Latest / Leaders In Payments / Embedded Finance Special Series: From Features to Revenue Engine with Ali Mast & Ashley Willson, Revolv

Transcript

Embedded Finance Special Series: From Features to Revenue Engine with Ali Mast & Ashley Willson, Revolv · Leaders In Payments

• 0:00
  SPEAKER_02: Hello everyone and welcome to Litters and Payments Podcast.
• 0:03
  SPEAKER_02: I'm your host, Greg Myers.
• 0:04
  SPEAKER_02: And as many of you know, embedded finance has quickly become one of the most important conversations in payments and fintech.
• 0:11
  SPEAKER_02: More vertical software companies are looking beyond their core platforms and exploring how payments and other financial products can create new revenue, strengthen customer relationships, and deliver a more seamless experience.
• 0:23
  SPEAKER_02: It is also the focus of Embedify, the Embedded Finance Summit I'm hosting on October 13th in Lehigh, Utah, where vertical SaaS leaders, technology providers, and industry experts will come together to discuss how embedded finance is being built and deployed in the real world.
• 0:40
  SPEAKER_02: We'll be talking not only about payments, but also lending, banking, insurance, accounting, and payroll.
• 0:45
  SPEAKER_02: You can learn more at Embedify2026.com.
• 0:48
  SPEAKER_02: As we lead up to the event, I'm talking with industry leaders who are helping software companies navigate the embedded finance opportunity.
• 0:57
  SPEAKER_02: Joining me today are Allie Mast and Ashley Wilson, the co-founders and principals of Revolve.
• 1:02
  SPEAKER_02: So thank you so much for being here and welcome to the show.
• 1:04
  SPEAKER_00: Greg, thank you for having us.
• 1:06
  SPEAKER_00: Thanks for having us, Greg.
• 1:08
  SPEAKER_02: Absolutely.
• 1:08
  SPEAKER_02: So, Ali, let's start with you.
• 1:10
  SPEAKER_02: Tell us a little bit about yourself and how and why you and Ashley started Revolve.
• 1:14
  SPEAKER_00: Sure, sure.
• 1:15
  SPEAKER_00: Happy to.
• 1:16
  SPEAKER_00: My background really started on the software side of the world.
• 1:20
  SPEAKER_00: I spent many years growing revenue and go-to-market functions inside vertical and B2B software companies.
• 1:27
  SPEAKER_00: And as an operator that was focused on increasing revenue, payments became a really big part of that growth strategy.
• 1:34
  SPEAKER_00: Eventually I went deep enough into payments that I moved over to the dark side and started working in payments on the provider side.
• 1:42
  SPEAKER_00: And at in that role, I worked with software companies much like myself when I was an operator.
• 1:48
  SPEAKER_00: And I helped them take over payments and embed it into their product by building tool sets to do that, to control the onboarding and take ownership themselves, boarding to processors and all the things that are really hard to do for a payments company.
• 2:04
  SPEAKER_00: When I was doing that, it was really interesting because I had the dynamic of both sides of the table, working at a payments company, working at a software company.
• 2:12
  SPEAKER_00: And it really just felt like they were speaking two very different languages and there was nobody there to translate in between.
• 2:20
  SPEAKER_00: So payments companies still to this day had this long list of acronyms that I've created a glossary for myself to navigate and define if anybody's interested.
• 2:31
  SPEAKER_00: And software companies were speaking in their own acronyms, but it was EBITDA, ARR, customers, product.
• 2:36
  SPEAKER_00: How do we grow?
• 2:38
  SPEAKER_00: And somewhere in the middle, a lot of that, with the same intentions on both sides, got lost in translations.
• 2:43
  SPEAKER_00: So that really pushed me to start working agnostically with software companies and helping them learn from what I learned from as an operator on both sides of the table.
• 2:53
  SPEAKER_00: And was very fortunate in that journey as I went out of my own to be introduced to Ashley.
• 2:58
  SPEAKER_00: Despite spending many years in the industry working at competing companies and actually selling against each other, we came to find out we were introduced through a women's leadership group and really hit it off and had similar motivations.
• 3:11
  SPEAKER_00: And then Revolve was founded from there.
• 3:13
  SPEAKER_01: Absolutely.
• 3:14
  SPEAKER_01: And like Alia, I came at this the completely opposite angle, right?
• 3:19
  SPEAKER_01: So I had spent 20 years as your traditional payments operator, right?
• 3:24
  SPEAKER_01: Starting a wholesale ISO focused on credit card processing and ATM, standing up all of the risk management, money transmission, money service business oversight that is required for a higher risk wholesale ISO under those models.
• 3:40
  SPEAKER_01: And I kind of came into this space actually from operational and finance perspective, thinking I'm going to go set up all these sponsor bank relationships.
• 3:49
  SPEAKER_01: I'm going to structure the operations of the company.
• 3:51
  SPEAKER_01: I'm going to oversee finance.
• 3:52
  SPEAKER_01: And I had this really great experience as a founder where I figured out really quickly that I actually had a passion for the revenue side of things and the go-to-market and started to bring in the right people to run those sides of the organization.
• 4:04
  SPEAKER_01: But it was such a critical piece, right?
• 4:06
  SPEAKER_01: Figuring out all of those layers is what sucked me into the dark side of payments, the black hole that we have all gotten lost in once the door is open.
• 4:15
  SPEAKER_01: And I got to figure out like how these puzzle pieces come together and culminate in an experience for the merchant on the end of it.
• 4:24
  SPEAKER_01: And so as I moved into the embedded payment space, it was really critical as a founding revenue leader at the two organizations I worked into, or stepped into after exiting my ISO 17 to really understand how does the product work?
• 4:41
  SPEAKER_01: What is the background of the risk management?
• 4:46
  SPEAKER_01: What's the sponsorship model and growing the business responsibly, finding the right partners, making sure that the product fit the customer experience?
• 4:54
  SPEAKER_01: And we get to build, right?
• 4:56
  SPEAKER_01: It was really great in those roles.
• 4:57
  SPEAKER_01: We got to build all of the fancy APIs.
• 5:00
  SPEAKER_01: We got to create all of the dashboards and the hosted low-code, no code.
• 5:04
  SPEAKER_01: And we really thought that we were giving these software companies everything they needed to be successful.
