Latest / Leaders In Payments / The Signal: Embedded Finance - From Fragmented To Unified with Jaris Executives, Chris Aristides and Matt Thomas | Episode 474

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The Signal: Embedded Finance - From Fragmented To Unified with Jaris Executives, Chris Aristides and Matt Thomas | Episode 474 · Leaders In Payments

• 0:01
  SPEAKER_02: Welcome to the Signal, powered by the Leaders in Payments Podcast, where we are cutting through the noise to reveal what truly matters in payments and fintech.
• 0:10
  SPEAKER_01: Hello, everyone, and welcome to the Leaders in Payments Podcast.
• 0:13
  SPEAKER_01: I'm your host, Greg Myers, and today's special guests are Chris Aristides, the founder and CEO of Jarrus, and Matt Thomas, VP of Platform Partnerships, also from Jaris.
• 0:23
  SPEAKER_01: So, Matt, Chris, thank you both for being here and welcome to the show.
• 0:26
  SPEAKER_01: Thanks for having us.
• 0:27
  SPEAKER_01: Thanks, Greg.
• 0:28
  SPEAKER_01: So this is episode two of our Jarrus series.
• 0:31
  SPEAKER_01: And today we're moving from the why to the how, how payment companies and ISOs can go from a fragmented stack of vendors and processors to a more unified embedded finance ecosystem.
• 0:42
  SPEAKER_01: We'll dig into what it takes to normalize this complexity across these legacy environments and how that foundation unlocks better retention, more revenue, and more products that merchants actually use.
• 0:54
  SPEAKER_01: So in a minute, Matt is going to summarize episode one for us, but I suggest you go back and listen to that episode as well.
• 1:00
  SPEAKER_01: So, Matt, to get us started, can you give us a brief overview of your background?
• 1:04
  SPEAKER_02: Yeah, for sure.
• 1:05
  SPEAKER_02: So I've been in payments for about 15 plus years, primarily focused on embedded payments for vertical SaaS companies at a number of places such as Paysafe, PayRix, World Pay, uh, and joined Jaris in 2024 to kind of shift over to the embedded finance world.
• 1:22
  SPEAKER_01: Okay, Chris, so will you quickly remind our audience about your background?
• 1:26
  SPEAKER_00: Uh yes, I am a 22-year recovering hedge fund manager and analyst focused entirely on technology and innovation through that time period.
• 1:34
  SPEAKER_00: So been working at this for seven years at this point.
• 1:37
  SPEAKER_01: Okay.
• 1:37
  SPEAKER_01: Well, Chris, sticking with you, can you give us a quick snapshot of what Jaris does?
• 1:42
  SPEAKER_00: Yeah, I think I mean there's many ways to describe it.
• 1:44
  SPEAKER_00: I think the way I described it in episode one is we consider ourselves vertical software and infrastructure as well as embedded finance for payments companies.
• 1:52
  SPEAKER_00: And that touches on things I know we're gonna talk about in greater detail today.
• 1:56
  SPEAKER_00: You know, but that's our version of trying to make life simple and easy for people to modernize their stack and stay competitive.
• 2:02
  SPEAKER_01: Okay.
• 2:02
  SPEAKER_01: Well, Matt, over to you.
• 2:04
  SPEAKER_01: Can you summarize the first episode for our audience?
• 2:07
  SPEAKER_01: And that'll help kind of level set for today's discussion.
• 2:10
  SPEAKER_02: Yeah, yeah, for sure.
• 2:11
  SPEAKER_02: So I think kind of the genesis of Jairus was really focused on making it easier for SBs to get access to capital and specifically a bank back lending program that offered the affordability and protection that they would expect from any banking program.
• 2:26
  SPEAKER_02: You know, we had success early on in the vertical SaaS space.
• 2:29
  SPEAKER_02: And I think as we started transitioning over into the world of payment processing, we realized that vertical SaaS converts at one rate and payment processing, beta finance of payment processing converts at a less or so rate.
• 2:42
  SPEAKER_02: And so, how do you shift over kind of the dynamics of that?
• 2:46
  SPEAKER_02: How do you drive vertical SaaS-like conversion of value-added services in the world of payment processing?
• 2:52
  SPEAKER_02: And really what it led us to was a shift from a single point product of lending to a more comprehensive ecosystem that covers the foundation first of everything from onboarding to managed settlement and dynamic funding instructions, all the way to additional value-added services like instant payouts and banking that complement each other, work together, and ultimately drive more engagement, more retention, and greater revenue for our partners.
• 3:18
  SPEAKER_02: So there's really kind of that shift from again focus more specifically on lending to how do we work with these large legacy payment processors and even more newer entrants to the market that want to offer these types of solutions, have a captive audience and large merchant bases, but there isn't an easy way for us to just plug into their systems and kind of getting creative in the solutions that we build to do so.
• 3:41
  SPEAKER_01: Okay.
• 3:41
  SPEAKER_01: Well, Matt, sticking with you, I know in the first episode we did talk a little bit about Square and how they offer multiple products and how they do that very well as kind of the gold standard.
• 3:52
  SPEAKER_01: So let's talk a little bit about the competitive landscape.
• 3:55
  SPEAKER_01: So, why do you think that kind of Square is that gold standard?
• 3:59
  SPEAKER_02: Yeah, so I think Square and Stripe as well both did an excellent job of removing complexity for merchants and partners.
• 4:07
  SPEAKER_02: So they took something that historically was very complex and complicated in the world of payments, and they made it incredibly simple for average merchants and even platforms to embed and adopt their product.
