In this episode of Payments on Fire, Chris Uriarte welcomes Anne Hay, Chief Marketing Officer, and Mike Kaplan, Chief Revenue Officer, from PayNearMe to discuss the evolution and optimization of the payments experience.
They explore the broader concept of payments optimization and how improvements and customization in all aspects of the payments journey can lead to organizations getting paid faster and with a lower total cost of acceptance.
Listen in as they highlight the challenges faced by billers in sectors like healthcare and utilities, and provide insights on the growing importance of alternative payment methods and meeting customers where they are.
Chris Uriarte: Hello, I’m Chris Uriarte, a partner at Glenbrook and your host for Payments on Fire.
The concept of payments optimization is not something new to our everyday client work here at Glenbrook, nor to this podcast. Throughout this year, we focused on this topic throughout a multi-part Payments on Fire series, which examined various aspects of payments optimization including issues related to voluntary and involuntary churn, improving conversion rates, and optimizing fraud decisioning.
But while much of the discussion about payments optimization is often focused on internal processes, practices, and technology within organizations, it’s often important to take a step back and examine the value of optimizing the payments experience from a holistic perspective.
How do we customize the experience from a merchant perspective? How do we personalize it from a consumer perspective? How do we ensure that we provide the same level of experience optimization to your best customers, as well as your internal customer support agents? These are some of the key areas that we’ll explore on today’s episode.
And joining me today on Payments on Fire, we have Anne Hay, Chief Marketing Officer, and Michael Kaplan, Chief Revenue Officer from PayNearMe. So Ann, Michael, welcome to Payments on Fire. How are you today?
Mike Kaplan: Great, Chris.
Anne Hay: Thanks so much for having us.
Chris Uriarte: Good to have you. So first time on Payments on Fire for both of you, I think. And we always like to start with the standard Payments on Fire question for our new guests, which is how did each of you get drawn into this crazy world of payments that we’re in today? We’d love to hear a little bit of background and your own stories. So I’ll kick it over to you so you could share that with us.
Mike Kaplan: Well, of course, like all things I do, it was a really well designed out plan. Uh,
Chris Uriarte: Of course, that’s usually how it works.
Mike Kaplan: Yeah, honestly, I sort of got into the world of payments through working with the team at PayNearMe and our founder and CEO for 20 plus years, over three different companies. And the one we tackled last happened to be in the world of payments. So I’ve been with the company for 15 years.
And as we were talking about prior to this, I hail from the great state of New Jersey, and that’s my sort of story.
Chris Uriarte: Excellent, excellent. As I do.
Anne Hay: Yay for New Jersey. Me too.
Chris Uriarte: Yay New Jersey.
Anne Hay: I very much answered an ad for a company that did bill payments, and I thought that was cool. But really I was in ed tech for a while as a journalist, and then I did start with a payments company, gosh, about 20 years ago. So I’ve been in the space for quite a few years, and just found it completely exciting and loved it ever since.
Chris Uriarte: Common stories, I think we hear. We rarely hear somebody come on here and tell us that they got a Master’s degree in payments from Harvard.
Mike Kaplan: Do they make one of those?
Chris Uriarte: It just doesn’t, it just doesn’t exist at all. So let’s start a little bit about the company PayNearMe. So why don’t you take us through little bit of a background, what you guys do, would just like to get a better understanding as a name that we’ve known for a long time and would love to just hear a little bit more about it.
Mike Kaplan: Yeah, I think the best way is, Chris, have you ever had to pay a bill online? And when you went to the site, you either you didn’t have your password or your account number or maybe worse, it’s a one-off bill and now they want you to create a new account?
Chris Uriarte: All the time. All the time.
Mike Kaplan: Yeah. How do you feel about that? How does that, what’s that experience like?
Chris Uriarte: It’s a terrible experience and we’re definitely going to dig more into this because it is really you know, our theme today, of course, is about optimizing the experience and this part of the world when we’re talking about billers, et cetera, have really, really done a great job at non-optimization of the experience.
So this is very, very common for sure.
Mike Kaplan: And so that’s what we do, right? That’s the problem we’re sort of solving. We’re focusing on how we improve the payment experience to make it fast, simple, and easy for our clients to accept payments from their customers. That’s really our goal and our focus.
And we do it through an approach called Payment Experience Management, which is combination of software and money movement services that optimizes the end-to-end payment journey across customer support operations and obviously the consumer journey. That’s really our focus is how do we get our clients paid faster and at the lowest total cost of acceptance.
Chris Uriarte: Yeah, that’s interesting. I really like sort of the optimization first messaging that you bring to that story. It really does differentiate you guys a little bit. But the company’s, at least to me, it’s not a new name, right. As I said earlier, I think I have known the PayNearMe business for probably 15 years or so. Initially, if you asked me about PayNearMe, especially going back five plus years, what the business does, I always associated you guys initially with cash acceptance, right?
