Sophia Goldberg, CEO of the startup Ansa, is a self-described payments nerd. She studied this industry for years — and literally wrote the book on payments — before starting her own company to develop digital wallets. In this live session, Goldberg, one of American Banker's Innovators of the Year, shares lessons on consumer and merchant behavior, and the changes she expects to see.
Transcription:
Daniel Wolfe: 00:10
Hello everyone and welcome to Leaders. I'm Daniel Wolf with American Banker, and I am here today with Sophia Goldberg, one of our innovators of the year. Sophia, congratulations on that honor. Thank you. You are the co-founder and CEO of Ansa. Why don't you tell me a bit about who you are, what you do, and how you got to where you are today?
Sophia Goldberg: 00:28
Yeah, of course. And thank you for having me. So I think I'll start with a little bit about me, but I've spent the better part of the last decade in payments and really like to say I love the physical mechanisms of the global economy. And so for me that's been payments and getting to learn new things every week still. Also, what drove me to write the book, the Field Guide to Global Payments.
Daniel Wolfe: 00:49
That's right, that's right. She literally wrote the book on payments, so we'll get to that later, but
Sophia Goldberg: 00:53
Yeah, yeah, thank you. And it also, we kind of exist in this crux between what I call kind of the growing chasm between how brands build customer experiences and how commerce has evolved and where payments sit today in the us. And so in short, we're closed loop payments as a service or branded wallets, stored value wallets as a service. So letting any brand create that customer experience to help drive retention revenue and really compete in the modern world.
Daniel Wolfe: 01:23
So part of what was fascinating when we spoke earlier, we kind of started to geek out a bit about the payments industry, and we've both been watching this industry evolve over the years and seen some hits, some misses. What would you say is the first true innovation in digital payments in the time that you've been a part of the industry?
Sophia Goldberg: 01:41
Well, it predates my time in the industry a little bit, but I really like to go back to the late nineties and really the year 2000 with PayPal. I think especially in the digital payment and the wallet space, it was this great coming together of this new advent in commerce, right? Peer-to-peer online with eBay, and then the need to be able to not just mail checks, which is what existed before PayPal. And so how do you solve? And it was really right moment, right time of solving the question of how does the money move? How do we build trust? How do you think about identity? And so I think that was really that core innovation that sparked so many things for the last really 20 plus years.
Daniel Wolfe: 02:21
And part of what fascinates me about that era is that it wasn't necessarily the banks. They came up with a solution. The banks and eBay had been working together on their own version of what PayPal had become, but it took an outsider to really show them, to generate that interest, that trust, what it took for consumers to actually latch on to something new.
Sophia Goldberg: 02:41
And I think that final part is what's so important about all kind of especially consumer payment experiences, is you really have to solve for what is a consumer going to use and what is the pain point they have. And so wanting to be able to check out and not being able to, that's a really big pain point. And so there's lots that can continue even now to be solved there.
Daniel Wolfe: 03:02
And so more recently then we get into mobile, and I remember some of the earlier attempts were based on text messages because this was before the app store and we all had just the ability to text. You could text something to an ad in a magazine or something like that, you would respond to codes and such. But then we had the smartphone, we had the iPhone, the Android, the Blackberry, and a whole world seemed to open. But that didn't necessarily mean that payments translated so cleanly into there. What are your observations on that era of the digital payments evolution?
Sophia Goldberg: 03:34
Yeah, I think we're still in the midst of it. I think Covid was a huge part of that. Even our real world payments started going digital, ordering ahead to go pick up coffee. No one was touching cash or coins anymore with coin shortages. And so I think a lot has happened. I think Apple Pay and Google Pay are a wonderful example of how do you then take real world payments digitally but still often for real world payments. And so that's tap to pay, that's the network token, that's all of that innovation. And I still think there's so much in the world of wallet specifically that hasn't been solved, but really at the end of the day, are you trying to do in-person online? That distinction has blurred so much for so many brands that we're kind of now in the phase of, okay, how do you help your consumers wherever they are, whatever the channel looks like. It might be online technically, but they're standing right in front of you. What does that look like and mean these days?
