February 18, 2025 • 24 mins
How do software companies transform payments from a bolt-on feature to a thriving profit center? In today's episode of The Payments Strategy Show, Ali Mast of Parachute Advisory shares her experience from a career at the intersection of SaaS and payments, and what she learned from embedding payments in 40+ software platforms.
- Why SaaS and payments companies often "speak different languages" and how to bridge the gap.
- How evolving banking and regulatory conditions have made it harder for SaaS companies to become payfacs and the growing role of modern payfac-as-a-service providers.
- Revenue-maximizing best practices for sales enablement, customer success, and more.
- What mid-market SaaS companies need to consider before taking on payments risk.
- Why SaaS leaders need to own their payments strategy—or risk losing revenue to third parties.
The Payments Strategy Show is brought to you by Rainforest, embedded payments purpose-built for vertical SaaS.
Grow revenue with the only payfac-as-a-service provider optimized to help you drive more payments volume at higher margins, without risk or compliance headaches.
Learn more: https://rainforestpay.com
Connect with us on LinkedIn: https://linkedin.com/company/rainforestpay
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Hey everybody and welcome to another episode of
the Payment Strategy Show.
I'm Joshua Sober, founder andCEO of Rainforest.
We help software platformsembed payment processing to
improve profitability andimprove customer retention.
I'm here today with our guestAllie Mast from Parachute
Advisory.
She has been in payments formany years.
(00:22):
I know she's got a ton ofwisdom to share with us.
Allie, to get us started, tellus a little bit about your
background.
How did you first get intopayments?
Speaker 2 (00:31):
Sure.
First, joshua, thank you forhaving me.
I will say my journey intopayments was probably a little
different than most, although,like most, I didn't wake up one
morning thinking you know whatI'd really like to get tangled
into interchange discounts for aliving.
But here we are.
I actually started in software,so I think you see a lot of
(00:54):
people that go from payments tosoftware.
I started the other way around,so I worked in a number of
companies that were bothhorizontal and vertical in
nature, running their revenue,sales and growth functions, and
learned about payments.
Like many softwareprofessionals, we looked at
(01:18):
payments as an add-on to ourcore product and rolled out
embedded financial opportunities, issuing acquiring as an
additional revenue stream.
And as I did that, I got all ofthe bumps and bruises that
typical software folks get.
And about five years ago Idecided to take the jump and
move to the other side of thetable, working for a company
that focused very much onpayments for software companies
(01:39):
and provided a tool set intothat industry I already knew
really well and ultimatelybecame a payment company
ourselves.
So I really got to know theacquiring side of the business
by helping at let's call it 40to 50 software companies embed
payments and learned by drinkingfrom the fire hose of acquiring
acronyms and partners andprocesses, and I'm by no means a
(02:05):
payments expert, but I like toconsider myself kind of a
payments and SaaS intersectionexpert if you will.
Speaker 1 (02:14):
Yeah, you're right.
I think a lot of guests I havewent the other way, so it's kind
of interesting, starting fromthe software perspective.
Now fast forward.
So you worked for a paymentsprovider for a while.
How did you get Parachutestarted and what do you focus on
?
Speaker 2 (02:32):
Parachute was really the motivation of my own
experiences.
I'd say, almost to be kitschy,parachute was about dropping
into rescue these SaaS companiesor ISVs as many payments
companies call them from thepayments chaos.
But also about helping anddropping in the payments
(02:53):
companies from the SaaS chaosBecause really, depending on the
side of the table you'resitting on, it could be viewed
both ways and I realized afteryears of having these
conversations that paymentscompanies and SaaS companies
were speaking very differentlanguages and I felt very
equipped to help translate thoselanguages and bridge that gap.
(03:15):
Now I don't know about you andthe space you're in, but after
years of rolling out theseembedded payments and vertical
SaaS, it was like Groundhog'sDay embedded payments and
vertical SaaS.
It was like Groundhog's Day,like the same mistakes on repeat
Software companies wantpayments revenue but don't
understand the complexity,compliance, underwriting, risk,
(03:40):
pricings, margins and paymentscompany want to work with
software companies because theysee that opportunity, they see
that need but don't understandhow to help them actually go to
market and execute in thispayment space.
So Parachute was kind of bornunder that thesis, like how can
I bridge that gap and help bothsides achieve their goals at an
accelerated rate with less ofthe bumps and the bruises that
I'm still recovering from.
Speaker 1 (04:01):
Yeah, I love that.
I had a recent LinkedIn postwhere I talked about why you may
need a payments consultant andI think that concept of bridging
the gap between the paymentscompanies and the software
companies is so true and it'sreally hard when one side is
talking only from theirperspective and using their
lingo and their language andvice versa.
So to have that person in themiddle parachute in, make that
(04:24):
rescue, I love that.
That's great.
Over the last number of years,how would you say that the
industry has changed both theSaaS side of it as well as the
payment side, Because you'vebeen on both and on both sides
of the table.
So what are some of the biggestchanges you've noticed?
What are some of?
Speaker 2 (04:43):
the biggest changes you've noticed.
Well, on the software side, I'dsay SaaS isn't just about
selling software or AR anymore.
