• James Booth, VP – Head of Partnerships, EMEA at PPRO
• Nick Fryer, Chief Technology Officer at Dojo
• Erika Wool, Head of Payments & Commerce Partnerships at Stripe
• Mitch Trehan, Head of Compliance and MRLO at Banking Circle
• Mélisande Maul, Managing Director, Founder, and Publisher at The Paypers [moderator]

Transcript

Russell Goldsmith [00:00:05] Welcome to the Knowledge Circle podcast from Banking Circle. My name is Russell Goldsmith, and, in this episode, we’ll hear the highlights from our recent webinar on whether collaboration can help payment providers meet merchants’ payment expectations. Our guests were James Booth, VP – Head of Partnerships, EMEA at PPRO, Nick Fryer, Chief Technology Officer at Dojo, Erika Wool,

Head of Payments & Commerce Partnerships at Stripe, and Mitch Trehan, Head of Compliance and MRLO at Banking Circle. Our host was Melisande Mual, Publisher and Managing Director at The Paypers, who we’ll hear from first.

Melisande Mual [00:00:40] Nowadays, businesses still face challenges in accepting and making payments. They lack access to payment solutions that make it easy for them to serve different geographies and accept different currencies. Today, we will discuss recent market research and insight on merchants’ current expectations of their payment providers, and we will discuss the role of collaboration with payment infrastructure providers to improve the experience and accessibility for all participants. So, stay tuned and learn more about what merchants expect from their payment partners and how to prioritise your product roadmap, the value of collaboration with payment infrastructure companies to better serve your customers and what it takes to set up successful partnerships, and we will discuss a future outlook on partnerships in the payment space. And I would like to briefly introduce the four of you, starting with Mitch. So, Mitch is Head of Compliance and Money Laundering Officer at Banking Circle and a public speaker. Mitch started his career at the Royal Air Force, training as a pilot before moving into financial services. He has more than 19 years of experience in corporate banking. So, Mitch, I would be really interested to learn a bit more about this rare move from the Royal Air Force to compliance. So how did that work?

Mitch: [00:02:02] It sounds like a bit of a therapy session, but let me give you the very brief, brief piece of it. I had to stop flying because of an injury and I studied law at uni. So, my first job actually ended up being in legal at Citi. And then from there, I realised I started doing roles in risk and audit and governance and then compliance. And I loved all those roles. And then eventually I realised that the one thing that I had in common with all of them is protection and defence. So, I realised that one of my core beliefs is if I care about something, I like protecting it, I like defending it. So that was sort of the evolution from Air Force to the roles I’ve had and who I am today.

Melisande: [00:02:40] It’s all about defence.

Mitch: [00:02:42] All about defence.

Melisande: [00:02:43] Thank you, Mitch. The next speaker is Erika Wool. She’s Head of Payments and Commerce Partnerships at Stripe, a company that builds economic infrastructure for the Internet. Prior to Stripe, Erika built and led the Global Partnership team for Google’s Next Billion Users Effort and previously led financial partnerships for Google Pay in Europe. So, Erika, can you tell us a bit more about the partners here in this panel you work with?

Erika: [00:03:09] Yeah, thanks so much for having me. This was a fun one to join because we actually work really, really closely with Banking Circle and PPRO, specifically Banking Circle. Mitch, I think we partnered with you guys since 2014. And we actually rely on Banking Circle for some of our core money movement across Europe. So, think pay-ins, payouts, safeguarding user funds, things that are incredibly important to Stripe’s business and to our users. And on the PPRO side, we’ve also worked together for a while, since 2015, so a few years before I joined Stripe. And we work with PPRO all over the world. So, as we’ll talk about one of the really critical things that Stripe does for our users, so the businesses that are building on Stripe merchants all over the world and actually ensure that they can reach all of the customers they want to. And that’s where PPRO has been instrumental, working with us to provide access to LPMs and ensuring that it works really well for our platform.

Melisande: [00:04:01] Great. Thank you, Erika. And the next speaker is Nick Fryer. Nick has been Chief Technology Officer at Dojo since 2015. Nick graduated the Montfort University with a computer science degree and has worked in software engineering for more than 20 years, including roles at Toyota Motors, T-Mobile, UK and Europe Office. So, Nick, for those outside the UK that might not know Dojo, can you briefly tell us a bit more about the company and the customers, the segments that you serve?

Nick: [00:04:32] Yeah. So, Dojo is very new. We’re only about two years old. Business a bit longer, we were operating under a different name. But Dojo itself is, we’re a payment processing business, a merchant acquirer. We’re a regulated entity where e-money institution regulated by the FCA and we’re scheme members, principal members of the four major card schemes. And we specialise in providing payment solutions for people with physical locations, traditionally smaller businesses, but we also go into larger chains of several hundred outlets, sometimes too. So that’s what we provide. We built this system from the ground up. It’s all native to the public cloud. We host on several public clouds, and it was built really with our customers in mind. We used to sell other products that were also good, but they were limited in some cases, and we tried to fix all those problems and that was what Dojo was. So, we had it basically building everything from scratch. It’s been loads of fun and it’s selling like hotcakes, just in the UK at the moment. So, we deploy about 10,000 terminals a month and it’s going really well, but UK at the moment. We do partner and have done for, I would say two years at least with Banking Circle, Stripe use it for core money moving, safeguarding, all that kind of stuff. We also use some of their loan offerings, some of their services to provide money to our merchants in the form of a merchant cash advance offering and also short-term loans. I mean, we can settle to our merchants sooner than most. So, yeah, it’s going well. We don’t work with PPRO yet, but as we start our foray into other nations, I suspect you’re in our future, James.