• 4:20
  SPEAKER_02: So they simplified pricing.
• 4:22
  SPEAKER_02: They made it easy for onboarding.
• 4:24
  SPEAKER_02: You could sign up through an online application and get approved in minutes.
• 4:29
  SPEAKER_02: And then they expanded from there and they made it really easy to drive multi-product adoption across their ecosystem.
• 4:36
  SPEAKER_02: So once you're in, it's not just a point product, you're not just signing up for payments.
• 4:42
  SPEAKER_02: That's your entry point.
• 4:44
  SPEAKER_02: But then from there, you can take a loan, you can set up a cash app and get faster deposits.
• 4:49
  SPEAKER_02: And they're all tied to the same ecosystem.
• 4:52
  SPEAKER_02: So it's seamless for the merchants and it's also easy for their partners to launch and expand these products.
• 4:59
  SPEAKER_02: And I think the results are pretty evident.
• 5:01
  SPEAKER_02: I mean, both companies have continued to grow their processing volume at pretty significant rates.
• 5:06
  SPEAKER_02: You know, Square looking specifically at them, what's really interesting is they've actually grown their non-payment revenue by almost 40% over the past two years, to the point that non-payments revenue now accounts for over 35% of their net revenue.
• 5:21
  SPEAKER_02: But what's really interesting is it's about 70% of their profit.
• 5:25
  SPEAKER_02: So not only are they growing these products, but these are high margin valuable products within their full stack.
• 5:32
  SPEAKER_02: And then there's also the retention aspect of that.
• 5:34
  SPEAKER_02: So both companies report that when they have multi-products in place.
• 5:39
  SPEAKER_02: So, for example, four products signed up on one merchant, they see 15 times higher retention rates than a single product solution.
• 5:48
  SPEAKER_02: And I think the really interesting part for us is we see those same type of metrics, and we'll kind of share some of those a little bit later on.
• 5:54
  SPEAKER_02: But you know, we took a similar approach in terms of removing complexity, making things simple with the world of embedded finance in our stack, especially for payment processors and ISOs.
• 6:05
  SPEAKER_02: But we really also are now looking to expand just beyond, again, a single point solution.
• 6:11
  SPEAKER_02: So even the best lending program might only touch 5% of your merchant base.
• 6:16
  SPEAKER_02: So you're seeing that strong retention revenue, but on a very small subset of your larger base.
• 6:21
  SPEAKER_02: So, how do you touch the other 95%?
• 6:23
  SPEAKER_02: How do you get that multi-product retention and adoption and revenue on folks that may just simply not need a loan at that time?
• 6:31
  SPEAKER_02: But there's other areas that you can help them.
• 6:33
  SPEAKER_02: So, again, our goal is looking at what's worked in the market.
• 6:37
  SPEAKER_02: I think Chris even mentioned in the first episode, lending itself, we don't really feel like you need to have product market fit there.
• 6:44
  SPEAKER_02: It's pretty evident that small businesses need access to capital.
• 6:48
  SPEAKER_02: They need help with cash flow.
• 6:50
  SPEAKER_02: So, how do you deliver those services at the place that they're already working today with payment processors and ISOs in a really elegant way that's easy for both sides to scale?
• 6:59
  SPEAKER_01: Okay.
• 6:59
  SPEAKER_01: So, Chris, over to you.
• 7:01
  SPEAKER_01: So, you know, we talked about these multiple solutions.
• 7:04
  SPEAKER_01: So why aren't traditional payments companies just building these solutions themselves?
• 7:09
  SPEAKER_00: Well, I mean, they can, and I'm sure somebody is, and then they stop being a traditional payments company the minute they've done that.
• 7:15
  SPEAKER_00: But I mean, it's interesting because stepping back, we are operating bank products, and the similarity on payments and banking is definitely going to be on the onboarding and the compliance side.
• 7:25
  SPEAKER_00: I don't see many people saying I'm gonna vertically integrate and become a processor, so I'm not so sure it makes business sense for them to do it.
• 7:31
  SPEAKER_00: There's definitely some difference in domain knowledge and expertise required.
• 7:35
  SPEAKER_00: There is a chunk of time that's required to do it the way at least we've done it, in the sense of we operate on an independent RTN, which means that you can't just walk into a bank and open a checking account and assume that that's the way this is gonna work.
• 7:48
  SPEAKER_00: You're gonna need a bank sponsor that you're gonna need to build a relationship with, trust, and operate in that manner, which requires really high barriers.
• 7:55
  SPEAKER_00: So overall, it's domain knowledge, it's time, it's energy.
• 7:58
  SPEAKER_00: And then I think you also have to ask yourself, if they were to do this, what's the certainty of revenue on back of that for a single merchant base, so to speak?
• 8:06
  SPEAKER_00: So for us, we can touch many of those merchant bases and we can mutualize that expense and provide the value-added services to the industry and hopefully normalize that back end across multiple processors.
• 8:17
  SPEAKER_00: And that just takes time, energy, domain knowledge, and some failures too, to get that right.
• 8:22
  SPEAKER_00: So I don't know that everybody has that amount of time so or wants to put up with that kind of failure, but we're at that point where you know we have that expertise and we've launched those products.
• 8:31
  SPEAKER_00: So we're pretty excited about it right now.
• 8:32
  SPEAKER_00: It's gonna be interesting to see how this plays out.
• 8:34
  SPEAKER_01: Okay.