It's really about the entirebusiness workflow and, depending
on your industry, that's anumber of things, but very much
(05:04):
so payments.
10, 15 years ago, payments wasa bolt-on and that was in my
early stage software experience,and now it's almost in many
cases a requirement and thefoundation of how software
companies grow revenue per userand valuation.
On the payment side of things,I'd say even five years ago.
Everything is rapidlyprogressing.
(05:24):
Five years ago, I think, youand I even had a conversation of
when to become a paymentfacilitator and own your own
payments and what was the rightstage in your payments journey
to do that.
I don't know if you'd agree,but five years ago we'd have a
very different answer than today.
Speaker 1 (05:41):
I think that's right.
I mean, look at how much thelandscape has changed with banks
compliance.
I mean I think it's harder thantoday.
I think that's right.
I mean, look at how much thelandscape has changed with banks
compliance.
I mean I think it's harder thanever to run a true payments
company or a payfac, justbecause of all the regulatory
changes, the increasedcompliance, a lot of failures
that have happened out there,both on the bank side, the
payfac side, providers, and soyeah, I totally agree that I
(06:05):
think the home market has reallyreshaped.
How I think about thedefinitions of when you should
be a payfax, when you should notpayfax as a service, those
types of things.
Speaker 2 (06:17):
I'm sure also a big inspiration for rainforest.
It's changed in many waysbecause the rainforests of the
world have come out with theseofferings which in my world, I
call these 2.0 providers or evenyou could say 3.0 providers
which are really tech-friendlypayback as a service, payback in
(06:37):
a box, whatever you want tocall it.
But in 2022, building thatprogram from the ground up was
one of the only options, and nowit's not.
And the margins are slightlycloser and the risk is much
lower to go with other partners.
I have some clients that cometo me now.
(06:59):
It's various stages in theirpayments complexity and journey,
but I like to take on some ofthe early stage ones just to
help them avoid some of thepitfalls, even though they don't
all have the GPB or the volumethat is very appealing to
partners.
I have clients that arebuilding software that is based
off payments monetization.
(07:20):
So instead of adding paymentsto their software, they're
building a software to solvepayments needs in the market,
backed by companies likeRainforest, and so it's almost
like years ago, toast, shopify,mindbody, all of these names you
know really well that don'tjust allow payments, they own
them and in many ways are nowconsidered payments.
(07:41):
Companies have shifted themarket in a bit to start with
payments versus adding paymentslater, and I think just on both
SaaS and payments.
That's heavily recognized andagain part of the reason why I
do what I do.
Speaker 1 (07:57):
Yeah, we've seen a lot of clients that come to us
that specifically started theircompany just so they could
capture the payments revenue andthat is the core essence of the
company now.
It's that payments monetizationversus the SaaS fees.
So what a dramatic shift.
You mentioned helping folks toavoid the pitfalls.
(08:21):
You know you mentioned helpingfolks to avoid the pitfalls.
What are some of the pitfallsthat you see?
Speaker 2 (08:31):
What are some of the mistakes that you see most
commonly made by your clientsand just other software
providers?
Yeah, I think it's across theboard, depending on their stage
and payments, but there's somegeneral, I'd say, pitfalls that
are pretty common.
And first I'll mention themindset shift that we talked
about, in that payments is notjust a feature, it's a profit
center, it's a core of theidentity in the software
(08:53):
execution and, like any highmargin product that you have,
that requires a strategy and itrequires a close eye on
execution.
And so the more common mistakesthat we see is in basics like
pricing and packaging andmisunderstanding how to charge
for payments.
Don't just pass through costs.
(09:14):
You want to own the potentialmargin that you have.
I actually think I read anarticle from you guys recently
that I agree with resoundinglyis that start high and you can
always go lower.
You can't go the other wayaround.
And then the other thing withpricing and packaging and I'll
mention a few others is just getto know your interchange.
(09:38):
It is a very complicatedconcept and it is foreign to
many.
It was even to me five yearsago.
Now I'm researching interchangedaily and reading statements,
and it's like a passion projectof mine to understand it better
and to optimize it and work withpartners that really help my
clients understand that in thelong term and work with partners
(10:00):
that really help my clientsunderstand that in the long term
.
And the other pitfall that'sreally common and I would
imagine you see this as well isjust the merchant or customer
experience.
If you don't make it easy foryour customers to adopt, they're
not going to adopt it.
Or if you're trying to comeinto a space where your
(10:22):
customers have an existingpayments program, you got to
come up with a migrationstrategy.
They're not just going to jumpoff of their existing payments
provider without a reason or aprocess or support and you have
to help them with that and makeit really easy.
And I'd say treating that newthe same as your existing
customer base again, dependingon where you are in your
payments journey is just asimportant.
So having an activationstrategy and your customer
(10:44):
success and making sure there'sadoption totally foreign in SaaS
when it's a predictable SaaSfee that you can claim in
advance.
It's so different than paymentsrevenue and payments usage.
So generally that merchantexperience, the sales and
go-to-market strategy it lastskind of on the go-to-market.
If your team doesn't understandhow to talk payments, they're
(11:05):
not going to be able to sell it.