Melisande: [00:06:02] So let me introduce James. James Booth is VP Head of Partnerships EMEA at PPRO. James Booth has over ten years of experience in the financial sector, eight years of those in FinTech and in his current role as VP Head of Partnerships for EMEA, he leads the new business and partnership development teams in managing PPRO’s new and existing strategic partnerships. And Erika talked about the partnership the two of you have, Stripe and PPRO. Any other partnerships that you have with panellists here on the table?

James: [00:06:33] Yes. So, we’ve also got a partnership with Banking Circle. So, I mean, I think similar to Erika, I’m quite excited for the discussion today because I’ve got two partners in the room, one potential partner, Nick we can talk after this! But obviously, in talking about partnerships, Banking Circle one is a supplier to PPRO, very core supplier and providing many different services, virtual IBANs and various core banking services for us. With Stripe, Stripe’s a client of ours. But we take a very strong partnership approach with our clients and building joint roadmaps, really solving problems and solving joint challenges together, which is why we like to use the word partnerships. So great to have two partners on the call today.

Melisande: [00:07:17] We’ll talk more about partnerships later in the discussion. But I would like to start with basically the unmet needs or the customer needs of merchants. And before we start that, this question of what are the needs, I would like to learn a little bit more about how do you organise the feedback loops or how do you basically get input from the customers you serve into your product teams. So, Nick, could you tell us a bit more about how you organise that within Dojo? How do you get that input from these shops and restaurants that you serve, into, back into products?

Nick: [00:07:52] So as I mentioned in the intro, Dojo was born to really solve the unmet customer needs as we saw them at the time. And I think before Dojo, actually that’s not strictly true, but a large number of the face-to-face payment solutions was seen as completely commoditised. It was a blockers thing that went ‘beep’ and you got paid and we didn’t see it that way. We saw there were ways of doing a better job and our sales suggest that we were probably on the right lines, but we didn’t want to rest on our laurels. So, we want to make sure we can find out what else our customers want. So, we take this super seriously. So, we do some fairly common activities like emailing our entire base, not too often because that irritates them. But once a month they get a survey, the standard NPS questions, but also things about their sentiment, how they’re feeling about Dojo, how they’re feeling about the economy and the various things that are going on about. So, we see a reasonably low response rate, but enough to make it meaningful in terms that we get quite a lot of insights from that. We also started up a program called the Dojo Insiders that are really engaged customers that want to, they want to drive the product forward, they want to try and help. And it really surprises how many people are interested in this. It’s into several thousands now. We thought it’d stick with a few hundred. Most of them are interactive, things like Zoom, so we use them for piloting new products and getting feedback on the existing one. A lot of that kind of thing. But we also do some fairly detailed interviews with them to try and get more insight about how they’re feeling about the economy and trying to keep our finger on the pulse in terms of not just our product and what we need to provide as a business, but also how they see the wider world. So, we get a lot of valuable insight from that. And then the last thing, it’s last but not least, is we do a whole lot of physical surveys. So, we target, even though we have an omnichannel offering, we don’t go up against the likes of Stripe really. We’re trying to go after people with physical locations. So, we actually have teams of people going around interviewing customers on the street. They’re not customers. Actually, we interview every location, so we have people visiting locations on a monthly basis. We do about two or three thousand a month and we find out what supplier they have, and we also find out how they feel about their supplier. So, it’s nothing to do with Dojo. We go into everywhere and we get really great insight from that around how people feel about us, but also how they feel about the competition, our competition and some of the things they like to see differently about their suppliers. So, we put this all together and we feed that into our product management team and hopefully come up with some of the solutions to these insights.

Melisande: [00:10:24] So that’s really thorough input you’re gathering with face-to-face, with surveys, with basically old methodology that’s out there to get it in. So, I would love to know from you, Erika, you’re also working directly with merchants. How do you organise that within Stripe?

Erika: [00:10:40] So similar to what Nick was saying about Dojo, that input from merchants and from the businesses that use Stripe is really critical for shaping our product roadmap. And as James can also tell you what we ask partners to help us build and the way we do it. And we focus on it on a variety of channels. So, Stripe, this is sort of been in Stripe’s DNA for a long time. I think there are some, at least here in the US, in Silicon Valley, some well-known stories about John and Patrick Collison, the brothers that founded Stripe and the really early days, actually showing up at customers offices to help them do the first implementation of the API. And some of that still exists today. But today we’re still serving start-ups and SMBs, but we’re also serving large enterprises. And so now we have to find more channels and more ways to get feedback both on a really detailed 1-to-1 basis, but also at scale. And so, we focus on a variety of things. I mean, we’re still all over the developer-focused channels. Everything from GitHub, Hacker News. Whenever we launch something, we’re still reading those forums. Twitter, at least for now, remains a great way for us to get feedback on product launches and a way for a variety of Stripe’s to interact with merchants and users. And it’s not just, again, the start-ups that are noisy about their feedback, though they are often some of the most demanding customers. The feedback we get from SMBs, and enterprises as well, super critical and we hear through those channels kind of from everybody. And then we continue to leverage the human interaction side. So, at this stage we still have the Stripe executive team involved in a lot of our important customer relationships, whether it’s platforms like Shopify or Squarespace or Wix to the large enterprise users and big upcoming start-ups. But now we’re at a scale where we have a significant user facing salesforce, so customer success managers, etc., and they provide a critical line of sight to our product teams and engineering teams about what it is that the users of Stripe today need, and the prospects of the future also need. And so, we use all of this to shape, to shape, our roadmap. And the last thing I’ll say is that customer support tickets, that is also a meaningful source of input for Stripe. We take all of those very, very seriously. And we use that to create sets of data, looking for patterns, looking for outliers that could be the next big thing we should build or problem that we should solve for. And so that’s also a really meaningful source of input from us, for us. And that, again, comes from businesses of all shapes and sizes.

