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 higher.
Bob Butler
Hi, everyone. Welcome to the PayFAQ, the Embedded Payments podcast brought to you by Payrix and Worldpay for Platforms. I’m your host, Bob Butler. And today I’m going to be talking with Richard Drake, the Senior Strategic Partner Manager for PayFac® developers here at Worldpay for Platforms, and we’re going to be speaking about the world of payment facilitation, or what we all like to call PayFac. Hi, Richard, welcome to the show.
Richard Drake
Thank you both a pleasure to be here. Always happy to talk about what’s going on in PayFac land.
Bob Butler
Fantastic. Well, I’m really excited to dive into the world of PayFac today. You know, some listeners may not be aware but when Payrix was acquired under the Worldpay line of business, it meant that software companies now have a one stop shop for all their payment needs. Every payment need a software company might have is bundled under the Worldpay for Platforms banner, and we meet software companies wherever they are in their payments journey. This is such an exciting topic that we’re making it into a two-part series. But before we go into full PayFac mode here, Richard, can you tell the audience a little bit about yourself and your software and payments background?
Richard Drake
Yeah, sure happy to do so. Spent the first 20 plus years of my career selling point of sale systems in the dry cleaning space. And then in the early 2000s, went ahead and pivoted over to payments, started with what was then RBSLink in 2005. Moved to what was then Fifth Third processing solutions in 2007. And then with a colleague started FTPS Government Services in 2009. And that’s what morphed into the PayFac team that we have today. I actually left in 2011 to go work for a payment facilitator here in Cincinnati, company called EZ Pay, doing online payments for schools, and then returned to what was then Vantiv. In 2015, I’m a, as you mentioned, a strategic partner manager, manage about 20 clients from a contractual and strategic perspective that sit on the Worldpay rails.
Bob Butler
Richard, now that Worldpay for Platforms has such a robust offering for software companies, what gets you most excited about that for software companies and PayFac® developers?
Richard Drake
Yeah, I think it’s such a great fit for us now. So, we’re able to do from beginning to end. So certainly, we’ve been offering the payment facilitator model since 2010. Vantiv got into the referral space in 2014 with an acquisition, but we never had that middle ground. Right. We never had the ability between referral and full blown payment facilitator. And we now have that with the Payrix acquisition. Bob, as you may remember, I texted you on that day and congratulated you and said, this is a big win for Worldpay from FIS and it definitely was. And as you’re well aware, right, I managed Payrix as a client, so I got to see what you did, how you did it, and who you did it for. But it’d be able to bring Payrix quote into the fold, and give us that middle ground that quote “PayFac on us”. It was a huge win for us.
Bob Butler
I couldn’t agree more. And it was super exciting for me. And it was super exciting that I got to work with you both as a client and now as a colleague. But I think what would be great is, can you tell the audience a little bit about what is a PayFac® developer? And how does a software company know they’re ready to even be a PayFac?
Richard Drake
Yeah. So, this is the really interesting part, right? The good news, everybody wants to be a PayFac because everybody wants to own the relationship and the payments experience. So, a couple of thoughts here. First of all, you got to have a decent volume, right? You got to have a lot of volume that’s processing through the rails, there’s costs associated with being a registered payment facilitator. And if you don’t have enough volume to generate the revenue to offset those costs, then it doesn’t make a lot of sense. Also, we’d like to see and suggest that you need an experienced payments risk person. For example, at Payrix you had Billi Jo Wright. Billi Jo has a fantastic, unique set of skills when it came to onboarding submerchants, in verifying who they are, what they’re doing, and are they really who they say they are. So, I’ve certainly seen some feedback around that, you know, as long as you’re in a vertical market you’re a good, safe prospect to be a payment facilitator. But I can certainly tell you from experience that even highly verticalized software companies don’t necessarily have what it takes to manage the payments risk, they’re also going to be owning the relationship. So, they got to be able to have the support infrastructure, right? There’s going to be questions around chargebacks, and settlements and billing and things like that. So, you got to have a team that’s ready to go to answer that phone. Because remember, when you’re a payment facilitator, while we’re on the back end, while we are engine, those sub merchants really have no idea who we are, right, because the payment facilitator is providing the infrastructure, the support, and has the relationship with the sub merchant.
