While “paying into” a company comes with nuance and complexity, it’s really nothing compared to what is involved when a business attempts to make an outgoing payment.

Most of us don’t think very much about these “payouts”. It’s been the domain of ERP software for decades, often an asterisk mentioning “supported payments”. Whether you are talking about B2B payments, expense reimbursements, or mass disbursements to gig workers, payouts started having a moment a few years ago.

Manish Vrishaketu, Chief Customer and Operations Officer at Tipalti, joins us for this episode to dive into why payouts have been overlooked for so long, what makes them challenging to master, and what is happening that may make things better and easier for a “niche” specialization in our industry that happens to be incredibly important for every company on the planet.

Yvette Bohanan:

Welcome to Payments On Fire, a podcast from Glenbrook Partners about the payments industry, how it works, and trends in its evolution.

Hello, I’m Yvette Bohanan, a partner at Glenbrook and your host for this episode of Payments on Fire. We spend a great deal of time and energy in this industry talking about bringing money into a company. My guess is that many of you listening got your start in payments hearing about the four-square model of card processing. By the way, it’s not a four-square model. It’s five, but that’s another episode.

As things progressed, maybe you learned about ACH and other forms of payment. These discussions are generally all in the context of consumers shopping and buying, paying each other, or maybe paying bills. While paying into a company comes with nuance and complexity, it’s really nothing compared to what is involved when a business attempts to make an outgoing payment. For outgoing payments, the importance of context is amplified, and the operational burden expands for a whole host of reasons.

Many of us don’t think much about these payouts. It’s been the domain of ERP software for decades, often an asterisk mentioning supportive payments at the bottom of a page. Whether you’re talking about B2B payments, expense reimbursements, or mass disbursements to gig economy workers payouts started having a moment a few years ago.

And that is our topic for this episode, a dive into why payouts have been overlooked for so long, what makes them challenging to master, and what is happening that may make things better and easier for this niche specialization in our industry that happens to be incredibly important for every company on the planet.

Joining me for this episode is Manish Vrishaketu, chief customer and operations officer at Tipalti. Over the last year, Tipalti has processed over $60 billion in B2B and mass payouts, and has reached an 8.3 billion valuation. What really caught my eye was that they’re doing all of this with 99% customer retention rates. So my guess is that Manish has a few thoughts on this topic.

Manish, welcome to Payments on Fire.

Manish Vrishaketu:

Great to be here.

Yvette Bohanan:

Great to have you. I’ve been really looking forward to this conversation. You have such a wonderful background and we always like to start by asking our guests, how did you land in payments? And you’re in a very specific corner of the payments world right now, but can you share your career journey with our listeners out there?

Manish Vrishaketu:

Yeah, absolutely. I think I’ve spent more than 20 years now in the payments industry. My journey started all the way back in 2003. And I know I’m dating myself, but I started with a company called CashEdge, and we were one of the first companies who used ACH as a payment network and infrastructure to bring consumer applications into the world through our banking and our credit union partners. So when you think, go back all the way, there was not an easy way for consumers to move money even within their different accounts that they own at different financial institutions, right? Then of course, it evolved into P2P transfers where I have the ability to send money to you, whether simply by using your email address or mobile number. If you recall, in those days, it was very hard for you to be able to open an account online. You need to be able to do all this paperwork and everything else. So we built out the entire infrastructure essentially for consumers to be able to open online bank accounts in one single session.

So that’s kind of how I got started in the world of payments. I was there for close to 10 years before we got acquired by Fiserv. I ended up taking a leadership role in their electronic payments division. That’s of course the division that powers a lot of consumer and business payment applications for, I would say thousands of banks and credit unions, including some of the largest ones. So all of the online bill pay that you do using your bank on your mobile banking platforms, all of the account account transfer, all the P2P transfer, Zelle was just coming out at that time. So worked very closely on all of those applications and that was my first opportunity to see payments at significant scale.

When I was at Fiserv, we were doing close to a trillion dollars worth of annual payment volume, so it comes with this own set of challenges and risk, and I had a lot of opportunities to learn. And then I joined Tipalti. That was about eight years ago, and this was sort of my first foray in the world of I would say B2B payments and global payments in a very complex way.

And at Tipalti, we really focused on automating payables operations, if you will, for all kinds of different businesses and different types of shapes and sizes. And today when I look back at my journey in Tipalti, we are running close to $60 billion in annualized payment volume. We send payments to 200 countries, 120 different currencies. 50 different payment methods for over 4,000 customers. So yeah, it’s been a very fantastic journey. Lots of learning on the way and here I am.

