online services have to use IAP for in-app currency purchases, in game items, digital content, and many more. However the rules do not define all the potential cases. In addition, Apple changes their rules from time to time.

Some read that the IAP is not required if the digital service (not digital content) is also provided outside of the iOS ecosystem.

How industry reacts to IAP

Not everyone is ready to share their revenue with Apple. For example, Netflix and Spotify do not use the IAP in their apps. Customers need to jump through the hoops (go to mobile web) to subscribe to their services.

There are some other notable cases where Apple has faced strong pushback regarding its fees from the industry.

Epic Games

• Why Epic’s lawsuit against Apple just won’t quit

"As a reminder, this whole case got started when Epic challenged Apple’s up to 30 percent fees to developers for in-app purchases through a splashy campaign where it basically ignored Apple’s App Store guidelines and put in its own mobile payment processing system in its popular game Fortnite. ... Ultimately, Gonzalez Rogers found that Epic did breach its contract with Apple with its stunt and ordered it to pay Apple 30 percent of the revenue collected through its outside payment system — about $3.5 million."

Though Apple won on most counts, Gonzalez Rogers also ordered the company to allow developers to use other purchase mechanisms besides Apple’s for in-app purchases."

37Signals (Basecamp, HEY)

• Apple vs. HEY, antitrust, and monopoly June 16th, 2020

• Our CEO’s take on Apple’s App Store payment policies | HEY (June 19, 2020)

• Apple, HEY, and the path forward June 22, 2020

“You can no longer help the customer who’s buying your product with the following requests: Refunds, credit card changes, discounts, trial extensions, hardship exceptions, comps, partial payments, non-profit discounts, educational discounts, downtime credits, tax exceptions, etc. You can’t control any of this when you charge your customers through Apple’s platform. So now you’re forced to sell a product - with your name and reputation on it - to your customers, yet you are helpless and unable to help them if they need a hand with any of the above.”

Spotify

Spotify was one of the first companies who were unhappy with the 30% rule. Spotify created a dedicated website about their relationships with Apple.

• Spotify files antitrust complaint over ‘Apple tax’ - The Verge - May 2019

• Spotify, Epic, Tile, Match, and more are rallying developers against Apple’s App Store policies - The Verge September 2020

“The Coalition for App Fairness cites three main issues of contention: Apple’s 30 percent cut of any payments sold through the store, the lack of any other competitive options for app distribution on iOS, and a claim that Apple uses its control over iOS to favor its own services”

What’s next

I do not expect that Apple is going to change their policy anytime soon and we can expect other players raising the concern about 30% fees.

Other good reads this week

• Klarna introduce balance and cashback new features (thepaypers)

• How Adyen does AI (Adyen Medium)

• Adyen confident in H2 success as multiple partnerships reap dividends (paymentexpert)

• Zip’s one-click BNPL payment method integrated into Stripe (paymentexpert)

Disclaimer

*This article is not a legal or financial advice. If you need to determine whether your app needs to use IAP or not, it is good idea to find professional legal advice.

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Many consider 2024 to be a second year of efficiency. What can you do to be more efficient than reducing your payment processing costs? This week in the Payments Weekly I outlined 12 methods to reduce processing costs through partnerships or new payment capabilities.

1. Review all items in your bill

Stripe, Adyen, Braintree, Checkout.com, and other payment providers offer additional payment services. A single provider can offer solutions for invoicing, anti-fraud, payouts, and many other auxiliary payment services.

These services come with a cost. Look at your bill and identify if you pay for services you don't use or if you are paying too much.

2. Consider interchange+

Image source: Adyen.com

There are two models of how payment service providers charge for their services: blended or interchange+.

• In the blended model, the payment service provider takes on all the costs and charges a flat price per transaction. For example, Stripe's blended rate is 2.9% + 30 cents.

• In the interchange+ model provider will transfer all the transaction costs to you and add their fee. The interchange+ model is more transparent and generally significantly cheaper. Providers often offer the Interchange+ model to merchants with certain existing processing volume.

3. Receive new offers

Now might be a good time to explore what other payment providers can offer. You can quickly receive offers from multiple payment providers to compare how good is your existing contract.

Keep in mind, that there are numerous payment fees, and payment providers have different pricing structures. It's important to thoroughly review all the fees when comparing offers.

4. Enable multiple vendors

Consider enabling multiple payment providers. There are different strategies for how a multi-vendor system can work to your benefit. It could be more beneficial to route different transactions to specific providers based on transaction amount, country, payment method, and customer segment.

To simplify the process of implementing multiple gateways, consider integrating through a payment vault or using payment orchestration platforms such as Spreedly, Gr4vy, VGS, and others.

5. Consider exclusivity

While it is possible to work with multiple payment providers simultaneously, some payment providers prefer exclusive relationships. If you process payments with one provider exclusively, you may be eligible for significant discounts. There are usually no restrictions on using backup providers or providers for specific payment methods.

6. Expand partnership

If you operate a marketplace or a software platform, you can explore various partnership and revenue-sharing models. Under this model, you will receive compensation for generating more business for your payment provider.

7. Enable card network incentives

Some card schemes offer incentives in the form of discounts. Adopting new technologies fast can help you reduce interchange. Contact your payment provider and ask for more possibilities to adopt new technologies.

8. Enable alternative payment methods

If you process high-amount transactions consider enabling payment methods with lower fees like bank transfers, ACH, SEPA, or payment vouchers.

Some new providers can help you enable bank transfers with a 21st-century customer experience like volt.io, Trustly, or Link.

9. Update your technical integration

Please ensure that you provide all the necessary information to your payment provider. The interchange fee may be lower if the issuing bank receives additional information about the customer. For example, to qualify for a Level-2 data discount, you are required to provide the zip code along with other supplementary information.

10. Enable authorize and capture

In the e-commerce industry, it's common for orders to be canceled. If you accept payment at the time the order is placed, you pay processing fees for both the payment and any subsequent refund.

One way to mitigate these costs is to separate the authorization and capture steps. You can authorize the payment when the order is placed but only capture the funds when the order is shipped. This means that if an order is canceled, you would simply cancel the authorization, incurring a lower cost compared to processing a refund, which involves higher fees.

11. Combine small payments

If your business accepts micro-payments (payments $1, $2), you may be incurring significant fees per transaction. Most payment processing companies charge both a percentage of the transaction amount and a fixed fee. For instance, if you pay 2.9% and a 30-cent fee on a $2 transaction, the fees would amount to 36 cents, which is a substantial portion of the payment.

There are various techniques to mitigate fees for micro-payments, such as offering packages of items (e.g., a pack of 10 for $20) or providing a wallet feature that allows customers to top up their accounts with a larger preset amount.

12. Enable local acquiring

When selling to customers located outside of your business location, you'll likely be processing cross-border transactions. There are several strategies you can use to minimize the fees associated with international payments:

• Selling in the local currency can help you avoid currency conversion fees.

• Accepting payments through a local business entity allows for domestic transactions without incurring cross-border fees.

Feel free to use this post as a starting point for creating your processing fee optimization checklist and let me know about optimization methods I didn't include.

Other great reads this week:

• Processing Fees, Not Interchange, Are the Cost Merchants Should Combat, Some Say [digitaltransactions]

• Checkout.com partners with Google Pay for authentication integration [thepaypers]

• PayPal launches Fastlane for quick checkout [paypal]