Episode 1: Supporting Innovation in Fintech with Dave Peterson

SPEAKERS: Ernest Rolfson, Dave Peterson

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Ernest Rolfson  

Hey, this is Ernest Rolfson, the CEO and founder of Finexio. Welcome to B2B Cashflow Conversations, the podcast dedicated to sharing insights and innovations in b2b payments, working capital and cash flow management, and FinTech entrepreneurship. In each episode, my guest and I tackle questions in the ever evolving world of FinTech and payments, an industry that's rapidly evolving and of great interest. Looking forward to having a conversation.

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E-bankingErnest Rolfson  

David Peterson, he's an e-banking pioneer is well known for his 30 years as an entrepreneur and content expert on payments for financial services, stakeholders, he's the president of US DataWorks, which is now part of Checkalt, a leading provider of integrated receivables. David's also a podcast connoisseur and podcast developer, he runs his own show, Innovation Driven Growth and it's clear that in listening and getting to know him a bit here he has a passion for getting businesses and people thinking more about how to spur innovation and And not only that, but have good decision making. So I'm excited to have you on on the podcast and guest number one. So David, great. Great to be with you, man.

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Dave Peterson  

It's a high honor Ernest. I, you know what, no one will ever be able to say that they were the first podcast guest, except for me.  Nobody.  So amazing.  

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Ernest Rolfson  

Hopefully not the first and last. We will we'll see where this goes at all rides. It all rides on this, this momentous conversation.

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Dave Peterson  

No pressure, no pressure.

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Ernest Rolfson  

There's every day is the is the Super Bowl. So, you know, that's it laces out, laces out as they speak.

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Dave Peterson  

And looking forward to our chat.

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Ernest Rolfson  

Me too. So why don't we start off by sharing with the listeners what is you know, US DataWorks and CheckAlt l in what what do you guys actually do? What what's making the sausage move there? And then certainly, if there's a vision or mission statement or something that's always interesting, I've gotten good coaching and advice on that over the years.

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Dave Peterson  

Love to hear from absolutely, absolutely CheckAlt bills itself as the largest independent payment processor in the United States. So most of the payments processors that are out there, providing payments to billers to organizations who need to acquire and post builds as well as financial institutions who are trying to acquire deposits. Most of them are aligned with one of the big core providers FiOS visor Jackanory at all. CheckAlt is an independent payments provider. So it gives billers but more importantly, financial institutions who are supporting billers, a complete suite of products and Shai Stern, who is our CEO is a great visionary in our industry, he likes to call check out the house of payments. If there's if there's something going on with payments that a biller or bank would need. Shai wants to make sure that we provide it either directly or through the many API's that we support, or through the many third party relationships that we support. So we tried to be a one stop shop for both traditional paper based You know, there's still 15 billion checks written every year. So there's still paper coming in with coupons and so forth. But there's also this push for electronic billing checkout wants to wants to basically be the independent provider in that space.

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Ernest Rolfson  

Well, look, the more you do for your customers and partners, the more valuable you are. Right. So that exact strategy makes makes a lot of sense.

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Dave Peterson  

Yeah, yes. So and leading with the software is key. Absolutely. Yes, it is. Now, you also asked about US DataWorks. So yeah, since early 2018, just data works has a long history as well in payments, but its primary focus is integrated receivables. And not to dive into the minutiae of that. But if you think about a traditional business, they now have many different ways that payments come in. And it's you know, old days, it was like checking the coupon. So you had all the payment information in the check all the remittance information in the coupon, it was really easy to match the post it to accounting now you have many, many different ways that payment can come in. And you have many ways that remittance information might be so now you have to have something that we're putting out always connected, right? They're not, they're not right, so so over time, companies have reduced the straight through processing of being able to post directly to accounts receivable, you know, from a high of you know, 90% of 7550. And in some cases, companies are down under 40%, meaning a lot of manual effort has to be done to say, Oh, this is David's payment and it goes to this account and that somebody's doing that well. That's huge impact gross margin. Because that's cost that's not helping the business grow. It's not doing anything to improve the customer spirits. It's just dead dead costs. So that's what USDA works focused on in the real difference between what checkout does, which also does integrated receivables. And what us data works is just data works provides an outsourced solution for a financial institution or a biller to be able to do that on their own through our hosted service check all has an outsourced service where they do all of that on behalf of a bank or a biller.

