Latest / Leaders In Payments / The Signal: Embedded Finance - Building the Infrastructure Layer with Jaris Founder & CEO Chris Aristides | Episode 470

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The Signal: Embedded Finance - Building the Infrastructure Layer with Jaris Founder & CEO Chris Aristides | Episode 470 · Leaders In Payments

• 0:01
  SPEAKER_01: Welcome to the Signal, powered by the Leaders in Payments Podcast, where we are cutting through the noise to reveal what truly matters in payments and fintech.
• 0:10
  SPEAKER_01: Hello, everyone, and welcome to the Leaders in Payments Podcast.
• 0:13
  SPEAKER_01: I'm your host, Greg Myers, and today's special guest is Chris Aristides, the founder and CEO of Jarriss.
• 0:19
  SPEAKER_01: So, Chris, thank you for being here and welcome to the show.
• 0:22
  SPEAKER_00: Yeah, thanks for having me.
• 0:23
  SPEAKER_01: So today we're launching a new series with Jarriss, and it's all about what it really takes for payments companies and ISOs to stay competitive as the market shifts towards owned payment experiences, where winners look more like Square and Stripe because they've built the infrastructure that makes embedded finance possible.
• 0:41
  SPEAKER_01: We'll unpack the technology, the business model, and the strategic choices behind that shift, and what it means for anyone trying to modernize and scale in today's payments landscape.
• 0:52
  SPEAKER_01: In episode one, we start with the origin story, why Chris set out to build square capital for everyone else, and why JARIS chose a bank-backed modern tech stack approach instead of a typical MCA model.
• 1:05
  SPEAKER_01: From there, we get into the big realization.
• 1:08
  SPEAKER_01: For many processors, it's a massive TAM, but it's also fragmented, legacy, and there's no outlet to plug into, especially in multiprocessor environments.
• 1:17
  SPEAKER_01: We'll wrap up with a teaser of where JARIS is going next, shifting from lending into the foundation that enables embedded finance, which we'll cover in detail in episode two.
• 1:27
  SPEAKER_01: So before we get into the meat of this episode, Chris, if you don't mind, tell us about yourself and your background.
• 1:33
  SPEAKER_00: Yeah, sure.
• 1:34
  SPEAKER_00: Thank you for that intro, Bray.
• 1:35
  SPEAKER_00: My background generally is in investment management.
• 1:38
  SPEAKER_00: So I spent 22 years primarily in the hedge fund business as an analyst and a portfolio manager, always covering technology and innovation.
• 1:46
  SPEAKER_00: I did it on both sides of the market, meaning betting on and betting against companies, so to speak, in the world of the hedge funds, so to speak.
• 1:53
  SPEAKER_00: And um, you know, through that that time period, I learned a ton.
• 1:57
  SPEAKER_00: The business changed.
• 1:59
  SPEAKER_00: And at some point, when you watch a lot of the guys in Silicon Valley build companies, you become a little bit envious of wanting to become an operator, which is which is one of the reasons I'm I'm here doing what we're doing now.
• 2:10
  SPEAKER_00: Been married for 27 years, have a couple kids, and still pretty active.
• 2:14
  SPEAKER_00: But but building the company is a lot of fun.
• 2:16
  SPEAKER_01: All right.
• 2:17
  SPEAKER_01: Well, let's talk about the company.
• 2:18
  SPEAKER_01: So tell us a little bit about what Jairus does.
• 2:22
  SPEAKER_00: Yeah, let me describe the company in to in the direction of where we're going and where we are today rather than where we started.
• 2:28
  SPEAKER_00: We consider ourselves vertical software company for payments as well as a full stack embedded finance company.
• 2:34
  SPEAKER_00: And just to unpack that a little bit, not to go into too much detail, but we've spent so much time in the industry working with payment companies that we decided, like a lot of the solutions you bring to market for embedded finance and for banking, they're applicable, obviously, since it's a banking product, so to speak.
• 2:52
  SPEAKER_00: And so that became the verticalization aspect of how do we meet partners and customers where they're at?
• 2:57
  SPEAKER_00: How do they operate?
• 2:58
  SPEAKER_00: What can we do to help them out?
• 2:59
  SPEAKER_00: At the same time, just helping them with those problems and becoming a cost center is not exactly where we want to go.