• 5:09
  SPEAKER_01: And what I found is that many still weren't, right?
• 5:12
  SPEAKER_01: None of us were hitting those adoption numbers that we hoped to hit.
• 5:16
  SPEAKER_01: And so I had gone out on my own, just wanting to spend some time with the software companies, understand the other operators' perspective.
• 5:24
  SPEAKER_01: And like Allie, came across a very similar challenge of like, I don't think the translation layer is there.
• 5:30
  SPEAKER_01: And they often are viewing their payment processor the same way a merchant may, where they're just purely a cost center.
• 5:36
  SPEAKER_01: And how do we help them leverage their payment processor in the right way and feed them into their strategy to generate more revenue?
• 5:43
  SPEAKER_01: So was really excited when Allie and I were sitting on a webinar together, chatting back and forth about what we were working on and figured out how complementary our backgrounds were and the ability to bring two operators from two different perspectives to solve what culminates in the biggest problem, which is adoption, scale, growth, monetization, and valuation of that software company.
• 6:07
  SPEAKER_02: Okay.
• 6:07
  SPEAKER_02: Well, thank you both for the introduction.
• 6:10
  SPEAKER_02: And Ashley, you and I have known each other for, I don't know, probably maybe 10 years and something like that.
• 6:16
  SPEAKER_02: Something like that.
• 6:17
  SPEAKER_02: It's crazy.
• 6:17
  SPEAKER_02: And it's kind of that dark hole that you talked about.
• 6:20
  SPEAKER_02: Ali, you and I have just kind of met more recently, but I wanted to thank you both, one for obviously doing this podcast, and two for you know being so heavily involved in Embedify and everything you're doing there.
• 6:32
  SPEAKER_02: So thank you for that.
• 6:33
  SPEAKER_02: And I really look forward to this podcast.
• 6:35
  SPEAKER_02: You guys have so much knowledge around this space.
• 6:37
  SPEAKER_02: So I'm looking forward to diving in.
• 6:39
  SPEAKER_02: So, Ali, let's start with you.
• 6:42
  SPEAKER_02: You both spend a ton of time directly with these vertical SaaS companies.
• 6:46
  SPEAKER_02: So when you look across the market today, where would you say most companies actually are in their embedded finance journey?
• 6:54
  SPEAKER_00: It's a great question.
• 6:55
  SPEAKER_00: And one nuance I may point out before answering it is I think embedded finance isn't just for companies that are vertically focused anymore.
• 7:06
  SPEAKER_00: We're also used to that.
• 7:08
  SPEAKER_00: It was what built this message and what built, I think, most payment providers' top prospecting lists, including Ashley and myself.
• 7:16
  SPEAKER_00: But there are other companies out there, some of the lesser exciting verticals that are actually some of the biggest opportunities hiding within the software that quietly keep everyday businesses running, small businesses, micro merchants.
• 7:33
  SPEAKER_00: And so while vertical SaaS by no means is dead, I don't think it's where the whole opportunity lies either.
• 7:40
  SPEAKER_00: We have a lot of conversations with companies that are very heavily B2B focused, or to the point I made earlier, supporting those smaller businesses that are very prevalent around America.
• 7:52
  SPEAKER_00: And we see a lot of opportunity there.
• 7:54
  SPEAKER_00: Vertical, I believe we read an article recently, and Ashley, you'll have to check me if I'm right with this stat.
• 8:00
  SPEAKER_00: But I think vertical was the fourth strongest predictor in payments performance.
• 8:05
  SPEAKER_00: And others were a little more tangible across verticals, like payments maturity, the age of payments, leadership structure and such within the organization.
• 8:16
  SPEAKER_00: So kind of first tying that back to your question, Greg, is we see that more as a trend in the space than just the stage of the company or what they're doing or where they are in payments.
• 8:28
  SPEAKER_00: And it's not just vertical anymore and it's not just payments.
• 8:31
  SPEAKER_00: It is embedded finance and hence our excitement about Embedify and the message that you're bringing with many operators to share their experience as well as many platforms to talk about how we've all learned these lessons the hard way.
• 8:46
  SPEAKER_02: Okay.
• 8:47
  SPEAKER_02: Well, Ashley, question for you.
• 8:49
  SPEAKER_02: So there's often a big gap between deciding we should do something with payments or embedded finance and actually building a strategy that works.
• 8:58
  SPEAKER_02: So where do you see companies get stuck in that process?
• 9:01
  SPEAKER_01: Yeah.
• 9:02
  SPEAKER_01: So I will quickly go back to one of the comments that Allie just made and the biggest drivers.
• 9:07
  SPEAKER_01: And I think people is probably one of the biggest places they get stuck.
• 9:11
  SPEAKER_01: But we'll we'll kind of circle back to that throughout the conversation and how critical that role is within the organization and how it should be led.
• 9:20
  SPEAKER_01: I think where we see people get stuck, I want to take this back to approaching it from the wrong angle, right?
• 9:28
  SPEAKER_01: So many companies get stuck because they either come in with this predisposition of walk for all run, right?
• 9:36
  SPEAKER_01: I should absolutely take a walk crawl run strategy.
• 9:39
  SPEAKER_01: I shouldn't known risk, or I'm not ready for it, or they're coming in with the perception that they've already made the walk for all run and they're ready to own all of the risk and that comes with some economic value.
• 9:49
  SPEAKER_01: The other part of that is economics, right?
• 9:52
  SPEAKER_01: I think the biggest companies that we see stuck heading in the wrong direction come to us and say, we need to save more money.
• 9:59
  SPEAKER_01: And when they're kind of being penny wise and pound foolish about that outcome, right?
• 10:04
  SPEAKER_01: So I'll give you one example.
• 10:06
  SPEAKER_01: We had a client recently that came to us with close to about 160 to 180 basis point take rate on their software business.
• 10:15
  SPEAKER_01: And we were just blown away, right?
• 10:17
  SPEAKER_01: I couldn't imagine if like a data analyst or just a software had taken that in without a person and team like Ali and myself who actually understood what that meant to say, wait a minute, these are extremely healthy margins on your business, right?
• 10:32
  SPEAKER_01: It was predominantly e-commerce.
• 10:34
  SPEAKER_01: How is this happening?