• 8:35
  SPEAKER_01: Well, Chris, sticking with you, and we've talked about this multiple times, is that it's taken a while, maybe years to build this infrastructure that you've built.
• 8:44
  SPEAKER_01: So can you actually walk us through what you've built?
• 8:47
  SPEAKER_01: And I think maybe you touched on this, but during that process, you know, as you were thinking through that and then you've built it, what would make it so hard to replicate?
• 8:55
  SPEAKER_01: Why can't others do it?
• 8:57
  SPEAKER_00: I think first, let's start with you know, banking foundation.
• 8:59
  SPEAKER_00: First and foremost, you have to find someone that wants to dance with you, someone that says, I will do this the right way.
• 9:05
  SPEAKER_00: And and you can look at what hasn't worked too.
• 9:08
  SPEAKER_00: So some things have worked, some things have not worked.
• 9:10
  SPEAKER_00: And then there's a definition of success in here for operational performance.
• 9:14
  SPEAKER_00: Obviously, Synapse didn't work so well, and there are lessons learned from that process.
• 9:18
  SPEAKER_00: To me, one of those lessons is having an independent RTN.
• 9:22
  SPEAKER_00: So you're not going to get mixed up in your payment flows.
• 9:24
  SPEAKER_00: So now you need to find someone that agrees with you that is willing to help support your process in allowing payment volume to move through their bank.
• 9:32
  SPEAKER_00: So that's not that simple to do.
• 9:34
  SPEAKER_00: We have to have a pretty strong use case.
• 9:35
  SPEAKER_00: You probably have to have a track record of trust.
• 9:37
  SPEAKER_00: I think going back to what Matt said, having worked a bank program for six years, five years prior to even starting on this, and having credit performance and behavioral history was enough to get that in the right direction.
• 9:48
  SPEAKER_00: We've got a couple of great partners there that are very supportive, but that alone is hard to do.
• 9:54
  SPEAKER_00: Second, we have to then vertically integrate a level.
• 9:56
  SPEAKER_00: So rather than using a third party to do it, now we're on the hook for managing ACH returns and moving funds, making sure that we're ledgered properly across the board, all the way through down to kind of the bare metal RTN.
• 10:08
  SPEAKER_00: And then I think finally you get to this idea of what are you going to do with it now that you got there?
• 10:13
  SPEAKER_00: And that was the genesis of the idea to begin with is we can get closer and closer to that bare metal with the understanding that we've built over the years.
• 10:19
  SPEAKER_00: And so we didn't have that in the first three or four years.
• 10:22
  SPEAKER_00: I couldn't tell you how Omaha worked or North worked or Tisa Sierra worked.
• 10:26
  SPEAKER_00: So now we have built up some domain knowledge to say these are the problems we want to solve.
• 10:30
  SPEAKER_00: Let's go do them at that base level.
• 10:32
  SPEAKER_00: I mean, it's certainly something somebody else can do.
• 10:34
  SPEAKER_00: I just find it unlikely that many people will spend time on it.
• 10:37
  SPEAKER_00: And hopefully they can use our process and we can support them in it.
• 10:41
  SPEAKER_00: But it's it's been considerable work to get there.
• 10:43
  SPEAKER_01: Okay.
• 10:43
  SPEAKER_01: So, Matt, back over to you.
• 10:46
  SPEAKER_01: And, you know, we've talked about this multiprocessor settlement.
• 10:50
  SPEAKER_01: So can you explain to the audience what problem that actually solves?
• 10:54
  SPEAKER_02: Yeah.
• 10:54
  SPEAKER_02: So I think if you if you look at it, a lot of companies in the payment space have grown through years of acquisitions.
• 11:02
  SPEAKER_02: So acquiring ISO partners, other processors, et cetera.
• 11:06
  SPEAKER_02: So where they're left now is they have merchants that are across multiple backends, Pfizer, T Sys, WorldPay, Elevon, et cetera.
• 11:13
  SPEAKER_02: Each of those has their own unique processing capabilities, their own unique settlement processes, their own contracts of what they can and can't do.
• 11:22
  SPEAKER_02: And so when you're sitting on that, kind of as your existing merchant base, and then you say, now I want to offer instant payouts, or I want to do lending with an automated repayment mechanism in the flow of funds, or I want to launch a banking product.
• 11:37
  SPEAKER_02: Some of those require split settlement functionality, or maybe you even want to offer split settlement yourself before Jairus or without Jairus.
• 11:45
  SPEAKER_02: You now have to look at building a custom integration with each and every processor, which not only takes a ton of time and resources, some of them just flat out may not support what you want to build, or do it in a time frame that you want based on contracts and things that you have in place.
• 12:00
  SPEAKER_02: So really Jairus's managed settlement solution is that extraction layer that handles that dynamic funding instruction.
• 12:08
  SPEAKER_02: So we can set up settlement accounts in the name of all the merchants.
• 12:12
  SPEAKER_02: We can receive those funds from the processors, and then we can let our partners easily configure the waterfall rules and post-settlement instructions across their entire portfolio, regardless of where the merchant is processing.
• 12:27
  SPEAKER_02: So now instead of spending hours every single day managing settlement flows across your back ends, it's all automated through Jairus.
• 12:35
  SPEAKER_02: You have visibility into it, your merchants have visibility into where their funds sit, and it makes it much easier for you to run this at scale.
• 12:43
  SPEAKER_02: And I think that's we'll get into it, but that's part of kind of our foundation is if you have to run on multiple processors, you have to run on multiple processors.