Daniel Wolfe: 04:30
And Apple Pay did the thing where they do have their own card, but they brought in all the banks under a single interface. Before that you had merchants and you had third parties, telcos as well coming up with their own approach. I remember there was a company that had these NFC stickers before your phone could make contactless payments NFC stickers. And the idea was you put your bank's logo on that sticker. And I was thinking, interesting technology, but that's a fashion statement. I don't know anybody as much as you may love your bank, I don't know anybody who wants to just broadcast that on their phone every time they take it out to scan something or text somebody or what do you think were some of the stumbling blocks we had along the way that many of these companies tried to overcome or some misconceptions that they fell into?
Sophia Goldberg: 05:17
Yeah, I think there's two sides to the misconceptions I see. I think one is more of a rhetoric, one in the industry that Apple Pay and Google Pay of won the wallet war. And I think commerce is running laps around our industry in terms of innovation, and we are building a lot across lots of different companies, incumbents and startups to kind of catch up. And so I think the fact that anything is one or done is just a huge miscalculation and not reality yet. And then I think the other side is payments or a wallet transaction. There's so many misconceptions because first is the question of what's a wallet? It can mean a hundred different things. Is it me storing a card with a retailer? Is it Apple Pay, Google Pay, which is stored credentials? Is it stored value? Which is what we help brands build at Ansa.
06:03
And so I think there's all of those questions and then there's so much beyond just the transaction. And I think that's where a lot of trip-ups can happen. And so it's identity, it's risk, it's reconciliation and actually moving money. And then the other side is it's a multi-party system. So you need the merchants and the consumers to both want to participate. And I think like you mentioned with the PayPal, its, it's what will get the consumer to move? Is it incentives? Is it convenience? Is it a global pandemic? Getting everyone adopted onto Apple Pay and Google Pay and merchants then having to update their point of sale systems. And so I think it's really these moments in time that have changed. So now we're much more digitally native. We're used to tap or QR code scanning, but at the end of the day, it's who are the players in the payment system you're building because it's so much more broad than just that one transaction and can you build something that everyone wants to actually use?
Daniel Wolfe: 06:57
And you raised a good point early on about people say Apple Pay and Google Pay won that mobile wallet war because a lot of the other contenders are still around. You've got your Starbucks app, you've got your Dunking Donuts app that people will use because of reward, stored value, whatever they have. How is it that there is still room for these other options when the Apple Pay or Google Pay is just built into half the devices, people carry around with them anyway. You'd think from a consumer standpoint, adding anything else just adds complexity.
Sophia Goldberg: 07:29
It comes back to the incentive are you selling on convenience, right? So there's still a huge swath of merchants that don't have mobile Google Pay, apple Pay, so we still have a long way to go even for adoption of that. And then you get to browser payments and they've just started accepting Apple Pay on browser, which is pretty cool, I think. But the other is the value exchange and gets into the question of what's going to happen to credit card rewards and how do you interact with your customers and how do you, I mean especially a lot of brands right now, how do they get back to first party checkout and data in a world where almost any product being sold can be sold by the brand or some third party channel, whether that's DoorDash, Uber Eats, Amazon, Walmart consumers have so many options. And so how can you drive people back to your brand? It's incentives. It's knowing your customers better, it's providing better slicker experiences, and there's great ways to kind of bring payments into that loyalty conversation and launch something like the Starbucks wallet or even the backend system for bus and transportation systems as well.