• 10:36
  SPEAKER_01: And we actually had to help the company think about how do you break this down, right?
• 10:40
  SPEAKER_01: You don't need to go save money.
• 10:42
  SPEAKER_01: This isn't an exercise in finding a new processor.
• 10:45
  SPEAKER_01: This isn't an exercise in shaving another few pennies off your current processor.
• 10:50
  SPEAKER_01: This is actually much more an exercise in understanding the health of your overall business.
• 10:55
  SPEAKER_01: So, one, are you seeing attrition?
• 10:57
  SPEAKER_01: Because that's a really high rate.
• 10:58
  SPEAKER_01: So, what's driving it?
• 10:59
  SPEAKER_01: We were able to help them identify very quickly that they were charging about 100 basis points more than the average competitor.
• 11:06
  SPEAKER_01: So they're going to lose some business there.
• 11:08
  SPEAKER_01: So, how do we help with adoption?
• 11:10
  SPEAKER_01: How do we help keep those margins without just overpricing the merchant?
• 11:14
  SPEAKER_01: And then we were able to help them think about where there's optimization within their current processing.
• 11:19
  SPEAKER_01: So interchange optimization.
• 11:21
  SPEAKER_01: There was significant savings there.
• 11:24
  SPEAKER_01: And then the follow-up to that was now what do clients actually want from you that generate some of that margin gap, right?
• 11:30
  SPEAKER_01: So this is where we help them think about embedded finance as a secondary.
• 11:34
  SPEAKER_01: So I think this client would have been a great opportunity or a great example of someone who could have been completely stuck in this.
• 11:40
  SPEAKER_01: We're just doing embedded payments and we need to make more money out of this.
• 11:44
  SPEAKER_01: And our board is asking us for a specific number when really there is a whole nother embedded finance strategy.
• 11:50
  SPEAKER_01: They were mature enough, they were ready for the next move, right?
• 11:53
  SPEAKER_01: And I think capital was a solution that worked really well for them.
• 11:57
  SPEAKER_01: Buyer fees were something that worked really well for them.
• 12:00
  SPEAKER_01: Unlocking things like tap to pay were actually something they really needed to be doing.
• 12:04
  SPEAKER_01: So we were able to help them think less about how do we decrease cost and more about how do we bring a product to our customers they're asking for that they want to use at a price that's competitive in market.
• 12:16
  SPEAKER_02: Yeah, it almost sounds like sometimes they come and they don't even know what the right question to ask is.
• 12:23
  SPEAKER_01: Allie, I'm sure we could go through a list of how many of our engagements start with the wrong question.
• 12:29
  SPEAKER_01: But I think that's why we're here, right?
• 12:32
  SPEAKER_01: If every customer was coming us to us with the right question, I would say there's probably not a value in market for advisors like ourselves out there.
• 12:39
  SPEAKER_01: And I think where we don't see often the wrong question is companies who have a really well-established GMA payments and see doing the role and really understanding it.
• 12:48
  SPEAKER_01: Where we're helping them a lot of the times is now how do we bring the board along and how do we bring other executive leadership along?
• 12:54
  SPEAKER_02: Makes sense.
• 12:55
  SPEAKER_00: How do we add the right products or incorporate the right next step or leverage our experience with hundreds of product assessments over the year to find the right one quicker?
• 13:07
  SPEAKER_00: It's just about accelerating versus identifying.
• 13:10
  SPEAKER_00: Whereas I'd say 90% of our customer base do not know the question, but at least they know how to ask for help and they know there is an opportunity for help, and that's where we can help define that a little more clearly.
• 13:23
  SPEAKER_02: Right.
• 13:23
  SPEAKER_02: So, Ali, Ashley mentioned a word that we want to talk about next, and that's adoption.
• 13:28
  SPEAKER_02: So a company can launch a great payments product or any embedded finance product, but if customers don't use it, none of the economics matter.
• 13:36
  SPEAKER_02: So, what separates companies that achieve strong adoption from those that really struggle with it?
• 13:41
  SPEAKER_00: This is my favorite topic of all time.
• 13:44
  SPEAKER_00: I could talk about adoption for hours and hours on end, both on the SaaS side and on the payment side, but we're here to talk more about payments.
• 13:52
  SPEAKER_00: I see it as the strongest companies build payments as a part of the product experience rather than bolting it onto the side, which very heavily leads to adoption usage and therefore what we know is very important, which is processing volume on the payment solution.
• 14:13
  SPEAKER_00: And it's not just product experience and making it a part of the core value or the core positioning of the product.
• 14:21
  SPEAKER_00: You also really need internal adoption.
• 14:24
  SPEAKER_00: And surprisingly enough, the majority of our clients, even very sophisticated ones who have been in payments for five to 10 years or have multi, multi-billion dollar processing orgs, do not have the right internal adoption to do this.
• 14:40
  SPEAKER_00: And when I say internal, it's completely cross-functional.
• 14:43
  SPEAKER_00: So you need product, you need sales, customer success, finance, leadership, the board, all cross-functional groups to really understand that this is a part of the core product and support that from a revenue number perspective, reporting perspective.
• 15:01
  SPEAKER_00: And even when they have somebody that owns payments already, like a GM or a VP of payments, sometimes that's not quite done.
• 15:08
  SPEAKER_00: The first step might have been hiring somebody versus getting that cross-functional approval.
• 15:13
  SPEAKER_00: And so while these are larger, more strategic initiatives, those types of things change entirely what we see in terms of adoption numbers.
• 15:23
  SPEAKER_00: And then you can get more tactical and granular around just giving your salespeople tools.
• 15:30
  SPEAKER_00: It's a novel concept.
• 15:31
  SPEAKER_00: But if you make payments a part of the product and you get that cross-functional support, but your salespeople or your customer success folks don't actually know how to sell payments or how to make it a part of the value prop, or don't have the right tools to compare what the margin should be internally versus your software fees.
• 15:51
  SPEAKER_00: Or maybe they're not even properly incentivized by a comp plan because you have these really large enterprise SaaS companies and salespeople that have been selling multi-million dollar ARR deals their whole whole career.
• 16:04
  SPEAKER_00: But how do they get excited about a truly hard-to-forecast potential trailing revenue number that could go over the next one to five years of a contract, right?
• 16:14
  SPEAKER_00: You really have to align all of those things.