• 12:51
  SPEAKER_02: We don't expect folks to say, I'm gonna move all my business to one and have everything there.
• 12:55
  SPEAKER_02: That's just not feasible.
• 12:56
  SPEAKER_02: So we really want to meet them where they're already sitting.
• 12:59
  SPEAKER_02: And so we say, okay, that's fine.
• 13:01
  SPEAKER_02: Keep boarding wherever you need a board, but plug in a Jairus settlement account every step of the way.
• 13:06
  SPEAKER_02: And now I don't care if you're boarding across 50 different processors.
• 13:10
  SPEAKER_02: If they're all funneling and settling back to these settlement accounts, you now have one viewpoint to view all your disbursements in one place, control funding flows, and offer Jairus products that in some cases require these settlement accounts and split settlement and things like that.
• 13:25
  SPEAKER_02: You can now offer them at scale without having to worry about the back-end configurations or doing a ton of reverse onboarding of bank accounts and bank account switches and everything like that later on.
• 13:36
  SPEAKER_01: Okay.
• 13:37
  SPEAKER_01: So, Chris, over to you.
• 13:39
  SPEAKER_01: And I know Matt has mentioned this phrase before, and I believe you have as well, this concept of foundation first.
• 13:45
  SPEAKER_01: So, what does that approach?
• 13:47
  SPEAKER_01: What does that really mean?
• 13:48
  SPEAKER_00: Yeah, I guess that's an internal term for us.
• 13:50
  SPEAKER_00: But I think foundation first, we've been through the learnings of what Matt's talked about and we talked about in episode one, which multiprocessor, a lot of acquisitions, a lot of CRMs when you typically walk into uh payments business and speak to them.
• 14:04
  SPEAKER_00: And so part of it became well, how do we do this at the onset of a relationship?
• 14:08
  SPEAKER_00: And that became this idea of foundation first.
• 14:11
  SPEAKER_00: People are still boarding plenty of people.
• 14:13
  SPEAKER_00: Maybe attrition's a little higher than everyone would like, but there's a lot of boarding going on.
• 14:17
  SPEAKER_00: So let's do this right the first time based on all the problems that we've seen in the past.
• 14:21
  SPEAKER_00: So for us, because again, we were a bank program to begin with, our boarding looks like merchant processing boarding, like bank account creation boarding.
• 14:29
  SPEAKER_00: It was fairly, I don't want to call it trivial, but it's not that difficult to port that into an external customer-facing product.
• 14:36
  SPEAKER_00: And so we spent the time to do that.
• 14:38
  SPEAKER_00: That does lead to a series of idiosyncrasies that we've had to work on with our design partners who have been fantastic for this.
• 14:44
  SPEAKER_00: But it just starts out with like, why don't we begin by supporting the idea of all the tooling we built, giving that away and giving that back out to our platform partners to make their life easier?
• 14:54
  SPEAKER_00: So pended apps are easier, additional owners are easier, boarding bank accounts is easier, pre-fill is easier.
• 15:00
  SPEAKER_00: So we took that tooling that we built and gave it away, so to speak, to the front end.
• 15:04
  SPEAKER_00: But what's important is marrying that with the settlement process and then looking at the results and the reasons for doing so.
• 15:10
  SPEAKER_00: So one of the reasons in going through analysis on our own breakage, even with some pre-fill data from other customers or platforms that we work with, we still notice varying degrees of breakage because of data quality and because of the fact that it needs to be run through multiple iterations, right?
• 15:25
  SPEAKER_00: One sponsor bank may have different requirements than the other.
• 15:28
  SPEAKER_00: So the idea that we can do this once and get it right from the beginning for all counterparties involved, became what we started talking about for foundation first.
• 15:37
  SPEAKER_00: We do have some experience with those metrics and the performance differences.
• 15:40
  SPEAKER_00: I think in our case, when we've had repeat customers come in where they can simply just click again, there's virtually no breakage for an application, and conversion post that application is extraordinarily high in the low 90s.
• 15:54
  SPEAKER_00: So when I think about the journey someone has to go through to even show clean pre-filled data and get them all the way through the steps through varying different policies and procedures, you still have material breakage points, and you can see that.
• 16:07
  SPEAKER_00: So we think it's about 10x better on the conversion side if we can go with foundation first multi-product.
• 16:13
  SPEAKER_00: And so that became that process.
• 16:15
  SPEAKER_00: Now, the second part of foundation first is what Matt was just discussing, which is the idea of let's set up the settlement process from the beginning.
• 16:22
  SPEAKER_00: So as we've helped onboard, we all retain a golden record of the merchant, as they become eligible for products, we can simply show those products and make it near frictionless for them to opt in because we've already done the onboarding work up front and we've done the settlement work.
• 16:37
  SPEAKER_00: So now there's no, hey, what are we doing next?
• 16:40
  SPEAKER_00: Who am I signing up with?
• 16:41
  SPEAKER_00: We're not throwing them outside of the user experience for someone else.
• 16:44
  SPEAKER_00: But you know, with respect to that, I think Matt, you've talked a little bit about the operational side of this.
• 16:48
  SPEAKER_00: Is there anything you'd add on the managed settlement side?
• 16:51
  SPEAKER_02: Uh yeah, I think, you know, really, if you look back, there's historically three problems that tend to kill conversion of traditional embedded finance programs, especially in with payment companies.
• 17:03
  SPEAKER_02: So the first, as Chris mentioned, is fragmented onboarding, right?