Yvette Bohanan:

People ask about the diversity of payments. You’re just talking about one company, and all of, think of this and multiply it out and the scale and where you were with Fiserv and what that scale was like. It is so complex. So how do you explain payouts to someone who isn’t a payment nerd? Your aunt, your uncle at some event says-

Manish Vrishaketu:

My son.

Yvette Bohanan:

Your son, yeah. What do you do?

Manish Vrishaketu:

As you can imagine, I’ve had that conversation with him saying, “What do you really do?”

Yvette Bohanan:

What do you do every day?

Manish Vrishaketu:

Yeah. I mean, in the simplest way, when you think about a business, you’ve got money coming in and you’ve got money going out. And when we think about money going out or expenses for a business, we typically think about payroll. You have to obviously pay your employees. But there are a lot of other expenses that a business has to bear in order for them to run their business. You’ve got your suppliers and vendors who you’re working with, so they need to get paid. You’ve got your employees who might be traveling and their expenses need to get paid. You may have contractors and other service people that you’re working with. They need to get paid. And then if you sort of think about what we broadly call the gig economy or the digital economy, pick a marketplace where people are selling their goods and services. They need to get paid. If you’re developing a game for let’s say Roblox as a platform, when your game gets monetized, you need to get paid. Right?

Yvette Bohanan:

Now you’re talking your son’s language.

Manish Vrishaketu:

I am. I totally am. Well, I’m the one who’s paying for all of this, right?

Yvette Bohanan:

That’s right.

Manish Vrishaketu:

So as you can see, there’s a lot of money that is going out of a business, and that’s kind of what makes commerce work. So when you think about payouts, whatever be the use case, whether it’s vendor, or a supplier, or a creator, or a gaming developer, whatever be it, there’s an entire set of complex operations behind the scenes that enable these businesses to be able to make those payouts in an efficient and automated way. And that’s how their business continues to run and that’s how they’re able to grow and so on. So in a lot of ways, payouts is one of the critical elements of how our business really runs.

Yvette Bohanan:

The other thing that’s interesting to me about that is the term payouts is a very payment industry way of describing this, and it took me a while when I started into the journey of payments to realize that when someone from the finance team was talking about cycles, procure to pay, all of that, they were thinking of it in terms of the books and how they are translating what’s going on in the business to the financial statements. And payments was like this little asterisk that was sort of a throwaway kind of thing like, “Oh yeah, we got to move the money,” and it would often default to checks because of that, because the automation was just so difficult for people. And I imagine it’s still difficult because you’re helping a lot of people with this.

But let’s break it down a little bit for our audience here. What makes outgoing payment operations challenging for companies? What is it around this that makes it so hard, besides the fact that we’re saying the same thing with different words all the time?

Manish Vrishaketu:

No, it’s a great question. And I think in some ways, you already answered it when you said payments is just an asterisk. And it’s an important asterisk, but it is just one element of what makes payouts work. When you have to break it down, I think you need to look at the entire workflow. So you use the term procure to pay. So let’s take an example of, I’m a business and now I want to do work with a vendor who might be, let’s say in the UK.

Now, once I’ve selected a vendor or a supplier, now several things need to happen before that last step of the payment status. Step one would be for us or me as a business to essentially vet that vendor, make sure that you’ve got all the right information about their business, their tax ID. We need to capture payment information to say, “Hey, at some point I’m going to pay you. How will you like to get paid?” Wire transfer, SEPA, whatever be it. They need to be vetted from a sanctions perspective. We live in the world with a lot of different regulatory regime, and sanctions lifts, and all of that stuff. You want to make sure that you’re doing business with someone who’s not on some kind of a negative list and so on. You need to manage risk.

And then to the extent there is tax treaty between countries, especially in my example because I’m talking about an international vendor, you need to be able to collect their tax information. There’s typically a very complex IRS generated W-8 form that will describe how much tax withholding to apply or not apply depending on the type of relationship.

So you need to do that all as a part of onboarding, and that’s just step one. So now that you’ve onboarded, you’ve got to get to the next step. And normally depending on the size of the business and the amount of controls businesses want to have, you will likely want to create a purchase order. What essentially describes here the budget, what is the process, what are we getting into relationship for, etc., right?

And so you ensure a purchase order and then this vendor of yours will deliver goods and services, whatever be it. And at the end of that process, that vendor will essentially send you an invoice. So now at that point of time, you’ve got an invoice. That invoice needs to somehow get matched to the purchase order saying, “Hey, is this really what we contracted for?” So you need to do that matching. And then after that, depending on the type of invoices and depending on the types of controls the business has, you will have all set of complex approval workflows that said, “Hey, up to $5,000. This person can approve up to $50,000 this person,” and there might be multiple layers of approvals based on the department and the type of purchase. So you need to essentially map all of those approvals like this.