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Ernest Rolfson  

Got it. You touched on one of the buzzwords in this space, straight through processing. There is that a kind of Holy Grail, would you say for these FI's and billers?

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Dave Peterson  

it absolutely is, and this is this is one of the most frustrating things is that there's financial institutions out there large and small, who have companies that have these kinds of integrated receivables needs. But they don't ever ask questions like think about CEO of bank going to visit CEO of Acme big business, right? So having a conversation, where does that turn...

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Ernest Rolfson  

The fundamental fly on the wall in that conversation?

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Dave Peterson  

When does the banker ever say Hey, what's going on with your accounts receivable? Are you are you seeing that your straight through processing rates have dropped below 40? Right? That conversation never happens. Anyway, so so this is this whole idea of how much assistance a financial institution is in a position to bring to their business, but never asks the questions that you have this rich supply of information that the banker then can say, Oh, well, we've got these tools that will help you lower costs. And when, when bankers lower the cost of doing business for their business customers, they become very strategic partners. CheckAlt is in the business of helping our financial institutions become strategic to their business customers.

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Ernest Rolfson  

That's right. That's right. Just not to go too much on a tangent here. But because these banks are just so poor, asking these deeper strategic questions and the nuts and bolts, do you see our job here is FinTech companies more about taking the decision making away right from the bank, and more of just what if the what if the serve What if the software and service made the decisions because it's just one's nose and robots. And we know that you know what we owe, there's an opportunity for straight through processing, there's an opportunity for electronic.

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Dave Peterson  

So things are going it is and let me separate the the functional aspects of actually getting these associations of billing, you know, payment and remittance information together from the ability of the financial institutions to connect to their business customers who need that service. So what we've done at checkout is we've said, Look, every time we have to manually make an exception repair, I don't know what this account number is, okay, I go through a series of steps and I associate this account number with this, with this payment. Now, our system learns you have machine learning or artificial intelligence, everyone say so. So now start their meeting. So

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Ernest Rolfson  

creeps back up to 90, you know, 94 95% here's the problem, even though we can technically do that, it still requires a banker, to go to their business customer to ask key questions to have a what I call a crucial conversation. So that they know and understand that that business, that medical company, that city, county government, that utility company, that property management company, they have a need that we can fulfill, we just haven't been asking the question. So so the technology is exactly as you represent it. It's advancing and doing a lot of things automatically. But bankers still aren't asking those crucial questions.

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Ernest Rolfson  

That's right. Well, I think the data can can be the way to serve the lead the horse to water, to help them to help them do that. That's right, I'll get putting that in their hands. Right.

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Ernest Rolfson  

And I'll just say that the outsourcing USDA to works has a very robust platform to be honest with you, we were not nearly as successful prior to our acquisition by CheckAlt as CheckAlt was because CheckAlt is outsourcing. A lot of banks now. And even billers are to the point where they're just like, we don't we don't want to touch we don't want the mail to come into us. We don't want to open envelopes. We don't want to touch and so that the issue about time for outsourcing is huge. Now it come You know, come into February of 2020. And what do we have a global pandemic? So how did people feel even more so at that point about physically touching of lives right back in those early days, they weren't really sure how the virus was being transmitted. So so the appetite for for people to come in and say, here's a professional organization that has operation sites all over the United States, so that wherever you are, we've got the ability to take your physical mail, bring it in, process it and give you files that post to your bank and post to your accounting. system. And then then further, let's take all of the things that you're getting in paper, and how can we help you convert that to electronic? How do we help you make that transition? So that instead of just being paper until the last check rolls through the system in year 2073, or whatever, now we're actually giving them the ability to migrate that over to electronic, which further reduces their their costs improves their gross margin. That's right.