Daniel Wolfe: 08:36
Oh yeah. I mean with transportation, it's so common now, at least here in New York, to see people just wave their wristwatches or their phones over a subway turns style just to board. When I remember much earlier on, there were some failed attempts, some effort to get there. And of course the pandemic, as we discussed, was one of those big things when people didn't want to touch anything anymore. I'm actually kind of still surprised that we went back to letting kids blow out their own birthday candles that I thought we were onto something there. That is gross to have a kid just breathe all over your cake and just wave it out with a plate or give them their own cupcake. But nope, last kid's birthday party I was went to all over the cake. So getting us off that gross topic before we move on to just the future, I just wanted to ask you one thing about the past, which is out of all we've discussed, out of all you've seen of this industry and the development of digital payments, what surprised you the most? What went against your preconceptions going in?
Sophia Goldberg: 09:39
I mean, I've got to plug my favorite payment method, which is the check.
Daniel Wolfe: 09:44 Oh
Sophia Goldberg: 09:44
Yeah. It's still a predominant payment method in the US which I think other countries are wild about, but this is my favorite little party trick around payments nerds is writing myself a check is the fastest way to transfer money between two accounts I own at different banks to do mobile deposit. It's so much faster to just write myself a check mobile deposit, 30 seconds done. That's wild.
Daniel Wolfe: 10:06 I've been trying to get my parents to stop writing me checks for my birthday or whatever, and I hope they never watch this because then they'll feel like I told you so.
Sophia Goldberg: 10:18 Yeah, it is. I think there's still so, and I think that just really speaks to the breadth of there's a lot of people that still use checks throughout their daily life, but there's still so much room in digital customer experience and how these systems interact and talk. Yeah,
Daniel Wolfe: 10:35
That's fair. New for the sake of new isn't necessarily solving anything. It has to build on something. And if that's something still just works, then you've got a long way to go. So let's look ahead right now. You of course talk about your own company, your own work, what are you seeing in the data? Tell us a bit about your customers and what you've learned from working with them.
Sophia Goldberg: 10:57
Yeah, I think we've learned a lot in the last few years. So we're stored value or embedded closed loop payments as a service. So really that's Starbucks in-app payment experience for anyone or can look like store credits in more of a retail use case. Our main use cases to date have been in the world of food and beverage or coffee at quick serve merchants. And I think what we've learned is some of what I said around this race to keep your best customers, we started using this term soft churn. So as consumers have more and more options, maybe are tightening belts in harder economic times, how do you make sure your 20% best customers, which are often 80% of a brand's revenue, still stay with you? And then payments costs have continued to go up. There's sometimes tiredness of maybe your point systems need a little bit something else in loyalty or you have all this great customer data through your marketing channels.
11:49
How can you kind of build that flywheel together and we take care of the technology financial side to let brands build these experiences. I think what's been the biggest learning is that it's how well it's working. We have some customers that have seen a 65% increase in engagement from their users, which translates to roughly a 30% increase in revenue from a customer adopting a wallet versus a one-off payment say like Apple Pay, Google Pay, and then about a 26 to 28% reduction in payments fees. And so it kind of creates their own ecosystem where they can funnel some of those savings into rewards, incentives, marketing, whatever makes sense to drive adoption. And I think the other surprise is how broad the use cases are. So we have a lot of brands we're talking to that are marketplaces and are trying to solve this. How do we keep funds on the platform? So many sellers are also buyers on these platforms. How do we promote that ecosystem and that economy? And then everything, the kind of macro way I say to talk about it is everything you would've used cash for in your daily life 20 years ago are these small sub $10, sub $20 transactions where you actually are a pretty habitual spender and if with a little bit of incentive from a brand, especially with all they know about you now can really drive this epic flywheel, the likes of which Starbucks famously has.
Daniel Wolfe: 13:09
So is there a momentum there? How do you sustain that? Because I know I tend to be very enthusiastic about technology and I know there's always a point where the novelty wears off and I'm looking for the next big thing and maybe I am not as excited anymore about whatever rhyme earning in a digital wallet. How do you keep that engagement going?