And I think that’s a really interesting part of the payments world that we don’t talk a lot about on this podcast. And we’re not going to get deep into it today. But I would be very interested in understanding a bit about how the company started in the cash acceptance business and kind of what that looked like.
Mike Kaplan: Absolutely. The initial problem that we set out to solve was one of sort of the most difficult and expensive edge cases as the world went digital is how do you digitize cash? And so imagine if you’re someone who doesn’t have a bank account or a debit card. How does that person transact online? How would they pay for their car loan or their rent?
You and I do it using a credit card or a debit card, or maybe we use our bank account. But there’s a significant segment of the population that doesn’t have access to that, the un- and underbanked population, or what we like to call is cash preferred.
And that was the problem we set out to solve. And we did it very successfully by stringing together the point of sale systems at some of the most popular brick and mortar retailers in the country. And that’s where we entered in. That was the problem we initially set out to solve.
Chris Uriarte: And it would be generally businesses that are billers using this service? And what was the term that you used for the consumer in this segment? I thought that was kind of interesting.
Mike Kaplan: Cash preferred.
Chris Uriarte: Cash preferred. Okay, I like that.
Mike Kaplan: Cash preferred. Yeah. We think of the bartender or the doorman, somebody who’s getting in a lot of cash as part of their income, and they want to be able to leverage that to pay their bills. How does that person leverage the fact that they’ve got cash on hand and they want to use that in order to fulfill on an obligation?
Chris Uriarte: Cash preferred. I like that term. That’s one I haven’t heard before. So did the company then evolve from the cash acceptance world to what it does today? Because it seems like two very different ends of the payment spectrum, right. Did your experience in the cash world help sort of launch you into the different services that you have today?
Or was this just totally unrelated and you realize that, listen, cash isn’t going to be the future. We need to evolve, we need to build something new. What did that journey look like and how did that help you guys in what you’re doing today?
Mike Kaplan: Yeah I described it earlier as cash is probably one of the most interesting and difficult edge cases to solve as it relates to payments, and in solving that problem, we had to build a platform that was highly configurable. When you think about if you were starting a business today and you needed to accept payments, you would build a platform and you build a system that accepted credit cards and debit cards, you’d be crazy not to, right? That’s the way people pay online.
But we were solving this sort of interesting edge case, so nobody was building to our specification. We had to build everything to everybody else’s specification. So we had to build a highly configurable platform in order to solve what is a challenge and use case, and we had to provide an experience that we could execute at 60,000 retail locations that all had different store operational processes. So that was the challenge we had.
What we realized in doing that is we built this really robust platform that was super effective in solving this cash, digitization of cash problem. But when we applied that to more traditional payment types, we realized the value that we had actually built. And net of it is while cash is a very expensive form of receivable for businesses to deal with, it is, at the end of the day, a relatively small part. And so we decided that there was real opportunity for us to sort of take on the other 95% of the payments by leveraging the platform we built specifically to deal with the cash issue.
Chris Uriarte: So that makes a lot of sense, and it seems to me that there’s probably a lot of great lessons learned there. The cash side of the business, if you’re dealing with billers, that probably has to be fairly large scale, right? If you’re thinking about a utility biller or something along those lines, you’re potentially looking at every household in a particular geography that has a pending bill associated with them. And I guess you guys have no idea how they’re going to pay. There’s a potential maybe that everybody’s going to pay with cash. We know that’s not going to happen, but you know you’re going to have a subset, but you have to be prepared for, I guess, whatever comes at you at the end of the day, right.
Mike Kaplan: That’s right.
Chris Uriarte: Yeah. Interesting. Let’s move on and talk a little bit more about the core of our episode today, which is optimizing the payments experience. So it might be best first to unpack what we really mean by this and what exactly that means. So, the payments experience, it seems like a fairly generic term. And the question that I would ask is, what makes up the payments experience? And if we’re talking about optimizing it, who exactly are we optimizing it for? What are we optimizing it for?
Obviously the first thing, when I think about optimizing the payments experience, the first thing that jumps to my mind is a consumer at a retailer’s checkout page. And we’ve known for years that retailers have put lots and lots of work into going through optimizing that experience. So when we talk about that experience, we’re kind of talking about things like the UI, UX, kind of what the page flow looks like, the way data might be entered or things along that line.
But is it more than that? More that we should be thinking about when we’re talking about optimizing the payments experience? What really are we talking about here when we use that term?
