Podcast: Payments innovation post-SVB

Whitney McDonald 0:01
Hello and welcome to The Buzz, a bank automation news podcast. My name is Whitney McDonald and I’m the editor of bank automation news. Joining me today is Ralph Dangelmaier chief executive of FinTech BlueSnap. He is here to discuss the growing need for payment innovation, learning experiences from recent banking collapses in the current state of payments rails.Ralph Dangelmaier 0:23
Great. Hi, I’m Ralph Dangelmaier, the CEO of Blue snap. Bluesnap helps merchants accept payments globally. And we do that through our platform, which we call the payment orchestration platform. And what that does, it allows merchants to accept payments in hundreds of countries with hundreds of payment types, hundreds of currencies, what makes it unique is that we can process those payments in 47 countries around the world, which allows merchants to have a higher authorization rates or less declines and lowers their cost of processing payments. So that’s what blue snap does around the world for merchants.

Whitney McDonald 1:08
Well, thanks so much for joining us. We’re definitely in a unique environment right now in the financial industry. I figured we could kick things off by talking about the recent collapses from SBB, first republic, Signature Bank and of course, the crypto environment as well wondering if you could kick us off with some lessons learned takeaways, just from your perspective on what’s been going on in the past several months.

Ralph Dangelmaier 1:35
Great. Well, I think there’s a lot of lessons learned here. I mean, boy, have we had a turbulent ride, right? I mean, COVID came, everything started booming, nobody could do anything wrong. And then whammo, everything hit. And I think the lessons learned are that you really can never put all your eggs in one basket. Right? So the people that didn’t have multiple bank accounts, that people that weren’t prepared for either higher interest rates, or were prepared for backups on their bank accounts. We had, I think a story that didn’t get told well is a lot of these banks were processing payments for people. So not just payroll, but actually payments. So we heard of 1000s of merchants that were down for the weekend processing payments. So really, it’s a redundancy story is one here that I think is the big lesson learned is where are you redundant? Where are your single points of failure if you have a problem? So that’s one big lesson. I think the other thing you mentioned, and I’ll just touch on it simply is you could not do a podcast or you could not do a story without someone bringing up crypto, crypto, crypto, crypto, it was everywhere. And I think some people understood it, some didn’t. And now we’ve seen crypto collapse. So we had this banking collapse and crypto classes the same times really, really think made people nervous. And I’ll throw a third thing in there as lesson learned, is this Buy now pay later was literally the hottest thing ever. And so you’re constantly like borrow money and spend everything you can to grow and get into crypto and do buy now pay later. And all of a sudden, all three of those sort of stuff came tumbling down and merchants were left hanging Wait a man, this was my strategy a year ago? And now what do I do? So I don’t think I’ve seen so many real hot trends, crash, or really take this deep dive in so rapidly in any period of time and payments. So due diligence, redundancy, single points of failure, am I setup with the correct providers globally? These are the things now people have to look at when they’re setting up their payment networks around the world.

Whitney McDonald 3:58
Now, speaking of payment networks and payment rails and where we stand today, maybe we could just talk through the current environment and what exists today. Before we talk about the good stuff, the innovation.

Ralph Dangelmaier 4:13
Yeah, so what we ended up talking to a lot of our customers about is, you know, they get confused. So if you think about it, there’s hundreds of companies, hundreds of territories or countries out there, they all have their own payment rail in their country, right. So they all have their own like Pay Pal in their own countries. And then you have these global networks. There’s about seven of them, right like China, UnionPay and Visa and MasterCard, American Express, and when do I use them? And then there’s bank transfers that happen like ACH or EFTPS in certain countries. And now there’s real time gross settlement which is happening, which is like fed now, and open banking sort of in another little Avenue Over in Europe, and this is confusing people. That’s really what the message here is they’re confusing. What rail do I use? For what customer type? In what country? In what currency? And what does it cost. And so I think what’s happened is we’ve taken something that was very simple. When you use sort of ACH for payroll, you do buy things online with a card, and the smartphone and the innovation and the worlds can, again, smaller is confused everyone, because now there’s literally hundreds of wallets around the world. And they got to work on hundreds of different connected devices. And you’re trying to work with hundreds of currencies, and people that are just confused. So I think trying to really map out payments, and what rails you’re going to use as part of your product plan when you roll things out. Like let’s catch people doing it right, like people like Uber, or maybe Intuit. That’s where I think the rail conversation really comes about. And usually if you’re selling outside of your own country, you have to educate yourself on what’s the right rails that aid process for those customers outside of the country. Whitney,