So there's got to be somealignment in the selling muscle.
Speaker 1 (11:11):
Right.
You mentioned several times themerchant experience.
In your opinion, what makes agreat merchant experience and
what makes a very poor merchantexperience?
Kind of compare and contrastboth sides of that spectrum for
us.
Speaker 2 (11:26):
Yeah, I mean I think it's being very seamless,
feeling like it's a part of theproduct and not a completely
separate experience, and alsogiving them visibility, giving
them step-by-step help andmaking sure it's just really
easy.
On the visibility point though,the seamless merchant
(11:48):
experience, I think it's equallyimportant that the software
company have visibility as themerchant, and by that I mean I
have a lot of clients that cometo me.
I have a client in thehealthcare software space.
They have medical practicesthat do card present, card not
present and offer.
(12:09):
Let's call it like a CRM-likeexperience for their medical
practices.
They had three referral modelsin place when they came to me
and had no idea with any of themwhere their customers were with
underwriting or if they weredeclined, why and what they
could do to help, and so I justthink that visibility and
(12:30):
control of the merchantexperience will help making the
merchant feel like it's just apart of their day-to-day use of
your platform.
Really important.
Speaker 1 (12:40):
Makes sense and any other things that you've seen
that are big no-nos that you'relike.
This is just a disastrousmerchant experience, besides the
visibility and the things youmentioned.
Speaker 2 (12:53):
I mean, you know, I think when the partner that you
work with doesn't understandyour vertical, it can really
slow things down and it dependson the level of risk that you
take, but I would say risk andcompliance being a big factor as
well, make sure you understandwhat you are compliant for, or
(13:14):
what you are required to do tobe compliant, and what your
partner is, and don't let itslow down the merchant
experience.
Make sure your vertical istaken into consideration and the
risk tolerance of your vertical.
Treating healthcare the same asB2B, kind of different.
Speaker 1 (13:35):
Yeah, it doesn't make a lot of sense.
Obviously it's going to dependquite a bit on vertical, but for
a mid-market software companymaybe they're doing $100 million
in card processing a year.
What do you typically recommendfrom a risk position and do you
think that software companyshould be taking risks?
Should they put that on thepartner?
A hybrid?
What are some of the thingsyou've seen and any generalized
(13:58):
advice that you can give?
Speaker 2 (13:59):
Yeah, I agree it very much depends on the vertical.
That said five years ago, Imight say if you're growing to
500 million in GPV in the next12 months, let's start taking it
on.
Speaker 1 (14:13):
Now.
Speaker 2 (14:14):
I don't actually see that as the path.
I think there are so manyoptions out there that will
either share in the risk or takeon the risk on your behalf, and
of course, there's a price tagthat comes along with that.
I know Rainforest enough to bedangerous.
I think you have offerings thatallow customers to take on a
(14:35):
variety of levels of risk Atthat size.
It does not make sense from mypoint of view to take it
in-house.
It's too much of a burden foryour resources.
It ends up being a very riskycompliance challenge to take on.
The OOs aren't too happy aboutthat, and so, with those $2
(14:56):
providers, why not outsource it?
And if you do grow at thatrapid rate and maybe it's $1
billion, $1.5 billion in thenext year to 24 months.
You can always slowly take thaton.
Speaker 1 (15:10):
Yep, that makes sense .
I think that's really sageadvice.
Let's pivot a little bit.
In all the years I've known you, one of the conversations I've
enjoyed most is really on thego-to-market and adoption side.
I know that's something thatyou're particularly passionate
about and have been beating thatdrum for a long time of
software platforms only going tomake money on payments once you
(15:33):
get that adoption.
What are some of the bestpractices for go-to-market?
How do you help softwarecompanies sell payments when
they're used to selling softwarePayments are so different.
Any tips you can share?
Speaker 2 (15:48):
So so different.
I mean you wouldn't treat yourcore SaaS product like a side
hustle.
So I do that with payments.
I think and again it depends onthe client and the vertical but
the best practices are motivateyour salespeople.
Make sure they're incentivizedby payments monetization revenue
, not just SaaS revenue.
(16:09):
Educate your salespeople, makesure they're incentivized by
payments monetization revenue,not just SaaS revenue.
Educate your salespeople, makesure they know how to speak
payments.
They know the right questionsto ask.
Make sure they understand whatI mentioned earlier how to
migrate a client, existing ornew off their existing payments
provider, how that's going toimpact them and how you can
reduce that impact to them sothat they have a pain-free
(16:30):
experience.
I would say the biggestchallenge in go-to-market and
I'm so curious if you see thisas well and if you would agree
is customer success.
In SaaS, customer success is alittle more of account
management.
You add products you want toupsell, maybe you have
transactional revenue that youwant to manage and get them into
(16:50):
new commitment levels, butcustomer success and payments is
absolutely paramount to ongoingrevenue and success and I think
it is so overlooked.
Speaker 1 (17:03):
Yeah, certainly.
What we've seen is the more youcan merge the payments and the
core offering together, so it'salmost like a check the box to
sign up.
It's just part of the offeringas opposed to selling it
separately.
