Transcription:
Joey Pizzolato (00:09):
Thanks everyone for sticking around with us. Yeah, there's people nodding. We're going to take a look under the hood as to how startup accelerators and engagement programs can combine the agility and creativity of startups with the resources and market reach of established companies to drive sustainable growth. That's mouthful. Before we get started, I wanted to give you all an opportunity to introduce yourselves a little bit further. So maybe Sabrina, you can tell us a little bit about your background and your role at MasterCard.
Sabrina Tharani Libby (00:40):
Yeah, absolutely. Hi everybody. Thank you so much for having us. So Sabrina Tharani and I lead global FinTech programs at MasterCard. One of the most well-known and global programs of that is called Start Path, which is a program that helps what we believe to be later stage companies. So series A, series B startups continue on their pathway to scale by providing them really curated and bespoke access to MasterCard's network. And within this model and in this framework of star path, we have kind of a studio of tools and resources for founders that we've built. So we have a partnership acceleration arm, which is how Jordan and I met, and we'll get more into that in a bit. But really how do we help accelerate the way that fintechs can partner with our business in meaningful, tangible commercial ways? But then we also have a fund that we own and operate as part of our team. So it allows us to deploy equity capital into the FinTech founders that we believe to be most synergistic with our business. We have a corporate membership model which allows us to broker introductions not just between MasterCard product teams, but our ecosystem of 27,000 customers around the world and a number of other tools. But really this comprehensive look at how MasterCard can leverage all of our resources to help fintechs be successful, not just in their ambitions with MasterCard product teams, but around the world.
Jordan Wright (01:56):
Having worked with Sabrina over a number of years now I could say she runs a great program at MasterCard in this regard. So anyone looking at how do you run a program like that, please? I mean you should take advantage of the opportunity to talk to her while she's here. My name's Jordan Wright, I'm the Co-Founder and CEO of Atomic Financial and I got commented twice today that I'm wearing double branding. When you're a founder, it's all the clothes you have, so excuse me for that. But what Atomic does is a couple of things. First off, we help our customers power primacy. So if you think about primary financial relationships, we work with eight of the top 10 financial institutions in the United States. We have about 300 customers that use us to be able to switch over direct deposit. So if a consumer signs up for a new checking account, we can move that over their paycheck over to the new account and then additionally, we can move over all their payments and so ACH or credit card payments move over. And then the last one is that we can also work on bill management canceling subscriptions and things like that. So I feel like in context of what we're discussing today, having launched with a very large number of, and we're only a 6-year-old company, and so you could probably list on one hand the number of fintechs that have eight of the top 10 banks within the first five or six years of their existence. And so we have some recent painful memories and good memories to share on this topic today.
Joey Pizzolato (03:17):
Awesome. Well thank you both for joining us. We are going to get into y'all's specific partnership, but first I just want to level set a little bit just broadly, what are the biggest challenges financial institutions face when trying to innovate and bring new services to market? And then how do those partnerships address those challenges?
Sabrina Tharani Libby (03:38):
So I can maybe kick off and then Jordan can absolutely come in here with his lived experience in working with these large institutions, not just the networks but the banks, but before jumping to the challenges, there's a lot of advantages of being at a large institution and endeavoring to work with fintechs. You have a lot of credibility. You have a huge built-in customer set. At MasterCard, we have a saying if it doesn't scale, it doesn't matter. I imagine a number of your institutions feel the same. And so everything we do has market moving power, which allows us to be very strategic in the products that we've bring to market. But to that point, there's also quite a bit of cumbersome things that we need to get over. So for MasterCard in particular, I won't pretend to speak on behalf of banks, but we do work on a large network legacy technology that can never break.
(04:24):
And so every enhancement that we make to the network, every partner we bring into the ecosystem has to service the same standards of execution, of quality, of go-to market of our global network. And so with that comes a lot of restrictions in what we can and can't do, but also a lot of hard work and making sure that we're properly identifying the right partners here, that we're helping them onboard and retrofit that their own technologies into our ecosystem. There's a lot of franchise and regulation that we have to think about as part of these partnerships.