• 17:08
  SPEAKER_02: So if you're a merchant, you have one application for payments, you have another for a loan, you have another if you want a banking product, another if there's instant funding or faster funding.
• 17:18
  SPEAKER_02: So you have all these applications, nothing talks to each other.
• 17:22
  SPEAKER_02: So you have duplicate data entry and ultimately higher abandonment as you get deeper into the stack.
• 17:27
  SPEAKER_02: Folks just get tired of having to put in their tax ID over and over and over and over.
• 17:32
  SPEAKER_02: So that's the first.
• 17:33
  SPEAKER_02: The second is vendor chaos, I would call it, which is you have all these different vendors providing individual point products that have different ways of managing those relationships internally and with your merchant base.
• 17:46
  SPEAKER_02: They're not sharing data between each other.
• 17:49
  SPEAKER_02: So you as a processor, you don't have a unified view of, okay, what is this merchant doing from a value-added services standpoint?
• 17:57
  SPEAKER_02: What products are they using?
• 17:58
  SPEAKER_02: How much are they using them?
• 18:00
  SPEAKER_02: What's what are they eligible for that they haven't applied for yet?
• 18:03
  SPEAKER_02: You have to go to all these fragmented systems and try to piece all that together.
• 18:07
  SPEAKER_02: And then you have to try to share that now with all your downstream distribution channels as well, which adds just another layer of complexity.
• 18:14
  SPEAKER_02: And then the last piece is just that settlement complexity.
• 18:17
  SPEAKER_02: Again, if I want to offer these solutions that really work best when they're repaid in the flow of funds, so to speak, and it's all automated for the merchant.
• 18:26
  SPEAKER_02: They're not having to worry about an ACH debit hitting three days later from a loan repayment that happened on Thursday that now I'm getting billed for on Monday, and I just had to pay for some things over the weekend and stuff like that.
• 18:39
  SPEAKER_02: You're removing that, you know, you're having to deal with that complexity.
• 18:42
  SPEAKER_02: And again, you're either having to do a ton of manual work on the back end of constantly switching accounts and setting up lock boxes and all of that, which delay settlement times and all of that, or you simply just don't do it.
• 18:55
  SPEAKER_02: So, and the product kind of dies on the vine.
• 18:57
  SPEAKER_02: So that's where, again, by starting with onboarding, really, we look to kind of solve all three.
• 19:03
  SPEAKER_02: So not only could in some cases we modernize a partner's just overall merchant experience from an onboarding standpoint, but more importantly, we're collecting all that merchant's data up front and we're cleaning it and we're validating it, and we're ending up with this golden record that a partner uses for boarding, but now Jarrus is going to use that golden record to quickly approve merchants for loans and our products.
• 19:27
  SPEAKER_02: So when they become an eligible for instant payouts and they click to apply, it takes them right to a review page because we already know who that merchant is.
• 19:34
  SPEAKER_02: We checked all this data 30 days ago, 60 days ago, 90 days ago, whatever it was.
• 19:40
  SPEAKER_02: We know that the data we present is accurate because it cleared underwriting before.
• 19:44
  SPEAKER_02: So we have a high likelihood that it's going to clear again, hopefully, things can happen.
• 19:48
  SPEAKER_02: But now you go from, hey, it takes me five minutes to apply for a loan to this took me 20 seconds.
• 19:54
  SPEAKER_02: It takes me five minutes to apply for instant payouts to this took me 20 seconds.
• 19:59
  SPEAKER_02: It took me five minutes to apply set up a bank account, it took me 20 seconds.
• 20:03
  SPEAKER_02: So now instead of 15 minutes of additional application time on top of my payment onboarding, it took me a minute total to set up three additional products.
• 20:11
  SPEAKER_02: And so now as the processor, I've bolted on more products without asking the merchant to apply over and over and over and risking abandonment.
• 20:19
  SPEAKER_02: And then the last piece is again that settlement.
• 20:21
  SPEAKER_02: I keep going back to it, but really that's kind of the crux of where a lot of these things, why they don't convert the way that they should, is if you have multiple products going on at once, you really want someone to be able to see that it from a holistic view.
• 20:35
  SPEAKER_02: So if I'm lending to someone or if I'm gonna do instant payouts, I should also know if there's a loan repayment involved in there.
• 20:42
  SPEAKER_02: You know, if I'm gonna be doing a loan, I may want to know if there's instant payouts.
• 20:46
  SPEAKER_02: I may want to, their banking products may help push adoption to one or the other.
• 20:51
  SPEAKER_02: So having everything unified through those settlement accounts that are originated at the start of onboarding just gives Jarus and our partners a clearer picture of that merchant.
• 21:01
  SPEAKER_02: So we're able to offer products that actually resonate with them as soon as they're eligible and make it super simple for them to opt into those, which just maximizes conversion.
• 21:11
  SPEAKER_02: And I mean, going back to your earlier question, Greg, of like that gold standard of striped and square, that's exactly their playbook.
• 21:17
  SPEAKER_02: Get into the ecosystem and make it super simple for folks to expand from there.
• 21:21
  SPEAKER_02: We're taking that exact same playbook and now we're helping processors adopt that at scale.
• 21:26
  SPEAKER_01: Okay.
• 21:27
  SPEAKER_01: Well, Matt, sticking with you, so obviously you have to generate revenue, you're in business.
• 21:31
  SPEAKER_01: So specifically, if you're out selling and you're talking to a partner, what are the products that you're offering?