We often have the saying thebest way to sell payments is not
to talk about payments, to talkabout that value that you're
(17:23):
delivering, right Dollars goinginto a bank account based on the
services that that end merchantis providing.
That's much more compellingthan let's talk about payments.
So I couldn't agree more.
We're seeing across the boardmany of our customers start to
roll out incentive programs, notjust for account execs, the AEs
, but also for customer success,because they are in many cases
(17:48):
the tip of the spear.
They're the ones talking tothose merchants, those clients,
each and every day.
And so having good alignmentbetween the revenue org and the
success org and sometimes Ithink, best case they actually
may be the same org, but havingthat alignment is really
important.
But you know, having thatalignment is really important.
(18:11):
Any KPIs or specific metrics orbest you know what does best in
class look like from adoptionperspective and you know just
generally monitor a performanceof payments programs as it
relates to adoption paymentsprograms as it relates to
adoption, yeah, and I think toyour earlier point.
Speaker 2 (18:35):
Nobody likes the word mandating, but including
payments can really, of course,increase your attach rate and
success.
Speaker 1 (18:39):
And if you're not doing it, your competitors are
Absolutely In education, forexample.
Speaker 2 (18:44):
There's all of these great platforms out there.
You can manage tuition payments, you can manage your enrollment
right, and then you haveBlackbaud and they're mandating
payments and if you don't wantto lose your payments revenue,
you got to do something similarright On the KPI point.
(19:05):
I think it also depends on thestage in your journey.
Early stage there's things likerevenue share, buy rate, cost
per transaction you should behyper aware of when you're
negotiating a contract.
But later it's your paymentsattach rate percentage and I
think it used to be consideredthat 10 to 20 percent of attach
rate is really successful.
(19:25):
Now, depending on how you go tomarket and what your market
opportunity is, I think youshould be much higher than that.
Not everybody's going to betoast in mind body.
Not everybody's going to makemore revenue from payments than
SaaS.
So you have to have a realisticview of your industry but it's
shifted and then making sure youunderstand your take rate.
So what is the revenuegenerated per transaction that
(19:49):
you process?
Also different than the wayyou're viewing your recurring
revenue, your GPV?
There's like a million acronymsin payments.
It drives me crazy.
I actually have a glossary andan enablement training session
that I go through with mysoftware customers on all of the
terminology, and I think weshould do it for payments folks
(20:10):
too, because SaaS terminologyand KPIs are equally as
important to all LTV, cac,ebitda, and so all of these are
really important KPIs and,depending on your stage of
growth, I think you should haveheightened awareness of each of
them.
Depending on if you'reVC-backed, pe-backed, you'll
also have heightened awarenessand goals around each of them.
Speaker 1 (20:33):
That makes total sense If you could give SaaS
leaders one or two pieces ofadvice about driving revenue,
driving enterprise value.
What are the most importanttakeaways?
Just the top one or two.
Speaker 2 (20:52):
I mean, own your payment strategy.
Don't just assume that theeasiest partner is the right
partner, or the big name or thisreferral that you have a
treasury relationship with orsome sort of other relationship.
Own that strategy.
It's not a business modeldecision, not just a I'm sorry.
(21:15):
It's a business model decision,not just a tech integration.
So just owning it.
And I'd say, if SaaS companiesdon't get intentional about
payments, someone else will bemaking money off of your
customers.
So owning that strategy isabsolutely the most important
advice that I would give SaaScompanies.
Speaker 1 (21:39):
Yeah, I love that takeaway.
They're going to get them fromsomewhere else, whether it's
just a third-party providerthat's trying to get a bigger
share of wallet or a directcompetitor that just has that
integration already done out ofthe box.
That makes a lot of sense to me.
One follow-up question on thatI often have a debate with folks
about where in the organizationshould payments sit.
(22:01):
Should it be product function?
Is it a revenue function?
Is it something else entirely?
Across all the clients you'veworked with and SaaS companies,
you've seen any thoughts onwhere it's best to have that
role sit or evencross-functionally, how that
should work.
Speaker 2 (22:18):
Yeah, I would say all of the above.
Cross-functional is important.
You have to have the buy-in ofproduct, you have to have the
buy-in of finance, you have tohave the buy-in of go-to-market
and revenue growth.
Actually, one of the mostcommon engagements that I do
with my software customers isthis, what I call a fractional
jam of payments.
It is really hard to findsomebody that understands owning
(22:41):
a P&L and understands havingthis payments product experience
where you can get the roadmapaligned with the go-to-market,
and so oftentimes I come in todo that and build the program,
build the go-to-market, buildthe enablement, and then bring
in somebody that may be lesserexperienced in actual payments
or even SaaS, depending on thecompany, but can take over and
(23:04):
lead it and own thatcross-functionally.
Because I believe if you don'thave cross-functional alignment
you will not be successful,especially when you then get to
the point where you have toreport to the board and you have
a PE-backed visibility.
Somebody needs to be able to ownthat.
So I guess my answer to yourquestion and we could probably
go back and debate this forhours is answer D all of the
(23:29):
above.
Speaker 1 (23:30):
Fair enough, we'll let that be the closing word.