Bob Buter
You know, I’ve heard some players in the space say that vertical payments aren’t risky. And you touched on that. So, I want to I want to go back to that for one second. You know, has that been your experience?
Richard Drake
Most of the time, vertical software payments have been a very, quote, safe place to operate in. But I’ve also, unfortunately, over the years, seen some examples where even a highly verticalized software provider can not necessarily get into trouble, but can certainly get into a market that perhaps they shouldn’t be in to begin with.
Bob Buter
Well, you know, you’ve worked in the PayFac space for such a long time, if you were a developer, why would you choose Worldpay for Platforms for your payment facilitation needs?
Richard Drake
Well, obviously, I’m biased. But I certainly think we’re the best, right? We were a pioneer in building out this product. We started it in 2010. By the way, we have the trademark for PayFac and we have a, in my opinion, the best and the most superior support team in the industry. Highly focused on payment facilitators, whether it’s from the risk side, pricing side, whether it’s from the support side, and especially the strategic side, right, the part that I’m in, where we were able to work with our clients, give them the benefit of the knowledge of we have with working with a very large number of payment facilitators, sometimes in the same vertical market, and sometimes in a different market, but to have all of that knowledge at their beck and call, ready to go. So, when a payment facilitator comes to me, and a lot of times it’s hey, Richard, we want to do this or we want to do that. What do you think about that we’re there? Is there a sounding board to give them the advice they need on what we may or may not have seen that has worked out there in the in the ecosystem.
Bob Butler
What’s the biggest misconception around becoming a PayFac?
Richard Drake
I think it’s the software companies think this is going to be easy. Payments is hard. And PayFac is payments on steroids. You know, we’re turning the software companies into mini acquirers. Basically, mini versions of us at Worldpay. And there’s a perception that comes with this that it’s going to be straightforward. Just going to reach out to your existing book of business and maybe send an email, and that portfolio will easily move over. While we’ve got a lot of experience with helping with portfolio moves at scale, there’s certainly no overnight successes. Right? So there’s definitely some things to think about there.
Bob Butler
Well, once a software company has determined that going the PayFac route is the right fit for their business. How do you guide them on choosing the right payments products for their business?
Richard Drake
Yeah, a good example of this is just last week, I was sitting down with one of my clients, we were talking about how they’re doing their processing right now, and what they wanted to do in the future. And what they talked about is while they don’t offer it right now, there’s certainly a need for them to offer recurring payments. Now, obviously, every payment facilitator is different. Some of them may be doing recurring payments right out of the door. But for the ones that are not, for example, it leads to a conversation around security tokens, network tokens, and also account updater. Right, updating the card on file, so that there’s a best opportunity to get those authorizations because obviously, without an authorization and a settlement, then you’re missing out on that payment. And sometimes when you miss out on a payment, you miss out on it forever, which doesn’t do any of us any good. So I think there’s definitely some technology. And there’s some strategy that we can bring to the table here.
Bob Butler
Now that’s fantastic. And I can tell you from my own experience working with you over the years that that was the case, before we were part of Worldpay. You were a fantastic partner to us and really helped us in that regard. I really appreciate you being on the show today. Richard, any last pieces of advice that you’d like to leave for a software company?
Richard Drake
Yeah, I’d ask software companies to think about the sort of the payments ecosystem, especially the payment facilitation ecosystem. I like to describe it as not being fragile, right up until the point where it is fragile. And when you’re a payment facilitator, it’s going to sound like a cliche. But when you’ve got that great power, you have a great responsibility that comes along with that. Also think about when I talked earlier about portfolio moves. So, when you’re looking to entice those merchants to move over onto your PayFac® program, that’s going to involve carrots and sticks, right? It’s going to involve incentives, and then perhaps sometimes a nudge or sometimes a push to move over. So, you really need to start thinking about what incentives and what carrots and sticks am I going to be using to help my portfoli moove over under my newly formed PayFac® program. And that’s where you really need a good commercial team that understands payments, and can help bring the sticks and the carrots.
Bob Butler
Well, Richard, I really want to thank you for being on the show today.
Richard Drake
Thanks, Bob. I had a great time.
Bob Butler
You know, I’ve spent a lot of time with you over the last well, at least five years. And I know we’re both big believers in sharing knowledge and experience. So once again, I really appreciate you joining us today for the part-one of the world of PayFac. 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/podcasts
