Latest / The Payments Shed / Ep. 67 - LIVE from FTT Payments with Protect Group: Refund Protection, Ghost Debt, and the Next Evolution of Embedded Finance

Transcript

Ep. 67 - LIVE from FTT Payments with Protect Group: Refund Protection, Ghost Debt, and the Next Evolution of Embedded Finance · The Payments Shed

• 0:04
  Welcome back to the Payment Share podcast live from FTT
• 0:07
  Embedded Finance and Super Apps. This afternoon we are joined by
• 0:11
  Sarah Gorton, financial services lead at Techs Group.
• 0:14
  Sarah, welcome to the podcast. Please can you introduce
• 0:17
  yourself, tell us a little bit about your, your career and your
• 0:20
  background and the Tech group. Thank you.
• 0:23
  OK. Well, financial services lead at
• 0:25
  Tech means we are target targeting financial services.
• 0:30
  Protect Group traditionally has worked with merchants, but we
• 0:33
  recognise that financial serves the big space from credit cards
• 0:37
  to payment processors and we recognise that there was an
• 0:40
  opportunity to to work with them.
• 0:43
  I'm sorry, yes, probably sorry with the the first question.
• 0:46
  So how does refund protection, as you call it, shift payment
• 0:53
  from being infrastructure to much more of a revenue riser?
• 0:57
  Good question. So payment processors, it's a
• 1:01
  race to the bottom. It's become very commoditized.
• 1:05
  So this is an opportunity to actually turn something that
• 1:08
  would maybe call it like a dump pipe that mean to insult, but a
• 1:11
  dump pipe into something that becomes a revenue generator.
• 1:15
  So as I said, we've traditionally worked directly
• 1:17
  with merchants. Now for us that means 1
• 1:20
  integration, 1 merchant working with say a payment processor, 1
• 1:25
  integration. And as long as they work with
• 1:28
  travel, ticketing, hospitality, then it becomes to many
• 1:32
  merchants. Now for them, I think they get
• 1:36
  around 3 to 7 bits bits for actually processing when you
• 1:43
  actually had a refund protection product on there.
• 1:45
  So embedded in the in the gateway it comes to about £0.40
• 1:49
  per hundred that they're actually making as opposed to
• 1:52
  say 5 pence. So is this then one of the early
• 1:56
  examples of embedded finance really helping to increase
• 2:02
  margins and not just enable transactions that we're seeing?
• 2:05
  Yes. I mean, I think we tend to think
• 2:07
  of embedded finances and embedded finance product in a
• 2:10
  non financial area. This is a little bit about on
• 2:14
  its head. It's a finance product in the
• 2:16
  financial services payment processes sector.
• 2:20
  My handset, you know, so one of the interesting ideas that here
• 2:23
  is of course what you call the the triple win for merchants,
• 2:26
  right? Can you break that down?
• 2:28
  And how much of that is about increasing conversion by
• 2:31
  reducing what's called booking anxiety at the checkout?
• 2:35
  Yeah, sure. I like to think it was the Holy
• 2:37
  Trinity one is increasing conversion.
• 2:41
  There's a lot of market research about, I think it's something
• 2:44
  like 5 times multiple if you actually add or make your refund
• 2:49
  terms very clear. So being able to add refundable
• 2:53
  products onto non refundable tickets, flights, hotel booking,
• 2:57
  this actually can help reduce that booking anxiety.
• 3:03
  The other one is mitigation. So if I sat there with a broken
• 3:08
  leg and I can no longer go, I might actually be raise a charge
• 3:13
  about friendly fraud. Give it a go.
• 3:15
  It's just a few buttons on my app.
• 3:18
  Now, because Protect Group have a refundable booking, we
• 3:23
  actually pay out on that. So if they've taken that out at
• 3:26
  the point of purchase, they'll come to us for a refund.
• 3:29
  So it totally avoids the whole chargeback scenario in the 1st
• 3:32
  place. It's not going to address the
• 3:34
  entire chargeback issue that's going on, but for those bookings
• 3:38
  that actually are in the right sectors, they will do.
• 3:41
  It's interesting because I'm a die hard train line user, right?
• 3:45
  I should probably go on GWR directly because because they do
• 3:48
  cancel trains a lot and I get to lay repay a lot quicker.
• 3:50
  But I just love the train line interface, always have.
• 3:53
  And they deployed embedded insurance maybe like two or
• 3:57
  three months ago. And interestingly, I think it
• 3:59
  must be going quite well for them because they've since
• 4:02
  amended their refund terms, which does make me now think
• 4:05
  more ah £2.53. Maybe I should click that
• 4:09
  because then you can only get a refund 24 hours before you can't
• 4:12
  get it on the day now. So if your travel plans are
• 4:15
  changing later, you're probably more incentivized with their new
• 4:18
  TNCS now to click, I'll take the insurance, right?
