Webinar: Why vertical SaaS companies are taking control of payments

  
0:00  
So this isn't just about embedding payments, it's about making payments part of a product and customers that do this well and think about that, you know, as a product have been really successful.  

  
0:18  
Hi everyone.  

  
0:19  
Welcome to summer school.  

  
0:20  
My name is John Gaffney and this is PYMNTS TV.  

  
0:24  
You know, vertical SAS platforms are becoming the operating systems for entire industries really.  

  
0:30  
They give merchants one place to manage work flows, data, customer experience and payments.  

  
0:37  
With 82% of businesses willing to switch platforms for better payment capabilities, expectations around what software should deliver are rising quickly.  

  
0:46  
That shift is changing where payments live.  

  
0:48  
They're no longer a back-office function or checkout step.  

  
0:51  
They're becoming a part of the daily software businesses used to make decisions.  

  
0:56  
In this PYMNTS summer school session, Worldpay will examine why software platforms are winning more control over payments distribution and why execution now matters as much as technology.  

  
1:08  
It'll also look at how AI and embedded finance are accelerating the move from systems records to systems of intelligence.  

  
1:16  
And hear from Worldpay.  

  
1:17  
Joining us today, Billi Jo Wright is executive lead general manager, integrated and platforms PayFac®.  

  
1:23  
How you doing, Billi Jo?  

  
1:25  
How are you doing today?  

  
1:26  
I'm doing good.  

  
1:27  
How are you?  

  
1:28  
I'm good, I'm good.  

  
1:30  
And I'm, I'm excited for the conversation here.  

  
1:34  
You know, we're, we're going to kick off with talking about vertical SaaS as a new distribution channel.  

  
1:39  
Why, Billi Jo, are vertical SaaS platforms increasingly becoming the place where merchants discover, adopt and even manage the payment capabilities?  

  
1:50  
Yeah, I mean, if you think about this, this really just comes down to the evolution of our industry, you know, when you when you think about it.  

  
1:58  
So vertical SAS platforms have really become the operating system, you know, for businesses.  

  
2:05  
So, you know, merchants are naturally discovering and adopting payments directly within the tools that they already rely on to run their business from a day-to-day perspective.  

  
2:15  
And, you know, payments is a huge part of how customers run their business.  

  
2:21  
So for me, it's kind of an absolute requirement to not only embed payments into software, but to do it in a way that can provide, you know, a frictionless experience, more flexibility into payment capabilities and even use payments to drive key insights to run their business.  

  
2:42  
And you called this stat out earlier, right?  

  
2:44  
But the, the Merchant Insider report, you know, came out with a stat that I thought was very interesting.  

  
2:50  
The 82% of businesses say they will likely switch platforms for better payment capabilities.  

  
2:57  
That's pretty amazing when you think about it's not easy to change a software platform out of your business, but payments are that important to a business that they're willing to do that for better payment capabilities.  

  
3:11  
So it just shows how important software and payments together is within our space.  

  
3:19  
Well said, Billi Jo.  

  
3:20  
So, you know, my understanding also was that this is no longer a separate back-office function, right.  

  
3:28  
But what changes when payments are built directly into the billing, the inventory, customer management tools, what changes when they're built directly into those rather than handles as a separate process?  

  
3:42  
Yeah.  

  
3:42  
So when you embed payments into workflows like site scheduling and billing it, it does shift it from being that back-office task to more of a core part of the merchant experience.  

  
3:54  
It improves speed, visibility, ease of use.  

  
3:59  
But then if you take it one step further right it, it provides reconciliation of revenue, cash flow, predictability, vendor payouts.  

  
4:08  
These are all capabilities of what a software company can embed when they incorporate payments into their software platform.  

  
4:17  
So it really becomes a key component of how the customer thinks about that solution and how they can use that to manage their business.  

  
4:28  
OK, let's talk a little bit more about the embedded nature here, because embedded payments can create new revenue stream for platforms at same time they improve retention and and do a better job with the merchant experience.  

  
4:41  
So in your in your mind, Billi Jo, how should software platforms think about payments as a growth lever, not just a feature?  

  
4:50  
Yeah.  