Sophia Goldberg: 13:28
It's really about value and looking at the data. And so what's working for different consumers. We also like to say we are not the payments platform for every brand. This also isn't the payment product for every customer at a brand. And so how can you really engage your highest value customers? And so there's different ways that they can plug in with that. They can change incentives, they can make it monetary, they can make it experiential, they can, Starbucks famously did something which we don't recommend too much to do, but it was the only way to pay in the app. And so there's also, that's until Omni in New York also you had to have a metro card, so you had to have stored value balance to be able to ride. And so I think there's a lot of different levers and we're really excited for the learnings in that. And a lot of what we're building product wise this year is alongside what we're calling our incentives engine. And so what works for different brands for different consumers, there's a ton of data to be able to build awesome products off of.
Daniel Wolfe: 14:25
What's the dynamic there between merchants and consumers? How much of what you're seeing is driven by what the merchant wants and how much is driven by what the consumer wants?
Sophia Goldberg: 14:33
Yeah, I think as any B two, B2C company, it's always an interesting line. The merchants are our customers. We want to help them build things that have business impact for them, otherwise they will do the integration and get this kind of product off the ground. But it's so heavily reliant on the consumers being happy. And so most of our focus outside of the core technology is tools to help them build the right thing for their customers. And so it's really, I think being driven by merchants. I think in the next few years it'll be interesting to see if actually more consumers start realizing the power of them a little more. And I think the main thing that comes to mind there is both surcharging we might see on credit cards and what that will do to rewards. And so me using my Chase Sapphire reserve, if I'm going to start being charged a little more, say 2% extra to use that at checkout at Duncan versus maybe I earn 2% cash back for using the wallet, there start to be these really obvious parallels where merchants are able to build their own ecosystems.
Daniel Wolfe: 15:35
So we brought up the pandemic a bit before and we've all lived through it. And you don't need to hear my bit about the birthday candles again, but what were some of the missed opportunities there, do you think? I don't know if we all envisioned exactly how it would end, what behavioral changes we expected to stick, which ones we expected might go back, might revert. I mean I know a lot of people were desperate for haircuts pretty early on, but just what do you think was something in hindsight the payments industry could have taken advantage of that we missed?
Sophia Goldberg: 16:12
I mean, I think it'd be interesting to see if or when we get there in the us, but I think we missed a bit of a moment in time to build our own version of something like UPI because we had so much we were working on in identity with vaccine cards with a lot of countries, did digital vaccine cards, things like that
Daniel Wolfe: 16:32
Can interrupt you just in case anybody doesn't know what it is. What is U-P-I-U-P-I
Sophia Goldberg: 16:35
Is the big payment system in India, which is big move with demonetization to digital payments and it's powered in part by the government and picks in Brazil is very similar. And so there's a lot of national programs of digital payments in a lot of countries right now. And I think in the US there's conversations of, oh well is Zelle that? Oh, well we have private things like PayPal or Venmo here or other peer-to-peer networks and Visa, MasterCard obviously have a lot of sway in the US payments ecosystem. I think for me the question has always been we don't have the same sense of national identity on the individual. We've got great national identity, but an identity system where it could make it really easy for all kinds of people to get online really easily and adopt payments through smartphones. And I think we kind of had that moment with covid where we could have reached everyone tied it to vaccines or other things, the
Daniel Wolfe: 17:36
Stimulus checks as well. That was stimulus checks. Everybody needed to have a bank account for that.
Sophia Goldberg: 17:39
Exactly. And so I think there's this moment that it could still happen, but I think that could have been this really galvanizing if we had something like a UPI stimulus checks could have been easier aspects like that.
Daniel Wolfe: 17:51
And in contrast also there were the changes to transit. They had an opportunity to add, as you'd mentioned, OMNI in New York ways for people to use their open loop cards to pay contactless and not have to get a metro card or tokens or anything like that. Is there anything else that you see from that time that has put us on a path that we haven't fully realized yet that's built a foundation?