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Ernest Rolfson  

I mean, one of the things in parallel, I mean, right, my company Finexio was about helping companies make and deliver payments and as much pain as it is, for the suppliers or pays or near world, these billers right about you can't be sending people in the office right now to collect checks. You can't do it. It's got to be electronic, it's not safe. And we've seen I mean, I'd spent spent this last week with three companies over 300 million in revenue, sending people in just to deal with checks. And on our side, they're sending people into print and mail checks. Right now. That's crazy. And so I think the pain is higher than ever, on both the receiving end the sending side. And, you know, we've got, you know, a robot being controlled with an iPhone, they're crawling around on the moon. Right. Sorry, Mars. I'm sorry, I forgot I thought I was in 1964. For a minute. I I better take another sip of coffee we're in. We're on Mars now.

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Dave Peterson  

How is it that we can see a beautiful High Definition picture of the landscape of Mars and yet the landscape of payments for both on the accounts receivable and your world accounts payable side is still in 1973? How does that happen?

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Ernest Rolfson  

Look, banks are not technology companies, as we know as we know. That's where people nice people like me, and you come into play.

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Dave Peterson  

We have to help them, you just have to help me be very clear. Let me be clear, I am not disparaging financial institutions at all these these are folks who who perform an incredibly valuable service. And they're absolutely they are is super important. They are so important, especially to business customers, where they're getting credit to expand their business, you know, your ability to bring on new people, and do all of these payment things. What what they really haven't done when you think about large banks, you know, the Bank of America, Wells Fargo city, Chase, and so young, when you think of all of these 1000s of small community banks everywhere, the companies like checkout are there to provide that that downstream, you know, 1000s and 1000s of banks the ability to do things that might otherwise be very expensive for them to

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Dave Peterson  

Yeah, we're not saying that they're not capable. We're not saying they're not paying attention. We're saying let us come alongside you, and provide the pieces that are missing so that you can offer an incredibly strategic service to your customer. It will do all the work.

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Ernest Rolfson  

You're a known speaker and an influencer around innovation and in financial services. I mean, is it hard is what is fundamentally in your view with some of these banks we're talking about and smart people, good people. Is there a barrier around innovation within these, these those four walls that you think we should know? Or talk about or tease out here? Is there something real or what why is this there's this explosion in FinTech, right? I mean, why banks? They have all the business they have all the money, they have all the relationships why or what? What's going on?

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Dave Peterson  

Yeah, it's it's incredibly hard to be a bank. A few years ago, the OCC opened up a FinTech charter, and there was worried that you know, dozens or hundreds of fintechs were going to go be banks, I think maybe one with four to eight is really hard to go through all the process and be a bank. And as somebody who started a software company years ago, goldleaf technologies that was a wholly owned subsidiary of a bank, I know how difficult it is to actually operate as a FinTech and be a part of a bank holding company. There's just rules and regulations that limit your ability to truly be innovative. Right. So your initial question was, are Is there a barrier right to banks being innovative? banks are incredibly tradition bound, and incredibly traditional. And in fact, I'm going to throw this out there. And it's I don't know if this is go crazy to your crazy, but I recall, I was working. I'm on the board of payments, first nonprofit payment Association based in Atlanta. We were talking about the conference in September conference, what kind of speakers who I said, you know, we need we need a funeral home director to come give a talk. And they're like, what?

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Ernest Rolfson  

that's a great venue to talk to,

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Dave Peterson  

you know, what do you tell them is a great, it's a great business.

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Ernest Rolfson  

That's a great business.