Melisande: [00:13:31] And maybe a question for you or for other panellists. Do you see differences across regions? Do you typically see that you serve a lot of customers, but do you see some countries have slightly different needs or some regions slightly different needs? Something that you’re seeing in the feedback that you’re getting?

James: [00:13:54] Yeah. I think there’s always different needs per region. You look at the world from a payment perspective, the different roadmaps, the different needs always vary. Markets are different levels of maturity. So yeah, on a higher level, yes, there are certainly different needs. I think from PPRO’s point of view, I often get jealous of companies like Dojo and Stripe who have direct access to merchants for feedback because PPRO, where we sit, we’re an indirect partner. We never work with merchants directly. That’s not our go-to market approach. Our approach is a pure partnership approach. So, feedback during QBR, feedback during regular meetings with our clients, feedback from our sales engineer, from clients, such as Stripe, is so vital for us to help us build these joint roadmaps. But yes, I would say it does differ from region to region, depending on where certain countries are in their development.

Melisande: [00:14:48] It makes perfect sense. So, thanks for your insights into these feedback loops and how you organise this and would like to talk for the next topic a bit more about what are these merchants’ needs and what is keeping them awake. And I think before we zoom into specific needs, I think it would be good to also address the current economic downturn because I’m sure that will have an impact on the merchants you serve. I mean, we’ve seen ecommerce going down, slightly, conversions going down. So, I was wondering, Erika, do you see a difference or a shift in needs of those merchants that are impacted by the economic downturn? And can you maybe give some examples on how you help them to navigate through these challenging times?

Erika: [00:15:36] Definitely. And as you pointed out, we do see e-commerce traffic on the decline, which for many merchants who just experience two years of boom times during the pandemic, it feels pretty jarring. And at the same time, for Stripe, we do have an in-person payments business, a product we call Terminal. It’s grown 2X since the start of the year. But again, many of our merchants are not selling in person and they’re not benefiting from that return to in-person life. Definitely be interested to hear what Nick has to say about how that’s looking for Dojo’s business, but for us certainly, the things that we’re all hearing in the news, cost of living, inflation rates, energy crisis, for the businesses using Stripe in EMEA, uncertainty because of war, all sorts of things. I mean, this is really creating a lot of stress for the companies and the individuals that use Stripe. And so, we’re focused on a couple of different things. And I think that regardless of, again, size or sector, I think these are pretty universal things that we’re trying to do. And the first is help these businesses operate more efficiently. So, how do you run your billing or your invoicing in a way that lets you reduce the manual hours associated with that so you can spend the time on something that’s more core to your business? How do you optimise your revenue? And this is where PPRO continues to be a critical partner, that’s really about, are you offering the right set of payment methods? Is your checkout sort of set up to be highest converting, etc.? Are there other efficiencies that we can drive that help you optimise your revenue radar, which is our fraud monitoring product, etc., really focusing on delivering more value through these things for our users and then finally adapting quickly and maintaining optionality. We can see the impact that the economic climate is having on merchants today. But we don’t have a crystal ball and we don’t know exactly what’s going to happen next. So as an API-first company, can we think about building our product roadmaps in such a way that helps people adapt really, really quickly when something happens or in advance of something happening? Do we have sort of the right thing for the right moment? And that includes being able to do that for companies that are sort of building their full stack on Stripe, coding everything themselves, to SMBs and sometimes even more sophisticated mid-market companies that want lower code solutions. So, we’re looking at the full range of those things when it comes to the adaptation and optionality side of things.

Melisande: [00:18:11] Yeah, as you mentioned, I would also be keen to learn from Nick because you’re more into the face-to-face commerce. What are you seeing in terms of the impact of these economically challenging times for the merchants you serve?