• 16:17
  SPEAKER_00: And again, I seen, I know I mentioned I could go on about this for hours.
• 16:20
  SPEAKER_00: I'll give you one last tidbit and I'll stop myself.
• 16:23
  SPEAKER_00: There's another little win that we see all the time in our clients who are software folks at heart and product folks at heart, but it's easy to forget.
• 16:31
  SPEAKER_00: You can make your product-led steps easier to allow adoption.
• 16:37
  SPEAKER_00: So lead your customer through the journey.
• 16:39
  SPEAKER_00: Make it a part of the product experience.
• 16:42
  SPEAKER_00: You're not just embedding payments, but you're embedding the experience for payments to lead to activation versus sign up.
• 16:49
  SPEAKER_00: And so little steps within your product, depending on the vertical you serve or how the product is used, can heavily impact how the customer experiences it and their return and therefore how they represent the product in the full suite with payments as a part of it or embedded financial products as a part of it.
• 17:08
  SPEAKER_01: Allie, I can't I can't help but think about as you're talking, how many of our clients do we go into and help solve exactly that like journey of like how do you lead the client?
• 17:19
  SPEAKER_01: And then we get to the sales rep conversation you were just having, and the sales rep's basically told if you want to get payment pricing approved, you have to send it to the founder of the company because nobody else knows payments.
• 17:31
  SPEAKER_01: And then we're like, well, there's no better way to keep a sales rep motivated than get them off the phone with the client, have to call the client back and slow things down.
• 17:40
  SPEAKER_01: So it's I love how you talked about two sides of that because it's so much of what we're doing is like, hey, we'll let you down this path.
• 17:47
  SPEAKER_01: Here's how you get the merchant in the door.
• 17:50
  SPEAKER_01: But where are things breaking internally?
• 17:52
  SPEAKER_01: And how do you allow your sales reps to really go run?
• 17:55
  SPEAKER_00: And hopefully every payments company out there will appreciate this last comment and the value proposition of selling payments for adoption is not just giving a lower rate to get them to sign up.
• 18:09
  SPEAKER_00: And so starting there is often something hard to unwind.
• 18:13
  SPEAKER_00: I highly recommend not starting there.
• 18:16
  SPEAKER_02: Yeah.
• 18:16
  SPEAKER_02: So a little bit of a follow-up to that, because I think all of that, correct me if I'm wrong, not just for payments, but for all of the other financial products, you have to, you have to have the journey in mind when you embed them.
• 18:29
  SPEAKER_02: I mean, there's really nothing within what we're considering embedded finance that you just kind of bolt on and hope for the best, right?
• 18:37
  SPEAKER_02: It really has to be integrated into that journey.
• 18:39
  SPEAKER_01: Absolutely.
• 18:40
  SPEAKER_01: Absolutely.
• 18:41
  SPEAKER_01: And I think, you know, we probably made the comment earlier of like very intentionally from the beginning, it needs to be a part of the product experience.
• 18:48
  SPEAKER_01: And it's it's not uncommon that we have clients that are unwinding that.
• 18:52
  SPEAKER_01: There's no problem with that, right?
• 18:54
  SPEAKER_01: You can unwind that at any phase.
• 18:56
  SPEAKER_01: There's different strategies that we'll take along the way with some of our companies, whether it's multi-processor or sometimes it's a harder cutover.
• 19:03
  SPEAKER_01: But I would say a good chunk of our clients are coming to us with a legacy engagement on a referral partnership and just really looking to move into a more embedded strategy.
• 19:11
  SPEAKER_01: So if you've started, good, right?
• 19:14
  SPEAKER_01: You got started.
• 19:15
  SPEAKER_01: You can you can move things in the right direction if you need to.
• 19:18
  SPEAKER_02: Okay.
• 19:19
  SPEAKER_02: Well, Ashley, sticking with you, so you've been involved in a lot of these processor and partner evaluations over time.
• 19:26
  SPEAKER_02: What mistakes do software companies make when choosing a payments partner?
• 19:30
  SPEAKER_02: And what questions should they be asking that they often don't ask?
• 19:34
  SPEAKER_01: I think this is an interesting one for us because I I think majority of the time we get asked similar to the economic question, and I need to save more money.
• 19:44
  SPEAKER_01: We get asked, I need a new payments processor.
• 19:46
  SPEAKER_01: The payment processor I'm working with isn't doing it for me.
• 19:49
  SPEAKER_01: We actually had a really unique situation come up with a client earlier this year that I think was a refreshing spin from this and something to think about in parallel.
• 19:58
  SPEAKER_01: We had a client come to us and actually ask the right question.
• 20:00
  SPEAKER_01: And they said, we don't think we need a new processor, we don't think we have the bandwidth for it, we just don't think we've given the book of business time and attention.
• 20:08
  SPEAKER_01: And can you help us think about what time and attention we should put into it?
• 20:12
  SPEAKER_01: Is there an uplift here?
• 20:14
  SPEAKER_01: We were actually able to help them move from 20 basis points of take with their current provider and just adjusting their strategy with their current provider.
• 20:24
  SPEAKER_01: And in a conservative estimate, they will see about 56 basis points under the new model.
• 20:30
  SPEAKER_01: In an optimistic, they're going to be closer to 100 to 110 basis points of take rate.
• 20:35
  SPEAKER_01: And so I think this is interesting in the world that we sit in is not every conversation is actually about bringing on a new processor.
• 20:42
  SPEAKER_01: Where we do see clients make mistakes, though, oftentimes is that hard cut over, right?
• 20:48
  SPEAKER_01: So we get a lot of clients that come in and they're like, we need a new processor tomorrow.
• 20:52
  SPEAKER_01: Our contract is up for, you know, renewal in three months.
• 20:56
  SPEAKER_01: We're not going to renew.
• 20:58
  SPEAKER_01: I don't know that that's always the best way, right?
• 21:00
  SPEAKER_01: Sometimes it is.
• 21:02
  SPEAKER_01: We've made some aggressive moves and said, let's do it.
• 21:04
  SPEAKER_01: This is the migration strategy.
• 21:06
  SPEAKER_01: Help you pick the provider and let's let's do this and move quickly.
• 21:09
  SPEAKER_01: And there is times where that's needed, but it's less than more.
