Ep. 221: Joe Keeley - Unleashing the Fintech Potential: How Companies Can Thrive in a Financial Technology-Driven World

< Intro >

– Welcome to Count Me In.

Today we have a special guest,
Joe Keeley, CEO of JustiFi.

Joining us to discuss the world of fintech

and its impact on business.

We'll explore what fintech really means?

How companies can harness its potential,

and why it's important for businesses

to understand the various tools
available in the fintech toolbox.

Joe will also share are some
fascinating success stories

and insights on how
companies can thrive in this

financial, technology-driven world.

So let's get started and delve
into this exciting world of fintech.

< Music >

So, Joe, I want to thank you so much

for coming on the podcast, today.

We're really excited to have you on

and we're going to be
covering the topic of fintech,

and that is a big buzzword
in the industry right now.

And I was hoping that
we can maybe start with

defining where you fit in the fintech world,

and we'll continue on from there.

– That's great, thanks for
having me, Adam.

And it is, I think, fintech

is one of the biggest
buzzwords that's out there.

It's been said by leading
venture capital firms

that every company should be
or will be a fintech company.

So it's like, "Okay, well,
that's a lot of pressure."

So first of all, I think, we need to step
back and say, "What is that mean?"

I mean, it's just an abbreviation,
just flat-footed,

first, it's financial technology,

which can mean so many different things.

But, for us, the company
that I lead is called JustiFi

and we exist to do just that.

To accelerate the potential

or the fintech potential
of other software platforms.

So in that context, it turns out that

a lot of companies that are out there,

one of their major, or their biggest,

or only economic engine is
not actually selling the product,

or the service, or the access,
then, that is there in plain sight.

So, for example, software platforms,

there are many software platforms

that sell a SaaS fee, and
they charge you to use it.

But that is simply the Trojan
horse to get funds flow.

So they're making money on payments.

They're making money by offering

additional fintech products
like embedded insurance,

embedded lending, card issuing.

So when you think about interchange

that, deliberately, opaque monster

that no one really seems to understand.

You can make money
and participate on interchange,

by lowering your costs
and keeping your price.

And you can make money on interchange

by participating at being high,
too, by issuing cards.

So there's just a lot in there.

But, ultimately, what we do as a company

is help platforms with their
economic engine being fintech,

and we provide infrastructure
and a team to help them do that.

But it's interesting for all companies,

not just software companies, to
think about and try to understand

what are the different tools
in the fintech toolbox,

and how could they be applicable

to your business, big or small?

Whether that be through cost reduction,

or an area that's typically not talked about

by finance and accounting professionals

is enhancing the revenue.

– Totally, and I think the
other part of the problem

that we run into, with every company
being a fintech company,

is that, you and I were touching on this

a little bit before we started recording,

where does it live?

Your IT team has to manage it
and finance has to touch it,

but nobody really owns it.

And how can you really fully manage it

if no one really owns the software,

when it's within your company?

– Yes, and that is a really big issue.

And part of our JustiFi, we have
what we call our tech infrastructure,

but we also have an
engaged fintech team.

Where we have a dedicated
chief payments officer.

A chief fintech officer
that's available to our clients

because they sit in between
finance and accounting,

and product and engineering
or IT at a particular company.

But I would think one of the things
that I would really encourage

and if multiple people own something,

to your point, Adam, then nobody owns it.

But to finance and accounting professionals, to really take

the ownership of how can we
and challenging the status quo.

Does this 3% need to be 3%
when we collect

or how could we think about
differently on lowering cost?

How could we think differently on

what adjacent revenue streams
could be available to us.

Where you're enhancing the
offerings to your customers?

It may not be the core product

but, ultimately, it's been said that
on every dollar in commerce,

there's up to 10% of that.

So a thousand basis points that
is available and leaks out,

whether that's in fees-in fees-out,

early pay discounts, all
of these different things.

So I would encourage from a
strategic perspective, it's one that

finance and accounting can own this.

Implementation of how it's working

is more product and engineering.

– Of course, an example
that comes to mind is

I just saw an article,
a couple of days ago.

Where Amazon is going to start

accepting Venmo as a payment option.

And if the big behemoth, Amazon,

can start accepting Venmo as a payment.

What possibilities are there
for every company

to accept different types of payments,

and be more creative using technology?