Anne Hay: As we lightly touched on it earlier, there’s been so much innovation to, you point out, to the customer experience in the commerce world, right? Because there’s no sale without the transaction. And so commerce has seen incredible innovation, not only right there on the checkout page. And unfortunately, consumers don’t have that same kind of experience when it comes to paying their bills and other non commerce transactions.
And if a perfect world, every payment would get processed through self-service, and all we would have to do is optimize that first touchpoint. But we know that doesn’t happen. There’s manual intervention that needs to happen when a payment doesn’t go through or a customer hits a barrier.
And that’s why we have to pay attention to much more than just the customer experience. We really need to look at every touch point in the payment journey. So not just the customer, but also at the support staff who may be servicing the customer and the operation staff who really need to complete that payment journey, and whether they’re dealing with reconciliation or manual chargebacks.
And previously, I believe that most people look at those other areas as just a cost of doing payment business. We talked about subpar agent experiences that really are quite frustrating for everyone, not only the customers calling in but also for the agents who have to service them. And that’s not really a cost of doing business of payments. It’s actually a fixable problem.
And that’s why we need to pay attention to all of the touch points in the payment journey. And so if we stop at the customer experience, we’re leaving a missed opportunity there. And that is where when we go beyond the customer experience and we look at where there’s manual intervention or reconciliation, that’s where the high cost of payments really start to come in.
It’s not in the transactions. It’s in those cases where there isn’t straight through process and there’s some sort of exception or a process needs to be involved. So we really want to optimize across the whole journey, not just stop at the customer. Because when you do that, that’s how organizations will be able to get paid not only faster, but lower that total cost of acceptance.
Chris Uriarte: I think that’s really interesting and it brings something into my mind. One of my colleagues here at Glenbrook Partners, Russ Jones and I, we went down and we visited a very, very large retailer last year, and we were invited down by this CFO and his team to do a presentation and do some knowledge sharing.
And we sat in the conference room in the CFO and the Treasurer’s office and there was a big sign on the wall that said “the customer transaction is not completed until we get paid”.
Anne Hay: Ah, that’s great.
Chris Uriarte: And I thought that was great. I thought that was a great, great sign. But I think it speaks to what you’re saying.
It’s sort of like you have to take a step back and you have to look holistically at our payment processes. And as you said, you just can’t stop upfront. It’s not just about the consumer getting a screen on their web browser that says payment completed and that’s it. They walk away, right. There’s a lot more things that need to be considered behind the scenes when we’re talking about optimization, right?
Mike Kaplan: What I think is actually interesting there, Chris, too, is, for a retailer, that’s very much the case, that it doesn’t stop until they get paid.
Chris Uriarte: Yeah.
Mike Kaplan: For a biller, right, for somebody who’s delivered a service already, they’ve already acquired that. When you’re a retailer, you’re acquiring the customer at the point of transaction. That’s actual customer acquisition.
Chris Uriarte: Ah, yeah, that’s a good point.
Mike Kaplan: When you’re a biller, if you’re an auto lender, I’ve already lent you the money. You already have the car. Now it’s my job to collect on it, right? And so this is a reason why we believe firmly that there hasn’t been as much optimization in this area because it isn’t the point of acquisition. It is, in many cases, has become an afterthought.
And I think that’s why you see so much innovation or have seen so much innovation by retailers because they recognize, Hey, if we don’t get paid, we didn’t acquire this customer. But in the case of an auto lender or utility company, really anybody that’s in this service business where they’ve delivered a service and now have to collect, it’s been a very different, has had a very different level of focus, which is why we think there’s so much opportunity here.
Chris Uriarte: So that’s a really good segue into what I want to ask you next, but it’s clear that this benefit of optimization, as you’re pointing out, really from a traditional retailer perspective, those benefits are pretty obvious, right?
But in my experience, as we talked about, when you look at other categories of billers, you look at things like repaying a loan. You said somebody who’s offering a loan on a car, for example. Other things that stick out to me maybe are things like government payments, toll payments, payments in the healthcare sector, right? It seems to me generally that these do tend to be the absolute worst types of payment experiences.
And what I think is that these folks figure that, you don’t really have any alternatives, right? It’s not like if you’re shopping for some sort of commodity between Target and Amazon and Walmart. When you’re looking for something, if you have a bad experience, you could potentially jump from one of them to another to get what you want. But in this case, these billers, you have to pay directly with them. You have to pay them for whatever it is that you owe them. You don’t really have another option.
So I was going to ask you, is that just my perception in these sectors that there’s just these really poor experiences, but I think we’ve hit that, right. But I think just in general, as you go deeper into these sectors, you’re probably seeing that there’s tremendous opportunity for optimization, correct.