And only after all of this has been done, the onboarding, the matching, the purchase order, and invoice approval, you come to that final step, which is to say, “Yes, this is ready to get paid.” Once you get into that, now again, there are two aspects of it. You need to be able to withdraw money from this business’s bank account or wherever they hold funds. And then depending on the type of business, and the size of the invoice, and the geography, you will need to pick the right payment method in order to execute that payment. To make it more complex, if you’re dealing with an invoice that might be in a different currency, then you’ll need to manage currency and effects on that transaction as well. So you do all of that step. And by the way, that’s not the end of effect.

Yvette Bohanan:

That’s right.

Manish Vrishaketu:

Once you make the payment, now you need to take that payment and then you need to mark that invoice or the bill as paid within the company’s accounting system, which is typically the ERP. And that’s when the business can move on to the end of that cycle. They’ll close their books, and now you’ve got to rinse and repeat the same process.

So if you break it down, there’s seven or eight different stages in automating or managing that whole payouts process efficiently. And then the challenge of course becomes, how do you take each one of those processes, map it to what the business policies are, and then automate each aspects of it? That’s what makes it complex, and each of these steps has its level of complexity again.

Yvette Bohanan:

And then there’s the nuance, right? Because here, you’re describing the canonical procure to pay or vendor payments, supplier payments, whatever you want to call it. But gig economy has its own nuance. Working with a company that’s very much in the cutting edge of currency and payment space like you were talking about Roblox or something like that, and Web 3.0, which nobody’s talking about anymore, but it’s happening, all these things. Those things are really separate use cases that are still following that same general pattern, but they have a tremendous amount of nuance.

Manish Vrishaketu:

Absolutely. I think that world in particular, in fact the Tipalti when we started, we actually started in that space. We started in that what you’re calling broadly speaking, the gig economy, when we were supporting ad networks, and affiliate networks, and marketplaces, and a lot of gaming and streaming platforms, that’s sort of where we grew out.

And so in a lot of ways, almost from day one, we dealt with the complexity of the infrastructure that was required to support that part of the economy, and there’s something which are very different there. It does not look like a traditional B2B payments. You could have a lot of low value payments where it could be a consumer who’s building up game and is publishing on a platform, and I need to get $50.

By definition, because you’re talking about the world of online commerce, it’s spread out geographically. From day one, you want to be able to support 200 countries. Anybody should be able to onboard and pay or publish a game or to be able to sell their goods and services on a marketplace. So the geographical diversity is very complex. Emerging markets now come into play, because a lot of users and the creators are coming from that world, which has a own set of complexity and challenges.

And then what we realized is because in that Roblox example, you could have somebody who are Roblox Studios who are publishing games and you can have a hobbyist. So you need to be able to deal with a very high value payment, like a million dollar payment and a $20 payment. And the way you execute that is very different, and now you’re dealing with hundreds of currencies. And then all the complexities that comes with the global compliance framework that we need, because you’re really touching so many different wheels, and so many different users, and so many different regulations.

So yeah, completely different world. Also, the velocity of payments is extremely high. It doesn’t follow the normal AP cycle that you’re talking about where typically, businesses will make payments to their vendor once a week, once every two weeks, or once a month. This is now you’re talking everyday payments. “Hey, I sold something, I sold my t-shirt on this marketplace. I need to get paid now.” Right? So speed of transaction, velocity, and all of those things are dramatically important.

Yvette Bohanan:

Yeah. That was a really important aspect of marketplace evolution actually, when you think back about it. People implemented systems in the marketplace to pay out on a regular basis. And in fact, if they were a smaller seller on the marketplace, they had a longer payout cycle, which really was counterintuitive to a tiny business needing better cash flow.

I mean, every size business wants to optimize cash flow. I don’t care who you’re talking about out there. But it’s super critical when it’s sort of that hand-to-mouth thing. And yet when this started, people were like, “Oh, we’ll wait till you accumulate more money before we pay out, because it’s too hard for us to get this money, too expensive.”

Manish Vrishaketu:

It’s funny you say that because it took me a while to understand that, that in that world you do not treat a payout as a vendor payment. Yes, vendor payment is important. But in this case, especially for the small business and stuff you talk, it’s their livelihood. They’re not just a vendor. For them, when you’re a business, you think, “Hey, payroll should never get delayed. It’s super sensitive. Your employees will get it.” For them that payment is their payroll.