• 21:13
  SPEAKER_01: And so a lot of times this is where the crawl walk run model works really, really well.
• 21:18
  SPEAKER_01: And it's let's stabilize your current processor, right?
• 21:22
  SPEAKER_01: Where does the business sit today?
• 21:24
  SPEAKER_01: And can we optimize it?
• 21:25
  SPEAKER_01: Right?
• 21:26
  SPEAKER_01: Can we take you from the 44 basis points or 40 basis points you're seeing today and put you on a trajectory to see closer to 60 or 70?
• 21:33
  SPEAKER_01: Let's get that stabilized.
• 21:35
  SPEAKER_01: Once we've stabilized the current processor in parallel to that, we're looking for a new processor.
• 21:40
  SPEAKER_01: And sometimes that is running a multiprocessor strategy for a period of time.
• 21:44
  SPEAKER_01: And that new processor needs to be selected for more reasons than just economics, right?
• 21:49
  SPEAKER_01: Like a recent client that we helped save, right, to increase the 20 30 basis points.
• 21:54
  SPEAKER_01: This is a different use case, their current provider.
• 21:57
  SPEAKER_01: We were able to get them closer to 80 to 90 basis points.
• 22:00
  SPEAKER_01: Take rate with a new processor, and that's great.
• 22:02
  SPEAKER_01: But the only way we were able to do that is because the client was actually getting the future functionality that emergence were asking for.
• 22:08
  SPEAKER_01: So don't make that move because the economics are better.
• 22:12
  SPEAKER_01: The economics are better.
• 22:14
  SPEAKER_01: The attachment rate is lower because their clients had been begging them for things.
• 22:20
  SPEAKER_01: The first thing they were asking for is a better support experience.
• 22:23
  SPEAKER_01: So this allowed them, this is one of those moves where they move from a legacy referral relationship.
• 22:30
  SPEAKER_01: They kind of sat in a secondary support position.
• 22:33
  SPEAKER_01: We moved them into the primary support position and embedded the product into their embedded payments into their product.
• 22:39
  SPEAKER_01: Then we were able to unlock things like text to pay, right?
• 22:42
  SPEAKER_01: And I think we underestimate sometimes what is the person on the other side of the phone or the person on the other side of the visit with a merchant or that interaction, how are they actually taking payments?
• 22:54
  SPEAKER_01: And in this case, they were seeing something close to, I think it was like 70% of transactions were keyed.
• 23:00
  SPEAKER_01: And so how do we optimize your interchange and write, put your customers in a better situation to track payments?
• 23:08
  SPEAKER_01: And so going back to like the original question there is like we don't actually typically take every client that asks to go evaluate a new processor down the path of evaluating a new processor.
• 23:20
  SPEAKER_01: And I think that is one of the biggest mistakes that we see.
• 23:23
  SPEAKER_01: I think of another client we had, shoot Allie.
• 23:26
  SPEAKER_01: I mean, that ended up in a quite tough situation because another consultant, frankly, told them to go find another provider without looking at their current agreement.
• 23:34
  SPEAKER_01: And that was absolutely not something they had the right or ability to do at the time.
• 23:39
  SPEAKER_01: So I think that is the mistake is assuming that just a new processor is going to solve the problem without looking back at those pillars we talked about before of what's the product experience?
• 23:50
  SPEAKER_01: Who are the people owning it internally?
• 23:52
  SPEAKER_01: Have we given this the right time and attention before we just cut out the partner and find a new one?
• 23:58
  SPEAKER_00: We don't avoid RFPs, but we don't do RFPs for the sake of RFPs, just because they're fun.
• 24:04
  SPEAKER_00: They're not fun.
• 24:05
  SPEAKER_02: No one said ever.
• 24:06
  SPEAKER_00: Yeah.
• 24:08
  SPEAKER_02: So, so Allie, we've talked about this a little bit already, but I think it's so important to the conversation.
• 24:14
  SPEAKER_02: You know, a software company wants to take payments from simply being a feature to really start to treat it like a real business inside of their business.
• 24:22
  SPEAKER_02: What changes do they need to make organizationally that's going to make this successful?
• 24:27
  SPEAKER_00: Yes, yeah, I feel like we we touched on it with adoption.
• 24:30
  SPEAKER_00: We touched on it even with uh with how we see companies progress in their embedded finance journey.
• 24:37
  SPEAKER_00: One thing I think is really paramount, especially for software companies that have been around a while and have been doing this and solving for payments in different ways, is remember that just listening to the customer demand internally can cause a lot of issues.
• 24:53
  SPEAKER_00: So as opposed to doing that, taking a step back and building a strategy for what you want to solve for the customer.
• 25:00
  SPEAKER_00: And a really common use case in this scenario is a software company that's allowed their clients to bring their own gateway or processor over many, many years.
• 25:12
  SPEAKER_00: And the product team and the sales team are both like, yeah, sure.
• 25:14
  SPEAKER_00: Right?
• 25:15
  SPEAKER_00: Sales will always say, yeah, sure, we can do it.
• 25:18
  SPEAKER_00: And the product team says, yeah, sure, we can integrate to that gateway.
• 25:20
  SPEAKER_00: No problem.
• 25:21
  SPEAKER_00: And while that's great, maybe at the time to win the customer engagement, what it doesn't lead to is payments being a core part of the product and allowing you to control that experience from support to onboarding to actual settlement times and how they're managing payments.
• 25:39
  SPEAKER_00: And so we call it the third-party gateway integration mass pandemic of software companies, where they've solved this problem by saying yes and unwinding that to get to the adoption we talked about and to get to the internal alignment is very challenging.
• 25:55
  SPEAKER_00: So it causes more challenge for both the product team and the sales team and the customer.
• 26:01
  SPEAKER_00: And we see in this whole world of AI-created software companies and all you hear all the time are AI created companies going to take the business away from these vertical software companies that have been around for years, or even the direct merchant software companies like Toast.
• 26:17
  SPEAKER_00: And I think where they actually have the leg up, what we should be thinking about is not that they're AI created.
• 26:24
  SPEAKER_00: It's that they're building their companies with payments as not a requirement, but it is just a part of the software.
• 26:32
  SPEAKER_00: And so they're not saying you can bring your own partnership and you can bring your own gateway.