Mike Kaplan: Oh yeah, absolutely. There are some folks out there that probably take the opinion of they have to pay us anyway, but I’m sitting here and I have a, you mentioned medical billing. I have a medical bill sitting here in front of me on my desk. It’s $7 and 37 cents, and it’s 60 days past due.
It’ll probably go to 90 days past due, and it’s not because I don’t have $7 and 37 cents. I have it, I swear. It’s because it’s painful to pay. Right? And so that $7 and 37 cents bill is going to cost the biller who sent it to me untold amounts of money because they’ve created a poor experience for me. I’ll wait to get the third notice. Maybe I’ll call in to the call center. Like, and all of this is building costs, right? It’s slowing the time that you get paid. It’s reducing your cashflow and ultimately it’s driving up your costs.
So for those that sort of have that attitude of, Oh, they’re going to pay me anyway, you really have to sort of look at what the total cost of accepting the payment is. Because yes, you may eventually get paid, but how much did it actually cost you? And I’m not talking about the transaction cost. because transaction costs are transaction costs, everybody has to pay them.
But what’s the all in cost of getting me to pay that $7 and 37 cents. My sense is it may be way more than $7 and 37 cents, especially if I pick up the phone and call somebody.
Chris Uriarte: Especially if you do that. And it really does make me scratch my head about why some of these billers are not more motivated to invest the time and money in optimizing the payments experience for the reasons that you’ve talked about. And I experienced this same thing, and Mike, in the medical side, I get these blood tests once every quarter, right, and I wind up getting a similar bill from one of these big lab companies that we all know. And it’s always, like you said, for the same thing. It’s like for $3 and 50 cents or something along those lines. And the process to go and pay that, to log in and type in your customer number and your invoice number and all those sorts of things, is sometimes I go two or three quarters and I’m behind from Q1 and I still haven’t paid the first one just because I don’t want to do that.
And I’ll contrast this with kind of the billing from the medical group that I go to that actually does the blood tests on me. Whoever they’re using for their payments experience is, I wind up getting an email from them that has a very easy either click through path or even they actually embed right in the email a QR code that I could just point my phone to and double click an Apple Pay transaction and complete that in about 20 seconds time.
And anytime I get an email from them and I see it, I’m just motivated to pay that and to get that out of the way immediately, where I’ve got three quarters worth of bills from the lab company sitting on my desk right now. Literally like you, Mike, right on my desk. There’s two of them sitting right here in my stack of bills, and I just, again, scratch my head with these companies saying that there’s, just with a little effort, right, there’s a lot that could be done to get that money through the door much quicker, right?
Mike Kaplan: I think that’s right. I think there’s a lot, to the point that we talked about earlier, making things that simple and that easy actually takes a lot of technology and it takes a lot of know-how to have the right platform and the right sort of partnership in order to make that a reality.
And so it sounds to me like you’ve got one of your billers has invested that time and energy with the right type of partner and you have one that hasn’t. But I can tell you that sort of what we have built in our platform, it’s highly complex. Like there’s a lot of moving parts for some of these organizations, and that’s why it’s really important that you’re working with a modern platform provider, a modern payments platform provider that understands the importance of these experiences.
And then, sooner or later, we believe most billers come around to that, but it takes, some people have to spend a lot of money in order to learn that lesson.
Chris Uriarte: I think you’re pointing out something as well that’s quite interesting is, a lot of times, these types of billers, they don’t know what they don’t know. They don’t even know the right questions to ask, right. If you’re a medical group, you’re focused on doing whatever a medical group needs to do well, and you probably have somebody from accounting or finance in the backend that is just kind working with these, I’ll use the term legacy systems that have been in place at a practice for a long period of time. And I feel like a lot of people probably say, It is what it is, this is just how these systems work. And maybe don’t even know that there are options out there to help improve the customer experience, improve the receivables timeline and things along those lines.
So I’m assuming that in a lot of these different verticals, there’s a bit of sort of lack of knowledge and know how to even get them to ask the right questions and to go out there and look for the right solutions. Would I be right about that?
Anne Hay: A lot of the conversations that we have with the market are around where problems are and looking at what the cause of those problems are. Like we have companies come to us all the time and talk about, We have high volume of calls in the call center. And traditionally, I think the easiest fix to do is to hire more call center agents to handle more call center problems. But when we get down to it and look at it and ask the question, it turns out a large number of these volumes of calls are password reset requests, right? There are things that like, your problem is not that you can’t keep up with the call volume. A problem is that you have a poor payment experience that’s driving customers to call you.
And I think when we start to have conversations like that and get people thinking more broadly about where in their business they’re just applying sort of bandaids, right? We have one client who told us they were spending 45 minutes a day per chargeback, and it’s a very manual thing, but it doesn’t really have to be.