Thank you so much for joiningme today, allie.
How can people best reach youif they want to follow up or
have questions?
Speaker 2 (23:41):
Sure, and thanks for having me.
This was, this was fun.
You can reach me at Allie atparachuteadvisorycom, or just
hop onto the website and go toparachuteadvisorycom.
I tend to be very active onLinkedIn, so you'll find me
there as well.
Speaker 1 (23:58):
Very good.
Well, thanks so much for thetime.
It was a blast.
We'll talk soon.
Thanks everyone.
Hey everybody and welcome to another episode of
the Payment Strategy Show.
I'm Joshua Sober, founder andCEO of Rainforest.
We help software platformsembed payment processing to
improve profitability andimprove customer retention.
I'm here today with our guestAllie Mast from Parachute
Advisory.
She has been in payments formany years.
(00:22):
I know she's got a ton ofwisdom to share with us.
Allie, to get us started, tellus a little bit about your
background.
How did you first get intopayments?
Speaker 2 (00:31):
Sure.
First, joshua, thank you forhaving me.
I will say my journey intopayments was probably a little
different than most, although,like most, I didn't wake up one
morning thinking you know whatI'd really like to get tangled
into interchange discounts for aliving.
But here we are.
I actually started in software,so I think you see a lot of
(00:54):
people that go from payments tosoftware.
I started the other way around,so I worked in a number of
companies that were bothhorizontal and vertical in
nature, running their revenue,sales and growth functions, and
learned about payments.
Like many softwareprofessionals, we looked at
(01:18):
payments as an add-on to ourcore product and rolled out
embedded financial opportunities, issuing acquiring as an
additional revenue stream.
And as I did that, I got all ofthe bumps and bruises that
typical software folks get.
And about five years ago Idecided to take the jump and
move to the other side of thetable, working for a company
that focused very much onpayments for software companies
(01:39):
and provided a tool set intothat industry I already knew
really well and ultimatelybecame a payment company
ourselves.
So I really got to know theacquiring side of the business
by helping at let's call it 40to 50 software companies embed
payments and learned by drinkingfrom the fire hose of acquiring
acronyms and partners andprocesses, and I'm by no means a
(02:05):
payments expert, but I like toconsider myself kind of a
payments and SaaS intersectionexpert if you will.
Speaker 1 (02:14):
Yeah, you're right.
I think a lot of guests I havewent the other way, so it's kind
of interesting, starting fromthe software perspective.
Now fast forward.
So you worked for a paymentsprovider for a while.
How did you get Parachutestarted and what do you focus on
?
Speaker 2 (02:32):
Parachute was really the motivation of my own
experiences.
I'd say, almost to be kitschy,parachute was about dropping
into rescue these SaaS companiesor ISVs as many payments
companies call them from thepayments chaos.
But also about helping anddropping in the payments
(02:53):
companies from the SaaS chaosBecause really, depending on the
side of the table you'resitting on, it could be viewed
both ways and I realized afteryears of having these
conversations that paymentscompanies and SaaS companies
were speaking very differentlanguages and I felt very
equipped to help translate thoselanguages and bridge that gap.
(03:15):
Now I don't know about you andthe space you're in, but after
years of rolling out theseembedded payments and vertical
SaaS, it was like Groundhog'sDay embedded payments and
vertical SaaS.
It was like Groundhog's Day,like the same mistakes on repeat
Software companies wantpayments revenue but don't
understand the complexity,compliance, underwriting, risk,
(03:40):
pricings, margins and paymentscompany want to work with
software companies because theysee that opportunity, they see
that need but don't understandhow to help them actually go to
market and execute in thispayment space.
So Parachute was kind of bornunder that thesis, like how can
I bridge that gap and help bothsides achieve their goals at an
accelerated rate with less ofthe bumps and the bruises that
I'm still recovering from.
Speaker 1 (04:01):
Yeah, I love that.
I had a recent LinkedIn postwhere I talked about why you may
need a payments consultant andI think that concept of bridging
the gap between the paymentscompanies and the software
companies is so true and it'sreally hard when one side is
talking only from theirperspective and using their
lingo and their language andvice versa.
So to have that person in themiddle parachute in, make that
(04:24):
rescue, I love that.
That's great.
Over the last number of years,how would you say that the
industry has changed both theSaaS side of it as well as the
payment side, Because you'vebeen on both and on both sides
of the table.
So what are some of the biggestchanges you've noticed?
What are some of?
Speaker 2 (04:43):
the biggest changes you've noticed.
Well, on the software side, I'dsay SaaS isn't just about
selling software or AR anymore.
It's really about the entirebusiness workflow and, depending
on your industry, that's anumber of things, but very much
(05:04):
so payments.
10, 15 years ago, payments wasa bolt-on and that was in my
early stage software experience,and now it's almost in many
cases a requirement and thefoundation of how software
companies grow revenue per userand valuation.
On the payment side of things,I'd say even five years ago.
Everything is rapidlyprogressing.
(05:24):
Five years ago, I think, youand I even had a conversation of
when to become a paymentfacilitator and own your own
payments and what was the rightstage in your payments journey
to do that.