– That's right and, sometimes,
you're accepting a type of payment

like Venmo or a buy now, pay later,

and it's actually a more
expensive payment method.

Those are more expensive
payment methods then credit card

and debit card, and then
bank transfers, and ACH,

going all the way down.

And you do that because you're
trying to get more customers

or you're trying to ease the customer
journey, the customer experience.

But in terms of every company
being a fintech company,

you want to make those choices
with your eyes wide open.

Because what if you could monetize

or make money on that payment flow?

And it takes certain kinds of
architecture to do that.

But just understanding
the space, it's the first step.

Why are we doing something?

What is it actually going to cost?

And there's just an immense amount
of opportunity that exists there.

But basis points can matter at scale,
they very much matter at scale.

– Yes, especially, when it's affecting

your bottom line in the long run.

Especially when there's a
tight market, and inflation,

and everything else happening.

– That's right.
– So as we think

about companies trying
to be more advanced,

and trying to be a fintech company,
and trying to be creative.

Do you have any examples of companies

that have been successful?

It doesn't have to be specifics, but
are there any things, successful ways

of becoming a fintech company?

If you're just a regular,
maybe, we could talk about

some success stories that you've seen.

– Yes, that's great.

I mean, we have a number of them

and we help a number of software
platforms harness the power of fintech.

And, in that instance, it's
a little more straightforward

because in software platforms,
they have business customers.

The platform has a business customer,

and then the business customer
has a customer themselves.

And when you have three legs of the stool

there's, then, opportunity to do probably

one of the more best-known
fintech monetization,

which is payment arbitrage.

Where you're charging 3%, at
a platform level, to the customers,

but your cost is actually 1.9%.

And then you take that delta and
you multiply it times funds flow.

So then that number can,
sometimes, get much bigger

than the actual SaaS fee that
someone might be charging.

So examples of that are, Toast
is one that many of us interact with

on a weekly basis, whether
we know it or not.

So Toast is a vertical SaaS
platform for the restaurant industry.

They provide hardware, they
provide software for restaurants.

So if you go and order out
for takeout or delivery,

or you go into a restaurant

and you swipe at their terminal,
you'll see the little Toast logo.

Well, Toast is just a
fintech company, really.

They provide software and hardware,

but they're monetizing all the funds flow

from all these restaurants.

And then once you
understand the funds flow,

then you can start offering those
restaurants short-term loans,

maybe, to repair an oven.

And why would you do that,
from a customer standpoint,

is because if you are
embedded in their software.

That is a much better user experience

than that restaurant owner deciding,

"I want to go walk down
and talk to my local banker.

And by the time I fill out that application,

and do the KYC, and all the
things that need to be done,

I've already put the new
oven on my credit card

because it's an emergency, more or less,
short-term capital needs.

So there's all of these,

Toast really started as
a fintech company first,

that was their intent all along.

But if you look at a direct-to-consumer
company, this example

that's been fairly, widely, used is one

we all or many of us interact with on,

sometimes, our daily ritual
and that's Starbucks.

So you think about Starbucks
Starbucks launches their app,

and if you notice when you are topping up

your balance, the default is $20.

Now you can go in and change it,

but when you add $20
to their card, their app,

now their average transaction size

is much bigger than a $4 cup of coffee.

So their effective rate on
credit card processing goes down,

and they clearly have ability
to negotiate beyond,

let's say, all of us at this point.

But also Starbucks is now a bank.

They're holding billions and billions,
and billions, of dollars

on stored value cards
in which they can use

as working capital for no interest,

while we wait captive
to order the next Macchiato.

So just really stopping and thinking about

how is money flowing
into your organization?

How is money flowing
within an organization?

Maybe that applies, maybe it
doesn't, depending on the size.

And then how is money flowing
out of the organization?

So that's the first thing to think
about as a fintech company.

And are there opportunities
to capture a couple of basis points?

And you might say, "Oh, a couple of
basis points, I don't have the time."

And maybe you don't
and maybe it doesn't apply.

But, for us, we work with
vertical software platforms.

And a lot of times it's not uncommon

that they can get to many
hundreds of millions

or billions of dollars of money flowing in

and around their ecosystem.

So thinking about how,
and capturing 20 basis points

on a couple of billion,
all of a sudden, is material.