And so when we ask the questions like, why is this happening? It’s such a change of conversation around like, where in my process, to your point earlier about a payment’s not complete just because the transaction was made, are there these problems that are really, the cause of them are poor payment experiences.
And very often always goes back to there’s some break or some friction or some barrier that’s driving up problems across the business. And some of the companies that we have worked with that have really like looked at their business overall and examined all of the places where payments are really causing them high costs have been able to make some really awesome improvements in their business that’s really helping with cash flow and profitability because they’re looking at sort of the root cause, which is really, is a poor experience.
And that goes anywhere from, it’s the customer to it’s the agent who’s working in multiple payment systems and in order to take a payment related call, they’re flipping between systems and looking for information. So when we talk about experience being across the board in many different places, that’s a really great example of like looking at what your finance team is doing and where they’re spending their time, and why are they spending that much time on things that they really shouldn’t have to.
Chris Uriarte: So I think that the point around back office is really, really important here. Right? And I think you’ve pointed out a few things in what you just said. A lot of these tasks are not necessarily related just to kind of the core payment process itself.
For example, a customer service agent taking a call, I guess from a consumer or maybe handling a payments exception problem with a consumer. You have things like, you mentioned chargeback management. Huge, huge issue for everybody right now as the volumes of disputes continue to be increasing across the industry, et cetera.
We have a lot of problems with third party fraud, first party fraud, friendly fraud, all sorts of things that all put stress on the system there. Reconciliation, things along those lines. And I have run businesses like this where we have found that the systems and the processes that drive these back office functions are very often sort of very, very low on the priority list from an improvement perspective.
And our term today, optimizing the payments experience, very often doesn’t even come into conversation sometimes when we’re talking about those systems there. So what do you commonly see in these situations and what are some of the risks or why is it bad idea for organizations to deprioritize these types of payment experiences?
Anne Hay: I think it’s less about deprioritizing the experience and, and more about not realizing what’s driving these experiences for these other groups. So you talked about chargebacks and I would say that most businesses will say, It’s just the cost of doing business. I have chargebacks, I’ve got to deal with them.
But looking at the experience at multiple points, there’s a way to really drive that down. And if you’re looking at why chargebacks are high, well they could be stemming from in multiple places. We could be giving customers the ability to make a payment with a payment type that maybe isn’t ideal for them.
For example. Perhaps they’ve NSF done an a CH payment a few times and we’ll keep letting them pay. Well, why do we do that? Right? It’s, eventually it’s going to lead into a chargeback. We already know that. So having the ability to manage that right, at the point of the customer transaction and sort of like minimize the chance of a chargeback happening in the first place. And then when it does, making sure that the tool has all the data in place and the staff are able to actually manage the reconciliation or the chargeback, resolution with all the information they need to.
So I think that a lot of organizations, to answer your question, just aren’t thinking about all of the places that the payments are touching. It becomes less about deprioritization and more about realization of all of the areas where poor experiences are making other parts of the organization difficult. And unless you’re looking at every point of the customer payment journey, you wouldn’t see that.
So unless the CFO’s like looking at why call volume is coming up and why they’re getting the need to hire 10 more agents and asking the right, asking those kinds of questions, you wouldn’t naturally lead to that. And so when we’re having conversations with prospects and clients, we are asking those questions about where the problems are that they’re having and we’re aiming to look at where they’re stemming from and approaching solutions in that way.
Chris Uriarte: That’s interesting and I love this example that you gave that I think is probably like a major problem in the industry where probably an organization says, Okay, these are the payment types that we take, credit, debit, ACH, for example. And then you have a consumer that consistently uses, let’s say, ACH. And month after month after month, there’s some sort of failure, right?
There’s probably NSF type failures, et cetera, month after month. And then you have to deal with some sort of remediation there. And reaching out to them. Maybe they finally reach out to customer service. Maybe they eventually give a credit card over a phone as payment type to settle that. But then we just allow them to keep using ACH again and again and again.
So, the kind of scenario you’re talking about, I think is probably a very real thing. The question is, do organizations have the agility and the ability to react to that? And to maybe say, Well, listen, we should be switching this person to another payment form, or something along those lines.
And I’m assuming that that’s a challenge probably for a lot of organizations. That’s probably some more advanced logic that a lot of folks don’t have, right. But I love that example.
Anne Hay: It’s frustrating for the business, but also the customer. Imagine if you kept trying to make a payment and you had trouble every single time. And so we can do collectively a better job at delivering experiences for customers that are optimized for the way that they want and need to pay.
And you could have 10 options, but that doesn’t mean you necessarily should be offering everyone all 10 options. Right. And so when you have modern systems in place that you’re capturing the data and then you’re able to apply what you know about that customer back to deliver the kind of experience that’s best for them, and you do that at the consumer level, that’s the kind of experience that our customers deserve.