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Dave Peterson  

So here's what's happened. I have some friends who have recession proof. And we were sitting there talking about business and innovation, whatever and think about another business besides banking. That's pretty tradition-bound. Probably funeral homes, right? And so I was asking my friend about it. He said, David, he said, our customers have completely and totally changed. I'm thinking, What are you talking about dead people are dead people. He goes, No, no, that that's not our customers, those are our product. Our product is services for dead people, our customers are those that are left behind making decisions about what's going to happen with the dead people. So So those now are young Gen x's, they're millennials. And maybe even in some cases, some older, older Gen Z's. So the way that they have to pitch their services, the the model in which they talk about all the business of funeral homes has now completely changed. Even a lot of the things they're doing in funeral services are changing. Based on this changing demographic, they understand that they cannot stay Pat if their customers are getting younger and moving so much their marketing so much their services. And so I think this is the parallel that banks see they are still focused on those customers that make them the most money, which are primarily baby boomers, right people of my generation. But we're we're getting older and unfortunately dying at the rate of 10,000 a day now baby boomers. So the future for financial institutions are young Gen x's and millennials and eventually Gen Z's. They're the ones that are going to start companies, they're the ones that are going to have different types of payment needs. And yet most financial institutions aren't sort of skating to the puck to use a Wayne Gretzky term. They're not they're not letting their innovation move ever.

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Ernest Rolfson  

We need to have at least one Wayne Gretzky quote, in every way that you learned it right? That was it? Yep. That was it.

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Dave Peterson  

But a big part of the banks don't want to be on the bleeding edge. They don't want to be pioneers, because pioneers are dead people with arrows in their back facing west. So So there has to be, has to be, that's what they think of. So there has to be a way that if innovation, if they can start down a path of innovation, as these customers right there will there'll be an intersection of any

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Ernest Rolfson  

Need my 3d glasses right now to see that.

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Dave Peterson  

But some banks, some banks are getting it, you're seeing some financial institutions out there that are being very proactive in terms of working with fintechs, you're seeing a lot of banks move towards this idea of banking as a service or payments as a service instead of the traditional way of banking. But by and large banking really fundamentally has not changed much, even in the face of a great deal changing, especially as it relates to faster payment options.

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Ernest Rolfson  

Sure, well, they're gonna have to figure out to do something with these, these branches sitting there, they cannot turn them into San Francisco coffee shops, like our friends at cap one.

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Dave Peterson  

Nope. By the way, I have a whole series of content on branch transformation, perhaps for another time another day. Okay.

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Ernest Rolfson  

Okay. I know a thing or two about that. But you probably know a lot more than me. Well, I think the thing you heard it here first, folks is we're going to soon be shopping for Funeral Home Services via Instagram influencers. That's where things are going. That's what the kids are into these days. But now Look, I mean, same thing as same thing as a funeral home needs to innovate and communicate to a new generation f eyes need it, you know, they need to actually I think distribute their services and products through software, which is a way that you know, if you think about the Office of the CFO, the CFO suite, he or she is using accounting packages, they're using accounts payable software, accounts receivable software, they the financial services need to be embedded within the software. That's how people are making decisions. Now. They're not just calling up their banker and saying, oh, what product can you give me or whatever they're like, they want to use software to make their business go.

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Dave Peterson  

In a really good example of that, which which I'm sure relates to both our accounts receivable side your accounts payable side is the more that we can automate it, then then these things that are normal, the things that work, the way they're supposed to work are automated, nobody has to look at him. Nobody has to touch him. In that instance, when all of a sudden there's something that's a little bit awry when something goes sideways, he exception, how can how can somebody have a high touch? Reality right? And so now that's where you start thinking about chat, you start thinking about you know, other other ways of interactive video and just like we're chatting here and on video, you know, some some financial institutions have gone to video tellers, but but this idea of being able to get the expert in the bank on a little video chat who helps me with a particular vaccine problem, and, you know, Why didn't my AC h file didn't do this, or some, you know, some particular issue, the billing file, you know, it didn't go out like it was supposed to, and now I've got the ability to actually, you know, like, I've got a whiteboard right here. So if I was doing some kind of support, I might be able to draw a diagram whenever there's, there's I do it all day long aging, right. So so that's where, you know, we as technology companies are in in that mode, and so must I think the financial institutions Then say we can automate all of this, and then we'll offer a high touch experience if you have a vaccine problem.