The other thing that
folks should think about,

if they think about
themselves as a platform,

whether they're, literally,
a software platform

like we work with at JustiFi

or maybe they're a marketplace.

How many dollars are flowing,
not maybe through your P&L,

but in and around your ecosystem.

And could you bring those dollars in

in any way, shape, or form?

Could you offer that?

So that's really what software
platforms are doing.

On the Toast example,
they're providing lending,

probably, either off
their own balance sheet,

or a credit facility, or, probably, initially,

through partners, and they're
participating in that transaction.

But what they did is, "Our restaurants

are having short-term capital needs,

and it's not happening
within our software.

Wouldn't it be great if we brought that in

and then we're going to
participate in that?"

So that is the thing that
we do with our clients.

We help them build what we call
a strategic fintech map,

which is, "Where are
all the opportunities?"

And then you stack rank
and you go on that journey.

But finance thinking about dollars in,

dollars within, and dollars out
in the whole ecosystem,

and is there a way that
we could reduce cost?

Or oftentimes, even more
exciting is impact revenue

by harnessing some of
these fintech tools.

And it doesn't mean, in fact,
you should not go out

and think, "Okay, we have to go build

a bunch of infrastructure."

We have a sub-account architecture

and the software that we
provide for platforms.

I mean, gone are the days if
your product and engineering,

or IT team says, "well, jeez, we're
going to have to build all this stuff."

That makes about as much sense

as saying you need to have a server farm,

now, instead of using AWS or something.

– Yes, that makes a lot of sense.

And even as you were talking,

it made me think about the small
to medium-sized businesses.

Not everybody is a Starbucks and
can handle that kind of a thing.

But the way the technology is going,

any small and medium-sized business

can access this technology.

Whether it's working directly with you

or they're working with
an organization like Toast.

Where they can get access
to these payment methods,

to make these things more accessible

to their customers, and give the ability

to have those types of payments.

And the ability to have
this type of technology,

even if they don't have a
big IT team or finance team.

– Yes, and, I think, if their
business allows it,

if you're able to monetize the power

and harness the power of some
of these different fintech tools.

The value creation that
it can have in your company

in terms of valuation and how investors

or acquirers look at the company,

can have an impact of 10X, literally, 10X.

So when we work with software platforms

that maybe make 65 or $100 a month

in SaaS fees to their customers to use it.

So, maybe, it's a barbershop platform,

a software that helps barbershops run.

If they charge a barbershop
$100 a month,

they'll get good SaaS multiples
on that revenue for the valuation.

But if, all of a sudden, "Well, we
make money on payments

and we sell insurance to the barbershops,

and we provide capital
to the barbershops,

and we do spend management."

Now, all of a sudden, you're

in a completely different
valuation category.

– So what effect does
that have on the business?

Does it give them exponential ability

to grow from that point on?

– Oh, it increases the lifetime value
of the customer, probably, five X.

– That's huge.
– Because if you think about it,

if someone is charging $100 a month,

so we have a $1,200 customer
there for the software.

But, now, if they process, let's say,

a couple of million dollars a year,

and you're making 70 to
100 basis points off of that.

And now you're getting 20 basis
points off of a lending product,

or if you're getting, ultimately,
200 basis points

as you go on your fintech
journey of monetization,

by bringing partners in
and doing different things.

Now, you could double, or triple,
or quadruple that $1,200.

So now that customer lifetime value

is two to five X bigger than it
was just selling software fees.

And not only that, we know
from our experience

that they're remarkably more sticky.

Meaning the churn that
you experience is lower

and, oftentimes, what software platforms

that we work with, at JustiFi,
they have negative churn.

Meaning their existing customers
are growing beyond that

because their payment
volume is growing.

– Mh-hmm, so based on our conversation,

it completely makes sense

if you're not already doing something

and, probably, pretty much everybody is.

But let's say somebody's
just getting into this space

and trying to integrate different
fintech into their business.

Are there any red flags that
they should be on the lookout for,

since this is an ever-growing,
ever-changing thing,

with companies popping up all the time?

– Yes, I mean, a couple of things
that I would have folks think about,

is if you are bringing folks, partners,
into your ecosystem,

you should be participating in
the monetization, number one.

If you are finding yourself talking about

or actually building core infrastructure,

you should stop and ask, "Is this
something that we need to build?"