Chris Uriarte: That’s a good segue because that’s what I really wanted to ask you about next was about the concept of customization. Because when I think about optimizing the experience, obviously when we speak to, going back to what I was saying earlier, when we speak to more of these advanced merchants, they spend tons and tons of time optimizing their checkout page, for example, with that overall goal of increasing conversion.
But usually the first place they start is kind of at a generic across the board merchant level with the same experience that applies to everybody. Right? So, optimizing at the merchant level, I think is something that’s been done for a long, long time.
But can we get even deeper and start personalizing the experience on a consumer level? Like what exactly is kind of the art of the possible here and what can be achieved at the consumer level?
Mike Kaplan: Yeah. I think when we think about this, we sort of think about it in two different areas. One is like, I think you said, at the merchant level, right? So we think about it from a sort of customization or configuration really at the business level. And then personalization at the consumer level. Right? And then at the business level, that’s things like integrating in well with their workflow and business rules to do things like reduce returns, keeping somebody from NSF-ing every month, things like that, providing the right data access so that the agents have the ability to provide really solid experiences.
Then on sort of on the personalization side, it becomes things like our Smart Lake technology, which you sort of referenced earlier. The ability to have a QR code that’s pre-populated and staged type of payments, right, that’s specific to that consumer. Things like storing credentials and providing the customer with the data, the amount that they are due and what their payoff amount is.
That’s all things that can be do to personalize the experience, all the way down to leveraging AI and the data to actually help to predict what the best payment method for this customer actually is. And that’s a benefit for the customer and potentially for the merchant as well. Driving somebody to, what we describe as, the optimal payment type is good for everybody, right? Because that’s the payment that’s most likely to go through at the lowest total cost for the merchant to accept.
Chris Uriarte: I like that idea of not just customization, which was the term that I sort of led you with, but the idea of personalization on top of this as well. And there’s a lot of different factors from what you’re saying, I think, that can go into that personalization decision that a merchant or a biller makes. So I think that makes a lot of sense.
I love this story sort of where you’re going about the actual payment type itself. And optimizing on payment type is something that I think is becoming more and more relevant. And I had a conversation with a client of ours who’s a large gaming company, video games, that type of gaming. We were talking with them just about how important Venmo and Cash App is to them from a demographic perspective, being able to accept Venmo and Cash App at the point of sale. And it reminded me about this story that I told to a group last year about when I used to go and get my breakfast in the morning at the little deli around the corner from my place up in Hoboken, New Jersey.
And we were talking earlier, we’re all New Jersey people, but I used to treat myself twice a week to a good Taylor ham, egg and cheese sandwich. But I don’t have to explain to you guys how important that-
Mike Kaplan: Pork roll.
Chris Uriarte: I was just going to say, there’s a little controversy here about the terminology, but I don’t have to explain to you guys how important that that sandwich is culturally to folks from New Jersey down, some New York City, down to Philadelphia. But as I’m sitting there in the deli every morning, the deli’s around the corner from a middle school and these kids at 7:15 in the morning would just be coming in and out in and out.
And I eventually started paying attention to like, how are these kids paying for this? And I realized that in, in like 80% of the cases, every one of them is using a Venmo or a Cash app card and most of them are doing it through an Apple Pay or Google Pay digital wallet on their phone. But I’m just watching again and again. It’s Venmo, Cash App, Venmo, Cash App, Venmo, Cash App. And kind of relating that back to the conversation I had with our gaming client about demographics and how that plays into payment type.
I think when we talk about optimization, or back to using your term, Mike, personalization, maybe let’s talk a little bit more about how payment method comes into that conversation, right? Because we continue to see things like digital wallets and other alternative payment types, being more and more top of mind and top of wallet for consumers. How do we take this into account when we think about optimizing and personalizing that payments experience?
Anne Hay: It’s very important for us to be meeting our customers wherever they are. And that’s payment types, channels. They need to be able to pay with anything in their wallet, right, Chris? So, imagine if there was a customer with very little dispensable income. The bill that they have that’s easiest to pay will be the one that is paid first.
And if you have someone like a freelancer or maybe grandma gives me money and my funds in Venmo and I need to make a payment but my biller only takes ACH. I have plenty of money in my Venmo account that I can pay my bill with, but I don’t have the ability to use my Venmo account to pay it.
And so what does that process look like for me? I need to take the money from my Venmo account, move it to my bank account, and if I want to do that immediately, I have to pay for it. If not, I have to wait one to three days and then I have to pay via ACH. And that’s not immediate either.