• 26:36
  SPEAKER_00: They're saying if you sign up with us, here's all these benefits and you're doing your payments.
• 26:41
  SPEAKER_00: And so they automatically have a higher attach rate.
• 26:44
  SPEAKER_00: And that's where you may actually see them sneaking up on the payments business and sneaking into the margins because they don't have to charge a different way for that since it's a part of their core offering.
• 26:55
  SPEAKER_00: So going back to that making it who you are as a company, as a software company, and cross-functionally getting alignment, that one example I think really helps get you there.
• 27:06
  SPEAKER_00: BYO process or model should be of um previous life dates and moving towards baking it into your experience.
• 27:14
  SPEAKER_01: I think this is where like our experience comes together really well too.
• 27:18
  SPEAKER_01: And I've really loved that side of it of we get to think about how the customer is going to adopt this, but we also get to think about how the infrastructure is built.
• 27:27
  SPEAKER_01: And like we weren't just salespeople at a payments company and came out there and said, hey, we think we can help you make more money.
• 27:35
  SPEAKER_01: I mean, really, if you just want to go make some basis points, sure.
• 27:38
  SPEAKER_01: Keep your multiprocessor BYOB, make a little bit of margin on it.
• 27:42
  SPEAKER_01: And anyone can tell you how to go do that.
• 27:44
  SPEAKER_01: And we really want to work with these clients on like what's the more complex organizational issue behind it?
• 27:50
  SPEAKER_01: And how do you how do you make that bigger move?
• 27:52
  SPEAKER_02: Okay.
• 27:53
  SPEAKER_02: So, Ashley, one of the themes that we're talking about at Embedify is what comes after payments.
• 27:59
  SPEAKER_02: So let's say Vertical SAS company has payments working well, optimized, doing all the right things.
• 28:06
  SPEAKER_02: How should it decide whether lending, banking products, insurance, payroll, or any other financial product for that matter actually starts to make sense and belongs in the platform?
• 28:17
  SPEAKER_01: I'll go back to kind of three themes that we've talked about a little bit here and how they culminate in this question.
• 28:22
  SPEAKER_01: One, do they have the people in place, right?
• 28:25
  SPEAKER_01: Is there somebody owning?
• 28:28
  SPEAKER_01: In many cases, we come in and we work alongside someone who's kind of an up-and-coming GM of payments, or we're helping to like place that person in role.
• 28:37
  SPEAKER_01: Sometimes we are there in a longer-term advisory capacity, but does somebody within the organization truly own payments and have oversight over it?
• 28:46
  SPEAKER_01: I think the second piece of that is what is the strength of your current portfolio?
• 28:52
  SPEAKER_01: Like, do you really understand the benchmarks and the current strength of your payments?
• 28:58
  SPEAKER_01: What is it?
• 28:58
  SPEAKER_01: Is it performing at the numbers you expect it to?
• 29:01
  SPEAKER_01: Are you like the client I talked about earlier where you're seeing like 180 basis points take rate and you've milked this thing for all that it is worth and you are performing at a phenomenally successful level?
• 29:12
  SPEAKER_01: Let's start to think about what's next then.
• 29:15
  SPEAKER_01: And then I think the the next piece is are you expanding because a client has asked you, right?
• 29:21
  SPEAKER_01: Going back to this theme of like, don't just build it because it was asked for, right?
• 29:26
  SPEAKER_01: Has a client truly asked for this?
• 29:28
  SPEAKER_01: Or does one noisy client want it?
• 29:31
  SPEAKER_01: And is there a true revenue opportunity?
• 29:34
  SPEAKER_01: So we oftentimes get asked from clients like, we want to add a new embedded finance capability.
• 29:41
  SPEAKER_01: And as we start to flush through the use case, maybe all they're actually trying to solve is a reconciliation gap, right?
• 29:48
  SPEAKER_01: They're not looking at the banking solution perhaps as a way to monetize.
• 29:53
  SPEAKER_01: They're just trying to make their jobs easier and get reconciliation for their client.
• 29:57
  SPEAKER_01: Or they're looking at capital and you find out that there's one really noisy sales rep who's heard about capital and one client asked for it and they just won't stop talking about it.
• 30:07
  SPEAKER_01: And so I think the last piece of that is like, have you really built a strategy around it?
• 30:11
  SPEAKER_01: Have you thought about it in the way of long-term growth, total adoption, stickiness?
• 30:17
  SPEAKER_01: And is there really a monetary value there?
• 30:20
  SPEAKER_01: But if you're gonna go stand up a capital solution and you're gonna get two adopters out of, you know, 3,000 merchants, was that just a distraction?
• 30:29
  SPEAKER_01: Yes, right.
• 30:31
  SPEAKER_01: So I think we try and help them think about it in the bigger picture, like where is this request coming from?
• 30:35
  SPEAKER_01: Or did you hear it at a podcast somewhere?
• 30:38
  SPEAKER_01: Did you read an article?
• 30:39
  SPEAKER_01: Did someone on the board say you needed it?
• 30:41
  SPEAKER_01: Let's put some numbers behind it.
• 30:43
  SPEAKER_00: What is refreshing though, as we see companies looking to add revenue streams outside of payments, is learning where to start if payments is not the place to start an embedded finance.
• 30:56
  SPEAKER_00: It's always been kind of the gateway place to start for software companies that understood the easy to embed, known possibility.
• 31:05
  SPEAKER_00: It's really refreshing when we get calls from our network in APAR or B2B, where they're looking to start with issuing.
• 31:14
  SPEAKER_00: And that makes much more sense.
• 31:15
  SPEAKER_00: It's actually where I started my career in payments on the issuing side.
• 31:19
  SPEAKER_00: And there's a lot of potential opportunity there.
• 31:22
  SPEAKER_00: There's also a very big untapped market there.
• 31:25
  SPEAKER_00: So what's refreshing I find in this where do you go next is sometimes taking a step back and say, where do you start?
• 31:33
  SPEAKER_00: Where will you get the most adoption and value in your customers and an embedded financial product?
• 31:37
  SPEAKER_00: And is it just accepting payments versus issuing them or anywhere else?
• 31:43
  SPEAKER_00: But there's there's a lot of nuance to it.
• 31:46
  SPEAKER_00: It's hard to answer the question I find sometimes without a tangible, well, at what stage are they in?