• 3:05
  SPEAKER_00: We want to produce a profit center for these guys and for their constituents as well, which means let's drive multi-product outcomes, lending into payouts, banking services, things that the folks you mentioned in the beginning, the squares and stripes of the world, have pushed pretty hard on.
• 3:20
  SPEAKER_00: So that's the way I would describe us, and we are continuing down that path fairly aggressively.
• 3:25
  SPEAKER_00: We made that decision to pivot the business or at least pivot the go-to-market about two years ago, and a lot of that's uh coming to the end, and we're getting a lot of these customers live as we speak.
• 3:36
  SPEAKER_01: Okay, and we will definitely get into that.
• 3:38
  SPEAKER_01: So before we get there though, let's start with the genesis of the company.
• 3:42
  SPEAKER_01: So, what problems were you looking to solve in the market originally?
• 3:46
  SPEAKER_00: I mean, originally there's a couple of problems.
• 3:48
  SPEAKER_00: One of them was just the small business lending gap.
• 3:51
  SPEAKER_00: If you recall global financial crisis happens, not to spend too much time on it, but the Basel framework and the risk-weighted asset framework come out, and essentially banks just say, I'm not going to lend into the space anymore.
• 4:03
  SPEAKER_00: The gap widens rather than collapses for funding need.
• 4:07
  SPEAKER_00: And at the same time, you've seen the squares of the world pop up with an integrated banking product that's super easy to use.
• 4:14
  SPEAKER_00: And so that gap needed to like fill in for the non-squares of the world.
• 4:17
  SPEAKER_00: And I think you did a good job of saying like we were a square capital for everybody else.
• 4:21
  SPEAKER_00: But we took a very integrated approach to that because of the conversion metrics you see out of the best in-class guys.
• 4:28
  SPEAKER_00: So the original idea was let's just build that as a horizontal product because it actually entails a lot of domain knowledge.
• 4:34
  SPEAKER_00: It should need a lot of scale to be a real business, and it's got some serious technical challenges.
• 4:39
  SPEAKER_00: So that's how we started the business.
• 4:41
  SPEAKER_01: Okay.
• 4:42
  SPEAKER_01: And the concept of embedded lending for SaaS and payment companies, it's been around for some time, but you guys took a different approach than the traditional MCA program.
• 4:52
  SPEAKER_01: So tell us about that and why you went that route.
• 4:55
  SPEAKER_00: Yeah, I think you know, it's funny because everyone wants to walk around and say, I want to prove product market fit.
• 5:00
  SPEAKER_00: I don't know that you have to prove product market fit when you just look at what the competitive landscape is doing.
• 5:06
  SPEAKER_00: I mean, Squares Volume's been massive.
• 5:08
  SPEAKER_00: We don't know what Stripes is.
• 5:09
  SPEAKER_00: I assume it's going to be pretty solid.
• 5:10
  SPEAKER_00: PayPal's and others at the time were disclosed to a point where every now and then someone would ask me, Well, how do you know my merchants need capital?
• 5:18
  SPEAKER_00: It's like, well, the entire small business world needs capital.
• 5:21
  SPEAKER_00: It's a well-documented problem.
• 5:22
  SPEAKER_00: And there's a pretty good playbook on how to do it.
• 5:25
  SPEAKER_00: So the approach, instead of saying, I'm going to go prove product market fit and go with an MCA product and an ACH withholding product, became, let's not do that.
• 5:34
  SPEAKER_00: Let's go best in class.
• 5:35
  SPEAKER_00: So let's start on a bank program because with a flex loan on a bank program or installment loan or what have you, you provide a lot of necessary comforts to your platforms and customers, right?
• 5:44
  SPEAKER_00: Because you're operating inside of that bank regulation, which means underwriting and servicing are all very tightly aligned with the regulations.
• 5:53
  SPEAKER_00: So that was definitely the reason we went there.
• 5:56
  SPEAKER_00: I think the second reason is you know, once you start building down a certain path, changing is quite difficult.
• 6:02
  SPEAKER_00: And I think from the beginning, I always knew at some point we want to go into more than just loan products because my view of the world is banking is a bundled business, and lending's a great business, and so is deposit banking, but they're also related.