So what happens to that money that I did have to pay my bill in between the time that I need to move it from where I have it, to where my biller will take it from? If it’s even there after those, roughly five days, right? Every time there’s added friction, that payment is becoming much less likely to be made, right. And so you and I had spoke earlier about the potential implications of only offering ACH and not other payment types. That’s a great one. Customers want to pay with wherever they have their funds.
PayNearMe does research pretty regularly on what consumers are looking to do and where they’re looking to pay. And our most recent research report found that 60% of customers, consumers wanted to pay with a digital wallet. That actually doubled in the last three years, last time we did the survey. And it’s not even isolated to one age group. When we looked at where it was, it was across all age groups. So it’s not only those who are younger who want to use it, and the actual highest group was in the 40 to 60 age groups. So digital wallets alternative, we’ll call them alternative payment types, really need to be an option for customers to be paying their bills as much as traditional payment types need to be.
Chris Uriarte: Yeah. And I think if we look at where we’ve come over the last decade, the way that consumers today access different financial services is just tremendously different, right? 15 years ago, it was really one option. It was the bank, and if you did not have a bank account and you were not using those services, you were sort of forced into this alternative financial service universe of check cashing and in-person bill payment and things along those lines. Going back to a lot of what you guys had historically done with cash payments, but that has changed tremendously today, right? We have a lot of, while they’re typically not licensed banks, these digital banks and these neobanks are now servicing that demographic in a way that banks serve the rest of the world, right?
So there’s a lot more options today, and it’s opened these more traditional banking, financial service products up to individuals that maybe didn’t have a bank. They were unbanked, they were underbanked, you know, maybe they had accounts, but they were accounts that were just completely full of different fees associated with them that just made it prohibitive to access those services or to keep their accounts open, et cetera.
So this is a very, very different world in regards to the service providers that are out there to service these different communities as well as, as you’ve just brought up, and just consumer behavior around payments is mobile is dominant. The wallets are continuing to just grow, skyrocket from a growth perspective year over year.
We’re in a very different world than we were even five years ago, right?
Mike Kaplan: Yeah. What we see is that people are just simply storing value in other places. And they’re storing value in places like Venmo, in places like Cash App, to your point, in some of these neobanks. One of the biggest areas of opportunity for us when we’re talking to folks that are clients or potential clients that are used to these more traditional ACH recurring payments is getting them to understand that people are storing value in these other places.
And to Anne’s point earlier, by making it difficult for them to get you money, right, by slowing them down, by putting more friction in the process, ultimately you’re increasing your total cost of acceptance. Yeah, ACH a great payment method, all the way up until the point where you hit somebody who doesn’t, isn’t using a bank account or isn’t reliably having fun sitting in that bank account. At that point, that becomes a really, really expensive transaction when it NSFs. Right.
And so yes, some of these other payment types may be a little bit more expensive on a transactional basis for a merchant to accept, for our clients to accept. But at the end of the day, when you look at the total cost of acceptance and getting your money faster by making it easier for your customers to pay you, the total cost of acceptance actually comes down, even if the transaction price is a little bit higher.
Chris Uriarte: Those are really good points. I really like what you started with though, I think it’s quite simple just to say that people are storing money in other places. It kind of reminds me of a conversation I had with a current client just last week looking kind of at their demographics and thinking about this concept of earned wage access products that are out there.
And, specifically, I’ll give an example, if you look at gig economy workers, Lyft workers, Uber workers, et cetera, drivers, so many times these days, their earnings don’t even hit a bank account. Their earnings are paid out to a prepaid card, so they could immediately go and buy gas with it, or they could buy food with it, or things along those lines.
So, to your point, if that driver has his primary bank account linked to a biller’s profile, for example. It’s maybe not like you and I who are getting a direct deposit every two weeks from our paychecks into our bank account. Perhaps their primary source of funds is being paid out alternatively, and they’re not really seeing that flow of funds come into the core bank account.
So, yeah. I’ll just go back to what I said earlier. It’s a very different world that we’re living in today, right.
Mike Kaplan: And by the way, that right there is a really good example of the type of customer that you wouldn’t want on a recurring payment, right? Because they’re not reliably getting direct deposit into their account every two weeks. And that’s the type of customer that’s very unlikely to sign up for that recurring ACH payment, right?
But you still have to service them. And you want to do that in a way that’s going to get you paid as quickly as you can and ultimately at the lowest total cost. We’re starting now to see a shift within the billers that we service who are very, very on, heavy on the ACH and recurring payment side, really look at that and figure out how do they start effectively servicing this new segment of the population that doesn’t transact the way that their traditional customers.
Chris Uriarte: Yeah. Very interesting. This is a super interesting discussion on the topic for sure. I want to wrap up with a topic that I think legally we can’t avoid today which is the topic of AI and agentic commerce, which of course is the hot topic of the year.