(04:58):
And lastly, I would just say we are not as technically fluid, I would say as some of the FinTech founders that we work with so well, it's very easy for our FinTech founders to adjust code to make product feature enhancements for us, the same type of product lifecycle might take us six weeks or six months. And so just making sure that we find companies that can come with us along that journey and ensure that with conflicting potential KPIs that we're still obviously bringing something fruitful for both of us to market, but not ignoring those challenges. There are things that we can work through and partnership programs like mine are meant to help cut some of the red tape that FinTech founders tend to face with carve outs, with our franchise teams, carve outs with our vendor onboarding process. But I won't sit here and pretend that we figured it all out. From a large company's perspective, there's still a lot of work that goes into making sure that partnerships between fintechs and corporates are successful.
Jordan Wright (05:52):
Nice. I will share one example. So about a month ago I visited one of our clients and I'm meeting with the most senior executive at the financial institution that we report into for our product. And I'm like, of all yours, 30 minutes, whatever you want. And the guy says to me, I want to understand why we have to take an SDK from you and not build directly to your APIs. And the main reason for this is my app is becoming SDK everything, and I can't maintain my own experiences across all these without. So I think that's one example of your question to answer your question of these are questions that a senior architect is having to have to solve across their financial institution. They want to have as much of it as possible be their own experience. And so I think that's a challenge that they face is how do I then solve for that when I want to bring in this new technology?
(06:48):
But in some cases, an SDK is necessary. It's a more technical answer to your question, but that's when you're sitting there as a founder and that's what you get hit with. And I'm not a software engineer having to describe that as an interesting problem. The other one that I will say that we see on a regular basis is that especially right now, I mean Sabrina talked about we have this technology that's existed for a long time and has to always work. And obviously financial institutions have the same mandate to make sure everything is continuing to function, but at the same time, their systems have become bloated with lots of different third party systems. And so a lot of our large financial institutions are coming in and saying where there were three companies servicing things, we want it to be one. And so I think another thing that financial I've seen financial institutions successfully do is look at their roadmap and say, I want to get best of breed.
(07:38):
I understand that, right? But how do I make sure that that person is aligned with my future roadmap so that the next product and the next product and the next product are aligned with what I want to do and accomplish internally. So I don't have to go through a 18 month cycle to find a new vendor to go solve this for me. I can go to a vendor that has my same vision. Additional to that is is that vendor going to be around three years from now? We're very fortunate at Atomic that I can look that person in the face and I still control my company and I can say, well, I'm not selling this company maybe for north of a billion dollars, but that's not happening anytime soon. So I can say we're here for the next three to five years and we'll build that future with you. So a few things. Yeah. Well
Joey Pizzolato (08:22):
That was great and that very much leads into my next question, which you sort of already touched on, but what are some key considerations for financial institutions when deciding to partner with the FinTech outside of, are you going to be around for the next three years? And outside of build versus buy? Because I'm not interested in talking about that.
Jordan Wright (08:42):
Cool. You want me to talk about it Sabrina, or you want to take it?
Sabrina Tharani Libby (08:45):
I can maybe jump in, but it does pair to this last question. I guess the reason that I'm on this team, let's put it like this. I was in the product organization at MasterCard for a very long time working on our very technical platforms. I'm sure Betty of you in the serum have gone to EMV CO with Proposition. So I was doing a lot of standardization work for the network and about five years ago I uncovered this massive gap that we had in one of our messaging, not gap, but something that we needed to standardize as part of our messaging. And so I brought it back to our product teams and the answer that I got was, you're right. This is going to take us three years and cost us a lot of money. And it was this light bulb moment for me because while that's probably true, there was a FinTech that we could have found to bring into our ecosystem that could have solved that problem for us much faster than three years and in a much more capitally efficient way.
(09:37):
And so that's why I found and founded in part this team, which is really how do we help connect what are our most strategic gaps from a product perspective with founders out there in the ecosystem that are innovating not on spaces that are completely out there but really closely adjacent to our business and then create this equation where we can bring the two together to amplify the needs of both. We need to solve these very specific, very technical product challenges that we have. And there are fintechs that are doing this. This is all they think about. This is what they do all day every day. They're experts at this and they can really help us and accelerate the way that we go to market. We can then help them deploy and get access to scale on day one in an engagement that we have. And they're solving, again, a huge pain point that while we could have built ourselves, it wasn't the most efficient way for us to do it. And so that's the primary consideration that we have when we look for partners, I mean take some of the other criteria out of the equation. We look for strong founders. We look to make sure that their companies are financially sound, we make sure that they have good technology, but outside of that, the most important criteria is how are they going to help us solve a key challenge or key pain point, a gap in the market or in a product that we know we can't efficiently solve for ourselves?
