It’s easy to feel like a kid in a candy store when considering Embedded Payments for your software business. Before you know it, the enticing numbers, models, and spreadsheets can have you taking on more than you can chew.
The smart move is to take your time and be very thoughtful about your payments roadmap, according Greg Hatcher, Head of Payments at iClassPro and this week’s guest on the PayFAQ Embedded Payments podcast.
Listen in as he tells our host Bob Butler about iClassPro’s journey to becoming a PayFac®, from what drove their decision and the considerations that went into building their roadmap to how they got leadership on board and what set them up for success.
iClassPro is a class management software platform for gymnastics, cheer, and swim schools. Like many other platforms, the decision to “own more of the value chain” was based on improving their customer experience as well as the ability to grow its business with a new revenue stream.
“If you’re a software platform, looking at building up payments, you’ve got to start by considering the pillars of what that even means and what it means to process payments. So, you have to think about onboarding, the act of processing and transacting, funding, reporting and risk management, and you really need to dig into each of those and identify what you want to own, and how deep that ownership will go, as well as what your partner will continue to own.”
So, before you get out in front of your skis, spend a few minutes listening to this week’s podcast to learn what it takes to nail the basics.
Want to learn more about iClassPro’s transformation? Click here
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Transcript
Welcome to the PayFAQ Embedded Payments podcast brought to you by Payrix. As payments and software experts that eat, sleep, and breathe Embedded Payments, we’re as passionate about you as you are about your customers. Each podcast episode will provide insights about Embedded Payments designed to help you feel the transformation and growth of your software business. You’ll learn from industry experts, Payrix customers, and leaders on the Payrix team about the latest trends, best practices, and real world guidance from payments experts to help you take your software platform.
Bob Butler
Hi, everyone. Welcome to PayFAQ, The Embedded Payments podcast brought to you by Payrix. I’m your host, Bob Butler. And today I’m going to be talking to one of my favorite people in the industry. It’s Greg Hatcher, he’s the head of payments for iClassPro. And we’re going to be talking all about how to create your company’s payments roadmap. So hey, Greg, welcome to the show.
Greg Hatcher
Hey, Bob, thanks for having me. I’m really excited to be here.
Bob Butler
Well, hey, let’s start with some background on you. I mean, I obviously know you from the space, but I’d love to learn a little bit more about you, your payments background and any information on your company, etc. So it’d be great to just jump right in there.
Greg Hatcher
Yeah, absolutely. I’ve been in payments for almost a dozen years now. I’ve served in a variety of capacities, operations, risk and compliance, product management, most of that time has been on the software platform side, so functioning as an ISV embedding payments for our customers. However, I’ve also had some time at processors as well, to round out my knowledge and see the other side of things. Right now, I work at iClassPro, we are a class management software platform. So, we help businesses like swim schools and gymnastics academies manage their business, communicate with their customers and collect payment.
Bob Butler
Hey, how did you know that your software was ready to make the big leap into and be responsible for payments for your customers?
Greg Hatcher
So, iClassPro made that decision actually before I joined the company. I’ve been there about two years now. But you know, digging into that history to understand how we got where we are, it really aligned with what we hear time and again, from software platforms, it kind of comes down to two primary drivers. And those are the voice of their customer. Being in tune with your customer tends to lead you towards a payment path if that’s a use case, that makes sense in your software. And then also business growth payments provides a great revenue stream, and can be a big driver as well. So, you know, those two things are really kind of where it kicked off. And we heard pain points from customers, you know, really due to the bifurcation of our payment feature prior to becoming a PayFac®. So, we were integrated to gateways, but because we didn’t own the merchant account, there was friction for them around the onboarding process, getting support, right, if they were wondering how payments ended up depositing, or why certain things failed, that it was just a back and forth. That was really kind of what led us to start digging in deeper and ultimately make the transition to own more of the value chain.
Bob Butler
So, when you think about iClassPro or any of the other SaaS companies you may have worked with, what was the information you needed to build out that payments roadmap?
Greg Hatcher
That’s a great question. There’s two ways that I think about answering this. So, there’s kind of the generic answer as a payments person. You know, if you’re a software platform, looking at building up payments, you’ve got to start by considering the pillars of what that even means and what it means to process payments. So, you have to think about onboarding, the act of processing and transacting, funding, reporting and risk management, and you really need to dig into each of those and identify what you want to own, and how deep that ownership will go, as well as what your partner will continue to own. And for those items that you choose to own. It’s pretty standard product management, right? So you’re identifying problem statements that exist with your current solution, desired outcomes that you would like to move towards, and that really will help you inform your prioritization. What’s the minimum loveable product? That was a term I heard not too long ago, I like it a lot more than minimum viable. And you can really sequence from there.
Now at iClassPro, we’ve been a PayFac® since 2015. So, it was a little bit different here, right? We’d already gone through those core pillars. We had that minimum lovable product out there. So, if you’re a bit more mature, and you’re further along as the software platform, you need to consider other things, such as you know, where’s your software expanding globally? Or do you have a strategy to go global? Do you have multiple software applications that you’re trying to serve your payments solutions to, thinking about how you can make things better for your internal operations team, support teams, how you can better manage risk, really evaluating where are the dials that you can still turn up a bit underneath of those core pillars that we talked about earlier.