Nick: [00:18:22] Much like Erika says, our research and interviews and the like, show that our customers are particularly terrified of energy prices, but that I don’t think has quite hit yet. It’s definitely in the post, but it’s not quite hit. But they definitely know it’s coming and generally costs, everything’s going up, all the costs are skyrocketing and combined with the fact that people won’t have as much money to spend, we have an awful lot of restaurants, pubs, those kinds of things. And you can always find cheaper options than going out to eat. So, I think there’s a lot of worry. However, having said that, we’ve studied the data really closely about how much each location is trading on a month-by-month, quarter-by-quarter, or year-on-year basis. And we’re still seeing it is up year on year, but that could well be masked. So, November ‘22 is higher per location. Nothing to do with us. It’s just that business, at least through their card terminals, are transacting more than they were this time last year. But to Erika’s point, this could be more of a shift in behaviour, more than it’s showing that demand is still really strong. So it could be that the QR codes that everyone was paying in restaurants, they’re still there sometimes, but a lot of them have kind of peeled off and fallen off and they’ve gone back to the card machine. And I think the return to normal life after COVID has been really slow and drawn out. And I still think we’re still getting some kind of, well, not benefit. But the reason those numbers are probably higher than expected there’s a few probably reasons that maybe are masking potentially, I don’t know, but potentially a real drop. But it’s being masked by, and the cash to card thing as well. So COVID made a whole lot of people abandon cash and just go to card. Again, we just see the cards. We’re never going to see the cash. In our data still, things are looking like each location is still doing pretty well. But we’re keeping a very close eye on it and we’re pretty sure that something’s going to go wrong at some point. So, we’re thinking again, much like Erika was saying, around the kind of tools and services to make your business more efficient. And that’s definitely something you can do, and we’ll try to do that all along. We’re driving things like accounting systems, integration, making sure that the end of the day is pretty much automatic. You know, they don’t want to be messing around doing that when they’re trying to keep their business afloat. So things like that, we’ve already got some and we’re working on that. But beyond that, we really, you could say just lower your costs. Why don’t you halve your costs, help them out? But in reality, that would make a tiny, tiny difference. It’s probably a difference they’d welcome. But in reality, that’s not going to save anyone. We’re looking at things to try and generate demand for our customers, try and get more customers to our customers. We have a part of our business that is a queuing application that allows it in a lot of the quick service restaurants, particularly in London. So, people try and find somewhere to eat on this, on an app. It’s a consumer app, it’s about half a million active downloads and they can get onto some of the most famous restaurants in London, particularly the ones you can’t book. And then we’re starting to offer some of our other customers, they can be listed on this thing and potentially present offers to these people to try and drive some demand. So this is a very first toe in the water, but it’s an idea of trying to help our customers by getting them more revenue, that is a real way of helping them as opposed to shaving off a couple of pounds a month. That probably won’t make the difference. That’s our plan and that’s where we’re going.

Melisande: [00:21:49] So, it’s more about basically not so much about cutting costs, but more like finding ways for them to do business more efficiently and to drive demands. Makes perfect sense. So, I would like to talk a bit more about the challenges that merchants face. And Banking Circle did a recent research, where they surveyed quite a lot of merchants to ask them what are your biggest challenges and maybe Mitch you can comment a little bit on the key topics and then we can collaboratively address these topics. And let’s focus on the global enterprise merchants first.

Mitch: [00:22:22] So we sit similar to James, right, and we’re very envious of Erika and Nick. We don’t see the direct merchant. There’s always a PSP between us and the underlying merchants. So, for any data points or anything we want to get, we need to go out and do a survey. And that’s exactly what we did. We surveyed 900 online merchants, 300 from the UK, 300 in the DACH region, 300 in the Netherlands. And the noise that we’re hearing is that merchants still feel that they’re facing financial exclusion and they can’t get access to payment solutions that make it easy for them to serve the international geographies that they really want to. So that was one of the main pain points that were coming out. We mentioned earlier in the conversation about what is it that everyone wants. The same message over and over again – low cost, fast international payments, incoming and outgoing. That’s a common theme. Each market will have its own nuances to what sort of payment methodologies. But that’s the bottom line: low cost, fast, international, in and out. And then we went to the biggest pain points and wanted to know what are people really saying are their biggest pain points. For them, the key 4 that came out was security, speed of settlement, and I know Dojo you’re doing stuff to really support on that piece, but that was one of the big key concerns, security, speed of settlement, FX facilities, that makes sense when they’re talking about international markets, and service support. And that I really loved the tie in to Erika, what you were saying before, you’re looking at your customer support tickets and really doing a trend analysis on that, which I think is brilliant because the survey we did showed service support is one of the things that people are really looking at and really want and need. And, interesting, some want 24/7 support now because the way their businesses are running and they’re saying 24/7 was the poorest performing area that they see between them and other PSPs generally with 23% of respondents saying it was either poor or very poor and less than half are saying they get the help for all the countries in which they trade, which means they have to have multiple suppliers. So, from our survey, that’s the key aspects that we found.

Melisande: [00:24:36] Yeah. And let’s talk a little bit about these key topics. You mentioned cross-border payments, speed. James, what can be offered or what kind of conversations do you have to basically help merchants tackle this issue, how to increase speeds?

James: [00:24:54] It’s an ongoing challenge as well as an ongoing opportunity, I guess. I mean, through all of our partnerships and our client partnerships, yes, obviously everybody wants ubiquitous access to the most relevant payment method. They also want it in the same fashion that they do at home. A lot of these merchants, they might start small, they might start regional. And in terms of speed, settlement, time frame, kind of banking infrastructure, it’s generally within a closed-loop system. So, they get used to a certain level of performance, a certain level of speed, and as soon as they move cross-border, they expect the same conversion rates, they expect the same funding time frame, they expect the same level of service. But as soon as you move into a cross-border scenario, the complexities, they increase exponentially the further afield you go, and especially when you move into some exotic locations. So, for us, we find that’s our it’s almost the number one conversation we have with a lot of clients, is optimising the flow of funds, optimising our conversion rates, making sure clients have access to the right payment methods with the right currencies, the right funding time frame. And it’s an ongoing challenge. I mean, I think if you look at some of the more developing countries and some of the more developing corridors, we’re reaching a stage where the speed of settlements is getting much better. We’re at a, I wouldn’t say instant, but we’re getting to a stage where I can see that becoming a reality. But on a global basis, I think we’re still far away from there. So, for us, it’s really about helping our clients manage merchants’ expectations when they start moving cross-border and wanting to do international payments because there are so many different flavours of cross-border payments that it’s next to impossible today to offer ubiquitous access. So, we really have to consult with clients to help them navigate that because their expectations are quite high and it’s a difficult landscape to work in.