• 6:14
  SPEAKER_00: So let's build on the bank and then we can horizontally scale over time into new products.
• 6:19
  SPEAKER_01: Okay.
• 6:20
  SPEAKER_01: And you built a bank-backed lending program.
• 6:23
  SPEAKER_01: We mentioned that at the beginning on a modern tech stack.
• 6:26
  SPEAKER_01: So who were your early partners and what did you learn from those experiences?
• 6:31
  SPEAKER_00: You know, we had some great early partners, and I think the fintech issues are fairly well documented.
• 6:37
  SPEAKER_00: You know, our first bank was Blue Ridge, and we continue to work with one of the technology providers on Blue Ridge as of right now.
• 6:44
  SPEAKER_00: We're in the process of making a handful of changes there.
• 6:47
  SPEAKER_00: But that early infrastructure was pretty nascent, and we all had to work together on that from a regulatory perspective, from a software perspective.
• 6:55
  SPEAKER_00: You know, what did I learn?
• 6:56
  SPEAKER_00: I think I learned the same thing a lot of others learned that when your bank catches a cold, you get the flu.
• 7:01
  SPEAKER_00: You want to put some protections in there.
• 7:03
  SPEAKER_00: And I think as great as the modern tech stacks are, we're going to be beholden to their roadmaps and their compliance and the banks that they work with.
• 7:11
  SPEAKER_00: So since then, we've made a number of changes around that and added a handful of other banks and will continue to do that at a fairly slow and deliberate pace, just because it's it's quite a bit of work to bring up a new bank.
• 7:22
  SPEAKER_00: I think on the customer side, we learned a ton too.
• 7:25
  SPEAKER_00: Actually, our first partner wasn't Belgium, it was Worldline and very different regulatory environments across Europe at a country by country level.
• 7:34
  SPEAKER_00: And I think that's where probably we we saw our first difficulties when you look at how legacy payments work versus some of the more vertical SaaS-oriented folks.
• 7:44
  SPEAKER_00: Then on the actual places where we really started to see velocity, it was in that vertical SaaS model, so to speak, where you get a high level of engagement.
• 7:53
  SPEAKER_00: But we learned a ton through these initial periods about everything.
• 7:56
  SPEAKER_00: And in Belgium, we learned about servicing, right?
• 7:59
  SPEAKER_00: Because we would end up having to go and do some of the ugly things you had to do in lending that was highly applicable here, maybe slightly different legal structures, but learning about our banking infrastructure and how to operate it, learning our servicing and underwriting, and then applying it in vertical SaaS to begin with, and now, of course, moving into the legacy payments world for uh solving a different problem.
• 8:18
  SPEAKER_00: That's essentially what we did in those early years.
• 8:21
  SPEAKER_01: Okay.
• 8:22
  SPEAKER_01: And it seems like working with more of the legacy payment processors, as you mentioned, adds a lot of complexity versus the newer vertical SaaS platforms.
• 8:31
  SPEAKER_01: So why didn't you just focus on the vertical SaaS?
• 8:33
  SPEAKER_01: Why even target the payment processors?
• 8:36
  SPEAKER_00: Yeah, everyone's kind of wired a little different.
• 8:38
  SPEAKER_00: I'm kind of wired towards that type of complexity.
• 8:41
  SPEAKER_00: I like it.
• 8:41
  SPEAKER_00: I feel like it's a problem for me to solve from uh you know personal perspective.
• 8:46
  SPEAKER_00: You're absolutely right.
• 8:46
  SPEAKER_00: I mean, the vertical SaaS guys convert so well.
• 8:49
  SPEAKER_00: And you know, some of the conversion we've seen is toast and above from a lending perspective in the vertical SaaS market.
• 8:56
  SPEAKER_00: However, I am not so sure that's all the companies need.
• 9:00
  SPEAKER_00: And when you look at that from a business model perspective, there's a couple of particular issues.
• 9:05
  SPEAKER_00: One of them is even when you do a spectacular job in lending, you're not touching that much of the customer base.
• 9:12
  SPEAKER_00: It's actually pretty interesting.
• 9:14
  SPEAKER_00: One of our competitors had some data that was posted recently and it showed conversion on vertical SaaS versus conversion on ISO, so to speak.