Jordan Wright (10:50):
And I'll add something from our relationship so far. So a very large financial institution was evaluating us when we announced our partnership with MasterCard. It gave them the opportunity and I was fine with it of them saying, Hey, we already have this broader commercial relationship with MasterCard. Can we buy this through MasterCard
(11:11):
So that we can, and it's allowed me as a FinTech on my side to accelerate go to market on something that it would've taken them a lot longer to bring me in as a new vendor than what we're doing right now with MasterCard. So I think that's one interesting thing that these partnerships allow for on the financial institution side. And I feel like I am the FinTech here that's doing the partnerships, but from what I've seen on the other side is that there's a strong desire to be able to say we see a lot of, honestly, it's like a softer thing of cultural fit. We have a customer sitting in the room today that I would describe a very strong cultural fit. And it's tough to really put your finger on pinpoint it, but this is somebody I said this with when I was fundraising, somebody asked me, how do you know if this person is the right investor for you? I'm like, if we got stuck in an elevator for 10 hours, would I want to go hang out with them the next week? It was basically my criteria,
Sabrina Tharani Libby (12:12):
S about that to me.
Jordan Wright (12:16):
But our customers, I think I genuinely feel that way about them. I hope they feel the same in reverse, but these are people that when we're together, it's pretty natural. And so another thing that we consistently hear actually just I got a call, I was in a QBR end of last year and one of our customers said, I was asking for feedback and they said, the number one thing is that I never feel sold to when I'm talking to somebody from Atomic, I always feel like we're working on something together and I forget that you probably are selling me, but that's not my goal either, right? We're trying to solve a problem together. And when you feel like you're being sold to, that crosses a line in the relationship that culturally is not a dynamic you want to have. And so I think that that's another thing is people don't be entrepreneurs. They love pain. That's what I've done. I've experienced pain for a long time starting multiple companies. They start them because they can't not start them. And that's because I just love building stuff. And I think that that's a key thing is finding a partner that doesn't do it for, it's like the only thing that they're fit for. I can't do anything else at this point. So anyway, I think that helps in the partnership.
Joey Pizzolato (13:26):
Oh yeah, absolutely. And you just sort of hinted at a potential pitfall, always feeling like you're selling to folks. Any other pitfalls in evaluating potential partnerships that you have experienced or have seen?
Jordan Wright (13:42):
My list is Too long on this. Can I go first?
Sabrina Tharani Libby (13:42):
Yes.
Jordan Wright (13:45):
So pitfalls. So we experienced the most crazy thing a little while ago. So I get a phone call from somebody that's buying that's looking to buy us and comparing us in a competitor. And they said, well, your competitor is going to give it to us for free for two years. And I was like, wow, their product must really suck if they're paying you to use it. But I think that's a big warning sign, right? Because also, and another one, sorry, this is too long of a list. I'll go one more. But if you think about what happened in 2020 and 2021, a bunch of these fintechs raised a ton of money. And what that made it happen is that they didn't have to actually make any commercial value happen from their contracts because they have enough money in the bank that they're betting on.
(14:35):
And I literally had a FinTech founder tell me this. It's like, oh, I don't care about revenue. All I want is that there's a slope like this. When I go to raise my series B, I'm like, well, I actually want to start a real business. But I think that's another thing to be careful of and wary of is founders that are willing to do anything. And sometimes those look like sweet deals, but what is the likelihood? I mean, they're in it for one reason and one reason alone, and that is their exit, right? I'm a capitalist, but I also love building companies. And so I think that that's another warning sign to me is if a founder or if the team is selling to you, if they're doing some of those sweetheart deals or things like that, you should negotiate the best you can, but be very wary of somebody that's willing to give away all of their revenue on a deal. Because I mean now that company, we have eight of the top 10 and they don't have one of them, and that's a problem for that company. And that will be a very difficult future for them. So those are two.