By the way, I forgot to mention this earlier. I had read I think just yesterday that I think you guys just secured $50 million worth of funding as part of your series E to continue to grow and innovate. So congratulations on that. And I bring that up now because, I joked earlier that I don’t think I’ve heard anybody get $50 million worth of funding in the last six months that wasn’t an AI company. So, you didn’t have to change your name to PayNearMe.ai to get that funding. So congratulations on that.
But, you’re not immune to the AI world and the agentic commerce world at all of course. What we’re looking towards perhaps a future where we have lots of these agents running around doing work on our behalfs and I’m just curious to start thinking about how that might impact the payments experience.
And I actually started thinking about this maybe six or seven weeks ago, not because of our podcast here, is I was prepping for a panel that I had moderated last week in San Diego at the MRC conference. And Vanessa Culver, who heads up global payments operations for GoDaddy, we were talking about this and she said something to me that never clicked with me.
She said, You know what, sort of like what we were talking about earlier, we have spent so much time optimizing the experience for the consumer in the browser and the mobile app, but I think my future is also going to take into consideration optimizing whatever the experience is for the agent, trying to get the agent to behave in a way that we want to see the agent behave.
And I thought that was really, really interesting. I didn’t even think about that. But I guess for you guys, is there a point where optimizing agents in a similar way that we’re optimizing for humans sort of becomes part of the optimization of the payments experience? Or what else do I have to kind of think about when we’re talking about this topic here and how have you guys thought about this?
Mike Kaplan: Obviously AI is front and center out in technology generally, and similarly within our organization. To Anne’s point earlier, we’re looking at the end to end payment journey. And where all of the points that that intersects. And, you know, things like call centers are ripe for automation, right?
Agentic or, you know, the replacing of live call center agents with either virtual agents as well as chatbots and things of that nature. So we are very aware of that and focused on how do we sort of optimize payments in a way that can take advantage of those technologies.
And so one of the things we’re in the process of doing is launching our own payments, uh, virtual agent to replace traditional IVR. Right? That’s an area that we are actively in the process of releasing. So those are some of the things, but I think to your general point, it’s all about, you know, when you go, when you approach it, the way we think about it from an experience perspective.
It’s optimizing the experience. And so today that’s, you know, the consumer experience, it’s the agent experience, it’s the operations experience. And at some point it’ll be how do we effectively optimize for agent to agent experience, right? So, hey, I have an agent paying for me, and you have an agent collecting, well, how do we optimize the data and how do we optimize payments in a way that makes that effective?
Because at the end of the day, if my agent fails to pay, then that becomes my problem as a consumer, which is going to then drive back up costs for the company that’s getting paid, right? I think the approach that we have around how do we create strong experiences across the end-to-end payments journey will apply no matter sort of who’s making the payment and who’s accepting the payment.
And I think that approach will apply to agentic, as well as it does to, Ann picking up the phone and calling you Chris to make a payment. I think it’s the same it’s the same approach will serve us well.
Chris Uriarte: Yeah. And Ann, are you just getting a lot of questions from your customers today? Is it confusion? Is it, I’m not quite sure where we are, where we’re going with this yet, but curious as to what you’re hearing out there.
Anne Hay: I think if you’re not working with a organization that’s experimenting, you’re already pretty far behind. When I think about just in marketing and what tools and technology I use, I’m looking towards the tools and technology I use to implement AI and to leverage AI in a way to make the experience of that I have with the tool easier.
And I think that billers and other non commerce organizations should be looking towards their payment providers for exactly the same thing and to be asking those questions. How are you thinking about applying AI and other technologies into your platform to continue to make those experiences easier and faster?
That’s where nobody has it figured out, right? If anybody tells you they figured out exactly how to do it, no, they haven’t. But, experimenting is key and really relying on your payments provider to be implementing those technologies into your platform, I think, is what should be expected.
Chris Uriarte: Yeah, no, nobody has figured this out. And I was speaking to a group, just facilitating a conversation about agentic commerce a few weeks ago, and the person that was on stage said that there was going to be an agentic commerce expert talking to the room later in the day. And I looked around the room and I realized that I was supposedly the agentic commerce expert, and thought-
Mike Kaplan: I hope you took credit for that.
Chris Uriarte: We’re really in trouble if that’s the case. I do talk a lot about agentic commerce, but for anybody to call themselves an expert today would be disingenuous to say the least, for sure.
Listen, that brings us to time today. This has been a really, really great discussion. I thank you both for joining me today. We have Anne Hay, Mike Kaplan from PayNearMe.
And I want to thank all our listeners as always, for listening to Payments on Fire. I’m Chris Uriarte from Glenbrook Partners. Until we talk to you next time, do good work and we’ll talk to you soon.