I don't know if you'd agree,but five years ago we'd have a
very different answer than today.
Speaker 1 (05:41):
I think that's right.
I mean, look at how much thelandscape has changed with banks
compliance.
I mean I think it's harder thantoday.
I think that's right.
I mean, look at how much thelandscape has changed with banks
compliance.
I mean I think it's harder thanever to run a true payments
company or a payfac, justbecause of all the regulatory
changes, the increasedcompliance, a lot of failures
that have happened out there,both on the bank side, the
payfac side, providers, and soyeah, I totally agree that I
(06:05):
think the home market has reallyreshaped.
How I think about thedefinitions of when you should
be a payfax, when you should notpayfax as a service, those
types of things.
Speaker 2 (06:17):
I'm sure also a big inspiration for rainforest.
It's changed in many waysbecause the rainforests of the
world have come out with theseofferings which in my world, I
call these 2.0 providers or evenyou could say 3.0 providers
which are really tech-friendlypayback as a service, payback in
(06:37):
a box, whatever you want tocall it.
But in 2022, building thatprogram from the ground up was
one of the only options, and nowit's not.
And the margins are slightlycloser and the risk is much
lower to go with other partners.
I have some clients that cometo me now.
(06:59):
It's various stages in theirpayments complexity and journey,
but I like to take on some ofthe early stage ones just to
help them avoid some of thepitfalls, even though they don't
all have the GPB or the volumethat is very appealing to
partners.
I have clients that arebuilding software that is based
off payments monetization.
(07:20):
So instead of adding paymentsto their software, they're
building a software to solvepayments needs in the market,
backed by companies likeRainforest, and so it's almost
like years ago, toast, shopify,mindbody, all of these names you
know really well that don'tjust allow payments, they own
them and in many ways are nowconsidered payments.
(07:41):
Companies have shifted themarket in a bit to start with
payments versus adding paymentslater, and I think just on both
SaaS and payments.
That's heavily recognized andagain part of the reason why I
do what I do.
Speaker 1 (07:57):
Yeah, we've seen a lot of clients that come to us
that specifically started theircompany just so they could
capture the payments revenue andthat is the core essence of the
company now.
It's that payments monetizationversus the SaaS fees.
So what a dramatic shift.
You mentioned helping folks toavoid the pitfalls.
(08:21):
You know you mentioned helpingfolks to avoid the pitfalls.
What are some of the pitfallsthat you see?
Speaker 2 (08:31):
What are some of the mistakes that you see most
commonly made by your clientsand just other software
providers?
Yeah, I think it's across theboard, depending on their stage
and payments, but there's somegeneral, I'd say, pitfalls that
are pretty common.
And first I'll mention themindset shift that we talked
about, in that payments is notjust a feature, it's a profit
center, it's a core of theidentity in the software
(08:53):
execution and, like any highmargin product that you have,
that requires a strategy and itrequires a close eye on
execution.
And so the more common mistakesthat we see is in basics like
pricing and packaging andmisunderstanding how to charge
for payments.
Don't just pass through costs.
(09:14):
You want to own the potentialmargin that you have.
I actually think I read anarticle from you guys recently
that I agree with resoundinglyis that start high and you can
always go lower.
You can't go the other wayaround.
And then the other thing withpricing and packaging and I'll
mention a few others is just getto know your interchange.
(09:38):
It is a very complicatedconcept and it is foreign to
many.
It was even to me five yearsago.
Now I'm researching interchangedaily and reading statements,
and it's like a passion projectof mine to understand it better
and to optimize it and work withpartners that really help my
clients understand that in thelong term and work with partners
(10:00):
that really help my clientsunderstand that in the long term
.
And the other pitfall that'sreally common and I would
imagine you see this as well isjust the merchant or customer
experience.
If you don't make it easy foryour customers to adopt, they're
not going to adopt it.
Or if you're trying to comeinto a space where your
(10:22):
customers have an existingpayments program, you got to
come up with a migrationstrategy.
They're not just going to jumpoff of their existing payments
provider without a reason or aprocess or support and you have
to help them with that and makeit really easy.
And I'd say treating that newthe same as your existing
customer base again, dependingon where you are in your
payments journey is just asimportant.
So having an activationstrategy and your customer
(10:44):
success and making sure there'sadoption totally foreign in SaaS
when it's a predictable SaaSfee that you can claim in
advance.
It's so different than paymentsrevenue and payments usage.
So generally that merchantexperience, the sales and
go-to-market strategy it lastskind of on the go-to-market.
If your team doesn't understandhow to talk payments, they're
(11:05):
not going to be able to sell it.
So there's got to be somealignment in the selling muscle.
Speaker 1 (11:11):
Right.
You mentioned several times themerchant experience.
In your opinion, what makes agreat merchant experience and
what makes a very poor merchantexperience?
Kind of compare and contrastboth sides of that spectrum for
us.
Speaker 2 (11:26):
Yeah, I mean I think it's being very seamless,
feeling like it's a part of theproduct and not a completely
separate experience, and alsogiving them visibility, giving
them step-by-step help andmaking sure it's just really
easy.