• 31:51
  SPEAKER_00: And what is the vertical, or what is the end customer buying?
• 31:55
  SPEAKER_00: Because how do you even say to the board, we're gonna put the these product resources towards it, or we're gonna change the roadmap entirely to do this without that?
• 32:04
  SPEAKER_00: But I would say, Ashley, wouldn't you agree issuing is far higher on the conversational list than even two years ago?
• 32:11
  SPEAKER_01: 1000%.
• 32:13
  SPEAKER_01: I think we hear capital issuing banking, where we're really seeing clients dive in though is issuing.
• 32:19
  SPEAKER_01: I think the other things are still kind of a tan, like a side conversation.
• 32:24
  SPEAKER_01: And I still think the processors are trying to figure out like what size company do we even want to allow to have these capabilities.
• 32:31
  SPEAKER_01: Issuing has come much further through this transition we saw in payments, where in order to do issuing before, right, you used to have to be like full bank direct program manager, like had to do all the things.
• 32:44
  SPEAKER_01: There is now some solutions out there and providers out there that can get you the solution without having to own all of the risk burden.
• 32:52
  SPEAKER_01: No, you don't need to become a PayFAC.
• 32:54
  SPEAKER_01: Those days are done for us, I think.
• 32:56
  SPEAKER_02: Okay.
• 32:56
  SPEAKER_02: Well, Ali, you work with companies at all different stages from businesses that are just establishing, you know, a payment strategy to those that are backed by larger PE firms or public companies that really just want to optimize payments.
• 33:10
  SPEAKER_02: So, how does the embedded finance playbook change as a company matures itself?
• 33:15
  SPEAKER_00: I think the the term playbook is not something we often use, but there's a very different strategy for each of them in that one, a startup is looking to build the value prop, make the embedded financial product a part of their identity.
• 33:31
  SPEAKER_00: These are the core basics and integrate.
• 33:34
  SPEAKER_00: And how how does the journey impact the customer experience?
• 33:38
  SPEAKER_00: So you start a much smaller there.
• 33:40
  SPEAKER_00: We'll say Ashley and I are both very passionate about startups.
• 33:43
  SPEAKER_00: We've both run our own startups and worked in many startups and brought them through PE uh stages.
• 33:49
  SPEAKER_00: So we would love to work with all startups to help them with said playbook or or the steps to avoid all of the missteps we've seen.
• 33:57
  SPEAKER_00: But at the end of the day, we do actually see many more PE backed companies come to us because naturally they've progressed and gotten that support from their board and investors to go do something.
• 34:09
  SPEAKER_00: The question is just what do they do and what does that process look like?
• 34:14
  SPEAKER_00: And that becomes much more sophisticated and complex because you're reporting to multiple people.
• 34:19
  SPEAKER_00: You have internal people that are passionate about the product and are passionate about the consumer.
• 34:25
  SPEAKER_00: And then you have a board that is passionate about the numbers and passionate about the exit strategy.
• 34:29
  SPEAKER_00: And so there are very different playbooks, talk checks, and steps for each of them.
• 34:35
  SPEAKER_00: And in many cases, actually, Ashley and I are actually brought into companies by the PE firm, whether it's at a due diligence stage or just at a place where they want to look across their portfolio at optimization potential.
• 34:48
  SPEAKER_00: And we help them identify the low-hanging fruit and then go step into the client to or their their portfolio company to go execute on that.
• 34:56
  SPEAKER_00: And that may have some overlap in playbook like scenarios, but part of the reason we have a job is because there really is no playbook for every stage or or every financial product within every vertical.
• 35:10
  SPEAKER_00: It's it's hard to define.
• 35:11
  SPEAKER_01: Allie, I feel like you might agree with this.
• 35:14
  SPEAKER_01: I think one of the most refreshing things we've actually seen is the number of bootstrap companies that have just done.
• 35:21
  SPEAKER_01: I think we have passion for that.
• 35:23
  SPEAKER_01: I personally built my first company Bootstrap, this one is as well.
• 35:27
  SPEAKER_01: And these founders who have just come in and like impressive growth on payments, right?
• 35:33
  SPEAKER_01: Sometimes, you know, 500 million to a billion and a half or two billion dollars in processing, and they've done it on their own and they've really built this thing, and then they're coming to us because they need to get it to a fit and finish stage that they can present for fundraising.
• 35:48
  SPEAKER_01: And so we get to have this really cool opportunity to go through the journey with them and you learn their story.
• 35:54
  SPEAKER_01: And there's nothing more passionate than a bootstrap founder who kept this thing open despite hard days or days that you may not have been able to make payroll, and now they're seeing all of the success.
• 36:04
  SPEAKER_01: And those are the really cool stories where we get to help them get to the table with the right private equity firm or VC firm.
• 36:11
  SPEAKER_01: And we're helping them really tell the story of payments and where it plays into their product, and in some cases is very much outpacing their software revenue.
• 36:19
  SPEAKER_00: It ties back to we we say it almost in a joking fashion, but very serious, just being a translator.
• 36:26
  SPEAKER_00: Translator not just between payments and software companies, but sometimes between software companies and their investor market.
• 36:34
  SPEAKER_02: Yeah.
• 36:34
  SPEAKER_02: Yeah, I I hear that a lot.
• 36:36
  SPEAKER_02: That's uh that's fascinating.
• 36:38
  SPEAKER_02: I mean, Ashley, you you you kind of said it there.
• 36:40
  SPEAKER_02: I mean, I'm passionate about these businesses too.
• 36:42
  SPEAKER_02: That's why I do what I do and I interview these, you know, CEOs and founders, and often the passion comes the most from the founders, right?
• 36:49
  SPEAKER_02: This is their baby, and to see it be successful and to hear them talk about it is always a great experience for me.
• 36:56
  SPEAKER_02: So, Ashley, I think this next question, I think you've answered it before, but let's let's kind of this is going to bring a lot of the conversation together.
• 37:04
  SPEAKER_02: If you were to sit down with the CEO of a vertical SaaS company and they said, you know, our payments business is doing okay, but we think we're leaving a lot on the table.
• 37:13
  SPEAKER_02: What are the first three or four things that you would want to understand about that business?
• 37:17
  SPEAKER_01: Why do you think that?