Sabrina Tharani Libby (15:37):
The valuation comment, I was on a panel earlier this week just about that and how you can become a billion dollar company if you have do AI at the end of your
(15:45):
Name now. And I argued with some venture capitalists on stage, but I would agree with everything you said, and our friends on the next panel are actually going to talk, I think more about the technical challenges that come with partnership. But the only thing that I'll maybe say to augment that answer is misalignment of incentives or objectives at the onset of the relationship. I think when you're going into a partnership with a company of a different size than yours, it's very important to make sure that there's radical transparency at the beginning to genuinely understand what a company founder like Jordan is trying to get out of the relationship and then what you're trying to achieve from the business. And it's not just the beautiful picture of what this could look like if everything goes right, but it's also really understanding practically what your budget is to spend and give to a founder to help them develop or code to your systems. It's about how long it's going to take you to get your organization to buy into the idea of the partnership, which for some of us can take many weeks, and that's something that's kind of unreasonable and unfathomable for a founder who moves very fast. But for us, a month goes by very quickly out of corporate. So just going into the relationship with this crazy level of transparency I think is something that doesn't happen well or often, but it's something that's a very critical ingredient to making sure that these long-term partnerships succeed.
Joey Pizzolato (17:00):
Awesome. You guys are really transitioning into my next question really well because impress, alright, so my next one was how do you ensure that alignment's there, any sort of practical tips outside of just sitting down at a table and be like, this is what we need and what we expect from you?
Sabrina Tharani Libby (17:15):
Yeah, I think as an organization we are pretty honest with ourselves about what we can and can't do. And so we try to be, again, as transparent as we can with our partners about that. I think there's a few formulas that work we look at when developing the archetype of what the relationship or the product outcome could look like. Is it desirable? So will people want this? If we were to do it and bring it to market and invest in it, is it feasible? Meaning will it actually work technically? Is there a go-to market play here? Is there a commercial play? And that's really the final anchor, which is if people want this and if we do bring it to market, well will we both make money off of this investment that we'll make? And so if those three criteria and all the subcategories that fit within those are met, we tend to see good outcomes. But again, that's just the very MasterCard way. There's a number of other models that are used, but we tend to see those work well.
Jordan Wright (18:14):
Yeah, I mean there might be a few more gray hairs in this room than me. I have a few, I've been doing this for 15 years, not as long as some here, but I will say my experience is that overconfidence bias is a very real thing when it comes to these partnerships. And the way that you solve for overconfidence bias is that you say, show me numbers that prove to me that my expectation will be real. And I think that we focus on that a lot both in our sales process and in our time with clients post-sale is let's make sure we set an achievable benchmark, even though that client's saying, I want a 50% increase in X, Y, Z. Okay, I can't do that for you, so go find somebody else. Maybe they'll promise you, but this is what we can do. And setting that very clear expectation.
(19:01):
And usually we try to under commit and over deliver. And so when we come into it, it might start here. And when I was saying, and then I tell all of our customer success team members, I'm like, you got to walk 'em through the valley of, you're going to say, I hate atomic and they suck at this point, but then over here you're going to say to myself, okay, they're not so bad. And then over here you're like, okay, this works. And so I think that setting that expectation ahead of time on both sides, and I think being really making sure that you can say you're drafting off of real data points. And so we come in with our customers and we say, okay, here are, it's fortunate that we have enough customers that we can do this, but here are three customers that are in your approximate area, not naming the customers, but here's what their conversion rates looks like. Here's what the outcome that they were trying to chase looked like, and here's how they did compared to that. Now compare yourself to them and see if you can do as well. Yeah,
Joey Pizzolato (19:53):
Right. How often would you say you're working with a potential partner and they are pressing you for maybe an ROI that isn't feasible?