Melisande: [00:26:51] Yeah, thanks. And it’s not only speed, I guess it’s also cost.

Mitch: [00:26:57] Exactly.

Melisande: [00:26:58] Erika, Mitch mentioned the cost of FX. There’s the payout, getting your payouts faster. Can you elaborate a bit on what you see as sort of the challenge and how you try to, within Stripe, to basically get that cost down and what can be done?

Erika: [00:27:16] Definitely. And James also touched on some things that I wanted to mention as well. About two years ago, and he actually used the word that we like to use as well, which is ubiquity. But two years ago, we started pushing really, really hard and we worked really closely with PPRO to make this happen, to enable what we call ubiquitous access to payment methods, because it turns out that was both a conversion booster but also a way to decrease costs. And so great example of this is merchants in Hong Kong that are selling to the Netherlands. Without access to iDEAL, those transactions are going on international cards, more expensive, conversion is much lower than if you offer an ideal. And so, we wanted to really make it possible for businesses, regardless of where they are around the world, I mean, I think this is like the great promise of the Internet, to be able to sell wherever they want to sell or wherever their customer base is. And so that is one way, really unlocking access to payment methods and local payment methods is a way that can really help with costs and that does sometimes have trade-offs with speed, particularly on settlement timelines. And that’s something that Stripe has been trying to solve as well. I’ll give you one example. JCB, which is critical for merchants to be able to sell in Japan, has a 30-day payout window. That’s wild. And I think that for Stripe merchants, even really, really large ones, that can be a barrier to entry or a reason to think differently about the way you operate your business there. And so, in September, through a lot of work on the Stripe side, we were able to move from that 30-day window to a T plus four, which is still longer when you think about T plus one, instant settlement of certain payment methods and other regions. It’s still not great, but it’s a massive improvement. And the other thing that we’re able to do was be able to do payouts for all of your card payments and unified settlement. And that’s one of the things that Stripe users really, really value about the Stripe platform is that you can receive unified settlements and payouts. It makes it easier to manage your books, manage your business if you have to pay suppliers, if you have to pay, if you’re an on-demand company and you’re paying your workforce, it’s a huge benefit. But for Stripe to be able to do that, we do have to work with partners, with payment methods directly, etc. to harmonise and in some cases normalise the speed of payout. And it’s a huge challenge.

Melisande: [00:29:54] Yeah, it is. And I guess over the last two years during the pandemic, a lot of merchants expanded internationally and now there is this awareness of, oh my gosh, the cost of FX for that.

Erika: [00:30:09] That’s right. And we were talking about this a little bit earlier this week. That was a big trend that we saw businesses who shifted online during the pandemic and had no intention necessarily of being an international seller became one because thanks to the likes of PPRO and other partners, it was easy. It was possible. And as we move into more uncertain economic climates where you’re used to receiving, I mean, you are receiving pay-outs in your local currency, if you have questions about what that FX rate is or if it’s moving a lot day to day, it creates uncertainties in your business that can be really hard to manage, but you still want to reach those customers. So being able to, whether it’s the platform that you’re using, so whether you’re a Shopify seller or you’re working directly with Stripe or something, we play a really important role in helping ensure that they can run their businesses in a way that creates certainty because there are a lot of other challenging things to deal with.

Melisande: [00:31:10] Thanks, Erika. And I just wanted to turn to Nick to talk a little bit about challenges that you see, particularly in the SME segments. What underserved needs do you see that you are helping them address?

Nick: [00:31:23] SMEs, cash flow is king and cash flow problems could put people out of business really very quickly. So, we work with partners, mainly Banking Circle and others, but mainly Banking Circle, to provide not only faster settlements. So, we have the same problem Erika has. It’s not quite as complicated because we’re just in the UK, but even the schemes that work in the UK settle at different rates and you’ve got international coming at different times as domestic, blah, blah blah. So, if you impose that kind of weird staggered payout onto your customers, you’re making their life difficult. And the whole thing we’re saying is let’s make their life easy so they can concentrate on running their business. So, we pay out 10:00 every day, 365 days a year from the previous day’s takings. And so, Christmas Day you get paid. And so, I think that’s really important to our customers and I think it’s very valued by our customers to get them their cash as quickly as possible, that’s a huge thing. But we also offer really, very easily accessible, the industry call it merchant cash advance, we call it business funding. And we again, we work with Banking Circle to supply that. But we’ve been through a bit of a journey. It was put in very quickly around when COVID started hitting, but it was pretty clunky in terms of the sign up. Took a long time. Conversion wasn’t great, but we’ve done a lot of work with those guys to make that. We can basically make it one click in our native apps that the customers have. They can click a button, they’re pre-approved and they get the money pretty much straight away. And it’s affordable. It’s not free, but it’s not expensive. And so, it’s something that provides a potential lifeline to our customers that they pay back as part of their regular takings. And it’s something that provides real value and has proved very, very popular with our customers. And we get a lot of repeat business that suggest that they value it. It’s access to cash generally, get them some additional cash flow if they need it and get it to them quick. There’s probably some more unmet needs of the smaller business, but it’s mainly around getting them their cash quickly.