On the visibility point though,the seamless merchant
(11:48):
experience, I think it's equallyimportant that the software
company have visibility as themerchant, and by that I mean I
have a lot of clients that cometo me.
I have a client in thehealthcare software space.
They have medical practicesthat do card present, card not
present and offer.
(12:09):
Let's call it like a CRM-likeexperience for their medical
practices.
They had three referral modelsin place when they came to me
and had no idea with any of themwhere their customers were with
underwriting or if they weredeclined, why and what they
could do to help, and so I justthink that visibility and
(12:30):
control of the merchantexperience will help making the
merchant feel like it's just apart of their day-to-day use of
your platform.
Really important.
Speaker 1 (12:40):
Makes sense and any other things that you've seen
that are big no-nos that you'relike.
This is just a disastrousmerchant experience, besides the
visibility and the things youmentioned.
Speaker 2 (12:53):
I mean, you know, I think when the partner that you
work with doesn't understandyour vertical, it can really
slow things down and it dependson the level of risk that you
take, but I would say risk andcompliance being a big factor as
well, make sure you understandwhat you are compliant for, or
(13:14):
what you are required to do tobe compliant, and what your
partner is, and don't let itslow down the merchant
experience.
Make sure your vertical istaken into consideration and the
risk tolerance of your vertical.
Treating healthcare the same asB2B, kind of different.
Speaker 1 (13:35):
Yeah, it doesn't make a lot of sense.
Obviously it's going to dependquite a bit on vertical, but for
a mid-market software companymaybe they're doing $100 million
in card processing a year.
What do you typically recommendfrom a risk position and do you
think that software companyshould be taking risks?
Should they put that on thepartner?
A hybrid?
What are some of the thingsyou've seen and any generalized
(13:58):
advice that you can give?
Speaker 2 (13:59):
Yeah, I agree it very much depends on the vertical.
That said five years ago, Imight say if you're growing to
500 million in GPV in the next12 months, let's start taking it
on.
Speaker 1 (14:13):
Now.
Speaker 2 (14:14):
I don't actually see that as the path.
I think there are so manyoptions out there that will
either share in the risk or takeon the risk on your behalf, and
of course, there's a price tagthat comes along with that.
I know Rainforest enough to bedangerous.
I think you have offerings thatallow customers to take on a
(14:35):
variety of levels of risk Atthat size.
It does not make sense from mypoint of view to take it
in-house.
It's too much of a burden foryour resources.
It ends up being a very riskycompliance challenge to take on.
The OOs aren't too happy aboutthat, and so, with those $2
(14:56):
providers, why not outsource it?
And if you do grow at thatrapid rate and maybe it's $1
billion, $1.5 billion in thenext year to 24 months.
You can always slowly take thaton.
Speaker 1 (15:10):
Yep, that makes sense .
I think that's really sageadvice.
Let's pivot a little bit.
In all the years I've known you, one of the conversations I've
enjoyed most is really on thego-to-market and adoption side.
I know that's something thatyou're particularly passionate
about and have been beating thatdrum for a long time of
software platforms only going tomake money on payments once you
(15:33):
get that adoption.
What are some of the bestpractices for go-to-market?
How do you help softwarecompanies sell payments when
they're used to selling softwarePayments are so different.
Any tips you can share?
Speaker 2 (15:48):
So so different.
I mean you wouldn't treat yourcore SaaS product like a side
hustle.
So I do that with payments.
I think and again it depends onthe client and the vertical but
the best practices are motivateyour salespeople.
Make sure they're incentivizedby payments monetization revenue
, not just SaaS revenue.
(16:09):
Educate your salespeople, makesure they're incentivized by
payments monetization revenue,not just SaaS revenue.
Educate your salespeople, makesure they know how to speak
payments.
They know the right questionsto ask.
Make sure they understand whatI mentioned earlier how to
migrate a client, existing ornew off their existing payments
provider, how that's going toimpact them and how you can
reduce that impact to them sothat they have a pain-free
(16:30):
experience.
I would say the biggestchallenge in go-to-market and
I'm so curious if you see thisas well and if you would agree
is customer success.
In SaaS, customer success is alittle more of account
management.
You add products you want toupsell, maybe you have
transactional revenue that youwant to manage and get them into
(16:50):
new commitment levels, butcustomer success and payments is
absolutely paramount to ongoingrevenue and success and I think
it is so overlooked.
Speaker 1 (17:03):
Yeah, certainly.
What we've seen is the more youcan merge the payments and the
core offering together, so it'salmost like a check the box to
sign up.
It's just part of the offeringas opposed to selling it
separately.
We often have the saying thebest way to sell payments is not
to talk about payments, to talkabout that value that you're
(17:23):
delivering, right Dollars goinginto a bank account based on the
services that that end merchantis providing.
That's much more compellingthan let's talk about payments.
So I couldn't agree more.
We're seeing across the boardmany of our customers start to
roll out incentive programs, notjust for account execs, the AEs
, but also for customer success,because they are in many cases
(17:48):
the tip of the spear.
They're the ones talking tothose merchants, those clients,
each and every day.