And so there is so much sensitivity around making sure that they get paid, they get paid on time, and they get paid on demand, which is, I think it’s the lifeblood. And that’s what we’ve learned and impacting the policy thing. That’s kind of what allowed us to understand really how critical making sure that the infrastructure that we have built is in terms of the level of redundancy, and level of certainty, and everything else that needs to go, because otherwise these types of businesses just completely fall apart. A marketplace will not be able to operate if you cannot provide that level of confidence around making sure that they get paid on time every day, right?

Yvette Bohanan:

Yeah, yeah. It’s super, super critical and I think that’s just been a whole learning curve the industry has had over the last, I don’t know, 20-ish years, right? Yes. As this has all evolved.

So here we sit today. How much of the operations of this whole environment with all its complexity and nuance, how much can people reasonably expect to automate versus keeping it manual?

Manish Vrishaketu:

Yeah, and we’ve been at it for a decade trying to automate all aspects of the workflow that was describing for you. I think we’ve come a long way. I would say a lot of things which are related to the workflow, whether it is onboarding of the suppliers, or vendors, or providers, whether it is about being able to automatically match and invoice to a purchase order. We’ve automated almost all aspects of the approval workflows based on the policies that the businesses have.

And taking it all the way where you can almost have a touchless process, from the time the invoice comes in, we do capture, we will digitize the invoice, we will automatically match it to a purchase order. It’ll go into the approval queue, and as soon as it completes all aspects of approval, it will automatically get queued for payment. We have automated aspect of pulling funds from our business accounts. Obviously the payouts to a great extent has been automated as well. And we’ve spent a lot of time building that last mile, which is the connection into the ERP system. That’s one of the most complex aspects of closing the loop, just because ERPs are so customizable, and there are so many of them that it’s hard to build very, very standard pipes and connections. So we’ve worked really hard on that, and I think that’s one of the more complex aspect of this automation.

So I think in a lot of ways, we had ton of progress. And I’m also very hopeful that especially with AI and the way we are leveraging AI tools, that we will be able to further automate some of the remaining aspects. The part that has not been automated, as you can imagine, especially in the world of payments, I think it becomes hard when you deal with exceptions, and we are dealing with so many different payment networks. I would say those are the two pieces which are extremely non-standard, right? I talked about the fact that we send money in 200 countries, we work with 550 different payment methods.

Now each of these payment methods has one set of nuances. A local bank scheme in the UK looks very different than a local bank scheme in India. We know the challenges with SWIFT network. A lot of wire processing is still very, very manual. When we send out wire transfer to our bank partners, you’re still dependent on cutoff times, and wire booms, and all that fun stuff.

I see that the connections we have with our payment partners, some of them are more API driven and it’s more real time, and you can send a payment and get an acknowledgement. That’s great, and you can be very much straight through processing, but a lot of our bank partners still require us to send file based instructions. And when you’re dealing with multiple files, you get back so many files, and it leads to some exception. So we’ve had to create a payment operations team to manage some of these exceptions parts of it.

So I would say the lack of standardization of payment networks, and then of course the rejects and the exceptions that come and how we manage it as probably two parts, which is I would say relatively manual. We are still working on it. I think we’ll make progress, but I think we have ways to go.

And in the third one, which is more in the world of risk and compliance. So there are a lot of tools that allow us to do transaction monitoring and got all kinds of rules that flag it. But then once a transaction gets flagged, then what? Still currently it requires some manual intervention, and I think there are ways to sort of make it better or reduce it. But I would say those are two or three aspects that are still relatively manual.

Yvette Bohanan:

And you mentioned AI, so I have to pick up on that. No one can just leave that thread hanging on the ground. Are you looking at prioritizing the application of AI technology in these areas that have more exceptions? Is that the, if you’re stack ranking your features list, where are you?

Manish Vrishaketu:

Yeah, I would say there are probably two or three aspects of it. One aspect is around that workflow automation. So one of the things you’ll think about is when an invoice comes in, you can digitize it, you can use OCR, but invoices look different. So not everything gets 100% digitized, but when you start to look at matching patterns to say, “I saw the same invoice last time and this is how it got coded,” even though an individual or a person did it, next time the person doesn’t have to do it.

So you can use AI to then push the boundaries on that and saying, “I’ve seen a pattern before.” The first time the human did it second time, the human doesn’t have to do it.

So there’s lot of different aspects around the matching of invoice to POS to say, “Oh yeah, this one I was not able to match, but I see that Yvette went into the system and this is how she matched it last time, so I’m just going to automatically do it for her this time.” So we are seeing a lot of opportunities around that.

