Latest / The Payments Shed / Ep. 41 - Live from MPE Berlin: Payments as Infrastructure - Margin, Reconciliation & Control with Payrails

Transcript

Ep. 41 - Live from MPE Berlin: Payments as Infrastructure - Margin, Reconciliation & Control with Payrails · The Payments Shed

• 0:02
  Welcome to the Payment Shed podcast live from MPE Berlin
• 0:05
  2026. We are joined this afternoon by
• 0:07
  Alex, Head of Payment Ecosystem at Pay Rails.
• 0:10
  Alex, welcome to the show. Nice to be here, thank you for
• 0:13
  having. Me.
• 0:14
  How are you finding the event so far?
• 0:15
  Oh, it's great. I love the energy.
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  I love all the people, I love all the opportunities to have
• 0:19
  interesting discussions. We just don't like the flights
• 0:22
  being cancelled out of Berlin airport.
• 0:23
  That's a different challenge for us today.
• 0:24
  Well, at least we made it. We made it here, that's the main
• 0:27
  thing. So we wanted to talk to you
• 0:28
  today around how enterprise merchants are seeing payments in
• 0:32
  2026. What are they looking out for?
• 0:35
  Yeah, great question. And 2026 merchants, enterprise
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  merchants are looking even more than they used to before at how
• 0:43
  to optimize their payment state, how to get better authorization
• 0:46
  rates, how to get lower cost, how to reduce fraud because you
• 0:50
  know, the competition is increasing.
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  AI is really pushing the pace of of all the new entrants in the
• 0:55
  market. And as an enterprise customer,
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  you really need to be able to to build those modes and to be to
• 1:01
  stand on ground. And that you do by giving your
• 1:04
  customers the best possible user experience.
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  And you need to be able to have, you know, enough money to invest
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  in that. So that's why cost is important.
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  So it's a mix of reducing cost and improving optimizations, but
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  you know more than before because AI is accelerating
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  everything around. Us, I wanted to ask you as well
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  today, right, who owns the responsibility within an
• 1:25
  enterprise merchant for the payment stack?
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  Is it still the CFO or is it more becoming heads of payments,
• 1:31
  payments teams as individuals? Like where do you see that lying
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  in 2026 again? Yeah, I think the trend has been
• 1:38
  over the last few years that there is always in a in a
• 1:40
  company a one person responsible for payments and this will be
• 1:44
  ahead of payments there in some companies there has been this
• 1:47
  chief payments officer title or moral joke.
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  But the reality is that payments is becoming more important.
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  The, the value that payment teams bring to, to kind of big
• 1:58
  enterprise customers becomes more clear and that one, one
• 2:02
  person is existing in the most companies and whether it sits
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  under the CFO or under the CPO or CPO or somewhere else, this
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  is less important because payments itself is a cross
• 2:14
  functional domain. You need to have a product, you
• 2:17
  need to build stuff, you need to, to have data, you need to,
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  you have cost and you need to report them and you need to
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  forecast them. And you have partnerships and
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  marketing and everything is is under the same roof, all kind of
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  rolled up in a lot of contracts and liabilities and terms and
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  that's payments. It's complex.
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  It's a thing of its own. And you mentioned costs there.
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  So I really want to ask you, do merchants truly know what
• 2:43
  they're paying today for payments?
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  No. Nobody has idea of what exactly
• 2:49
  they're paying. They have estimation and some
• 2:51
  estimations are better than others, but the reality is most
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  players in the environment don't know.
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  Even acquirers don't really know because the way the the the
• 3:00
  schemes are charging is it's very complicated.
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  The scheme fees are charged monthly, quarterly for
• 3:05
  transactions in, in arrears. So it's very hard even for
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  acquirers to figure out how much a transaction costs.
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  And then there's different incentives, you know, different
• 3:14
  kind of ethics opportunities that the acquirers might take.
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  So there's some sort of inbuilt in transparency in the system.
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  So because of that, nobody really knows what they're
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  paying. And the better you can
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  approximate what you're paying and the better you understand,
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  then the more opportunities come up to optimize.
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  But if you have no idea what you're paying, then you just
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  type out this money on the account and that's it.
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  How do you guys work to assist customers with that challenge?
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  Now we have two ways of doing it.
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  One is we have built a product where we're taking the different
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  settlement files from the from the various acquirers and we're
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  able to look into the few reports and, and try to make
• 3:54
  sense of that. And the second one is we use
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  artificial intelligence, but also human intelligence of our
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  payment experts, our strategy team that work together with the
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  merchants to go through the data and try to make sense of, you
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  know, what we're paying, what are opportunities to improve and
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  how can we we set up the payments routing in a better
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  way. That's that's really hard.
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  Yeah. And and that's, that's great to
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  assist. I think there's this notion that
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  interchange plus plus pricing was a silver bullet.