Whitney McDonald 6:12
if we can take that a step further, what are those conversations look like? How do you know that you are selecting the right payments? Well, especially with more coming to market fed now coming in July? How do you know you’re making that right? Choice? Yeah,

Ralph Dangelmaier 6:29
so it really comes down to is what it? Who’s your customer? I know it sounds simple, but it’s who’s a customer? Is it b2b is a b2c? Is it a mix? How does that customer now what’s the way it likes to pay? So there’s a payment method called ideal, which does about 70% of all online transactions. In the Netherlands, right? So that’s how people want to buy as a consumer. Bigger business may want to pay with a bank transfer, or something called SEPA over in Europe, right? Very similar United States, right? Where we pay with small transactions use in cards and big transactions, we’ll probably use an ACH or wire, that wire now might move to a Fed now. So you really need to look at who’s my customer base? Where are they located? What’s their preferred currency? What’s the preferred payment method? What’s the dollar amount? Because if it’s $100,000 payment, you’re probably not going to put that on a credit card. But if it’s a $10 payment, you most likely are? And what’s the work involved in the back office on collecting payments? And how much work it is? So there’s a little analysis that has to be done by the company to figure out what does make the most sense based on who my customers are? And that’s really the question that I know we spent a lot of time to is who’s your customers BBB Z both is an invoice, you know, they buy online, and that’s helped figure out what then is the most optimal payment method that you need to offer on your checkout to really cater to those customers.

Whitney McDonald 8:07
So one of the things that comes up is that that confusion that you’re hearing from customers, there’s friction in this process, maybe we can shift into some innovation talk here where there is opportunity for innovation in payments, and the importance of innovating within this space.

Ralph Dangelmaier 8:26
So there’s been so much innovation in payments in the last 15 years is one of the I think it’s a second most invested space by private equity firms in the world after biotech. We’ve seen all of it come with the invention of lots of cool things right? Apple Pay By now pay later crypto, all the things we mentioned. So are we going to stop innovating? No, I think we’re on a small pause innovations down a little bit because we’re in the middle of this sort of transition period. But it’s going to spike back up. And where’s innovation going to spike? At least from our point of view? Well, I think absolutely real time payments and open banking those concepts. cutting out the middleman is absolutely going to be a spike. I think you’re going to see this concept of super apps, right? Where Why am I going to log into so many different apps? Why do I have so many of a wallets on my phone to check out? And it really, you know, it looks like, you know, just a confusing menu. I mean, I was buying something the other day from a well known retailer and they must have had it looked like a NASCAR racetrack there was so many stickers on there. I’m like, which one do I pick to choose to buy? So it’s making things so we’re going to see that consolidate in my opinion, you’re gonna see so many wallets. I think the other thing you’re going to see is the concept of pain more in what I call ubiquitous or common currency is going to change right and right in the changing things back and forth. So think of like a common Euro that we’re going to see around the whole world, we’re all using a single currency, sort of what Bitcoin is trying to do, I think you’re gonna see innovations in FX. And the other one that I think is kind of one of my favorites is, you’re going to see platforms, which really run companies, if you think about it, right, the likes of whether it’s Salesforce or HubSpot, or Intuit, or SAP, or Salesforce, they’re really running, they’re the heart of what runs these companies, right in this specialized ERP and CRM systems per industry, they’re going to start offering banking services, you’re going to be able to open your bank account as a law firm, or accounting firm or school or camp, you’re gonna be able to open your bank account on your platform, and you’re gonna be able to form payments, and you’re gonna get lending there, it’s already started to happen, we’ve seen about, we’ve done a survey ourselves. And we’ve seen a lot of outside data that says about 10% of the platforms today are serving up and opening bank accounts. And the trend is being called embedded banking or embedded payments. And you’re gonna hear a lot about that over the next 10 years that this business is gonna go from very little to potentially a trillion dollar business in the next years. And that’s one of my favorites, because I think it makes it easy. It’s frictionless for the merchant. And when they’re filling out their application to sign up for Intuit, or Salesforce, they’re also opening the bank accounts and to do something different. And they don’t have to go do this coding integration, hire system integrators to do it, which we have a huge problem in the world with technical debt, right? Everything requires technical resources, and we just don’t have enough of it. So I think that’s ripe for disruption and innovation right now and where we are in the market.