• 9:22
  SPEAKER_00: And it's 13 times greater on vertical SaaS.
• 9:25
  SPEAKER_00: I can say we've seen the same thing.
• 9:26
  SPEAKER_00: I also think we've tried to figure out what the problem with that is because all the monies in all the dollars processed are in the legacy model relative to the vertical SaaS model.
• 9:35
  SPEAKER_00: So, you know, there's a couple of things here.
• 9:37
  SPEAKER_00: Single product in vertical SaaS is a smaller business than multi-product across the board.
• 9:43
  SPEAKER_00: And if you can add that vertical software to it component and be an integral part of the business and support the company from an operational perspective and position yourself for multi-product to support their business, I think that's generally where we want to go.
• 9:57
  SPEAKER_00: I know it's way more complicated.
• 9:58
  SPEAKER_00: The point you made earlier on what did you learn in the early days?
• 10:01
  SPEAKER_00: We learned a lot.
• 10:02
  SPEAKER_00: So we've gone back and built around this idea of saying, you know, we want to go and help and support that legacy model because there's a lot that that entails, whether it's a lot of the compliance tooling, some of the transaction monitoring, some of the instructional funding components, and then adding embedded finance.
• 10:18
  SPEAKER_00: And then that means is it one product, is it just lending, or is it lending, is it instant payouts, is it the potential for commercial bank accounts embedded in the platform?
• 10:27
  SPEAKER_00: And I think we've gone that other direction, and we made that hard turn about two years ago.
• 10:32
  SPEAKER_00: So it's a much bigger market, it's a a much more complex market, but hopefully we'll be rewarded accordingly, and hopefully our customers will be too.
• 10:41
  SPEAKER_01: So going off script a little bit here, but it it kind of made me think of this.
• 10:45
  SPEAKER_01: How much of the difference between the conversions of the vertical SaaS and the and the processors or the uh the ISOs, if you want to call it that, is it related to having the data?
• 10:57
  SPEAKER_01: What is it that drives a higher rate?
• 11:00
  SPEAKER_00: I mean, it's a great question.
• 11:02
  SPEAKER_00: So I'm I'm excited to see some of our own data over the next six months because we've been working towards this point for quite a while.
• 11:08
  SPEAKER_00: But I think engagement and personalization will have to definitely be there.
• 11:12
  SPEAKER_00: And when I look at the legacy market, that's not like you just download an app for the legacy market.
• 11:17
  SPEAKER_00: It just doesn't exist.
• 11:18
  SPEAKER_00: So engagement is actually the ISO engaging.
• 11:22
  SPEAKER_00: And the relationships they built with their customers are spectacular.
• 11:25
  SPEAKER_00: We we hosted a handful in our office a few months ago to just listen to the stories and hear how they operate.
• 11:32
  SPEAKER_00: So providing those guys with tools and providing them with engagement tools for their customers and then directly to their customers if desired in their brand becomes the engagement point.
• 11:42
  SPEAKER_00: So I like the off-script question because really, when you kind of dialed in, our job is to support some super ISOs, so to speak.
• 11:49
  SPEAKER_00: And I don't know if that's the right language I should be using because everyone uses something slightly different, but I want to support them in supporting their ISOs, and I want to support the ISOs in supporting their merchants.
• 11:59
  SPEAKER_00: It's a little bit different than the way I think I think Jim from Payrock was on your show and described how his customer is the ISO, but we're trying to build that glue that binds these things together to drive that engagement.
• 12:10
  SPEAKER_00: So if we have to do white label work that transfers through to the ISO so their brand gets to the customer, because that's who they know, we're happy to do it.
• 12:19
  SPEAKER_00: So we're pushing through on that type of work.
• 12:22
  SPEAKER_00: So it shows up in that ISO brand within.
• 12:24
  SPEAKER_00: So it's really, it's a very uh symbiotic and complementary relationship.
• 12:29
  SPEAKER_00: We can't go straight to ISO.
• 12:30
  SPEAKER_00: We can't, we can go straight to Subaru ISO, but putting them together is actually the real value add because you have that full stack approach that solves those problems from instructional funding to onboarding to branding to data path.
• 12:43
  SPEAKER_00: To your point, that's a very complex process to go through.
