We spoke recently with Eric Bachman, former Chief Operating Officer of Marqeta and one of Qolo’s newest board members to discuss the biggest needs not being met in payments right now, and how Qolo is set to change the industry.
QOLO: Can you give an overview of what’s happening in the payments space right now?
EB: There are amazing things going on in the payment space right now. Dozens, if not hundreds, of early stage companies are taking a swing at solving long-standing payment issues. Some of them are leveraging nascent technologies, others are putting new twists on well-used products. A good number of these companies are doing an excellent job addressing specific client and industry needs and they are being rewarded with strong growth and incredible valuations.
QOLO: Can you elaborate on some of the industry pain points?
EB: One significant characteristic shared by nearly all of these success stories is “hyper specialization”- the use of the same or a very limited set of tools or products to solve the challenges of each of the company’s clients. This phenomenon happens very naturally as a company finds a solution that addresses a need, works, sells, and generates profits. Rather than investing in the additional development necessary to broaden its product set, the company ends up investing largely in its sales machine. For many of these solutions, the market is large enough that sustained growth is possible without a broad product set. The very large downside of this approach is that “when all you have is a hammer…”
The net result of this product-centric approach (rather than a problem-centric or needs based approach) to providing a client with the solution that best addresses its needs is that because the problem-solving begins with an analysis of whether the pre-existing solution answers some portion of the client’s needs rather than what the best solution might be, in many cases the client companies end up with a cookie-cutter solution that is not adequately differentiated and provides sub-optimal functionality.
QOLO: How can the industry solve this problem?
EB: Qolo’s experienced team of payments professionals has a diverse background in payments, BaaS, and Fintech software and processing. They have targeted and quickly built out a broad range of products and services that will allow for a much more customizable solutions set for its clients. Qolo’s ability to provide 100% of its functionality in the cloud, manage domestic and international money movement through multiple channels, and its full spectrum of flexible servicing models provide its clients with truly differentiated products and with the ability for those products to grow and change as product needs change.
QOLO: There is a lot of confusion in the industry as to where a company deemed a “processor” stops and BaaS begins. What’s your take? Is there overlap and are there gaps?
EB: Banking as a Service is an interesting industry that was born out of the issues with legacy infrastructure players. Some BaaS players sit on top of that older infrastructure, some use it as a baseline, adding their own layer on top of it in sort of a hybrid mode. In almost all cases they rely on someone else for card processing, as that is the most difficult aspect of payments that requires specialized knowledge, systems and expertise. One common problem with this is that card processors have to be the system of record, and many BaaS companies have built their own systems of record for underlying accounts. You can’t have two, and this represents a big gap in the industry. Qolo has solved for that gap with its Interact Embedded Processing capability.
QOLO: Embedded processing is becoming more in demand. Can you share your thoughts on this functionality and where the industry will be in this regard five or ten years from now?
EB: As a card processor, connecting to networks is time consuming and difficult. Decades ago this was streamlined by switches which allowed processors to make one connection to a switch and gain access to all the payment networks that the switch was certified with. But that still left a lot of heavy lifting at the processor level--things like chip acceptance, PIN and CVV encryption, baseline authorization logic, transaction matching and settlement, and more, not to mention fulfillment integration and money movement. What Qolo has done with Embedded Processing is take the switch concept and expand it to include all of the difficult processing tasks. Essentially, Qolo enables Fintechs to become their own processors through a single API endpoint without all the technical overhead associated with the card world. This construct allows Fintechs to build their own secret sauce in the card authorization stream and account structure, without having the burden of building a full-blown processing system.