Melisande: [00:33:25] It’s mainly about getting cash quick, for which you basically just have this partnership with Banking Circle. So, we talked a lot about collaboration, about partnerships, basically all of your partners. But what is the definition of partnership? I mean, what means partnership for you? Mitch, how would you define it? It can be a lot of things for a lot of people.

Mitch: [00:33:46] Personally, this is what I’m seeing and hopefully people are seeing the same. Or if not, shoot me down. The word partnership is becoming a buzzword, right? Everyone loves the word partnership. Everyone’s bandying it around. You see it online and, and it means different things in very different contexts. I think the underlying heart of it all is showing that willingness to work together and wanting to work together. So, there’s an actual relationship. And I think that’s the important point for us to be focusing on here is how do you manage that relationship, whatever that relationship might be. But if we want it to be another phraseology, it’s just a supplier or a client relationship. And those, I think, are the key things that we really need to think about when we want to have a discussion on partnerships or anyone’s talking on partnerships that everyone’s on the same page about what it is that you really mean. What is the partnership? What is a supplier relationship? What is someone you’ve purchased that you’re saying, we’re going into partnership with this company, right? You know those phrases about Visa is in partnership with other companies, they just bought them. So I think it’s really key that we start realising that. And then you look at partnerships for what your underlying merchants or consumers actually want, right? So, the Monzo and Wise partnership for international payments, the Tesco and Zopa partnership for car loans, that’s where it’s not a supplier relationship. It’s people coming together to see a need and see how they can support and do something on that. So, I guess that’s really, and James, I’d love to hear your thoughts on this as well, because I know you guys use the phrase partnerships a lot as well. But as a correspondent bank, I will say this one thing, partnerships are really interesting for us, not just on the client side for our payment firms that we support, but also between ourselves and other correspondent banks. If you think about it, the other correspondent banks and ourselves are suppliers to each other,  which makes us clients to each other. We go into forums, UK finance whatever it might be with regulators, or peers, in that forum. And we’re also going after the same market segment. So, we’re competitors. And you have to manage that relationship with the other institutions that you’re a supplier, a client, a peer, and a competitor at the exact same time. So, navigating it can be difficult. That’s my take on it anyway.

Melisande: [00:36:12] And what’s your take on partnerships, James? How do you see that? How do you define?

James: [00:36:18] think I’ve got a very similar take on partnerships to Mitch.  I mean, in my world, we have suppliers and partners, and we have clients and partners. So, if I start on the on the supplier side, we’ve got some vendors who we work with where it’s a very structured approach to the relationship, we sign a contract with them. We kind of abide by, both parties are really formally structured around that contract, around the service offering, and there’s not much co-development, there’s not much partnering up. And then we’ve got some partners like Banking Circle where, yes, we’ve got a contract in place, so we’ve got strong governance around that contract. But we’re also looking to take the next step. We’re also looking to see how can we develop our products and services together. Is the mindset of the business on the same track and how can we help one another achieve our goals at the end of the day. So, I know we’ve done some joint developments with some mutual clients. Our engineering and our product team speak very often, our treasury teams have a good relationship and a good working relationship. Mitch, you mentioned the word relationship. It comes down to how you do you want to work with the people. Do you have the right culture and within the two businesses to actually mutually benefit one another? And it’s a similar story on the client side. We have some clients that just see PPRO as a vendor and they treat us as a vendor and we act very professionally with those clients and we ensure we give them the best level of service. And then we’ve got other clients who we formed real, real deep partnerships with them. And in that case, yes, we are their vendor, and we keep strong governance around the contracts we have in place with them. But we always go that step further. We want to look how can we help them solve their challenges. How can all of our clients, they’ve got strong roadmaps, they’ve got merchant challenges that they’re facing, how can we help them achieve their goals, how can we help them move into market? And even if we can’t help them move into markets, I know the relationship with Stripe, Stripe use us for certain payment methods. They’ve also got direct relationships with other payment methods, and we won’t always work with them for every payment method out there, but we’ll happily give our opinion on certain markets, on certain relationships, because we know we’ve got a joint trusted relationship that’s mutually beneficial. And if you’ve got a strong foundation, then that’s what I would call real partnership. Partnership is being used a lot, maybe relationship’s a better word to be using.

Melisande: [00:38:54] So I hear there’s trust, that there’s a strong foundation and it’s basically a common vision of the markets that you want to enter. So now we’ve got this definition a bit more clear, because we at The Paypers, we write all day, every day about partnerships when we get so many releases in our inbox about partnerships. So I was wondering, do you expect more or less partnerships in the next years to come? Will it be more? Will it be less? Or will it stay the same?

Mitch: [00:39:24] I’m happy to go first. I expect more partnerships. I really do. I think as the payment landscape is evolving, it’s becoming more fragmented, more complicated. The demands from merchants are becoming more intense. And in order to solve those demands, I don’t think anybody out there can solve all of those challenges by themselves. So, in order to do that, I think you really have to form strong partnerships and strong bonds. I think in the short term, obviously with the current economic climate, the cost of capital is increasing. Companies are going through a build or buy decision right now, and I think they are going through very important decisions around where should we deploy capital and build solutions ourselves and where should we find a strategic partner. I think no business out there is completely independent, even outside of payments. I like to use the analogy of if you’re buying a Porsche or Mercedes, they don’t even make every element. Some of the key elements of these high performance vehicles are the tyres and the brakes, and that’s through third parties, through different providers. And you’ve got to have strong partnerships because they’re very key to your solution.