• 21:38
  SPEAKER_01: I mean, you mentioned lending and instant payouts and things like that.
• 21:42
  SPEAKER_01: So, what specific products do you offer?
• 21:44
  SPEAKER_02: Yeah, so we have two core products in the market today lending and instant payouts, and a third, which will be high yield savings accounts launching this year as well, kind of complement the others.
• 21:56
  SPEAKER_02: Our lending solution is obviously our most mature because that was the first product that.
• 22:00
  SPEAKER_02: We rolled out.
• 22:01
  SPEAKER_02: It converts with processors similar to how it could convert with vertical SAS.
• 22:07
  SPEAKER_02: And those are you know rival with what you would see in the market with folks like Toast and others.
• 22:12
  SPEAKER_02: Not quite to square conversion yet, but we're getting there.
• 22:16
  SPEAKER_02: But it's an incredibly sticky product, fantastic margins, and a great fit for merchants that need access to capital.
• 22:23
  SPEAKER_02: As I mentioned earlier, though, even the best lending program, not every merchant needs a loan at a given point.
• 22:29
  SPEAKER_02: So you might be touching 5% of that merchant base or upwards with the lending program.
• 22:35
  SPEAKER_02: So that kind of goes into the second, which is our instant payouts, which is really what's exciting our merchants and partners right now.
• 22:42
  SPEAKER_02: Instant payouts give merchants instant funding on current day sales before they batch, up to$10,000 a day.
• 22:49
  SPEAKER_02: So it works on weekends, it works on bank holidays.
• 22:53
  SPEAKER_02: The days when these merchants aren't typically receiving deposits from processor, it can help fill the gap.
• 23:00
  SPEAKER_02: And we estimate that roughly 50% of your merchant base would likely enroll in instant payouts.
• 23:06
  SPEAKER_02: Kind of the beauty of it is it's pay as you play.
• 23:09
  SPEAKER_02: So there's no cost to enroll in instant payouts.
• 23:12
  SPEAKER_02: You just pay a small fee on any dollar that is actually transferred.
• 23:16
  SPEAKER_02: So they use it when they need it.
• 23:17
  SPEAKER_02: A metric I often point to processors, if you wonder what your adoption on instant payout might look like, just look at how many of your merchants are paying every single batch for next day funding.
• 23:28
  SPEAKER_02: So they're paying that just to get their funds a day earlier.
• 23:31
  SPEAKER_02: How much of those would enroll in a product that gave them access to a portion of those funds right then, any day that they needed it?
• 23:37
  SPEAKER_02: And then the last is that that high yield savings account.
• 23:40
  SPEAKER_02: So really, if we look at it again, the con the conversion metrics, if I'm covering 5% of your base with a lending product, I'm covering 50% of your base with instant payouts.
• 23:51
  SPEAKER_02: How can I cover even more of that base with a high yield savings account for folks that don't need capital, maybe would use instant payouts, but could also use help with cash flow management on that piece of it?
• 24:03
  SPEAKER_02: But the key with all those is that our partners get every one of them through a single integration with us.
• 24:08
  SPEAKER_02: They all run on the same foundation at the end of the day.
• 24:11
  SPEAKER_02: We can do it through the same onboarding, same settlement infrastructure, same merchant experience.
• 24:16
  SPEAKER_02: That whole UI can be embedded into the partner's merchant portal if they have their own, or we can provide it to a white-labeled version, a hosted version if partners don't have their own portal.
• 24:28
  SPEAKER_02: We've even go gone so far, again, in our experience of working with processors, where we realize that 80% of a processor's business could be driven through distribution channels, i.e., sub-isos and agents.
• 24:41
  SPEAKER_02: Those may want to operate under their own brand.
• 24:44
  SPEAKER_02: So we can even brand our products for our partners' partners so that they get higher conversion.
• 24:50
  SPEAKER_02: You know, if I'm a processor and Chris is a sub-ISO and Greg, you're the merchant, you've probably never heard of me.
• 24:57
  SPEAKER_02: You know Chris, you know his brand.
• 24:58
  SPEAKER_02: So it makes no sense for me to go out and market it under my brand.
• 25:02
  SPEAKER_02: You're gonna see that email come through for a loan offer and probably think it's spam.
• 25:06
  SPEAKER_02: But if it comes from Chris, you know Chris.
• 25:08
  SPEAKER_02: And we want to leverage those relationships that that these ISOs have with their merchants.
• 25:12
  SPEAKER_02: I mean, that's that's kind of one of the strengths of them versus other players in the market is they know their merchants, they're patrons at their restaurants, they know the owners.
• 25:21
  SPEAKER_02: So their word goes a long way.
• 25:23
  SPEAKER_02: We want to leverage that branding and that to help drive adoption for our products too.
• 25:27
  SPEAKER_00: If I can add to what Matt said, go back to the very beginning.
• 25:30
  SPEAKER_00: So Matt touched on the merchant-facing products.
• 25:33
  SPEAKER_00: Obviously, onboarding and managed settlements can be platform-facing products and support their core businesses.
• 25:39
  SPEAKER_00: So that is certainly something that's worth calling out.
• 25:42
  SPEAKER_00: And then coming back to the point he just made, if we can do this right, we're essentially looking for high customer service and high customer engagement folks to have more modern products.
• 25:52
  SPEAKER_00: I mean, you do hear about I can't get a hold of someone to figure out what's wrong with my batch, where are my settlements, what's going on here in the world that Matt's living in, where I think I'm the sub-ISO and Greg's the merchant, Greg, you can call me and yell at me and we'll figure it out for you.