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Ernest Rolfson  

Yeah, I mean, I mean, so I mean, I think where I want to go with that is like we it's, these technologies aren't even the emerging technologies. But these are the technologies that I think are are influencing the roadmap for financial services, and, and are going to be embedded into the processes. But we're only at the very infancy stages of that, in my in my opinion, I don't know if you have a different idea, maybe, maybe there's more investment around SMB right now. But like, I live in upper middle market, I'm dealing with a couple 100 million dollar manufacturer, no bank is called, there's no innovation, it's all paper. That's all paper. And now the SMB has more technology than the company that's moving hundreds of millions of dollars. It's, it's amazing.

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Dave Peterson  

And it is it is exactly it is exactly the way the way that you say it is it is a situation where as companies move forward in a continuum of their growth, and especially think about somebody who's 27 years old, decides they want to start a business, and they go to their hometown bank, maybe this is where their dad and grandfather bank type of thing. And they go in there and they start talking about things and say, well, we're going to be taking payments from Zell. And, you know, eventually, we're going to need to send some overseas hch with IITs. And the person that they're talking to is literally clueless, like they don't understand these were what what, what are these things of which you speak, that's where the person doesn't get, maybe give them another chance or like, you know, right, this bank isn't, isn't forward thinking enough to be to be up to speed on what these things are. And now they go to some other large financial institution, because they think that's the only place they can get. So my important point is this, it's not enough for banks and credit unions, to have the technology and the payment services that they need. They have to be competent, and delivering that story, they have to be able to explain not only that they haven't, but why it's important for you maybe to use this to be in a consultative mode on it. And so that's another big piece is that to, to really sort of sell you have to be a good storyteller. And and bankers traditionally have not been in the storytelling business. Yeah. And that's another big factor as well.

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Ernest Rolfson  

You know the way that I, I don't know that I was taught this way I was I was trained in solution selling right, formerly, right, and you're selling a femoral I was at MasterCard, right. So what if you're a network? How do you sell somebody in network? You know what I mean? It's, so it's very ephemeral, very, like, What is your problem? Oh, you have a pain point. Okay, well, what if we could do X, Y, and Z, and it solves it? Oh, really, that would solve your pain point. Turns out, we do that actually, we can string all this together, and you kind of tell you lead the horse to water. That part of that is storytelling. But I think that, you know, the more you can create that emotional connection with the companies you're trying to help and paint them a vision, the stronger and more valuable the relationship becomes around what could in our world look moving money, that's a commodity, you can get a CH you can get checked, you can get wires from any number of places, right? And so it's a question of, who do you work with, you work with someone that's knowledgeable, that's a trusted adviser that has deep insight into your business, but can make that connection around what your business objectives are? And the pain and the feelings you want to have in the future about what will it feel like using my product and working with me? What kind of experience do you want to have? And I've never, I've never been delighted? how delighted Have you been when you walked into the bank branch or something like that? Right? There's no, it's a lack of delight. It's a lack of us. Right? Right.