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  But actually reality is it's still very, very hard to
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  understand, right. Yeah.
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  Reality is that Interchange plus Plus is just three blended
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  blended fees on top of each other and that are all kind of
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  approximations. At least the interchange and the
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  scheme fees in Europe is relatively easy because the
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  interchange is kept. So everyone is charging the most
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  they could reasonable. But the scheme fees nobody
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  really knows. So it's kind of like a blended
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  fee. And whether the acquirer figures
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  out, oh, there's some money that I got back after the quarter and
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  all the fees have been paid to the scheme, they never go back
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  to the merchant to give them back.
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  So it's a, it's a blended trait. And yeah, this, this, this
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  creates a lot of complexity. The price is one major
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  challenge, but we're also in this state now and it's it's
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  very interesting being at a conference that's so merchant
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  first. Many, many merchants now are
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  maintaining and managing multiple PSP relationships.
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  Yeah. What do we need to do as an
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  industry to assist with that process as well?
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  Well, I think the, the hardest part of managing many providers
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  is really the complexity of everything else, not just the
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  integrations. And many, and maybe this is a,
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  this is a problem of the orchestration industry where
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  maybe for the first five years we've only focused on, you know,
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  we can do integrations and we have like 100 integrations and
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  we can authorize against like 100 endpoints and capture and
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  refund. But payment is way more than
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  that. It's really managing the data,
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  managing the, the settlement, managing the charge back.
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  So the entire chain of events that can happen after you click
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  by now, because it's not just a click by now and the payment is,
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  is, is taken, but it's really what happens afterwards.
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  How do you know whether it's going well or not?
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  How do you know how much you're paying?
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  How do you know if you're you're even getting the money?
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  And in the end, if a customer has a complaint and does a
• 6:07
  chargeback, how are you be are you able to respond to that?
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  So it's super complex. And to go back to your question,
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  what the industry needs to do is really try to focus on a kind of
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  unified solution that solves all these problems.
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  Otherwise you can just go with your single PSV, but then you
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  don't get the benefits of orchestration.
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  I agree with that. And where do you think merchants
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  are leaking margins the most at the moment?
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  Oh, I think there's a lot of potential in the in the
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  chargeback space. This is something I've seen and
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  to be honest, I'm surprised coming back to this kind of
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  let's say more operational topic after a couple of years of
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  higher level work. I'm surprised by by how
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  merchants are currently dealing with chargeback and how how much
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  opportunity is left on the table.
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  We maybe make a mistake in the payments world, especially on
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  the merchant side. A lot of times thinking about
• 7:01
  negotiating the last basis point out of a requiring contract and
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  you really spend like 3 months doing business cases and back
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  and forth with your requires saying now this is like 10 basis
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  points. Now it's 9 basis points.
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  Whereas on the other side, you're losing, you know, 2% on,
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  on chargebacks and you're not winning any of them because
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  you're not disputing them or, or maybe you are disputing them in
• 7:24
  the wrong way and you're just end up paying fees.
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  So that's I think a big opportunity to kind of improve,
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  improve efficiency and cost. Do you think the the difficult
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  nature of reconciliation and we talked about multiple supplier
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  setups, do you think that becomes a distraction sometimes
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  to finding those marginal gains? Is is Recon still a big, big
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  problem that we have in the market?
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  Yeah, I mean, Recon is hard. I, I, I've been with three
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  merchants and it was always a problem.
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  And I think the the biggest challenge merchants don't
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  realize is that even if you close the month, that doesn't
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  mean that you've closed it correctly.
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  We've had this many times. Like I remember one time at one
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  of the merchants that I had, we somehow missed the chargebacks.
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  So we kept closing the month as if money was there, but it
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  wasn't there. And then at some point we had to
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  write off 1,000,000 1/2. And that's, you know, it happens
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  or, you know, when you don't reconcile properly.
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  We had this one case where we didn't know that our bank was
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  surcharging us for foreign exchange because the money was,
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  was, was coming from another currency.
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  And we were charged 5%. And we didn't know.
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  Nobody knew. We just saw, you know, there's
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  the money, we're good. And at some point we're like,
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  OK, but the money doesn't match. We go back a couple of months
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  and I was like, oh fuck, we pay 5% on, on all these transactions
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  and nobody knew. This is of course a mistake on
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  our side with whoever opened the bank account should have read
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  the terms and traditions of the bank account.
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  But this is what happens when you have such a decentralized
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  set up where you have like a someone in treasury opening a
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  bank account that has no idea about payment.
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  You have somebody in payment signing an acquiring contract
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  that doesn't really know what the what, what the, what the
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  contract is. And we all thought, yeah, I'm
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  processing payments. It's great.
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  And the other guys, I got some money is coming.
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  And then the accountants were like, I don't know, I see some
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  orders and I see some money. I hope it's good.