And so having good alignmentbetween the revenue org and the
success org and sometimes Ithink, best case they actually
may be the same org, but havingthat alignment is really
important.
But you know, having thatalignment is really important.
(18:11):
Any KPIs or specific metrics orbest you know what does best in
class look like from adoptionperspective and you know just
generally monitor a performanceof payments programs as it
relates to adoption paymentsprograms as it relates to
adoption, yeah, and I think toyour earlier point.
Speaker 2 (18:35):
Nobody likes the word mandating, but including
payments can really, of course,increase your attach rate and
success.
Speaker 1 (18:39):
And if you're not doing it, your competitors are
Absolutely In education, forexample.
Speaker 2 (18:44):
There's all of these great platforms out there.
You can manage tuition payments, you can manage your enrollment
right, and then you haveBlackbaud and they're mandating
payments and if you don't wantto lose your payments revenue,
you got to do something similarright On the KPI point.
(19:05):
I think it also depends on thestage in your journey.
Early stage there's things likerevenue share, buy rate, cost
per transaction you should behyper aware of when you're
negotiating a contract.
But later it's your paymentsattach rate percentage and I
think it used to be consideredthat 10 to 20 percent of attach
rate is really successful.
(19:25):
Now, depending on how you go tomarket and what your market
opportunity is, I think youshould be much higher than that.
Not everybody's going to betoast in mind body.
Not everybody's going to makemore revenue from payments than
SaaS.
So you have to have a realisticview of your industry but it's
shifted and then making sure youunderstand your take rate.
So what is the revenuegenerated per transaction that
(19:49):
you process?
Also different than the wayyou're viewing your recurring
revenue, your GPV?
There's like a million acronymsin payments.
It drives me crazy.
I actually have a glossary andan enablement training session
that I go through with mysoftware customers on all of the
terminology, and I think weshould do it for payments folks
(20:10):
too, because SaaS terminologyand KPIs are equally as
important to all LTV, cac,ebitda, and so all of these are
really important KPIs and,depending on your stage of
growth, I think you should haveheightened awareness of each of
them.
Depending on if you'reVC-backed, pe-backed, you'll
also have heightened awarenessand goals around each of them.
Speaker 1 (20:33):
That makes total sense If you could give SaaS
leaders one or two pieces ofadvice about driving revenue,
driving enterprise value.
What are the most importanttakeaways?
Just the top one or two.
Speaker 2 (20:52):
I mean, own your payment strategy.
Don't just assume that theeasiest partner is the right
partner, or the big name or thisreferral that you have a
treasury relationship with orsome sort of other relationship.
Own that strategy.
It's not a business modeldecision, not just a I'm sorry.
(21:15):
It's a business model decision,not just a tech integration.
So just owning it.
And I'd say, if SaaS companiesdon't get intentional about
payments, someone else will bemaking money off of your
customers.
So owning that strategy isabsolutely the most important
advice that I would give SaaScompanies.
Speaker 1 (21:39):
Yeah, I love that takeaway.
They're going to get them fromsomewhere else, whether it's
just a third-party providerthat's trying to get a bigger
share of wallet or a directcompetitor that just has that
integration already done out ofthe box.
That makes a lot of sense to me.
One follow-up question on thatI often have a debate with folks
about where in the organizationshould payments sit.
(22:01):
Should it be product function?
Is it a revenue function?
Is it something else entirely?
Across all the clients you'veworked with and SaaS companies,
you've seen any thoughts onwhere it's best to have that
role sit or evencross-functionally, how that
should work.
Speaker 2 (22:18):
Yeah, I would say all of the above.
Cross-functional is important.
You have to have the buy-in ofproduct, you have to have the
buy-in of finance, you have tohave the buy-in of go-to-market
and revenue growth.
Actually, one of the mostcommon engagements that I do
with my software customers isthis, what I call a fractional
jam of payments.
It is really hard to findsomebody that understands owning
(22:41):
a P&L and understands havingthis payments product experience
where you can get the roadmapaligned with the go-to-market,
and so oftentimes I come in todo that and build the program,
build the go-to-market, buildthe enablement, and then bring
in somebody that may be lesserexperienced in actual payments
or even SaaS, depending on thecompany, but can take over and
(23:04):
lead it and own thatcross-functionally.
Because I believe if you don'thave cross-functional alignment
you will not be successful,especially when you then get to
the point where you have toreport to the board and you have
a PE-backed visibility.
Somebody needs to be able to ownthat.
So I guess my answer to yourquestion and we could probably
go back and debate this forhours is answer D all of the
(23:29):
above.
Speaker 1 (23:30):
Fair enough, we'll let that be the closing word.
Thank you so much for joiningme today, allie.
How can people best reach youif they want to follow up or
have questions?
Speaker 2 (23:41):
Sure, and thanks for having me.
This was, this was fun.
You can reach me at Allie atparachuteadvisorycom, or just
hop onto the website and go toparachuteadvisorycom.
I tend to be very active onLinkedIn, so you'll find me
there as well.
Speaker 1 (23:58):
Very good.
Well, thanks so much for thetime.
It was a blast.
We'll talk soon.
Thanks everyone.
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