Bob Butler
So, when you think about structuring the plan, really the roadmap if you will, so that your senior leadership, your CEO, or any potential investors, how do you get those guys on board? And what criteria do they want as it relates to building this out?
Greg Hatcher
Yeah, that’s a really good question. And this is perhaps one of the most difficult things about being a payments leader at a SaaS platform is trying to generate the vision and buy-in in a way that folks on the senior leadership team or at a PE firm, who aren’t necessarily payments people can comprehend and get behind.
So, in my experience, regardless of what stage you’re at in your payments journey, whether you’ve got a referral partnership, or whether you’re using PayFac-as-a-service, or maybe you’re a fully registered PayFac®, you have to clearly identify your horizons and your growth curves, and how are you going to generate new growth curves? So, painting the picture for them of, look, we’re starting here, and that’s going to entail doing these variety of things. But here’s where we want to get in the future and what our models indicate those results will be. That’s a great start, but it’s not enough anymore. You will also have to show them that you’ve got a plan for the future that addresses things like when will it be time to adopt a new model with more responsibility, liability and risk, right, so if you’re saying we should move to PayFac-as-a-service, having that foresight to also be able to say when it might make sense to take on more ownership and maybe become a registered PayFac® explaining what that entails, and how that will shift those unit economics. If you can share that level of insight with folks, it really solidifies your expertise, they’re going to buy into what you’re saying is the right progression of activities to get to the final state of impact that you are presenting.
Bob Butler
That’s a great answer. And, you know, I obviously talk to a lot of software companies, but we’d love to know what you think as it relates to – what are the mistakes and oversights that a lot of software companies miss when they’re thinking about their payments plan.
Greg Hatcher
Yeah, it all comes back to money at the end of the day. It’s really easy with payments, the numbers are large, volume can be extremely large, and revenue follows suit. So, it’s really easy to over index on those potential revenue numbers. And when you look at the differences between the models, you might say, Hey, we’re not really doing anything in payments today. But holy cow, the revenue number, if I’m a full wholesale PayFac®, is bananas. So, I’m going to start there. That is a really foolish thing to do if you’re starting from zero in terms of knowledge or even your solution that exists today. And so you really have to keep in mind that it’s not a race, the numbers are certainly very attractive, but you can’t get so fixated on them that you have tunnel vision and forget about other components such as, Wow, if we want to be a full PayFac® that means we have to do underwriting. And we have to do risk management, which means we need to hire additional headcount. And they have to have subject matter expertise. You can pretty easily lose sight of those things and find out that it’s going to cost a lot more than maybe you initially thought in order to hit those numbers.
Bob Butler
Well, from the initial planning, not only at iClassPro, but elsewhere… what was it that set you guys up for success?
Greg Hatcher
Great software. It really is that simple. When you are embedding payments in a software solution, it’s only as good as the software. So, if you’re not generating new software customers, you don’t have anyone to process payments for. So, at iClassPro, that was true for us. We had great software. And you know, for anyone listening, assuming that’s addressed within your software, the most impactful decision that you can make, and a decision that we made really well, was picking the right role to play in the payments value chain at the right time. And then slowly but surely building up our capabilities, building up our expertise and shifting how we participate in that ecosystem over time.
Bob Butler
Yeah, makes a lot of sense. And I obviously follow iClassPro pretty closely. And I love how you guys have expanded globally. And you utilize all the different models that are out there, I think it’s brilliant. Any final thoughts or advice for software companies that are trying to build out this roadmap?
Greg Hatcher
The best piece of advice that I can offer is to take your time and be very thoughtful. It’s easy to get really excited, and try to move faster than you should just based on numbers and models and spreadsheets, right. But you have to be very realistic with what responsibility you’re going to take on, where you’re going to leverage a partner and their expertise. And then enter a phase where you’re just relentlessly building your knowledge around the things you’re currently doing. The things that you may take on in the future. Do those things really well. Learn deeply on the things that you’ll do next. And then you can start to think even further ahead about how you might expand beyond simple transaction capabilities. Whether that’s embedded finance integrations to accounting software or value adds like surcharging, you know, you don’t have to do all of those things immediately. And it’s really important to nail the basics before you get out in front of your skis and try to do the other stuff.
Bob Butler
Well, Greg, it’s been great having you on the show. I always love hearing the way that you view things. So again, thank you for being here today.
Greg Hatcher
Absolutely, Bob, it was fun. Thanks for having me.
Bob Butler
At Payrix we want to be a trusted resource for software providers who are out there trying to make sense of Embedded Payments and finance and to help them get the education they need to make the business decisions their customers and investors will thank them for.
Thank you for joining us today on the PayFAQ Embedded Payments podcast brought to you by Payrix. For more information about Embedded Payments, subscribe to our show at Payrix.com/podcast