  
4:50  
So, so traditionally if you wait go way back, right, software company like main revenue driver was from software fees.  

  
5:01  
So subscription, you know, software subscription whether it was monthly or annually, you know, so at the onset this was very enticing model, right.  

  
5:10  
The revenue was predictable.  

  
5:12  
It was the revenue was recurring high margin.  

  
5:16  
However, you know, with embedded payments, it creates an additional revenue stream, you know, while it and also creates additional value to their customers, which ultimately increases retention because it's, you know, tightly integrated into how merchants run their business.  

  
5:34  
So this shift isn't just about embedding payments, it's about making payments part of a product, you know, and, and customers that do this well and think about that, you know, as a product have been really successful.  

  
5:49  
It drives, you know, better attach rates, revenue per user and it provides that long term platform value that I think software companies are really looking for.  

  
6:00  
And, you know, for me, this is going beyond just payments, you know, with what we're seeing with embedded finance, it's evolving to working capital banking card, you know, card issuing payroll, you know, so payments is probably top of mind for many people, but it, it's the next step in, but there's also this next step of finance products and all of these can create more meaningful offerings and to software companies that provides additional revenue stream for them.  

  
6:38  
So I, I think, or it seems like that a lot of platforms understand the embedded opportunity, but they may underestimate the onboarding, the compliance settlement and support.  

  
6:50  
In your mind, where do platforms most often underestimate the operational complexity of embedded payments?  

  
6:57  
I think on all aspects, you know, it's when you think about the, the thought of being able to embed payments and how that does create additional revenue streams, it increases their, you know, overall valuation, right.  

  
7:17  
All of that is very enticing, but often not understood as far as how much it takes to embed payments.  

  
7:26  
You know, it's something that's probably very near and dear to my heart.  

  
7:30  
I've been in payments my entire career with a lot of that being in risk and compliance.  

  
7:37  
But I've also spent ten years on the sales side in the software space and partnering with our software companies.  

  
7:44  
And so I've seen just how challenging that could be.  

  
7:47  
I have seen just how much companies have underestimated, you know, what it means to be a payments company is when you offer payments, you are essentially a payments company.  

  
8:00  
You know, it's one of the reasons I joined Payrix almost seven years ago.  

  
8:04  
You know, it was and Payrix is the platform that enables our PayFac as a Service model.  

  
8:12  
We saw how the market was evolving with software partners owning the right to win when it came to payments, but we also understood the challenge that some of these companies were having with driving that adoption.  

  
8:27  
And back then the thesis was, you know, especially if it was a company that was recently acquired a private equity firm, right?  

  
8:35  
Like the, the playbook then was become a PayFac and you know, you'll get this top line revenue and you'll be able to increase your evaluation and you know, it's an easy playbook.  

  
8:48  
And then they get went down the path of being a PayFac and they realized just how hard that was the level of investment that was required to become a PayFac.  

  
8:57  
And that's really how Payrix was founded, right?  

  
9:03  
It was being able to take that thesis and still enable software companies to own much of the experience, the revenue, but not have to do all of the heavy lifting.  

  
9:14  
So when you think about, you know, settlement, paint, compliance and all of those, you're able to kind of accomplish those things without having to do that.  

  
9:27  
And one of the things that I really love about, you know, global payments for platforms is that we are able to kind of meet our partners wherever they are in that journey, right?  

  
9:41  
There's some key considerations that a company should really make when it comes, you know, when they think about their go to market strategy with payments, right?  

  
9:49  
How much of that experience do you want to own?  

  
9:51  
And, you know, how much are you willing to invest in the company in, in that piece to, to embed payments?  

  
10:00  
And, you know, that will help define the types of models because I mean, the reality is there's several, you know, there's several options as you think about embedding payments and you really need to be able to kind of understand where you want to head with that.  

  
10:16  
So some, some key questions I think they, you know, want to ask themselves, right, is, you know, what is the expertise that we have as we think about payments?  

  
10:27  
And you know, what is the level of support that you're expecting when you are partnering with a payments company to embed those payments?  

  
10:39  
Are you going to have somebody that is going to be able to strategize with you and be invested in your success?  

