Looking back, Looking Ahead: XUP’s 2022 Review & 2023 Predictions

We are continuing our interview series by asking a series of questions to Jose Rivera, our Chief Customer Officer, and Hanson Hodges, our Head of Product, Embedded Banking, to gather their thoughts on XUP’s customer models, trends on Payments in the FinTech space, and their own experiences in the payments industry.

Jose Rivera
Hanson Hodges

What have been some trends in the payment space over the last two decades?

  • Hanson Hodges – Digital payments is the main thing that has popped out over the last two decades, and it has two compounding factors. One is players like Amazon, Apple, and Google. All these big tech companies are coming into payments. The next piece has been FinTechs. The barriers to entry for FinTechs have decreased. It is easier now, or about the same, to become a processor as it is to become a PayFac these days. If you can develop your own settlement and billing, becoming a processor in today’s market is more advantageous, which is completely different from how it was in the 90s. FinTechs and the advancement of technology are making it to where it is easier to build your own gateway, be your own processor, go international easier, and on top of that, software vendors want to control the frontend for the customers and integrate deep so that you don’t have to have your own product that is out in the market. The last trend that has been added to this is devices. Devices went from laying your card on a sheet of paper and swiping it to now being a chip, which is a digital inscription, and sliding it onto your phone. With Square and some other providers, the devices and terminals are getting further and further away from being necessary to take payments. 
  • Jose Rivera – I agree. I call all that banking as a culture or payments as a culture. We are now marrying two major trends. The digitizing of banks, payments and people consuming digitally means that the actual transaction is becoming transparent. You don’t see it anymore; it just happens. For example, we used to have carbon copy credit card sliders in the past, and now you can pay someone with a text message. That’s the difference. You don’t see it anymore. It becomes part of the culture, part of your everyday work, and the banking and payments side of it is disappearing. You’re just living every day, paying for things, and it is all just happening in the background, and that is the significant change, and it will continue that way. We are going to see it go further and further away. You see things like paying with your phone, paying with your watch, tapping, and all the new stores that use just a QR scan. It will simplify even more, but that’s the big thing. It’s banks and payment companies going digital and moving away from actual transactions.

What do you consider to be the current trends in FinTech payments? Which of these do you see living on into the future?

  • Hanson Hodges – Risk vs. reward is a big trend in the FinTech space. A lot of smaller FinTechs are getting capital. They don’t have a bank that they work with, and they don’t have people that push risk approaches on them. So, they’re able to take riskier stances. They can work with riskier providers and merchants, and that’s where many of them are starting now. They’re taking those riskier approaches, then reigning it in over time. Stripe is a good example. They will issue a merchant Identification number, so you can start processing transactions immediately. Then, over the next 24 to 36 hours, they can take it away from you as they evaluate your application. But they do very lite initial risk checks to enable you and choose to be riskier on purpose. There is also a huge divide in the industry where a lot of FinTechs are trying to enable partners to go to a PayFac model and think PayFac will be the next big thing while the other half is going towards the ISV model with revenue share. So, there is a focus with the bigger traditional players like WorldPay and Fiserv, who are betting that the PayFacs model will be the winning model for the software vendors, and then the FinTechs and smaller players are betting that nobody wants to go that path due to the high cost. I am on the side that it is becoming simpler to be a processor and most independent software vendors (ISVs) want to be experts in their own verticals and not in payments; therefore, the ISV also known as the Integrated Referral approach with revenue share will continue to evolve as the new winning model.
  • Jose Rivera – I agree with Hanson. I would add that some massive things have happened in the last three years that have changed our lives. Covid is a big one, and it fundamentally changed how we buy and interact with companies. Consumers interact with companies, pushing companies to interact with other companies. The other big one is inflation. Things cost more, and we see higher interest rates. This frenzy of cheap money is going away in some ways, and the whole situation started with Covid. We can’t get stuff fast enough, and we can’t get to where we buy it, so what do you do? We haven’t quite figured out these challenges yet, but that is the banks like KeyBank and the different businesses we work with. We are all trying to figure this out. The three of four dynamics are converging and have been converging for the last three years, and I don’t know if anyone’s figured it out 100 percent, but they are going to continue for probably the next 2 or 3 years, not necessarily in the same combination. Those are trends that FinTech companies will need to figure out and come up with neat ideas for how to fix them and then how to make money.

What are XUP’s customer models, and how have they evolved?