Whitney McDonald 11:45
Now, with all of those examples in place, and different opportunities within the payments industry, what are you looking forward to or expecting from the payments world? Whether it’s innovation or reimagining money movement? What are you looking forward to or watching for even working on?

Ralph Dangelmaier 12:03
Yeah, well, I’m gonna follow up on my past theme, I’m really looking forward to watching these, these platforms starting to sell on open bank accounts and how powerful they become. And I think it’s going to be a big shift in banking, I’m going to think the SMB business is not going to go to the bank anymore. And I think you’re gonna see lots of bank closures, I think you’re gonna see a lot less use of cash. You know, cash is still rising every year. And the people don’t believe that, but they really are. Because, globally, cash is on the rise, especially as we get into tough economic times. So I’m looking forward to see that. And I think as soon as, as we come as recession, we’re gonna see explosion of investment and innovation on those topics I mentioned earlier. It will really I don’t know when it’s gonna exactly happen. But my guess is every time we’ve been through one of these things, when it was 1999 2000, we had a we had a sort of a low in the internet, and then boom, exploded. We saw another low in Oh, 708 the smartphone came along and exploded. We saw COVID Law things and we came out things exploded. I think we’re gonna see a real mass investment and explosion of innovation. Probably 2425 is what I see happen. And it’s just fun watching these companies, you know, kind of start and bloom into something very interesting.

Whitney McDonald 13:26
You’ve been listening to the buzz, a bank automation news podcast, please follow us on LinkedIn. And as a reminder, you can rate this podcast on your platform of choice. Thank you for your time, and be sure to visit us at Bank automation news.com For more automation news,

Whitney McDonald 0:01
Hello and welcome to The Buzz, a bank automation news podcast. My name is Whitney McDonald and I’m the editor of bank automation news. Joining me today is Ralph Dangelmaier chief executive of FinTech BlueSnap. He is here to discuss the growing need for payment innovation, learning experiences from recent banking collapses in the current state of payments rails.Ralph Dangelmaier 0:23
Great. Hi, I’m Ralph Dangelmaier, the CEO of Blue snap. Bluesnap helps merchants accept payments globally. And we do that through our platform, which we call the payment orchestration platform. And what that does, it allows merchants to accept payments in hundreds of countries with hundreds of payment types, hundreds of currencies, what makes it unique is that we can process those payments in 47 countries around the world, which allows merchants to have a higher authorization rates or less declines and lowers their cost of processing payments. So that’s what blue snap does around the world for merchants.

Whitney McDonald 1:08
Well, thanks so much for joining us. We’re definitely in a unique environment right now in the financial industry. I figured we could kick things off by talking about the recent collapses from SBB, first republic, Signature Bank and of course, the crypto environment as well wondering if you could kick us off with some lessons learned takeaways, just from your perspective on what’s been going on in the past several months.

Ralph Dangelmaier 1:35
Great. Well, I think there’s a lot of lessons learned here. I mean, boy, have we had a turbulent ride, right? I mean, COVID came, everything started booming, nobody could do anything wrong. And then whammo, everything hit. And I think the lessons learned are that you really can never put all your eggs in one basket. Right? So the people that didn’t have multiple bank accounts, that people that weren’t prepared for either higher interest rates, or were prepared for backups on their bank accounts. We had, I think a story that didn’t get told well is a lot of these banks were processing payments for people. So not just payroll, but actually payments. So we heard of 1000s of merchants that were down for the weekend processing payments. So really, it’s a redundancy story is one here that I think is the big lesson learned is where are you redundant? Where are your single points of failure if you have a problem? So that’s one big lesson. I think the other thing you mentioned, and I’ll just touch on it simply is you could not do a podcast or you could not do a story without someone bringing up crypto, crypto, crypto, crypto, it was everywhere. And I think some people understood it, some didn’t. And now we’ve seen crypto collapse. So we had this banking collapse and crypto classes the same times really, really think made people nervous. And I’ll throw a third thing in there as lesson learned, is this Buy now pay later was literally the hottest thing ever. And so you’re constantly like borrow money and spend everything you can to grow and get into crypto and do buy now pay later. And all of a sudden, all three of those sort of stuff came tumbling down and merchants were left hanging Wait a man, this was my strategy a year ago? And now what do I do? So I don’t think I’ve seen so many real hot trends, crash, or really take this deep dive in so rapidly in any period of time and payments. So due diligence, redundancy, single points of failure, am I setup with the correct providers globally? These are the things now people have to look at when they’re setting up their payment networks around the world.