• 12:47
  SPEAKER_00: But it's kind of nice to be on the other side of this and and looking at, I'm now looking for the proof points coming out of the other end of it.
• 12:53
  SPEAKER_01: Right, right.
• 12:54
  SPEAKER_01: Well, as we've both talked about, there's a very large TAM at the processors, and that's a huge opportunity.
• 13:00
  SPEAKER_01: But the challenge is there's no outlet to plug into, as we kind of mentioned earlier.
• 13:05
  SPEAKER_01: So can you kind of expand on that?
• 13:07
  SPEAKER_00: You know, one of the key assumptions, and I I heard a competitor of mine describe it this way a few years ago, was like, hey, you just show up, you plug into the processor.
• 13:14
  SPEAKER_00: It's like, well, wait a minute, to the point you made, there's no outlet.
• 13:16
  SPEAKER_00: You plug into a processor.
• 13:19
  SPEAKER_00: I'm gonna be totally dating myself, but it's almost like trying to operate a VCR with an owner's manual in the in the late 80s.
• 13:27
  SPEAKER_00: Did you trust it would work?
• 13:28
  SPEAKER_00: They're all different.
• 13:29
  SPEAKER_00: You know, what was the outcome gonna be?
• 13:31
  SPEAKER_00: So now you're in this situation where you're dealing with someone that's aggregated multiple ISOs and has a direct and an indirect business and they have multiple processors, and how are we gonna give them uniformity?
• 13:42
  SPEAKER_00: And then they've made a lot of acquisitions.
• 13:44
  SPEAKER_00: So now they've got n number of CRMs, dashboards, multiple contracts for those guys.
• 13:49
  SPEAKER_00: And so that became the idea of is there a better way to do this?
• 13:53
  SPEAKER_00: And I think that's where we became kind of interested in well, wait a minute, we can do processor agnostic instructional funding, we can abstract that from processing and support that group and enable embedded finance.
• 14:04
  SPEAKER_00: And so there's no outlet becomes there's no outlet for what, data, or no outlet for instruction and money movement.
• 14:12
  SPEAKER_00: So we worked on money movement, and that meant getting an RTN, standing up our own core, and going through quite a bit over the last couple of years.
• 14:20
  SPEAKER_00: And I think the data path is something we've just learned over time through being forced to integrate with a lot of the legacy guys, or or as Jim would call them, the super tankers, right?
• 14:30
  SPEAKER_00: Let's go and fill in the gap on the technology stack to help, you know, keep those guys going and to keep those that are using them going, because now we can hopefully try to be fairly seamless in blending that back end and allowing people to offer uniform services across multiple platforms.
• 14:47
  SPEAKER_00: I know that's just a lot what you just talked about, but yeah.
• 14:50
  SPEAKER_01: That's a lot there for sure.
• 14:52
  SPEAKER_01: But you know, uh, and I think this is kind of a follow-on question, is that there's so much fragmentation, right?
• 14:58
  SPEAKER_01: And these companies that you're talking about are often running on legacy technology.
• 15:03
  SPEAKER_01: So, how do you how do you do this at scale?
• 15:06
  SPEAKER_01: How do you tap into this process or market at scale?
• 15:09
  SPEAKER_00: So the the data pieces is one thing, which we kind of touched on, and and most of them have pretty consistent formats.
• 15:16
  SPEAKER_00: So I think we're very comfortable with how to ingest process that data for our own use and for their use.
• 15:22
  SPEAKER_00: And then I think the more difficult thing becomes how do you go and abstract settlement?
• 15:26
  SPEAKER_00: That's not simple, right?
• 15:27
  SPEAKER_00: You need to build your own rules engine, needs to be on a proper core.
• 15:31
  SPEAKER_00: So I if I kind of look back at what we've done, we went to our sponsor bank and said, this is what we want to do, this is what we want to build based off of from a core perspective.
• 15:40
  SPEAKER_00: So we didn't build a homegrown core.
• 15:42
  SPEAKER_00: What we actually did is we bought a cloud-based core that would work across multiple banks.
• 15:46
  SPEAKER_00: So we could be multi-RTN, which I think is important because you know we all had we've all seen what happens if one bank gets in trouble or something goes wrong there for whatever reason, or even if there's just a change in leadership and a change of art.