I would say the second one within the product infrastructure is around data visualization. So being able to look at my invoice, and aging, and being able to do cash flow forecasting to say, “Oh yeah, this is the number of invoices I get on the seventh, on the eighth, on the ninth. My due dates are this. And so based on that, this is how much cash I need to do and I can manage my forecasting.” So reporting analytics and data visualization is an aspect where I think AI will play a very, very big load. So instead of having those structured reports that you have to download into an Excel file and do all kinds of pivot tables, you can eliminate a lot of that. You can literally ask AI question saying, “Hey, show me the last five invoices that were delayed for payments,” and it’ll just give it to you. So I would say within the product flow, those are the two big areas for focus.

And then on the payment side, like you said, I think there are two or three areas. One of them is we are trying to almost predict, what is the likelihood of this transaction end up becoming a rejected transaction? Why? Because last time when I sent 10 payments to Nigeria which has these elements, seven of them came back. So we know that. So even though it’s not coded full in the system and corrected, but we will know it.

So instead of pushing it and then waiting for the seven rejects, you can stop it to say, “Hey, let me review this before we even bother sent it.” Same thing in the world of risk and compliance, tons of work going on in AI. I think because in the end, if you think about it, it is about taking large sets of data, looking at patterns of what has led to a fraud or a potential fraud in the past, and then you are applying it to say, what is the likelihood of this happening in the future? I mean, that’s kind of what AI is very good at.

And so we are starting to deploy that in all of our risk modeling, and compliance, and the fraud monitoring, and in our AML tools and things like. So I would say those are probably two or three areas that I’m personally very excited about.

Yvette Bohanan:

That is exciting actually. Okay, we’re here talking about operations and it’s exciting. I’m sure people are like, “Well, actually it’s more exciting to do a haiku with this stuff or draw this person in the style of Charles Schultz,” or whatever.

But this is exciting because it’s solving the daily grind for businesses, and it’s solving what makes doing business hard, and serving customers well, and all of that. I mean, it’s very foundational.

I thought the other thing that you said that I caught that is really interesting, is a lot of people focus on automating and exception handling on the reconciliation process. Is what I got paid, when I’m booking it in that last step to my ERP system or whatever, I’m booking it to a county, is that what I was expecting to be paid?

And they’re trying to solve the recon over here, and what you’re saying is apply more intelligence up front, upstream of that, and then you won’t have as many issues here in the back office with your recon. And we’ve been focused on recon automation for years without talking about the rest of this.

Manish Vrishaketu:

No, and you’re absolutely right. In fact, even before AI, just philosophically, when we started to design our platform and solution, that was sort of always the way to think about it to say, “Hey, the better work we do up front, it’ll lead to less pain in the end.” And so even if you think about onboarding, when we onboard, pretty much from day one, we said, “No, we are not going to do this manual onboarding, take a piece of information,” and we will actually create an entire self onboarding onboarding infrastructure. We will have all the validation rules right up front.

So I think we have close, my product team tells me 24,000 different validation rules up front to say when you’re keying in the information in real time, we are doing checks to say, “Hey, this correct, does this look right?” It’s like if you’re in the UK, this doesn’t make sense. If it is this, then all of that stuff. In capturing profiles, capturing your payment credentials when we are doing screening and saying, “Okay, this person is marked as payable.”

And that has actually led to a lot of benefit for us downstream. So even with the complexity I was describing to you about 200 countries, 100 currencies, 50 payment methods, our rejection rates are under 1%, which having been in this world for a long, long time, I think is absolutely world class, something that we are very proud of.

But more importantly, it leads to so much better experience for everybody who’s waiting for the payment and makes our life so much easier during that reconciliation process, and the closing of the books and everything else. So I think that approach is critical in every part of the workflow and how you design instead of trying to solve at the end.

Yvette Bohanan:

Right, it’s a systems thinking approach. It’s a cycle approach, and I think that’s what’s been missing in a lot of mindsets. So that’s fantastic.

The other trend that seems to have influenced a lot around, call it back office operations, for lack of a better word right now, is consumerization, right? If Netflix can tell me five movies I might like after I watch one, or if I can text message someone halfway around the world through my phone, why can’t I approve something that way? How much have you seen in terms of transformation where consumerization has influenced how people interact with the systems?

Manish Vrishaketu:

No, in a massive way. And I’ll give you a couple of examples even in our own world, but I think it’s for the better, right? I mean the truth is that the same person who is looking for the Netflix recommendation is the person who’s approving the invoice. So in a lot of ways, we are all consumers, and there is no reason why my expectation from a business system or what you’re calling back office should be different than how I’m interacting with the world, with all my consumer applications. And it has obviously led to expectations and that has led to a lot of forward leaning thinking.