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Dave Peterson  

It is there is no question and I will just use CheckAlt. As an example, if, if a financial institution goes to a vendor and says, Hey, this is what I want to do, I need I need to offer lockbox for 24 of my best, most profitable customers, I need to be able to do some type of electronic bill payment and presentment. And I don't want all that integrated together in a in a package. And a lot of companies say yeah, we have that. And it's very structured and standardized. This is the way it works. Yeah. It's a checkoff, we see a check all this more along the lines of having conversations with this financial institution and learning about some unique things that some of these companies are doing. And then using the tools that we have to basically create something that's standardized in terms of our ability to run it on the back end, but really gets tailored to what any individual customer needs. And I think that's that's the same model that because we do that we wind up having longevity, a lot of companies that stayed with us for years and years and years, just you know, maybe somebody else came along and said, Hey, we can do this for you for a nickel cheaper, whatever else but they they know what kind of service that checkout represents. And so so that's the same thing. We're looking for is if I walk into a bank and I say, Hey, I'm looking for a payroll account, I need to be able to pay my folks. And immediately they open up the big fan full brochure that has all of the checks of how you can do, right payroll checks, right? Well, wait a second, I didn't say anything about checks. I said, I needed a payroll account. So immediately, I should be thinking, a CH, a CH credit should be the way that those goes. It's just that difference of thinking of listening to what somebody says. And then understanding more what they mean. They only know what they know, we only need experts to know what they need and help them come up with a solution that fits their needs.

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Ernest Rolfson  

That's exactly right now, I mean, what you're doing at checkout around more of a I don't want to say custom solution, I want to say the right solution for the right customer versus in the box tailored, that's exactly the right word solution, a Savile Row styles solution.

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Ernest Rolfson  

Bespoke payments.

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Ernest Rolfson  

I mean, it's it's that's what gets you in with the customers. And I think for payments, and we've looked, we've seen this in Merchant Services merchant acquire, it's a commodity now it's just a commodity. And you can get credit card processing from 100 different places. And you can always get it for a nickel cheaper. You know, those guys had to learn a hard lesson. And the best players, the stripes of the world, the brain trees are realize that they've got to go with custom API integrations into software platforms. And there's a unique stickiness factor there's something around helping manage the data flow it's so it can't be about Can I just get it one nickel cheaper Can I get a few more basis points is you've got to work with people that know and understand your business and are willing to invest in do something unique. And that's the mistake I see companies making is thinking you know what, this is just a commodity, I can just I can call up 50 different banks and get virtual card better, more more rev share, and it's like 100% of zero is zero, you got to work with people that are gonna help you enable the growth here. It's

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Dave Peterson  

just so he says, I'm preaching. I'm chuckling because this is so real. For me right now, one of the things that I'm doing is really focusing on our checklists, our traditional paper items, you know, that come in dying. In some people have just completely written it off. And they're still about 15 billion checks that get written every year. And so you know, people go well, back in 97, it was 55 billion checks. But if you didn't know that, and I just told you, there were 15 billion checks, you go, that's a big number of checks, a lot of checks. So a lot of people are abandoning this business, a lot of companies that were traditionally in house, because of their volume now are 65% of volume, or 40% of audio, or 70% of volume. So there's more and more need for focus on these checks. And here's the big number. Two big numbers 526, that's the average amount in dollars of checks back in 1997 $526, average check 2020. It was right, I think actually 2019 might be the last published numbers over 20 $600. So what's happened is is as those small dollar payments have been eliminated by you know, PayPal and other forms of acth and other electronic payments that's left is a lot of b2b payments, which are large and are very important to quickly and accurately get posted to accounts receivable. So that company has money to pay people and buy supplies and grow their business. So so that's again where checkoff comes in and says, if you if your check business is such, where you really would just like to outsource it to somebody, and let us take it on, and all we do is send a deposit to your bank, and a file goes directly to your accounts receivable to post then that's, that's the model that we feel there's a Renaissance period now for these these paper items. In some cases, you still have coupons, you might have what like a stub, you get a full tariff about

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Ernest Rolfson  

on remittance Yeah, we send all of that

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Dave Peterson  

all of that stuff is still very, very active. And even though checks still are declining, the rate of decline has really slowed a lot. So there's still many, many years left of active check business and check out just wants. I don't know, what would Shai say he just wants half of it. He does. He's not a greedy person. So seven and a half billion will take seven and a half million checks. Sure, we'll be fine.