• 15:58
  SPEAKER_00: So we want to be multi-bank.
• 16:00
  SPEAKER_00: So starting out with individual RTNs and a cloud core, and then building our services around that became the next step.
• 16:08
  SPEAKER_00: So at this point, I think we could expand our capabilities fairly shortly.
• 16:13
  SPEAKER_00: But that kind of became the idea.
• 16:15
  SPEAKER_00: And I think if you peel back some of the innovations in the legacy guys, where someone's taken an existing process and said, hey, we're going to add instructional funding, the process they did it with is probably fairly similar to what we've done.
• 16:29
  SPEAKER_00: Ours is just outside of a single processor.
• 16:31
  SPEAKER_00: So we don't really care if you're on Pfizer or on WorldPay, or I suppose it's global in WorldPay now, or but on a system level, we don't really care what system you're on.
• 16:41
  SPEAKER_00: We can handle that for you, is the direction we went in.
• 16:44
  SPEAKER_00: So you can leave your processing where it is and still at a merchant level start to use our instructional funding and settlement on the back end.
• 16:53
  SPEAKER_00: Doesn't mean you have to put all your features in there, but if you wanted to just do split settlement, for example, you can do that.
• 16:58
  SPEAKER_00: You can leave risk at your processor.
• 16:59
  SPEAKER_00: I think most people will probably pick that because it's the easiest thing to do and it doesn't disrupt the risk team and doesn't force them to get involved.
• 17:07
  SPEAKER_00: But over time, we'll probably develop some more of those, some more of those tools for that particular group as well.
• 17:12
  SPEAKER_01: All right.
• 17:13
  SPEAKER_01: Well, we're gonna cover more of this in episode two, but give us a teaser on the vision for the company.
• 17:20
  SPEAKER_01: What's it look like moving forward?
• 17:22
  SPEAKER_00: Yeah, I mean, I think it's to develop, it's it's to continue to push down those paths, right, of software development and then financial services, those two things in the with the ideology being on supporting the payments industry.
• 17:35
  SPEAKER_00: I don't think it necessarily has to be legacy.
• 17:38
  SPEAKER_00: I think it it just happens to suit itself for that, where we're at today, because we've got a lot of competitive components and we've got other things like that you can work with, but we've been pretty laser focused on this segment of the market and will continue to be here.
• 17:50
  SPEAKER_00: I think the idea is how do you go and and collapse a lot of these barriers that were built years and years ago?
• 17:57
  SPEAKER_00: I mean, I'm sure you've read documents that that are probably based on something that's 30, 40, 50 years old, and it still has that language in there.
• 18:05
  SPEAKER_00: Why does that language need to exist?
• 18:06
  SPEAKER_00: Why does that process need to exist?
• 18:08
  SPEAKER_00: It's not like the more modern folks adopted legacy language and process.
• 18:12
  SPEAKER_00: They did the exact opposite.
• 18:14
  SPEAKER_00: So I think for us, it's to take those pieces of legacy that we find that are unnecessary, where we think we can solve it in a neutral way, break those things down, and then enable modernization for the existing volume.
• 18:26
  SPEAKER_00: That's really where I would argue we want to be.
• 18:29
  SPEAKER_00: And if we can do that across that group, I think, I think we'll be pretty excited about it.
• 18:33
  SPEAKER_00: And hopefully our partners will be as well.
• 18:35
  SPEAKER_01: So do you think that all the early days and and some of the things that you did back then, if you hadn't done those, you'd be where you are today?
• 18:43
  SPEAKER_00: You know, hurting yourself is a good thing.
• 18:45
  SPEAKER_00: You do you figure out how not to hurt yourself again.
• 18:47
  SPEAKER_00: So I mean, at least if you're if you're thinking about it that way.
• 18:50
  SPEAKER_00: Yeah, I I mean, I can guarantee you we made a lot of mistakes.
• 18:54
  SPEAKER_00: I'm sure I did too.
• 18:55
  SPEAKER_00: I know I did, especially when you're a former PM.
• 18:58
  SPEAKER_00: I think you know your loss rate is going to be pretty high.
• 19:01
  SPEAKER_00: I was a slugging percentage guy, so I was probably 52, 48 with a high slugging percentage.