And in fact, when I think about embedded finance, what is that? Essentially, it is exactly that, right? You’re essentially taking words like finance, payments, things like that, and you’re embedding it into what you will normally do in day-to-day life. If you’re a finance professional, you go in your logins, there’s a bunch of things you do. And finance, or operations, or payments or anything should be completely embedded. And the more you can make it invisible and make it behind the scenes, that was my point. Hey, you approve an invoice. You’re not worry about the vendor getting paid that will take care of. Because we know that when you approve the invoice, you meant that it’s okay for this invoice to get paid.

Once we know that, we will take care of it. We will queue it. We know the due date of your invoice, we will pull money from your account for the $1,000 for the invoice. We will make sure the vendor gets paid, we will go back, we will close the books, and mark that bill as paid. You don’t have to do anything.

So I think that’s kind of how we’ve approached it, and it’s actually becoming more and more critical. So you talked about procure to pay. So think about procure to pay. It’s such a finance term, procure to pay, and there’s a person who owns procurement. But when you think about the procure to pay experience and the workflow, where does it start? It does not start by creation for purchase order. It starts by an employee saying, “Hey, my laptop broke. I need a new laptop.” That’s when it starts. Then it goes into procurement, and you might call it a purchase order and send order to our vendor, who will send a Dell laptop, whatever be it. But it started with that.

So this person who’s an employee is not a finance person. This person should not have anything to do with a procurement tool. It should be as simple as slacking or sending an email to a procurement person saying, “Hey, I need a new laptop and it’s urgent.” And that’s the kind of experience we are starting to create now. Once you start to type it, we know it’s coming from Manish, it says laptop, it says it’s urgent. We take those three things and we actually automatically take that into and create a purchase order out of it, because we know the icon, we know the department, we know who Manish is, we know its urgency, time sensitive request, and it goes directly to that flow. But the point is the creation of purchase order should not be a user interface. It should be automatic.

Yvette Bohanan:

I shouldn’t have to learn how to use the system to get a laptop.

Manish Vrishaketu:

So that’s just an example. But same thing, we do it in our expense management tool. Exact same thing. You go, you swipe your card to buy a book for the company or buy bagels for your team. That should automatically show up in your expense tool ready to be approved. You shouldn’t have to do anything to say, “Hey, I went to Crumbl and I bought cookies.” You just swiped the card and you’ve got the rest of the information.

So those are the type of experiences that I think users are expecting, and we at least in Tipalti and lot of other places do. I think we starting to build it. So I’m actually very excited about how this is evolving, and the pressure it’s putting on the folks who are designing the product and the flows. We need to be able to meet that expectation.

Yvette Bohanan:

It’s a different… We’re raising a whole generation of people now, who assume the internet works. Assume you have face calls, FaceTime calls or whatever you want to call them, video calls. Two-year olds going up to TVs and touching the screen like it’s supposed to do something. What do you mean a remote control? It’s going to be a whole different world. And we call it consumerization now. I think we’re just going to call it normal in 10 years. Right? It’s kind of interesting. But it is a very different way than most of the workforce has been taught to think about work and how things work at work.

Manish Vrishaketu:

Yeah, exactly.

Yvette Bohanan:

Fascinating.

Manish Vrishaketu:

And I think and it’s definitely that trend has accelerated for sure, but we are starting to design products. It’s almost like we are starting with a consumer persona. In product design, you always think about different personas. And almost from day one, we are like, “No, let’s start with the consumer persona first before we worry about doing this analytics, and reporting,” and all that other stuff, which might be important, but you need to start with that. And I think that’s really helping us in terms of pushing the boundaries.

Yvette Bohanan:

Yeah, it’s that first principles applied.

Manish Vrishaketu:

Yes.

Yvette Bohanan:

The point of interaction, not at the point of process. That’s fantastic. So we also know that in payments, there’s always risk, right? Payments, risk management’s a big topic that we get into all the time. In this space, what are the most concerning or important risks that you bear top of mind when you are doing this design work? Is it legal risk? What’s on your mind and what do you really have to pay attention to in this space?

Manish Vrishaketu:

There are a lot of things on my mind. But yeah, there’s probably two or three that I would say is becoming more complex, and part of the complexity is because of the dynamic nature of it. If it keeps changing, then you need to stay on top of it. It’s not like you can design something and just forget about it.