And, three, in order to participate in this,

it used to be that you had to go through

just immense pain
and exposure to liability,

to be a payment facilitator or
to lend off your own balance sheet.

You no longer need to do that,

you should not do that.

So don't take on the burden of
being in the payments business,

being in the lending business.

There are businesses that are doing that,

but you can partner with
them and participate in it

and you are a better-together scenario.

Because the cost to build, maintain,

to be in this business, of course,

with financial regulations,
et cetera, is ever increasing.

So I'm not saying that
everyone should go out

and say, "Now we are a fintech company."

JustiFi is a fintech company.

We help others harness the power

of fintech within their platforms.

That doesn't, necessarily,
make them a fintech company.

And, so there's a slight nuance there.

Instead of the way the quote was from,

I think it was Andreessen VC firm,

"Where every company
is a fintech company."

Well, I think, I would modify
that, ever so slightly,

that every company could or should
harness the power of fintech

and fintech tools within their company.

– And that makes a lot of sense

because, right before you said that,

I was going to ask you that question.

So how can every company be
a fintech company in that case?

But you answered that,
where everybody can harness,

has the potential to harness that power.

And when you do harness that power,

you've already given examples

of how they can grow,
exponentially, from that.

So as we look at the future,
markets are all over the place.

There is inflation in the U.S. and globally.

What do you think the future of fintech

is going to look like as things are
changing, as we go forward?

– Well, I think it is going
to continue to accelerate.

There's all kinds of buzz out there,

as it relates to the
challenging of interchange,

the crypto blockchain, et cetera,
and all of that will happen.

But that's really the leading
bleeding edge, right now.

I think that there'll continue to
be alternative payment methods.

There is a great addiction to our
credit card points in the U.S.

So I don't see that going
away anytime soon.

Even if it reduces 10%, which
would be a massive number,

it's still just a massive space.

So I think that companies
are going to need

to really think about and meet
customers where they are.

How do they want to pay?

When do they want to pay
and with what method?

And, I think, just challenging
the status quo,

the way that things have always been.

Having that fintech mindset

is what I would encourage
folks to think about.

Look through that lens

and say, "Does this need to cost
what it has always cost, and why?"

"Is there a revenue stream
that we can participate in?"

And, sometimes, the answer might be no,

depending on the business.

But it's amazing that the power
and the value that can be increased,

with just a different point of view.

Sometimes the economic engine
that exists or could exist

inside of a business, is not what
the business is actually in.

Because when you think
about the size of all fintech.

Which includes payments,

which is one of the largest
industries in the entire world,

and insurance, and lending,
it's pretty amazing how big it is.

– It is pretty amazing,
and as I circle back

to the finance and accounting team.

Just thinking about that team,

the look of that team
is constantly changing

with the advances of technology.

Do you think that like
an accounts payable person,

their set of skills is
going to have to change?

What is that set of skills going
to look like in the future?

Because in the past, it was
just like receiving payments

and sending them out.

But that set of skills and that knowledge

is going to have to change,
as the technology changes.

– Yes, and there are some great
technologies that are out there

to help accounts payable
be more efficient.

And a lot of times those tools

will be available for low or no cost.

And that might be great,

and maybe that's just
embracing new technology,

and new companies that are out there.

But if you have the fintech mindset,

you're able to look at that

and say, "How come I'm going to
use this platform

and they're going to handle
all my accounts payables.

How do they make money?"

Is the question one should ask.

Well, they might be aggregating
all these accounts payable

going to vendors, and getting
the early pay 5% discount.

Now, all of a sudden,
that's 500 basis points

that they've captured
and they may be paying

those payables on a card, a virtual card,

a credit card that they spun up,

and are participating in
a portion of the interchange

for another 80 basis points.

So having that mindset,
because basis points matter.

They matter at scale, they matter
over years and years.

So having that mindset around,

and identifying, certainly,
for some businesses,

I mean, it's very clear the playbook
for vertical SaaS platforms

and marketplaces, that's who
we work with to help them.

It may not be as clear for the
neighborhood coffee shop, let's say.

I'm saying "Well, I'm not Starbucks

and I'm not a vertical SaaS platform."

But they do use a lot of
software and platforms.

So just having that mindset,
and looking at the world

and understanding how
is the money flowing

and who is making money
on this money flowing,

I think, is a great place to start.

< Outro >

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