• 26:07
  SPEAKER_00: So trying to bring quality products to the market with customer support and human intervention when needed is something that I think the world is missing right now.
• 26:15
  SPEAKER_00: So we are trying to support that process, as Matt said.
• 26:18
  SPEAKER_01: Okay.
• 26:18
  SPEAKER_01: And Matt, I think you answered this, but I want to make sure that it's clear to everyone.
• 26:23
  SPEAKER_01: How would you kind of describe the business case for your partners?
• 26:27
  SPEAKER_02: So I think really when you look at it, it's it's two things, and that's retention and revenue.
• 26:32
  SPEAKER_02: So processors are great at sales.
• 26:35
  SPEAKER_02: For most of them, that's their bread and butter.
• 26:36
  SPEAKER_02: That is literally what they exist for, is they are selling machines.
• 26:40
  SPEAKER_02: Uh, and they're also great at building and maintaining those personal relationships with merchants, where you know, we talk with ISOs that have had the same merchant for 20 years.
• 26:49
  SPEAKER_02: They've seen them go from doing$40,000 with them a month to$4 million a month with them as they grow with them.
• 26:57
  SPEAKER_02: But even with the strength of those relationships, these processors and our partners that we talk to, they're still losing 15, 25% of their merchants annually.
• 27:06
  SPEAKER_02: So there's churn is still a problem for them.
• 27:09
  SPEAKER_02: And just one Jairus product alone, we've seen can increase retention rates by 40, 50%.
• 27:15
  SPEAKER_02: So a lending product, for example, can increase your retention rate on your merchant book by 50%.
• 27:21
  SPEAKER_02: But again, lending might only cover 5% of the merchant base.
• 27:24
  SPEAKER_02: So from our standpoint, if you also add instant payouts and banking, now you're covering, let's say, 50% of your merchant base with a product and you're reducing the churn rate on that by 50%.
• 27:37
  SPEAKER_02: Now you've made a significant impact into the retention on your book.
• 27:42
  SPEAKER_02: You've gone from 20% churn to 10.
• 27:45
  SPEAKER_02: And that's not insignificant for these large portfolios as well.
• 27:48
  SPEAKER_02: And then the best part is you get paid on that, right?
• 27:51
  SPEAKER_02: So every product that you're introducing has Rev share tied to it.
• 27:55
  SPEAKER_02: So you're earning a Rev share on the loan fees, you're earning a Rev share on instant payout, you're getting deposit spread.
• 28:01
  SPEAKER_02: So I mean, if I had to sum it up, I would say the business case is really outside of just modernizing onboarding and underwriting and settlement flows.
• 28:10
  SPEAKER_02: If I wanted to look at it strictly from maybe a PL standpoint, it would be retain more of your merchants and earn more revenue while you're doing.
• 28:17
  SPEAKER_02: That would be the pitch line there as a business case for partners.
• 28:21
  SPEAKER_01: Okay.
• 28:22
  SPEAKER_01: Makes a lot of sense.
• 28:23
  SPEAKER_01: So, Chris, kind of as we're getting close to wrapping up, would love to hear your thoughts on where you're seeing traction, who's using this, name names if you can name names.
• 28:34
  SPEAKER_01: Would love to hear more about the traction.
• 28:37
  SPEAKER_00: Yeah.
• 28:37
  SPEAKER_00: So I think I went and made this pitch formally, must have been 16 months ago.
• 28:43
  SPEAKER_00: And I think in that meeting we got a okay, let's do this, which was nice to have that uh it's not a follow-up.
• 28:49
  SPEAKER_00: It was let's get it done.
• 28:50
  SPEAKER_00: Matt was in that room with me, and we um since then have gone out and signed a couple of more folks up for this.
• 28:55
  SPEAKER_00: So we wanted to get to our first three partners because there is some work in here.
• 28:59
  SPEAKER_00: It's not just a retrofit, there's some design that we're gonna need help with.
• 29:03
  SPEAKER_00: So Justify payments, Dart Bank from a payments perspective, Aurora, those are a few of the folks I can mention today that are in the mindset of foundation first, and then let's go and run this playbook.
• 29:15
  SPEAKER_00: There are obviously others that I don't really feel comfortable talking about quite yet, and Matt can talk a little bit more about some of this as well.
• 29:22
  SPEAKER_00: And obviously the relationship with global, which I don't know if we discussed on episode one for instant payouts.
• 29:28
  SPEAKER_00: But I think the the idea there was to find those first three, make sure they're successful, take the learnings from them, and then go out and expand.
• 29:35
  SPEAKER_00: So there's a few pieces in there that just take a little bit longer than you hope.
• 29:39
  SPEAKER_00: Uh, and some of it's just working with your partners.
• 29:41
  SPEAKER_00: In fact, in our work with Aurora, we will do a full team meeting where all the both the teams are there together.
• 29:47
  SPEAKER_00: It's pretty much as if we're one team from a co-development perspective, and who's taking this piece and how do we want to, where is the line drawn from where one thing gets handed off from Jairus or back and forth.
• 29:58
  SPEAKER_00: So it's been extraordinarily collaborative and it's exciting.
• 30:01
  SPEAKER_00: So I think the next part is like, let's get it in market the way we all think it should be there.
• 30:06
  SPEAKER_00: And everyone has their own things going on.