Whitney McDonald 3:58
Now, speaking of payment networks and payment rails and where we stand today, maybe we could just talk through the current environment and what exists today. Before we talk about the good stuff, the innovation.

Ralph Dangelmaier 4:13
Yeah, so what we ended up talking to a lot of our customers about is, you know, they get confused. So if you think about it, there’s hundreds of companies, hundreds of territories or countries out there, they all have their own payment rail in their country, right. So they all have their own like Pay Pal in their own countries. And then you have these global networks. There’s about seven of them, right like China, UnionPay and Visa and MasterCard, American Express, and when do I use them? And then there’s bank transfers that happen like ACH or EFTPS in certain countries. And now there’s real time gross settlement which is happening, which is like fed now, and open banking sort of in another little Avenue Over in Europe, and this is confusing people. That’s really what the message here is they’re confusing. What rail do I use? For what customer type? In what country? In what currency? And what does it cost. And so I think what’s happened is we’ve taken something that was very simple. When you use sort of ACH for payroll, you do buy things online with a card, and the smartphone and the innovation and the worlds can, again, smaller is confused everyone, because now there’s literally hundreds of wallets around the world. And they got to work on hundreds of different connected devices. And you’re trying to work with hundreds of currencies, and people that are just confused. So I think trying to really map out payments, and what rails you’re going to use as part of your product plan when you roll things out. Like let’s catch people doing it right, like people like Uber, or maybe Intuit. That’s where I think the rail conversation really comes about. And usually if you’re selling outside of your own country, you have to educate yourself on what’s the right rails that aid process for those customers outside of the country. Whitney,

Whitney McDonald 6:12
if we can take that a step further, what are those conversations look like? How do you know that you are selecting the right payments? Well, especially with more coming to market fed now coming in July? How do you know you’re making that right? Choice? Yeah,

Ralph Dangelmaier 6:29
so it really comes down to is what it? Who’s your customer? I know it sounds simple, but it’s who’s a customer? Is it b2b is a b2c? Is it a mix? How does that customer now what’s the way it likes to pay? So there’s a payment method called ideal, which does about 70% of all online transactions. In the Netherlands, right? So that’s how people want to buy as a consumer. Bigger business may want to pay with a bank transfer, or something called SEPA over in Europe, right? Very similar United States, right? Where we pay with small transactions use in cards and big transactions, we’ll probably use an ACH or wire, that wire now might move to a Fed now. So you really need to look at who’s my customer base? Where are they located? What’s their preferred currency? What’s the preferred payment method? What’s the dollar amount? Because if it’s $100,000 payment, you’re probably not going to put that on a credit card. But if it’s a $10 payment, you most likely are? And what’s the work involved in the back office on collecting payments? And how much work it is? So there’s a little analysis that has to be done by the company to figure out what does make the most sense based on who my customers are? And that’s really the question that I know we spent a lot of time to is who’s your customers BBB Z both is an invoice, you know, they buy online, and that’s helped figure out what then is the most optimal payment method that you need to offer on your checkout to really cater to those customers.

Whitney McDonald 8:07
So one of the things that comes up is that that confusion that you’re hearing from customers, there’s friction in this process, maybe we can shift into some innovation talk here where there is opportunity for innovation in payments, and the importance of innovating within this space.