Melisande: [00:40:30] Any thoughts from you Nick on partnerships because you’re the CTO, so you have a very good insight in how these partnerships works, some potential headaches. What is your take on partnerships?

Nick: [00:40:46] Yeah, no one can do everything themselves and it slows you down. If you do everything yourself it takes ages and the competition has run off into the distance. So there’s definitely, ecosystem is another buzzword that is used a lot. So you can partner with people to provide things you’re never intending on doing, HR payroll, whatever it might be your customer wants, and you can offer it through a marketplace. Everyone wants a marketplace. So there’s lots of partnership opportunities, and I think that’s where it will really boom. And I think that 95% more partnerships I suspect will be in that place. For me as the CTO, the miserable tech guy, I worry about partnerships because there’s something else to go wrong and it’s something that’s out of your control and that’s what I feel. So we work with a number of the public clouds, and the reason we work with a number of them is that we have problems with each and every one of them to the point where those problems impact our customers and sometimes pretty dramatically so depending on what that partner is providing to you, if it’s really core to your business and you need a partner, then make sure you’ve chosen that partner really, really, really carefully. And if it’s really, really important, have multiple versions. So Banking Circle are pretty core to us and we rely very heavily on them. But we have other options. If the worst happens, the worst doesn’t happen, Mitch. But the point is, if it did, we have other options. We have to have that. Otherwise, we’re putting our customers at risk. And by doing that, that’s not fair. So, I do agree that the partnerships are going to obviously, they’re going to expand, they’re going to make everyone’s life easier, but make sure they’re good partners. Otherwise, you can buy yourself a lot of trouble.

Mitch: [00:42:17] And another thing that we were saying before, it’s about making sure that relationship is a strong, actual, real relationship, which I am very pleased to say that we have across the table. And you’re all here as well with us. But Nick, disappointed that there’s other relationships. I’m emotionally hurt, but I get it, right. And that’s the right way to manage any business.

Nick: [00:42:38] You’ll get over it!

Mitch: [00:42:39] I will.

Melisande: [00:42:40] Erika, can you share some do’s and don’ts and learnings throughout your career because you’ve been in partnership for quite a long time. Things to avoid and things to really focus on?

Erika: [00:42:53] Yep, and I want to share one thing first. Melisande, when you were introducing me and mentioning what Stripe does and you used our tagline that we build economic infrastructure for the Internet, what makes it economic infrastructure is the thousands of partners we work with around the world. Without that, we’re just APIs. And so, they are pretty important to Stripe. But as Nick pointed out, when you are putting a third party in your critical path, it can be scary. And we publish our uptime. Our goal is five nines and there are times when we dip below that, that is a Stripe area, and there are times when we dip below that and it’s a partner-induced error. And so, partner selection is really, really critical. And being able to have the type of relationship with a partner where you can weather a storm if there is an issue that happens is also really, really important because we hold our partners to really, really high standards. And, luckily, many of them do deliver. In terms of, I think, lessons. I think I have also spent most of my time in partnerships in the payment space and the payments ecosystem is just so deeply interconnected. And whether it’s Stripe or Google or another fintech, to me even the most bold case where the company is like wildly successful beyond anyone’s dreams, you still need partners. And so it’s really critical to be able to build partnerships that are durable and can stand the test of time, but can also stand the test of the things that you’re going to put them through and whether that’s having high demands and needing to form or being able to tolerate when you make decisions that they may not love, whether it’s when we work with PPRO and we’re deciding are we going to work with PPRO for the expansion of this payment method or go direct? Those sometimes can be difficult conversations. I also think that there are other examples as well where you might have products that compete with some of your partners, but you still want to partner together. And so being able to build a team and build a culture that’s going to foster the types of relationships that can weather all of these challenges is probably the most important thing that I think I do for Stripe and probably many of us who work in partnerships are doing for our companies as well.

Melisande: [00:45:15] Yeah. Thank you. Thank you, Erika. We have some questions about sort of these specific challenges of merchants and also about partnerships and the best way to set that up. So, the first question is very much for Mitch and Nick. And it relates to basically the setup of speeding up and harmonising settlements in order to allow SMEs to get access to their cash faster. And if you can maybe elaborate a bit more on the concrete example of how you actually manage to achieve that.

Nick: [00:45:419] Shall I take that Mitch? At least start? So, our processing platform was designed to, I’m getting a bit technical, but the pay-out side, however much we’re going to pay out to the customer, is not directly linked to how much money we receive from the card schemes, or whichever they may be. So, if a customer processes a £1,000 on a Friday, we will pay them £1,000 first thing in the morning, Saturday morning. Job done. It just happens. So, then we will get cash from domestic cards later on that day. We will get cash from the international cards maybe another day after that. Maybe another scheme might pay later for everything. And we have to coordinate that. And if there’s a gap, if we don’t have the cash, then we have to either find it ourselves or our partners can help us in terms of short-term loans or whatever they might be. But it’s sort of solved on a technology level first and foremost. And any financial hole is supported either by our own funds or somebody like our friends, Banking Circle, providing funds for us.

Melisande: [00:47:04] And how does this look from the restaurant owner?