Jordan Wright (20:03):
It happens. Our space is largely due to conversion rates. And so we have a conversion rate not dissimilar from authenticity where they're logging into a bank account and there are a certain number of people that are going to succeed or things like that. So it's not dissimilar in that regard. There's a difference between having an unreasonable expectation and pushing our teams. One of our customers came to us recently and said, we want your provisioning time and you're switching a payment for these top 15 merchants to go from 20 seconds to 5. And we were like, well, that's not possible, but let's see what is possible. And so we find a way to make things happen asynchronously instead of synchronously. We got it down to eight seconds and they were like, sweet, that's good enough. We are pushing. And I told them thank you because I went back to our team and said, that's not good enough. We're of the largest banks in the country, so let's figure it out. So I think that there's healthy pushback, but occasionally it happens that they're too high.
Joey Pizzolato (20:58):
And then similarly, Sabrina, how often are you talking to fintechs that are sort of promising what they can do and how do you deal with that?
Sabrina Tharani Libby (21:08):
Well, every FinTech founder we meet can solve for world peace the first time that we meet them. But that's why we are so selective. I appreciate the laugh. That's why we are so selective in our diligence process and in picking the partners that we bring into this very specific program that we have. We spend the time to diligence these organizations to really understand how they can deliver on the specific needs that we as a business have, and then in return how we can actually help them be successful as well. So we have hopefully shied away from a number of the founders that the promise complete over delivery, but we do have aggressive KPIs. And the reason that we're opting for partnership over building it or just outright acquiring it like authenticity ourselves is because we do have aggressive ambitions for our partners. But I think they're all within reason. And again, that radical transparency at the beginning of the relationship outlining what we hope to get out of it is very important.
Joey Pizzolato (22:01):
Awesome. Awesome. I do want to talk a little bit more about path and all of that, but I do want to open it up. Does anybody have any questions? Got one in the front here.
Jordan Wright (22:12):
I can repeat it if you want to just say it instead. The microphone. Yeah.
Audience Member 1 (22:15):
What is the service that you partnered on? What was the gap or that you found?
Sabrina Tharani Libby (22:20):
Maybe you're showing your questions like this,
Jordan Wright (22:22):
Maybe I am. Yeah, the question was what is the service that we partnered on?
Sabrina Tharani Libby (22:26):
And so yeah, I can, maybe that's I think similar to the next question we were going to talk about anyway, so thank you for that. So I'll open it up and then Jordan, we'll get into some of the more technical detail here. And you can tell that we've maybe done this a few times together, but one of the ways that we end up sourcing companies is actually really listening to the market. It's not just ideas that in a vacuum MasterCard thinks are important that we should be paying attention to and that we've invented ourselves, although we are very good at creating problems for ourselves. But this one in particular, we were listening to our customers, we were listening, we were trying to figure out what are some of the gaps that maybe we had with the finicity and AI acquisitions and the open banking space that we had made and where we were wanting our product to go organically and where we were thinking partnerships would be a pathway for future growth for us.
(23:11):
And when one of those spaces was account opening and deposit account switching, account opening and bill pay. And so again, we took a really deep look at what would be feasible to build ourselves and if we even wanted to be in the space where we were building that ourselves. And we decided this is actually a great partnership opportunity for us. So my team and the open banking product team went to market to kind of look at who existed in this space that could potentially help us not just learn about how to frame this problem, but actually implement an architect, something that we could bring to market together. And that is exactly how we found Jordan.
Jordan Wright (23:47):
And I would add just more to the context of this is SVB happens in was that early 2022, I got my years wrong. And so a deposit crisis of sorts hits banking in 2022. MasterCard accurately detects this as a theme in the market. And so what are the ways you can increase deposits? Obviously if you get more consumers putting their paycheck into your bank. We have banks that have come back and said they saw a 10% lift in net due deposits from using Atomic for switching direct deposit for a consumer's bank account for their net new customers. And so as was mentioned, Sabrina and team went to market, identified the need, and I think that's the key, right? Chasing a thesis, not waiting for a thesis to come inbound, and although those might happen, but develop your own thesis about how the market is going to evolve and function. And I think going and chasing who's the right person to go and solve that problem based on customer feedback, we start with the customer and work your way back from there. And I think that was a good example of this and how it worked out. Did that answer your question?