  • Hanson Hodges – Initially, our model was gearing onboarding towards better applications for financial institutions: better information and better quality applications that weed out the fraud, the bots, and all the junk that comes in during the payment applications. Our initial customer model focused on financial institutions giving more quality applications. After being acquired by KeyBank, we have now evolved into providing better customer applications. Still, we have started to move towards creating a better application experience for the merchant and giving more tools to providers, supplying the ability to deliver better applications and refer more businesses. So, we switched from financial institution-oriented to customer- and merchant-oriented. 
  • Jose Rivera – The other significant impact for us is that our positioning of working from within a bank instead of being an independent finTech allows us to invest in innovation and push payments and all these trends we are discussing. This includes a big push into healthcare and real estate. Those might not have been natural customer models to go after when XUP existed by itself, but now with the bank’s power, we can focus a lot more on our innovative ideas and how to use our tried-and-true techniques and ways of simplifying and making business easier for our customers. So verticalizing XUP’s capabilities into new industries is a big deal for us, and that will be a big change that we now can do. 

Can you tell us about your experience in the payments industry and how it has evolved over the years?

  • Hanson Hodges – My initial experience was when I was on the merchant side, swiping and accepting cards. The payment experience started when many people went after interchange and wanted to get a piece of that pie. What’s evolved over the years, and there’s an induction point around 2019, was less about getting a piece of the pie and more about consolidation. So, all these FinTechs came up in the last 10-12 years, really trying to get their share, and many of them have been consolidated over the last few years. It is starting to be more of what you have to offer, and I will consider giving you a piece of the pie versus your competitor. So, it’s gotten more down the path of how you distribute that, and putting the keys in the providers’ hands, and putting the keys in some of the buyers’ hands than it was the traditional payment companies deciding all of that for them, forcing rates, forcing upcharges and all of that.
  • Jose Rivera – I spent a good chunk of my career in consulting, so I worked in many different industries over about 18 years. My experience with payments was how industries see and use payments in healthcare, pharmaceuticals, higher education, consumer goods, and banks. I worked on data, and IT projects around how payments are done and how those businesses make money. Then for about six years, I spent time at US Bank living in Atlanta, where I was responsible for the Technology Innovation Lab. We spent a lot of time with our friends at Elavon, a big payment processor, understanding their business and how they make money on the processing side, how the bank makes money by referrals, and all these different models that go along with it. Then how to innovate in that space. We spent a lot of time thinking about what the next 2 -3 years look like for both US Bank and Elavon, and what those products are, what those services are what the technology is that needs to be built today to facilitate those products in the future. I spent about six years doing that and then recently came to XUP.

How do you stay up to date with the latest advancements in payment technologies?

  • Hanson Hodges – There are quite a few sites I go to, including Paymentexpert.com and Pymts.com. There are a bunch of finTech websites and magazines out there. I follow them on LinkedIn and then visit the websites twice weekly. Many people I know in the industry will message me when something big happens. Usually, it gets through the grapevine fast.
  • Jose Rivera – In general, the big publishers, many of the big consulting companies: PWC and JP Morgan, the banks. They put out their annual looks and have very specific information on payments and banking, so I read all those articles. I also read a lot of stuff on innovation. Juniper Research is another big one. It is just your network and the research rags as you read. I spent a lot of time with startups at US Bank, so meeting those 1-5 person companies in Atlanta, the Georgia Tech Technology Hub, and on the west coast. You meet some innovative people thinking about stuff that has yet to exist. So, a combination of that group of ecosystems is basically how I keep my ear to the ground.

We recently interviewed Mandy Idol, our Head of Marketing, and Coryn Simmons, our Marketing Manager, during our marketing interview. How does the product team interact/work with the marketing team?

  • Hanson Hodges – One is we talk branding. Two, we talk about campaigns. Marketing works on campaign management, specifically KMS. We have a group that we work with there. Where they put together the target audience we are trying to get, the mediums we are going to reach from that, and the call to action. Those types of things that you see in a normal marketing plan. Product marketing is already in the works, where we look at the personas we will target and figure out the call to action. We figure out the messaging we are trying to put in, from getting the marketing-qualified leads through the implementation pipeline, what we want the messaging to be, and what specific call to action we have during that pipeline. 
  • Jose Rivera – At the higher level, the big thing is ensuring that marketing has everything they need from the product. All our product roadmaps, what we’re thinking about doing for the next 12 to 18 months, and how it lays out over that timeframe. Major capabilities, significant customers that we’re going after wins, how we drive the business, making sure that marketing has everything they need so they can produce their marketing materials, campaigns, and so on. The other thing is also helping on the pursuit side as marketing identifies and validates prospective customers. They work with sales for that but want to also look at what they’re going after and make sure that it is something that we can build or do or provide services for. So, in both providing marketing the things that they need that are product roadmap or capability specific, and also helping in their pursuits, when they’re going after stuff, and they want to validate things, we help on that side.