• 30:07
  SPEAKER_00: So we work around their schedules as well.
• 30:09
  SPEAKER_00: But it's exciting.
• 30:10
  SPEAKER_02: And I think, you know, Matt, I don't know if you want to speak a little bit to it or, you know, what you've seen since we've been able to go show this in production, but yeah, I mean, I think it's no secret that processors and ISOs are looking for more solutions to offer to their merchant base.
• 30:26
  SPEAKER_02: So that's not necessarily some aha moment that that we've discovered.
• 30:30
  SPEAKER_02: Like that, that's that's well known.
• 30:32
  SPEAKER_02: I think what gets me excited is that every call that we have ends in a request for more information.
• 30:38
  SPEAKER_02: So let me see a demo.
• 30:40
  SPEAKER_02: Let's get folks on to start start solutioning this, especially on the instant payout product.
• 30:45
  SPEAKER_02: So, you know, lending is not necessarily a new concept in the world of payments, right?
• 30:50
  SPEAKER_02: I mean, most truthfully, most partners that I talk to that have established businesses, they've already done some type of lending program in the past.
• 30:58
  SPEAKER_02: Now, it may not have worked to the extent that they wanted for the reasons that we've covered here.
• 31:03
  SPEAKER_02: It was fragmented, it was a form on their website that threw it over the fence and it took three days to get a call back and a week to do the application, and then the repayment was a nightmare and all of that.
• 31:14
  SPEAKER_02: But when we bring up things like instant payouts and how that can ultimately convert to expanding out a banking solution and things like that, you know, those are things that resonate with partners because those are anyone that's been in the world of payments knows that merchants, if there's anything that they are hypersensitive to, it's probably fees and settlement times.
• 31:34
  SPEAKER_02: I can't control fees, but I can give you faster settlement.
• 31:38
  SPEAKER_02: And so when I'm able to empower that and then do it in a white label fashion and more importantly, roll something out to them that takes weeks, not months or quarters to develop, doesn't require really any risk or capital on their part.
• 31:52
  SPEAKER_02: You know, for a lot of them, it's it's kind of a no-brainer.
• 31:55
  SPEAKER_02: So we're adding folks every single week to the program, working them through, getting them live, and we're seeing kind of real expansion very quickly with new partners coming on.
• 32:05
  SPEAKER_02: So we're really excited about it.
• 32:06
  SPEAKER_01: Okay.
• 32:07
  SPEAKER_01: Well, final question, and it's for both of you and Matt, since since you were up last, I'll stick with you.
• 32:13
  SPEAKER_01: What's the one key insight that you want the listeners to take away from this episode?
• 32:18
  SPEAKER_02: So I would say the main thing is if you're looking at embedded finance to drive revenue and retention, they can be fantastic path to do so, but to not focus on a point product.
• 32:31
  SPEAKER_02: So not looking at it as, hey, I just want to offer this solution for this subset of merchants.
• 32:37
  SPEAKER_02: Really, you should be looking at it from the viewpoint of how can I get the biggest bang for my buck on an integration, i.e., how can I deliver the most products that actually work and drive value for my merchants through this integration?
• 32:52
  SPEAKER_02: And then also, where are there areas from just our day-to-day operations that maybe aren't working so well that we could also kind of two birds with one stone with this solution?
• 33:02
  SPEAKER_02: So, but I think the main thing is just again looking what's worked in the market, right?
• 33:06
  SPEAKER_02: I mean, if you want to have a product that performs like Square Capital's product performs, then you need to kind of look at the playbook that they've had and you need to start getting comfortable with, hey, we may need to update our infrastructure to drive adoption to these products and think about it from your merchant's view.
• 33:23
  SPEAKER_02: Would you want to have to go through separate applications every time, or would it be way easier if everything was just embedded where you're already living today?
• 33:30
  SPEAKER_02: So yeah, those would be the main things.
• 33:31
  SPEAKER_01: Okay.
• 33:32
  SPEAKER_01: Chris, your key takeaway?
• 33:33
  SPEAKER_00: I think my key takeaway on the back of what Matt said, which is definitely the right business takeaway, is and everything that Matt said, how do you do that with a first principles approach?
• 33:42
  SPEAKER_00: And I think we've taken that to try and understand the industry to the best of our knowledge.
• 33:46
  SPEAKER_00: And obviously, Matt's from it.
• 33:47
  SPEAKER_00: I'm from parts of it from the uh banking side and that type of world.
• 33:51
  SPEAKER_00: So combining a first principles approach that hopefully does some future proofing, because a lot of the things we talked about today are very merchant-centric or boarding-centric, but we haven't talked about the other use cases for things, whether it's using managed settlements for net settlement and billing and some of the things that can come out of the back of the infrastructure that we've built.
• 34:09
  SPEAKER_00: So modernization with first principles and simplicity is what I would make the argument for.
• 34:13
  SPEAKER_01: Okay.
• 34:14
  SPEAKER_01: All right.
• 34:14
  SPEAKER_01: Well, I think that's a great way to wrap up the show.
• 34:17
  SPEAKER_01: So, Chris, Matt, thank you both so much for being here today.
• 34:19
  SPEAKER_01: I know your time is very valuable, so I really appreciate you being on the show.
• 34:22
  SPEAKER_01: Thanks, Greg.
• 34:23
  SPEAKER_01: Thanks, Greg.
• 34:23
  SPEAKER_01: And to all you listeners out there, I thank you for your time as well.
• 34:26
  SPEAKER_01: And until the next story.