(24:52):
Maybe I'll just, I didn't hear a good resounding enough answer, so I'll double down on a little bit. So when finicity has all of this open banking data, and so if they identify that a consumer is being paid by a DP, they can tell Atomic when that person's coming through an experience, and then Atomic can provide that person with an ADP switching experience without having to have that person identify their employer or their payroll system. And so when they're opening an account, they might fund that account using finicity, getting an account routing number from their old bank. At the same time, finicity can pull transaction data that can then make it easier so that their next step is, okay, now fund my checking account with my direct deposit, enter Atomic to be able to, and they hand us the account and routing number, or the bank hand us the accountant routing number, they hand us the payroll system and we switch that direct deposit for the consumer.
(25:41):
And then in addition to that, also the next step being, okay, now this consumer wants to switch over all their credit card they have at their existing financial institution and use their new credit card or new ACH information they just received. And then they can pull all of that information from that other system, and then we can say, okay, it looks like you're paying Amazon on a regular basis, AT&T blah, blah, blah, blah. Let's switch out your payment methods at those places. Is that a better answer for you?
Audience Member 1 (26:09):
Got it. I don't know what ADP stands for, but I got the rest of it.
Jordan Wright (26:11):
It's a payroll system. Yeah. Thank you very much. Yeah, thank you for the question.
Joey Pizzolato (26:15):
Anybody else with a question? No. Okay. I've got plenty more. Great. Okay. So what advice would you give other payment companies considering similar partnership programs? What's essential ingredients for a successful one?
Sabrina Tharani Libby (26:37):
Yeah, maybe a few things here. So I think the accelerator model isn't a good fit for large institutions. And what I mean by that is working with really, really early stage companies, despite the fact that they have fantastic ideas that are going to build next generation technologies, it's really hard for large organizations to partner with these very small companies. And so one of the things that I think MasterCard did really well is be honest with ourselves about where in the FinTech and venture value chain, we can be most supportive. And it's not at the very early stage, and it's not at the very late stage. Actually, it's right in the sweet spot of series A, series B, series C companies where they've demonstrated product market fit, they have some live customers are generating revenue, and really what their challenge is, is the pathway to scale.
(27:25):
And so that is something we can easily help them solve, but that's also where we can find them early enough that we can influence their product roadmaps to be much more adjacent to what we need out of a product partnership. And so what worked really well for us is not focusing on the sexy part of working with fintechs, which it is very sexy, but it's really practically how do we find partners that we can help grow with in the stage that they're at, and really think of that as a partnership accelerator, not an accelerator to just help them get from early seed funding to their series A, right? They've achieved all of that, and now we can be there at their side as they get to their next wave of growth. So I think that's one thing. Just be honest with yourselves about where realistically your risk profile is in working with smaller institutions, and it's probably not at the very early stage.
(28:18):
And I think structuring a program around series A, series B is very productive. The only other thing that I'll say here, because running low on time is the criteria that I mentioned before, which was don't find partners that are just operating in sexy spaces for the sake of it. Every company will sell you some big gen AI idea, but if you don't have a use case that you can bring to market with this company and it's just about exploration alone, you're not going to get very far and you're going to waste a lot of resources, time and money on trying to figure out how to dispel what this means for your business. So find companies and founders that are obsessed with a problem that's similar to a problem that you're facing and that are operating in very practical, close to your business ways, not these big white space categories that are filled with buzzwords alone.
Jordan Wright (29:06):
Yeah, and I would say, and this just comes from pure affection and gratitude from our experience on my side, but go find Sabrina and buy her drink. Well, not for a couple months still, but yes, nothing alcoholic in the near term, but do that and spend an hour with her. It's a good idea if you're looking at building out one of these programs. The other thing I would say is have just drive towards commercialization. Nothing frustrates me more than partnerships. I mean, there are things that frustrate me more than this, but in my professional life, not much more frustrates me more than partnerships that don't go anywhere and that we have this big dream of going and chasing and just have nothing. Having a shared customer pushing the agenda, I think is very important, which we have had several times. But I think also just a focus on commercialization from the FinTech side and from the other side. It's like, yeah, we're not going to talk to you unless we can commercialize in the next six months. If we can't do that, it needs to be a cut and dry. No, this might be a flashy buzzword. This could be a cool thing in three years, but until it can commercialize, it's not worthy of mention.
Joey Pizzolato (30:15):
Awesome. Awesome. Thank you both for such a wonderful conversation. Let's give him a round of applause.