So the first one of course is everything around global compliance. In our world in particular, because our business is so global in terms of where we are sending payouts, where our businesses are operating, we’ve got customers who are in 50 plus countries. We’ve got obviously payouts in 200 countries.

And so I think what adds a lot of complexity is that dynamic nature. We know the geopolitical situation, not very stable. Each country has its own lens on it. And based on that, they create these regulations on how you want to manage payouts in different countries. We are operating in a lot of jurisdictions. We are a US-based company, but we have local licenses in the UK, in the EU, in Canada. We are about to get one.

So we need to make sure that we are staying in top of obviously all of the regulatory requirements that we have as license holders in these geographies, but then also be mindful of the sanctions and the list, which frankly keeps changing almost every day. And those are very risky mistakes if you end up doing it. So I would say that’s something that’s definitely top of mind for our legal and compliance teams to make sure that we are culture and we are staying on top of it.

The second one, which seems to be evolving in B2B world in particular, there are good and bad. I would say the good is that unlike the consumer world, the velocity of the payments with the exception of that gig economy we talked about is not that high. So there’s a lot of planned payments in between parties that know each other, because I have an invoice, you send me an invoice, we know. So that’s good from a broad perspective because these are known parties exchanging money and payments.

But what I’m realizing is especially with AI, the chance and the risk of essentially fraud invoice, invoice capture, I think that is increasing. You were talking about all these tools and you can create whatever images you want. You can do the same thing with invoice, and it’s hard to kind of think about an invoice which looks real, came from the right person versus came from the wrong person. They will look the same.

So that will just be an example. But I think on the one hand, AI is going to help us fight these frauds and all that. On the other hand, it’s also a tool for the frauds. So I think we need to be mindful of the ever evolving novel ways of creating a fraud in the system. So I would say that’s something that we are staying very close to. And then the third one, which I think all of us, especially those who are in payments, and in banking, and deal with sensitive data, is everything around the fact that we have so much data that we hold on behalf of our customers, on behalf of our pay, a lot of sensitive information, and making sure that we keep secure. And again, same thing, just like with fraud. All kinds of different tools out there to create, breach, and penetrate your system. So staying on top of that and making sure that, I think that’s probably the other thing that’s always top of mind for us and for companies.

Yvette Bohanan:

I think those are the top of them.

Manish Vrishaketu:

Yeah, it’s very sobering to think about those.

Yvette Bohanan:

There’s a very long list of other things, but that makes a lot of sense. You’ve done a lot of work in your career and obviously where you are now too in emerging markets. How do you see the dynamics of payments between more developed markets and more emerging markets when it comes to payouts in particular?

Manish Vrishaketu:

It’s complex, and it’s complex because even when you say emerging markets, emerging market is also not a monolith. Each emerging market in some way has its own set of nuances and uniqueness that you need to manage. But we kind of take a step back and think about, let’s call it the developed economies and then the emerging markets. Broadly speaking, I would say it’s probably two or three things that makes them unique and it has to be managed differently.

The first one is that the truth is that still a significant part of the population who is engaged in commerce. We talked about the marketplace use case. And I’m trying to sell a T-shirt on a marketplace in Germany, and I could be sitting in Bangladesh for example.

Even a large part of that population still either is unbanked or underbanked. So in order for you to facilitate and make things efficient for them in how they get paid and all that stuff, you need to be able to find alternative mechanisms through which you can reach them. In a lot of market, wallets are becoming more popular. Not in every market there. Certain markets, in some ways they’re more popular than having a bank account. But that requires a different set of rates for you to be able to reach those wallets, different set of rules and all that stuff.

So I would say that’s probably one thing that we look at, and we almost have to go market by market and solve with that. You can’t solve for all 200 markets, but you pick the big ones, you pick the battles and you go and solve it.

The second thing is several of these markets tend to have very restrictive export, import, and foreign currency rules. They’re very restrictive, and it is because of the volatility in their currency. So if you try to make a payment in Brazil, try to send payments to Argentina, for example, highly restrictive.

So what happens is because of that, let’s say I’m in the US and I’m trying to make a payment to somebody in Argentina. And my invoice might be in Argentinian peso, but that peso will never reach there because they actually want to attract US dollars. And it creates a whole set of complexity around how do you deliver that payment in that local bank account, but in a currency that does not exist. And there are all kinds of restrictions around the size of the payment, and you need to be a business, need to have a license, export license, all of that kind of stuff, which makes it very, very hard. It creates a lot of friction for us in being able to do the payments. I would say that’s probably the second that I see more in emerging markets.