Sophia Goldberg: 18:15
Definitely, I think definitely. I think it gave a ton of brands breathing room to innovate and build up their digital ecosystems. I think everything went online. Even coffee shops had to launch online shops to order coffee. I think more and more had to update their terminals for NFC. So I think that accelerated. And so we're going to see a lot more in, and Visa just announced a week or two ago all of these new innovations in tap to pay and all the TAP products or ecosystem of products. And so I think there's a big swing that we'll continue to see there. And I think the other side is consumers being even more driven to value and ease of use if something's not quick and slick and on their phone onto the next thing. Oh
Daniel Wolfe: 19:07
Yeah. And so let's make sure that we're talking also about the future here. What do you see changing in the next one to five years in the payments industry?
Sophia Goldberg: 19:16
Yeah, I mean I think there's going to be a world of change. I think what I'm curious to see is what the role of the credit card is. I think that's more decade long, but I think we're seeing with the credit card competition act with the Visa MasterCard settlement, this ongoing frustration on the merchant side of what this looks like. And so I think that will be interesting. And the rise of account to account payments or this dream I'd say of account to account payments and that being able to save merchants from interchange. And so I think they're all, I call them cracks in the pavement of the starting of more large changes in what the status quo of payments is. And then obviously I think what we're doing is going to be hugely impactful for medium to large sized brands of helping them create their own payment ecosystems that make sense for their use case and how their customers want to pay. And I think that also we've talked a lot about more in-person use cases for what we've built, but that gets into the digital economy of how do you do micro transactions online? How do you do, I mean I think it's been a holy grail of payments for many years of how do you pay for just an article on a new site? Many people have tried and it's really hard and it's a coordination issue, but part of it's also payments technology issue and that's the part we can help solve.
Daniel Wolfe: 20:31
And speaking as a news site, we like it when people pay for all of the articles, not just one, which is
Sophia Goldberg: 20:35
Part of the coordination issues. It has to also make sense for the publications.
Daniel Wolfe: 20:40
So what is the role then? There's multiple roles here, the banks, the merchants, the consumers, and anybody else in that system who has the most impact here as these things transform? Who's got the biggest crack in the pavement that needs to be addressed?
Sophia Goldberg: 20:57
Oh yeah, I mean that's a tough one. I think in the US it's always, there's what seems to be, and then we'll see what happens with lobbying and what regulation and everything there. I think consumers have a lot of sway. And I think the other side is, so do the networks, and I think I've seen it for the last year or two. They're also pivoting from where payment rails too, where data rails, where commerce rails, they have all of these amazing connections across brands and banks. And so I think we are in the midst of seeing them reimagine what is their role in the financial ecosystem. And so I think they're being more open-minded about how they play with other companies and parts of the ecosystem. And so I think that's also a piece of they're also trying to figure out, okay, how do we stay irrelevant is not quite fair because the card networks are always going to be hyper relevant for a very long time in the us but I think it's part of, we'll see what the networks do, we'll see what regulation plays or doesn't play, and then what will consumers actually flock to?
21:57
Back to the eBay point, eBay could try and build it with the banks, but PayPal was able to build the thing that customers wanted.
Daniel Wolfe: 22:03
Yeah, exactly. So we've managed to get this far in the conversation without talking about AI and in this day and age that's an achievement, but what do you see as the role? We're already seeing AI being used for fraud detection. We've seen retailers talk about it for assisted shopping. I'm throwing a birthday party, tell me what I need to buy from you and stuff like that. So what do you see in the payments industry, the role of AI playing in the next one to five years?