Nick: [00:47:08] They just know that they did £1,000 on Friday, and they get £1,000 on Saturday. It’s what you want. We want to keep it simple. They get billed at the end of the month for any fees that they’ve incurred from their services, completely disconnected. But it’s good for their accountants, their CFO, if they’ve got one, because they did £1,000, and they’ve received £1,000, and everything adds up. And that’s what they want. They don’t want to have the, at least in the UK, they don’t want to have the fees removed from their settlement and they certainly don’t want staggered settlements to try and reflect the way schemes payout. That’s just not what they want. So, we take the buffer, ultimately the schemes pairs it all anyway. They net settle us; they take interchange off before they pay us anyway. So, we’re never going to get enough money. So, there’s always going to be a hole. It’s just we make a bigger hole by paying out even earlier.

Melisande: [00:47:58] And Mitch, is de-risking an issue or a headache for merchants that you see occurring more often?

Mitch: [00:48:05] I mean, de-risking is a whole topic on its own. And Banking Circle released a paper on that last year. But let me touch on the key aspects. During our recent survey, one of the parts was about how do you perceive, directly to the merchants, how do you perceive risk? And there was a number that did actually come back saying, it was less than a third, but they came back saying, yeah, the risk of their business is making it more difficult for them to find reliable partners. And what happens there is they’re looking at a PSP to help them with their payments, etc. But the whole ecosystem is based upon risk. You’ve got the clearing banks and the settlement banks at the top. They’re moving to the supplier banks, then to the PSPs, and then to the merchants eventually. And as the merchant’s risk profile starts to increase from low risk to even medium and high, some of the PSPs that support would usually say, actually, we’re going to stay away from medium to high risk, perceived high risk as well. A lot of risk is academic, statistical analysis. What is the probability of this person going wrong in this pool? And as a result, you do end up with an unfair ecosystem based upon those aspects of risk. So long story short, we’re still seeing that risk and the fear of de-risking is still very prevalent all the way through the banking infrastructure, all the way through to PSPs worried about will they still have access to bank accounts. And the way they control that themselves are by getting access to clearing and settlement systems is managing their underlying customer relationships, and that then means that they have less risk for some industries that are typically known to be medium to high. No long-term solution to that other than banks such as ourselves putting in place controls and systems and environments. That means that you really detect when someone’s academically high risk, which of those actors are actually resulting in a problem or something going on. And using artificial intelligence and other pieces of review is how we do that.

Melisande: [00:50:11] Thank you, Mitch. There’s another question, basically, it’s about a market observation. There is an increasing number of FinTechs foraying into payments. Is there a real player out there that has a distinctive offering?

Nick: [00:50:26] I’m going to have to take that and be all self-promoting. And so, yes, there is. It’s clearly us, isn’t it? So, I won’t get into too much about it. But I talk about fast pay-outs, we do an omnichannel solution. You can have that all in that same payout 10am the next morning. So, one payout for whichever channel you get and it’s 10am the next morning. We’ve got the fastest reports as well. Yeah, we’ve got great data access. We have real-time data reporting and all sorts. Anyway, I won’t keep banging on about it but I couldn’t let that one go without someone throwning it up for me. I needed to smash it away. But yeah, I’ll shut up now!

Melisande: [00:51:03] No, but I think you have a good point, Nick. I think especially in the SME segment, there are still a lot of underserved merchants and there is still room for new players to go into that space and to come up with products that just work.

Nick: [00:51:17] It’s not commoditised. It’s viewed as commoditised and it’s not. And we’ve proved by how much we’re selling that if you come up with something that actually addresses customer needs, people will buy it.

Erika: [00:51:28] The only thing I’d add to that and Nick, this may just play right into your narrative, where I think it’s particularly exciting is when you see the players and who’s doing it well are the players that are solving for very specific use cases. Restaurateurs are going to have very different needs than barbers, or accountants, or something like that. And so, I think that we see a lot of successful FinTechs, whether they’re moving into payments or other types of embedded finance, providing loans, capital, access to capital, etc., the ones that are absolutely nailing it for specific vertical, that just feels really, really exciting. I think we’ll see expansion beyond that. But I think that there are a lot of specialists that are doing really, really amazing things for certain segments of the market.

James: [00:52:15] I was going to say something similar because it goes to what I was talking about earlier, that merchant and consumer demands are increasing year over year. We’re becoming really demanding and no single provider can account for that, which is why we’re seeing vertical specific solutions pop up. But again, the vertical specific solutions, whether you’re a FinTech, getting into insurance, getting into house rent, corporate renting, whether it’s the marketplace, etc., you still can’t do it all. It’s very hard to kind of do everything and completely stick up for the market. But you do have certain stars in verticals.

Mitch: [00:52:53] I completely agree. There are real players out there who have distinctive offerings and it’s just about finding that right partnership and relationship. So, you find what is it I need and what is it I do, whether it’s a restaurant or a merchant.

Melisande: [00:53:06] To come up with the conclusion. Yes, there are still underserved needs, not only in the SME segment, but also at large for customers and enterprise merchants. And there is definitely room for more partnerships and better partnerships to solve these issues. So, thank you for now and have a wonderful day. Thank you so much Erika, James, Nick, Mitch for being here and for your wonderful insights into this particular field. Thank you.

Russell Goldsmith: [00:53:33] Well, that’s it for this episode of the Knowledge Circle podcast. Thanks once again to our guests, James, Nick, Erika, and Mitch, and Melisande for hosting. If you enjoyed the conversation, please follow, like and share on your podcast platform of choice. Hope you can join us on the next episode but until then, thanks for listening and goodbye.