• 19:06
  SPEAKER_00: So I know what it's like to make mistakes.
• 19:08
  SPEAKER_00: But those mistakes I think we learned from, which I think is is the key part of this.
• 19:12
  SPEAKER_00: Every time something went in the wrong direction, it was a point of evaluation in the grand scheme of what are we trying to ultimately do here.
• 19:20
  SPEAKER_00: I think without stubbing our toes and making those mistakes, I don't think we'd be positioning ourselves the way we are now.
• 19:25
  SPEAKER_00: And quite frankly, I'm I'm excited about it because I don't know a lot of people, if anyone, doing it the same way with the same type of idea.
• 19:31
  SPEAKER_00: I do see things that are what I would consider substitutes rather than competitive.
• 19:36
  SPEAKER_00: And substitutes can be competitive, and I'm not going to discount that.
• 19:40
  SPEAKER_00: But I think the approach of saying, how do I help support an industry with software to enable embedded finance is not something I've seen.
• 19:47
  SPEAKER_00: I've seen a lot of do you want my loan product?
• 19:50
  SPEAKER_00: Do you want my bank account product?
• 19:51
  SPEAKER_00: And I can't call it a bank account because it's an FBO account or whatever it's going to be.
• 19:55
  SPEAKER_00: Do you want my onboarding?
• 19:57
  SPEAKER_00: But how do you put those things together to actually collapse this problem and turn it into a solution is not something I see a lot.
• 20:04
  SPEAKER_00: So I don't think we would have come up with that type of an idea without just going through the pain and watching how people actually work because you know there's some process in there that needs improvement, and we've tried to take a pretty open-minded approach to solving that.
• 20:20
  SPEAKER_01: Yeah.
• 20:20
  SPEAKER_01: And I think your your timing is interesting too, at least from my perspective.
• 20:29
  SPEAKER_01: But as we talk about embedding things, embedded finance is now the more hot topic, at least, you know, from the people that I talk to.
• 20:37
  SPEAKER_01: It's about, okay, we've gotten good at payments.
• 20:40
  SPEAKER_01: And I've even seen the death of PayFAC.
• 20:42
  SPEAKER_01: I don't know if you've seen that, but people are talking about that, right?
• 20:44
  SPEAKER_01: So it's we're we've moved beyond that.
• 20:47
  SPEAKER_01: And I think even like the ISOs and the agents, they have to have more solutions to sell, right?
• 20:53
  SPEAKER_01: Selling payments today alone is hard.
• 20:56
  SPEAKER_01: And what you're building is not just lending, right?
• 20:58
  SPEAKER_01: So I think it's it's an interesting time to be doing what you're doing because I think it aligns with where the market's moving.
• 21:04
  SPEAKER_00: Yeah, I I think, I mean, obviously we agree, but I think you you hit on something which I think is a key point.
• 21:10
  SPEAKER_00: I think multi-product has to be there.
• 21:12
  SPEAKER_00: Engagement and multi-product are the things we're really in the process of rolling out.
• 21:16
  SPEAKER_00: Going back to it, if you touched three to five percent of your customer base with a loan, what about the other 95 to 98% that we need to get after or 97%?
• 21:25
  SPEAKER_00: I'm sorry.
• 21:26
  SPEAKER_00: There's a lot to do there.
• 21:27
  SPEAKER_00: And so having high yield savings of some capacity can touch someone that doesn't necessarily need financing.
• 21:33
  SPEAKER_00: So you've got someone that desperately needs financing, somebody with large balances that has a successful business, both need liquidity.
• 21:40
  SPEAKER_00: So I think the idea of trying to span that with loans, faster settlements, and commercial banking products is really where we're trying to go.
• 21:48
  SPEAKER_00: Because if you're gonna do this, why are we picking 3 to 5% of the customer base to go after?
• 21:52
  SPEAKER_00: I know everyone walks in with the data and says, hey, if 99% of your customers took this, you guys, they would all be borrowing this much.
• 22:00
  SPEAKER_00: You would be killing it and all of that stuff.
• 22:01
  SPEAKER_00: But the reality is like you've seen it with public data.
• 22:04
  SPEAKER_00: That just doesn't happen.