Sophia Goldberg: 22:29
Yeah, I think I'm a bit dubious on it and I think fraud is going to be one of the main ways. I think there's been a lot of types of ai, there's been a lot of machine learning in payments and financial technology for years now. So I think some of us look around and we're like, yeah, but what can it give us beyond that? I think what it'll give is more creative fraudsters, more vectors for attack, which means great products to figure out how to protect against that. And then I think the other side I get excited about is on the data side of how do you do better personalization, whether that's for incentives and offers and the reward side, whether that's from what payment methods show up at checkout, so you don't have nascar, you are able to see what would work better for a customer and learn. And so I think there's something interesting there, but I think on the core and we're seeing with some of the maybe world of partner banks and bass in the last few weeks is we don't want to change too much on the core structures because there's a lot of delicacy in how money movement and underwriting and all of these things work that I get nervous about. Let's not just throw AI at this yet.
Daniel Wolfe: 23:40
Okay. I teased at the beginning, you have written the book on the payments industry and I did buy a copy and I'm hoping you can explain to folks what this is and why you wrote it. It's not like a murder mystery or anything like that.
Sophia Goldberg: 23:53
Maybe it is. Alright, buy it to find out.
Daniel Wolfe: 23:55
To be fair, I have not read a cover to cover it yet because I don't think that's how it's supposed to be read.
Sophia Goldberg: 23:59
Correct. It's a reference guide. I call it the field guide for that exact reason. And there's an index in the back because it's supposed to just kind of, and why I cared about writing something physical, you can hand it to someone when they start the industry. You can have it on your desk as this reference guide. But I wrote the Field Guide to Global Payments out of this mix of kind of just love for the industry, but also I was at AIAN for many years across commercial and product roles and through the growth there, I didn't know about payments before I started working there. And I helped train a lot of people and realized I really like talking about payments and I'm
Daniel Wolfe: 24:33
Grateful for that.
Sophia Goldberg: 24:35
And I wrote the book I wished I'd had. And so there's payment systems in the US which is also a great book, but I didn't feel like they explained things in the way that I preferred to explain them or the way my brain worked. And so it came out of this need in this globalized world, almost no merchant or consumer transactions in one country. There's a ton of of different types of payment methods and all these underlining systems, lying systems. And I think no one benefits from payments being opaque. Merchants don't benefit, consumers don't benefit innovators in FinTech who maybe don't come from payments but have great payments. Ideas don't benefit from it. And so I like to talk about it as it's the mental scaffolding to help you understand why are things the way they are. Today I have what I call the taxonomy of non card methods so that if you're in Mexico and see an OXO payment, you're like, oh, this reminds me of kini in Japan and your brand can click on something that might not have been obvious. So I really wrote it to be able to help connect those dots for people.
Daniel Wolfe: 25:36
And as a journalist, I also keep a copy of the AP style book, and I see it as serving that same sort of function because as many years as I've been covering this industry, it's still hard to explain to people depending on their level of knowledge, how originally swiping, but now tapping or what have you, a card at the point of sale translates into money coming out of your bank account. And so we're just about out of time, but I did want to go back to the fact that you are one of our innovators of the year. And so I wanted to get your thoughts on what does the word innovation mean to you?
Sophia Goldberg: 26:11
Yeah. The word innovation I think to me is really kind of endless questioning of knowing why the world works today, but not being comfortable with the status quos. And so I think especially in baking and FinTech, it's how do we build solutions that are better, whether it's solving for a merchant or a bank or a consumer, and how do we just keep digging at the why, understand it and then get to decide if that's why is good enough of what we find? And to keep asking those questions and trying to build that more perfect world that we think consumers want, that brands want, that merchants will exist and the networks will exist within. And I think it's the fun journey of getting to do that.
Daniel Wolfe: 26:51
Awesome. Awesome. And I'm sure we could have this discussion many times over the years just considering how dynamic this industry is and how much innovation we're still seeing.
Sophia Goldberg: 27:01
Definitely.
Daniel Wolfe: 27:01
Well, thank you so much for your time today, Sophia, and thank you for coming into New York for us, and I hope the audience enjoyed this as well. Yeah,
Sophia Goldberg: 27:09
Thank you so much for having me. Yeah.