• 37:20
  SPEAKER_01: As much as we just want to say why do you think that, or where did you hear you could do better, right?
• 37:26
  SPEAKER_01: Is two questions I think we often lead with.
• 37:29
  SPEAKER_01: One, I want to understand where that sentiment is coming from.
• 37:32
  SPEAKER_01: It is so fun to hear the different stories of I was listening to a podcast or I read an article and I heard this or a board member said that.
• 37:39
  SPEAKER_01: But it helps us understand what's driving the outcomes of the project, right?
• 37:45
  SPEAKER_01: So so often getting just aligned with why they think that.
• 37:48
  SPEAKER_01: Then we're gonna go through some of these pillars that we've talked about probably at nauseum at this point, but like who owns it?
• 37:54
  SPEAKER_01: Is it you, right?
• 37:55
  SPEAKER_01: Does your sales team understand it?
• 37:57
  SPEAKER_01: What are the providers you're working with, and what is your relationship with those providers?
• 38:02
  SPEAKER_01: And you would be shocked how many times they can't answer.
• 38:05
  SPEAKER_01: I don't know if I'm a referral partner or a reseller.
• 38:07
  SPEAKER_01: I don't know if it's embedded, if it's not embedded, I don't know what part of the customer experience we own.
• 38:11
  SPEAKER_01: And then I think the last one is like, do you really understand your adoption of payments across your book and your take rate?
• 38:17
  SPEAKER_01: And Allie, I'm sure there's something else that you're thinking of top of mind as I'm going through it right now, because as we get answers to those questions, we figure out very quickly kind of where they are in the phase and what support and help that they need.
• 38:29
  SPEAKER_00: I would say one of the biggest things that you mentioned, Ashley, that that is overlooked in this, we're leaving something on the table is what is on the table.
• 38:39
  SPEAKER_00: What is on the table right now, which is referred to as the back book in this space.
• 38:44
  SPEAKER_00: But for a CEO or founder, it is your customers.
• 38:47
  SPEAKER_00: What are your customers doing right now?
• 38:50
  SPEAKER_00: And that leads to all of those details that Ashley just talked about that you would need to know to help the margin, the adoption.
• 38:56
  SPEAKER_00: But what is on the table with your customers?
• 38:58
  SPEAKER_00: What are they doing?
• 38:59
  SPEAKER_00: And what else needs to be on the table from your perception?
• 39:03
  SPEAKER_02: No, that makes perfect sense.
• 39:05
  SPEAKER_02: Well, I want to wrap up the show with one final question.
• 39:08
  SPEAKER_02: And I always like to talk about the future.
• 39:10
  SPEAKER_02: So let's look out a couple of years, maybe three to five years.
• 39:14
  SPEAKER_02: And maybe Allie, we'll we'll start with you.
• 39:16
  SPEAKER_02: Looking ahead those three to five years, what do you think will separate the companies that build really successful embedded finance businesses versus those that don't?
• 39:25
  SPEAKER_00: I think it's precisely the theme, the thread that we pulled on today, making the value ads that are revenue drivers a part of your product experience and your identity so that your customers experience them the same way you are initially motivated and your mission to solve the problem that you've built your company on.
• 39:45
  SPEAKER_00: That and progressing all further functionality to continue to create that adoption within the software equals adoption within payments or financial products.
• 39:57
  SPEAKER_00: So I think standing apart in that way and embracing the heck out of your partners.
• 40:02
  SPEAKER_00: Stop pushing back for one penny here or one thing there.
• 40:06
  SPEAKER_00: Look at it as a partnership, not a vendor relationship.
• 40:09
  SPEAKER_00: Embrace them.
• 40:10
  SPEAKER_00: They want to grow the same way you want to grow.
• 40:13
  SPEAKER_00: And I think everybody's gonna be a lot more successful if they do it together, hand in hand, versus going in two different directions.
• 40:20
  SPEAKER_02: Ashley, your thoughts?
• 40:22
  SPEAKER_01: I mean, I agree with everything that Ali said.
• 40:24
  SPEAKER_01: I think the only thing in sentiment that I would add to it is be intentional, right?
• 40:29
  SPEAKER_01: If you have payments and it's making you 20 basis points of, you know, take rate on that processing volume, you have something there.
• 40:36
  SPEAKER_01: So don't leave it alone, right?
• 40:38
  SPEAKER_01: Establish the right ownership around that, get help, mature it.
• 40:43
  SPEAKER_01: And if you're gonna do it, be intentional, own it and build a strategy around it.
• 40:48
  SPEAKER_02: Okay.
• 40:49
  SPEAKER_02: Well, Allie, Ashley, thank you both so much for your time today.
• 40:52
  SPEAKER_02: I think that was a great way to wrap up the show.
• 40:55
  SPEAKER_02: So again, thank you for being on the show.
• 40:57
  SPEAKER_02: And I know your time is very valuable, so so I want to respect that.
• 41:00
  SPEAKER_02: But this was a great episode.
• 41:02
  SPEAKER_02: I hope everyone listening will also think about considering coming to Embedify where these kind of conversations are gonna happen.
• 41:08
  SPEAKER_02: So, Ashley, Allie, thank you so much for being on today.
• 41:11
  SPEAKER_01: Thank you so much for having us.
• 41:13
  SPEAKER_01: We'll see you in Utah.
• 41:14
  SPEAKER_01: We can't wait.
• 41:15
  SPEAKER_01: We're excited to be there.
• 41:16
  SPEAKER_01: And yeah, want to have more of these conversations with everybody.
• 41:19
  SPEAKER_01: So hopefully everyone comes down and joins us.
• 41:21
  SPEAKER_01: It's a refreshing new venue, too.
• 41:23
  SPEAKER_01: So it'll be a nice change from Vegas.
• 41:25
  SPEAKER_00: Yeah.
• 41:26
  SPEAKER_00: On Vegas conferences for the win.
• 41:28
  SPEAKER_00: We're very excited for us.
• 41:29
  SPEAKER_00: And Greg, always a pleasure.
• 41:31
  SPEAKER_00: Thank you for having us.
• 41:32
  SPEAKER_02: Absolutely.
• 41:33
  SPEAKER_02: And for you and the audience to learn more about Embedify and to register to attend, please visit Embedify2026.com.