• 4:22
  Sure, and it's usually a small uplift on the ticket price.
• 4:25
  I mean we work on a a 10/10 rule, so one in 10 people buy,
• 4:31
  it's usually about a 10% uplift on the ticket price.
• 4:33
  So it depends on your appetite for risk.
• 4:36
  I mean, the other point is also because protect group are paying
• 4:41
  out the merchant if you can't go that broken leg.
• 4:45
  So the merchant has already taken your money.
• 4:48
  We're not asking the merchant to refund.
• 4:49
  It's it's on ours. And the merchants also still got
• 4:53
  the asset. So if there's enough time they
• 4:55
  can resell the tickets, they can resell the the airline seat.
• 4:59
  So is that an example of merchants turning a refund into
• 5:02
  a a profit event ultimately? And that's that, I guess that's
• 5:07
  been really well received by your customers as well, because
• 5:10
  like you say, they're keeping the goods still, right?
• 5:11
  So they're free money. They get, they get the asset
• 5:15
  they get. And then we obviously what I've
• 5:19
  just said about the uplift on the ticket price, we share that
• 5:22
  revenue and hopefully it reduces chargebacks as well, which given
• 5:26
  the new regulations and directives coming in recently
• 5:29
  from both Visa and MasterCard can only be a bit of a blessing.
• 5:33
  Actually. So I want to switch gear here a
• 5:36
  little bit. There's also been a lot of
• 5:38
  conversation about buying our pay later and risk and what is
• 5:42
  what is ghost debt in there? Why does it matter?
• 5:46
  So ghost debt as we, it might be our term, it might be a term
• 5:50
  that buy now pay later use, but it's when you're buying a laptop
• 5:56
  or a pair of trainers or sneakers.
• 5:58
  If, if that's the term, then you know, you've got a product that
• 6:02
  can be returned or it's usually got some kind of protection from
• 6:06
  the buy now, pay later organization for the experience
• 6:11
  economy, IE the holiday, the tickets.
• 6:14
  It generally doesn't. So back to my broken leg
• 6:18
  scenario. Maybe I've booked a holiday and
• 6:21
  I've made 5 out of 10 payments. I've paid 5.
• 6:26
  I still owe for the other five and I can't go now.
• 6:29
  You just think about the ultimate buyer's remorse and the
• 6:34
  associate, you know, the, the association with the brand
• 6:37
  identity. It's it's not a good and not a
• 6:40
  good fit. OK, interesting.
• 6:43
  And then how does embedded protection actually help both
• 6:48
  consumer and the lender in those scenarios then?
• 6:51
  OK. Well, what we've done is gone.
• 6:53
  OK. We want to make both whole.
• 6:56
  So the five payments I've made if I can no longer go for any of
• 7:01
  the emergency circumstances we deal with, which is is very wide
• 7:05
  is I get refunded my 5 payments and depending on who's carrying
• 7:11
  the credit on it, whether it's the merchant or the buy now pay
• 7:15
  later company, they get the remaining 5 S both organize both
• 7:19
  the consumer and the organization is made whole and
• 7:22
  it doesn't affect your credit rating.
• 7:25
  And Ek, that's important. Absolutely.
• 7:28
  So looking forward, what does it mean to turn that transaction
• 7:31
  feed into something like, you know, or to pull a financial
• 7:35
  bodyguard, OK. This is another different
• 7:38
  application of refund protection and this is agentic commerce is,
• 7:45
  is the buzzword, right. And you know Starling Bank of an
• 7:48
  announcer, they know they've done a an agentic commerce agent
• 7:53
  to actually look at the right products and services.
• 7:57
  We've applied this in a bit of a different way in the sense that
• 8:01
  you are you set the policy. So we don't want to spam
• 8:04
  anybody, but you are on your banking app and you said remind
• 8:10
  me if I book concert tickets or flights?
• 8:14
  I'm sorry. To read, to protect them.
• 8:17
  So it will just be a little pop up in the way that some of the
• 8:20
  neo banks are doing so well to go, hey, do you want to protect
• 8:23
  that booking? And it's as simple as that.
• 8:26
  So you set the rules, but it's just a a body card to enable to,
• 8:31
  you know, to catch those decisions.
• 8:33
  And so it's interesting that you mentioned concerts because
• 8:37
  reading the news in the last couple of weeks, the, the, the
• 8:39
  event space, particularly music festivals in the UK is going
• 8:42
  through a really difficult period at the moment.