• 22:06
  SPEAKER_00: There's a few metrics that are floating out there that are worth noting.
• 22:09
  SPEAKER_00: I think one of the Wall Street analysts has posted Clover converting 30 basis points of volume into loans.
• 22:15
  SPEAKER_00: I can tell you the legacy guys are down in the six to 10 area, which is super low.
• 22:20
  SPEAKER_00: You've got toast at 80 and you've got Square at 290.
• 22:23
  SPEAKER_00: Like, why are we hanging out in one direction?
• 22:26
  SPEAKER_00: Like, what has Square done so well?
• 22:27
  SPEAKER_00: They've done multi-product, they've done great user experience.
• 22:30
  SPEAKER_00: So I'd rather be pushing in that direction.
• 22:33
  SPEAKER_00: So I think you're right.
• 22:34
  SPEAKER_00: And one of the first questions I ask people when they say, hey, can you run a loan portfolio for us?
• 22:39
  SPEAKER_00: I generally start out with, like, are you sure that's the first product you want?
• 22:43
  SPEAKER_00: Because once you make that decision with that vendor, you may have painted yourself into a corner.
• 22:48
  SPEAKER_00: And what about the other 95 plus percent of your customers?
• 22:52
  SPEAKER_00: So it's generally a bit educational to go through that.
• 22:56
  SPEAKER_00: And even for me, when we started in lending, I wasn't quite sure what the what would be considered success.
• 23:01
  SPEAKER_00: At one point, I thought it was one thing, and it's it's clearly outgrown that.
• 23:05
  SPEAKER_00: But how do you adopt a solution that works for 100% of the customer base and drives that retention?
• 23:11
  SPEAKER_00: I think that's a different question.
• 23:13
  SPEAKER_00: And that's where we've been pointed.
• 23:14
  SPEAKER_00: So I agree with you.
• 23:15
  SPEAKER_00: I think this is the next thing, and I think it's got to be done right.
• 23:19
  SPEAKER_00: I think taking the baby step of saying I'm going to do one of these three products and they're not going to work together, that becomes extraordinarily difficult.
• 23:27
  SPEAKER_00: And I think that not only from an operating perspective, but from the user's perspective, like who am I dealing with now?
• 23:34
  SPEAKER_00: You've got a processor, you've got an ISO, you've got a super ISO, and now you've got a third-party lender and a third-party bank account or whatever it's going to be called.
• 23:43
  SPEAKER_00: That's a lot of documentation to go through and not understand.
• 23:47
  SPEAKER_01: Yeah, totally agree.
• 23:49
  SPEAKER_01: Well, this has been a great first episode.
• 23:50
  SPEAKER_01: I'm looking forward to the next one.
• 23:52
  SPEAKER_01: But before we wrap up, what would be the one key insight you'd like the listeners to take away from this episode?
• 23:58
  SPEAKER_00: That's a good question.
• 23:59
  SPEAKER_00: And I'm I'm not even sure how to answer it, but I think the the one key would be we are absolutely complementary to the existing infrastructure and the existing business models.
• 24:09
  SPEAKER_00: Our job's not to disrupt them, it's to preserve those and hopefully do the work that other people didn't want to do because it's a bit of a different domain, right?
• 24:18
  SPEAKER_00: Lending and banking is a different domain than payment processing.
• 24:22
  SPEAKER_00: Definitely related, but different.
• 24:24
  SPEAKER_00: And so if we can apply those skills to support the industry in that way, I think we'd be very excited for everyone to understand that that's the direction we're trying to go in.
• 24:33
  SPEAKER_00: And that's where that vertical software component comes in, right?
• 24:35
  SPEAKER_00: That we're trying to understand the industry and meet it where it's at rather than change it.
• 24:40
  SPEAKER_01: Well, Chris, this has been a great episode.
• 24:43
  SPEAKER_01: Thank you for being on the show.
• 24:44
  SPEAKER_01: I'm looking forward to the next episode.
• 24:46
  SPEAKER_01: So I know your time is valuable, so I really appreciate you being here today.
• 24:49
  SPEAKER_01: Yeah, thank you so much for having me.
• 24:51
  SPEAKER_01: And to all your listeners out there, I thank you for your time as well.
• 24:54
  SPEAKER_01: And until the next story,