Ralph Dangelmaier 8:26
So there’s been so much innovation in payments in the last 15 years is one of the I think it’s a second most invested space by private equity firms in the world after biotech. We’ve seen all of it come with the invention of lots of cool things right? Apple Pay By now pay later crypto, all the things we mentioned. So are we going to stop innovating? No, I think we’re on a small pause innovations down a little bit because we’re in the middle of this sort of transition period. But it’s going to spike back up. And where’s innovation going to spike? At least from our point of view? Well, I think absolutely real time payments and open banking those concepts. cutting out the middleman is absolutely going to be a spike. I think you’re going to see this concept of super apps, right? Where Why am I going to log into so many different apps? Why do I have so many of a wallets on my phone to check out? And it really, you know, it looks like, you know, just a confusing menu. I mean, I was buying something the other day from a well known retailer and they must have had it looked like a NASCAR racetrack there was so many stickers on there. I’m like, which one do I pick to choose to buy? So it’s making things so we’re going to see that consolidate in my opinion, you’re gonna see so many wallets. I think the other thing you’re going to see is the concept of pain more in what I call ubiquitous or common currency is going to change right and right in the changing things back and forth. So think of like a common Euro that we’re going to see around the whole world, we’re all using a single currency, sort of what Bitcoin is trying to do, I think you’re gonna see innovations in FX. And the other one that I think is kind of one of my favorites is, you’re going to see platforms, which really run companies, if you think about it, right, the likes of whether it’s Salesforce or HubSpot, or Intuit, or SAP, or Salesforce, they’re really running, they’re the heart of what runs these companies, right in this specialized ERP and CRM systems per industry, they’re going to start offering banking services, you’re going to be able to open your bank account as a law firm, or accounting firm or school or camp, you’re gonna be able to open your bank account on your platform, and you’re gonna be able to form payments, and you’re gonna get lending there, it’s already started to happen, we’ve seen about, we’ve done a survey ourselves. And we’ve seen a lot of outside data that says about 10% of the platforms today are serving up and opening bank accounts. And the trend is being called embedded banking or embedded payments. And you’re gonna hear a lot about that over the next 10 years that this business is gonna go from very little to potentially a trillion dollar business in the next years. And that’s one of my favorites, because I think it makes it easy. It’s frictionless for the merchant. And when they’re filling out their application to sign up for Intuit, or Salesforce, they’re also opening the bank accounts and to do something different. And they don’t have to go do this coding integration, hire system integrators to do it, which we have a huge problem in the world with technical debt, right? Everything requires technical resources, and we just don’t have enough of it. So I think that’s ripe for disruption and innovation right now and where we are in the market.

Whitney McDonald 11:45
Now, with all of those examples in place, and different opportunities within the payments industry, what are you looking forward to or expecting from the payments world? Whether it’s innovation or reimagining money movement? What are you looking forward to or watching for even working on?

Ralph Dangelmaier 12:03
Yeah, well, I’m gonna follow up on my past theme, I’m really looking forward to watching these, these platforms starting to sell on open bank accounts and how powerful they become. And I think it’s going to be a big shift in banking, I’m going to think the SMB business is not going to go to the bank anymore. And I think you’re gonna see lots of bank closures, I think you’re gonna see a lot less use of cash. You know, cash is still rising every year. And the people don’t believe that, but they really are. Because, globally, cash is on the rise, especially as we get into tough economic times. So I’m looking forward to see that. And I think as soon as, as we come as recession, we’re gonna see explosion of investment and innovation on those topics I mentioned earlier. It will really I don’t know when it’s gonna exactly happen. But my guess is every time we’ve been through one of these things, when it was 1999 2000, we had a we had a sort of a low in the internet, and then boom, exploded. We saw another low in Oh, 708 the smartphone came along and exploded. We saw COVID Law things and we came out things exploded. I think we’re gonna see a real mass investment and explosion of innovation. Probably 2425 is what I see happen. And it’s just fun watching these companies, you know, kind of start and bloom into something very interesting.

Whitney McDonald 13:26
You’ve been listening to the buzz, a bank automation news podcast, please follow us on LinkedIn. And as a reminder, you can rate this podcast on your platform of choice. Thank you for your time, and be sure to visit us at Bank automation news.com For more automation news,