And then lastly, I think it’s a lot more volatile. It’s like rules keep changing and you have to always stay on top of it. And so it’s kind of the same thing. You can’t say, “Okay, now I’ve solved for India. I can forget it and I can move on to the new market.” You have to always stay on top of it because of the ever-changing landscape there.

So more dynamic. It’s the access to alternative payments, I would say, and being aware of the local laws. I would say especially in B2B around export, import, and currency. I think those two or three things I think are critical to solving for.

Yvette Bohanan:

That just makes me think, we’ve touched on AI, we’ve touched on a lot of things that are changing here with consumerization. From what you’re describing here with emerging markets, do you see any hope through stable coins being used to try to help in these situations? I think a lot of people, if we had been joined today by, I don’t know, Solana Labs, or Circle, or so, they would be saying, “But stable coins. You could solve a lot of this friction and help people achieve things.” Do you see that as an emerging over-the-horizon or current even part of the solution?

Manish Vrishaketu:

I mean, in theory, yes, right? Because it kind of tries to address the reason why it is complex. It tries to address some of the complexity around volatility, it tries to address some complexity around the friction in payments and so on. So in theory, I would say yes.

At the same time, when I look at the state of the industry and I’ve been watching it closely, call me in some ways I’ve been on the sidelines, I’m watching to see how it evolves. I have not yet seen a good use case at scale, whether it’s in a region or specific to a use case. I’m just yet about to see that.

And in some ways, I feel like till the regulators actually embrace that and actually become a part of the solution, I just have a very hard time seeing how that becomes mainstream. And so if you need to get the regulators on board, then it requires change in regulations and everything else, which is not something that… I mean, at least I’m not aware of where we are close to solving for that, in any of these markets that we are talking about. So yeah, I’m hopeful. At the same time, I don’t see it on the horizon to have to.

Yvette Bohanan:

Yeah. Yeah, I think that’s what we’re hearing a lot. I think there’s a tremendous amount of promise in the tech and in the capability or the senders and receivers, but I don’t know that the regulations have caught up, and so people are a little bit holding back too.

Yeah. So we’ve talked about payouts for the last, I don’t know, 40 minutes or so. And then there’s the pay ins, the stuff people are always talking about, right? Is there any virtue to tying a bow, taking these two ends, and tying them together, and putting a bow on this? Do you see value in a company trying to pull this together more?

Manish Vrishaketu:

I mean, the answer is yes. You started by asking me, “Hey, how would you explain payouts to somebody who’s not a payment nerd?” And I basically said, “Hey, I mean every business has money coming in and they’ve got money going out.” In the end, I mean, in a lot of ways, those two things are tied together. Right? You’re earning revenues and need to be able to pay, whether it’s your employees, or suppliers, or vendors. It’s a critical way of how you manage cash flow. How do you do it? By tying pay ins and payouts together, your receivables and your payables.

So in theory, of course it is. But especially I would say in certain types of use cases, in certain types of businesses, we talk so much about marketplaces. Let’s think about anything which is like a two-sided network where it is directly tied together. I’m a seller, a buyer bought my T-shirt, I need to get paid. I’m an Uber driver, I drop the passenger, the passenger paid, and now I need to get paid for my service.

In any of those, which are a two-sided network, I see just tremendous value. In some ways, you almost cannot operate payouts independently of pains, right? We are actually doing a lot of work in that space, specifically in certain verticals like I described. Not necessarily by developing in our own paying solution, but being able to partner with paying providers who are essentially merchant acquirers and so on, and being able to connect those and bring those transactions directly into Tipalti. Money doesn’t have to go from this to our customer’s bank account. From there, they move to Tipalti, and then you have to manage payouts. You can just literally connect the two, and we are building some of the infrastructure and those connections that allowed us to do it. Obviously, it has a big benefit on the reconciliation side because you’re talking about thousands and thousands of transactions every day, and it just streamlines the process. I just described this four way process for you. And if you can just connect it, then it’s also a lot.

So plenty of work actually we are doing. Will also make some announcements soon around capabilities that allows our customers to be able to connect the receivables directly into the Tipalti platform. So you don’t have to separately fund or manage your payouts independently. Don’t think of it as independent. So yes.

Yvette Bohanan:

Wow. Super powerful. Excellent. Manish, thank you so much. I feel like we’ve just had a master class in payouts here today. And I can’t thank you enough. It’s been wonderful talking with you about this topic, and I’m sure there are a lot of people out there that found this very illuminating, so thank you.

Manish Vrishaketu:

No, thank you. Enjoy the conversation as well.

Yvette Bohanan:

And to all of you listening, we always appreciate you. Thank you so much for joining us. And until next time, keep up the good work. Bye for now.

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