• 8:44
  Lots of cancellations actually can the US stop to the border
• 8:48
  causing wireless to, to, to be cancelled for all the right
• 8:51
  reasons. But you know, it's, it's a, an
• 8:54
  interesting market from a payment provider point of view
• 8:56
  because it's one where a lot of exposure does exist potentially
• 9:01
  to that acquirer. And I think having an
• 9:04
  overarching insurance product like yours allows them maybe to
• 9:10
  facilitate a, a better set of terms and conditions for those
• 9:14
  events companies in particular, because the biggest risk is the
• 9:17
  chargeback exposure. Well, if the refund of that
• 9:20
  event being cancelled is guaranteed for someone like
• 9:23
  yourselves, there's less ambiguity around the terms and
• 9:27
  conditions and what would otherwise warrant potentially a
• 9:29
  refund or event failure, right? So you're allowing possibly
• 9:33
  customers that would struggle to get a card payment facility,
• 9:37
  particularly to actually get better terms and conditions from
• 9:40
  a payment company. Is that the fair statement?
• 9:42
  Yeah, I think that is a fair statement.
• 9:44
  I mean it to be clear, we cover the individual and their
• 9:49
  emergency circumstances. It's not about say a, a concert
• 9:53
  being cancelled. There are, there is insurance
• 9:56
  for that, that that does that. It's about and that was the
• 9:59
  original premise of how the company was founded.
• 10:02
  The guy that founded it, James, he was working in ticketing and
• 10:07
  realised that actually when I, I can't go or all these people
• 10:12
  wanted to cancel and weren't getting any refunds back.
• 10:15
  That was the the idea and how he created the company.
• 10:18
  So yeah, it it enables people that don't have the ability on a
• 10:25
  credit card to have some kind of recourse.
• 10:28
  Yeah. And do you think we're moving
• 10:30
  towards a world then where protection is offered after the
• 10:34
  transaction has taken place, not just at the checkout?
• 10:38
  Yeah. So we covered biosic that
• 10:40
  becomes into the realms of insurance.
• 10:42
  So at the point of check out it upgrades a non refundable ticket
• 10:46
  to refundable. That is not insurance, that is
• 10:49
  just an upgrade to merchants terms post check out becomes
• 10:53
  because it's a separate product, it's insurance.
• 10:55
  So the financial bodyguard agenda commerce that's an
• 10:59
  insured product. So it's slightly different, but
• 11:02
  they're both they're both valid. Yeah.
• 11:06
  So with that guy interesting. And I think that you know from a
• 11:11
  competitive landscape point of view, you guys are really you
• 11:15
  found a real niche slim swim lane, right?
• 11:18
  Like no, no, many, not many companies are doing what you
• 11:20
  guys are doing. And I think we're obviously at
• 11:22
  FTT today. It's interesting that you guys
• 11:25
  are are in the room and obviously looking at the fintech
• 11:28
  environment, the payments environment and how you can
• 11:30
  partner with brands in our industry.
• 11:32
  And I think this is where embedded finance in particular
• 11:36
  is bringing different industries together in a much greater way
• 11:39
  than we've ever seen before, which is brilliant, so.
• 11:41
  It's super. I mean a few years ago we we
• 11:44
  wouldn't have considered it and nobody would have considered us.
• 11:46
  We've got quite a few integrations going through sort
• 11:49
  of first people that are prepared to do first mover
• 11:52
  advantage. So it's exciting times, it
• 11:54
  really is. That's it.
• 11:57
  As a final part of the podcast, we have a a topic called The
• 12:02
  Shelf of Shame. What is one thing in payments?
• 12:06
  Why not pay later or embedded finance that you have a little
• 12:11
  bit of an ick for like that you want to put on that shelf and
• 12:13
  says I actually don't want to deal with this anymore.
• 12:17
  I think for me naturally working in this and maybe we've all
• 12:21
  suffered it, I don't see why the merchant should keep the the
• 12:25
  money and the product and I don't get a refund.
• 12:28
  It's like things that are non refundable should be a thing of
• 12:32
  the past. There should be at least an
• 12:33
  option to be able to upgrade on your own terms.
• 12:36
  I don't know. That's very topical.
• 12:39
  There's a there's a particular brand on the High Street that
• 12:42
  only do exchanges. They don't do refunds.
• 12:45
  It's part of their terms and conditions, so people can try
• 12:47
  and work that one out. But it really does grind my
• 12:50
  gears because I've given the product back.
• 12:53
  You might not want to buy anything else from your store,
• 12:55
  right? I don't need a store credit.
• 12:56
  I've just changed my mind. You've got the item back.
• 12:59
  So yeah, it is a an irk for me as well.
• 13:02
  I'd be happy to to put that on the shelf.
• 13:04
  For shame, 100%. And where can people get in
• 13:07
  touch with you? Where can they find out more
• 13:08
  about protects? Well, I'm on LinkedIn, so please
• 13:12
  go in touch via LinkedIn. That's probably a good place to
• 13:14
  start and always happy to have a conversation, see if it's a good
• 13:17
  fit. Thank you.
• 13:19
  Thanks. For joining us on the show
• 13:21
  today, enjoy the rest of your event.