  
10:46  
And are you going to be able to have somebody that is there to support your questions or your customers questions?  

  
10:54  
Billi Jo, let's turn the lens over to merchants.  

  
10:57  
My understanding is that their expectations in this area are rising.  

  
11:02  
How are they changing and how are they changing what software platforms need to deliver around payments and financial services?  

  
11:10  
I mean, I think really the expectation is increasing as far as like how software can simplify operations end to end including payments.  

  
11:22  
I think traditionally payments has kind of sat outside of that offering and it's created a bit of a clunky experience.  

  
11:28  
And so the expectation is that is not fragmented anymore.  

  
11:33  
And they're also looking for, you know, their platforms to deliver insights and business value, not just transactions, right?  

  
11:41  
It's about, you know, raising the bar for embedding payments into that experience.  

  
11:48  
And what I think is really cool about the evolution of software companies is, you know, combined with payments and even embedded finance, it's the opportunity to strategically think about how all that data can provide meaningful impact into streamlining operations, you know, improving that customer experience or even providing meaningful insights to help merchants manage their business more effectively.  

  
12:16  
Really, software companies are sitting in the middle of all of that data.  

  
12:21  
And I believe that data is going to future proof their business, especially when you incorporate the payments data with it.  

  
12:30  
Billi Jo, Are you ready for the inevitable AI question here?  

  
12:34  
It's got to happen, right?  

  
12:35  
You can't.  

  
12:35  
It's got to happen.  

  
12:36  
Here we go.  

  
12:39  
So, but in all seriousness, platforms that own the workflow and own the payment data can certainly use AI to improve automation, risk decisions, business insights, a lot of things.  

  
12:54  
How could AI change the role of embedded payments inside vertical software platforms?  

  
13:00  
What AI is going to do is it's going to enable a bunch of new software, so new entrants, new software companies, that is going to drive a new level of competition that we really haven't seen in the past.  

  
13:17  
And it's already a pretty competitive space.  

  
13:20  
But I believe the software companies that are able to incorporate all aspects of their data, including payments and even embedded finance and use that data to enable AI for things like you said, automation, risk decisions and, and personalized insights.  

  
13:40  
They're really going to be able to create this protective mode for their business.  

  
13:45  
And it's going to set them apart from their competition.  

  
13:48  
And you know, just to give you an example, right?  

  
13:50  
Like if you take that data, you know that that data can provide small business insights on inventory management, you know, based on what's been ordered in the past.  

  
14:01  
It can provide insights into their cash flow based on their processing history.  

  
14:07  
And if that same small business needs to buy, say, new equipment for their restaurant, that software company can, you know, that software partner can essentially help them determine how they're going to pay for it.  

  
14:20  
Or if they need working capital, they can provide that to them as well, right through an embedded finance solution.  

  
14:28  
You know, another example would be a new business starting out, right?  

  
14:31  
They're going to need software to run their business.  

  
14:35  
They're going to need a banking account, they need to take payments, right?  

  
14:41  
And then, you know, they may need payroll as well.  

  
14:45  
These are things that software companies are offering or will be able to offer.  

  
14:51  
And that is essentially, you know, those are some of the things that will help them build that Moat that's going to set them apart from competition.  

  
14:59  
And this really shifts platforms from being that system of record to what you mentioned earlier, systems of intelligence.  

  
15:06  
And I think that's a keyword.  

  
15:08  
And you know how we'll see the evolution, which is systems of intelligence.  

  
15:15  
And so, you know, AI is definitely going to have a huge impact on the software space in the coming years, probably way more than what we can even imagine.  

  
15:27  
But I'm really excited to see like where it takes us and you know, how we're going to evolve together to service the space better, you know, as we think about software and payments combined.  

  
15:41  
Billi Jo, you did a great job on the inevitable AI question.  

  
15:44  
That was really good.  

  
15:46  
Excellent.  

  
15:47  
All right, that's going to do it.  

  
15:48  
For this episode of Summer School on Payments TV, my guest has been Billi Jo Wright.  

  
15:53  
She is executive lead, general manager integrated and platforms PayFac at Worldpay.  

  
15:59  
Billi Jo, thanks so much for joining us.  

  
16:01  
Thank you.