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  And because of the FX, you couldn't really tell whether
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  it's good or not. And you would always say, oh,
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  it's maybe fluctuation, fluctuation, but over a longer
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  period of time, you realize, oh, half a million is missing.
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  That's mad, yeah. So then how do we build that
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  reconciliation piece in as a part of the actual payments
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  layer moving forward? Yeah.
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  I mean, what you need to do is really be able to account on the
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  transaction level for all the money.
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  I need to know, like if I have 100 transactions today, I need
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  to know that each individual transaction has been paid off
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  and I need to pay it out to us. And I need to know that each
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  transaction got the right amount.
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  And a lot of times mistakes happen, right?
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  Sometimes it happens that you have maybe mismatches in the
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  statuses, maybe a partial capture or a partial refund,
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  something that goes unnoticed and you miss these small things
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  here and there. But these small things, if they
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  aggregate like in my case that I had before with the 5% FX fee,
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  you know, 5% is not a lot on one transaction, but on all
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  transactions it's huge. And that's what you need to do.
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  You need to look at all the all the orders and try to match
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  order by order and have the guarantee that everything that
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  has been sold money has been received for because otherwise
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  you can't really close the month credibly.
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  And especially if you're a bigger company, if you have like
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  investors, if you're public, God forbid, and you make mistakes in
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  these accounting practices, then you're going to have a bad day.
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  Now we're an MPA in Berlin. We ask all of our guests at
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  these events, why is this such an important part of your events
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  calendar in the year? For me, it's because of the
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  people. It's such a great energy to be
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  able to come here and talk payments the whole day with
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  people that are equally excited about this obscure industry that
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  people outside of this building have no idea about.
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  So this for me is the best that I have discussions like the one
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  we're having even now. It's really, it's really the
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  people. I like that a lot.
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  So the final part of our our interview, everyone that comes
• 11:11
  on the Payment Show podcast, we have a final section, The Shelf
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  of Shame, where we ask you to nominate something in the world
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  of payments and fintech really grinds your gears.
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  If you could get rid of it forever, what will you bring to
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  the table today? Oh yeah, the chargeback process.
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  I am. I mean, I love chargebacks.
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  I I, I think chargebacks are beautiful.
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  Someone say that. Yeah, I think they are really
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  beautiful because chargebacks are the reason consumers pay
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  online. Chargebacks give you the
• 11:37
  confidence to try any website that accepts, you know, Visa,
• 11:40
  MasterCard, Amex, whatever, because you know that in case
• 11:43
  it's a fraud, you're going to get your money back.
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  In case the merchant doesn't behave nicely, you can get your
• 11:48
  money back. So it's a really important tool
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  of building trust and this is what payment is about.
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  But on the other hand, the process is quite complex and
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  maybe the process is fine, but the way the merchant and the PSP
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  is implemented is really a nightmare.
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  Like I've talked in the last 6 to 8 months since I've joined
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  payrolls with probably 30 merchants and a lot of them have
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  this very complicated manual process where they get data from
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  all the acquires in different format.
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  They try to get data from the back end.
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  They try to create these dispute files, which are APDF.
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  And you need to, to really take care about the PDF.
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  Because on the other hand, and this is what, what really blows
• 12:26
  my mind. On the other hand, there's also
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  a person I always tell, tell my team that the, the, the main way
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  we're going to build a good product in charge is if we
• 12:33
  create the best representment file so that the, the old lady
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  reading it on the other side of the, of the screen can
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  understand what we're talking about.
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  If you're just creating some nonsense and sending it there
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  like we don't agree with the charge where she's going to be
• 12:45
  like, yeah, this is my customer or this letter that doesn't mean
• 12:48
  anything. So the, the clarity of
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  communication needs to be important.
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  And this is the whole process is broken.
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  And I'm hopeful that with the product that we're building and
• 12:59
  the other products in the market, and hopefully the
• 13:02
  issuers will start being able to automate a bit on their side to
• 13:05
  improve accuracy, right? And to make sure that they also
• 13:09
  adhere to the scheme rules. We'll be able to help all the
• 13:14
  merchants and all the consumers. Because in the end, you want the
• 13:16
  consumer to be happy. Even as a merchant, I don't want
• 13:19
  to win all the chargebacks. I want to make sure that the
• 13:21
  consumers get the best experience.
• 13:24
  I think it's a great one. We've had chargebacks before,
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  but that was more chargebacks just as a tool in general,
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  whereas I think yours is more the process behind them.
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  The the notion of why the chargeback exists is is still a
• 13:34
  good thing, but let's fix the process and make it easier to
• 13:36
  manage from both a merchant and consumer point of view, right?
• 13:40
  Yeah, exactly. Well, I've enjoyed this
• 13:43
  conversation a lot, Alex. Thank you very much for joining
• 13:45
  us on the show today and enjoy the rest of your.
• 13:46
  Event, thank you so much. Thanks for having me here.
• 13:49
  Love talking to you all.