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Ernest Rolfson  

That's fine, that that works for me.

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Dave Peterson  

we'll have signs up as they send us your checks.

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Ernest Rolfson  

You know, one of the things we would say at MasterCard, you know, a billion here, a billion there and soon you're talking real money. Yeah. So it's, it's fine. That's cool. So where now now that we now that we are where we are aiming, there's been a lot of acceleration due to 2020 and the changes we've seen in COVID. I mean, is this going to continue here? Do you have any kind of predictions about this is it's going to slow down or I mean, this is this has undoubtedly been a help for your business. I would imagine.

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Dave Peterson  

It has no question. No question. Here's what I would say. I would say that we are not going to go back to what things were in the fourth quarter of 2019. I don't think there's any like, okay, everyone's vaccinated, or we got herd immunity or whatever. It goes back. I think enough time like people's behaviors change, when your brain changes way, right, you reorient towards that? So are we going to continue doing things in 2022? like we did in 2020? No, but you know, the phrase that you hear is new normal. And so I do believe there'll be a new normal, but the new normal has really spurred let's, let's call it financial institutions, and billers and organizations that may not have been as forward thinking relative to how they view the future of payments and faster payments and other forms of payments. And because of COVID, were sort of forced into thinking about that, so they're not going to go back. I think there's, there's, there's still a renaissance for those high value checks. But the opportunities now to actually capture new types of payments as we go forward. And you see RTP being advanced by the clearing house, and now the Federal Reserve is got a pending, faster payment called fed now, that would be out in 2023, maybe 2024, there's going to be other third party payment providers out there doing things, there's, there's an appetite now, for the ability to to quickly and securely capture and make payments, let's just call it push credits, I need to push a credit to Ernest and and there are a number of use cases both on the consumer side in the business side, as well as the consumer to business side, where an instant payment with two parties that don't know each other. But that is not going through the card networks could be very valuable. And I think that's where that's where, you know, really examining those use cases and then a banker going to businesses they know would would follow those use cases can now tell a story.

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Ernest Rolfson  

Understood, since you touched on it faster payments, I get asked this question a lot actually. Investors and folks are always like is faster payments, gonna kill virtual cards and eliminate the card rails and all this stuff. And, and I'm like work from where I sit, I've been asked exactly zero times by customers, CFOs big companies in the last five years about faster payments. So I see zero customer demand from where I sit. And you know, I work with companies that are like 100 million in revenue, 2 billion in revenue. I like we're plugged into large procurement software, they have 1000s of customers, not a single one is asked about faster payments, but it comes up a lot. Is this disrupting anything? I mean, is this just a we're just going to charge people a little bit more money to get an A ch a little bit faster? Is that really just what we're talking about here? Because that's my opinion, but I'm just one, you know, one? payment? slub? What do I know? You know,

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Dave Peterson  

So you hit it right on the head. So Finexio is dominating this world of automated payments, right? payables, right, how you're automating all of the tables, right? So here's a company, here's a company, they want to schedule and make their payments. And they may also have certain things that they've tied into their accounting system, as well as their financial institution for things like Positive Pay, you know, fraud prevention, you know, a whole bunch of stuff that they have built around this idea that a check with a check number, made out to a specific payee with a specific amount, you know, with, you know, all of that gets tied into all of these other systems. And then somebody comes along, says, Wait, why don't you just send that through a faster payment. And it's like, you know, just converting the check itself to a faster payment is really easy. What's not easy is now making sure that all of those other systems that you had for fraud prevention, for management of accounts payables, for for the, for the way that information is flowing between accounts payable systems and the RP, the accounting system of record, or the bank records, all of those things have to come together in order for you to say, I'm going to replace this check as a outbound payment from a business to another, probably to another business. So So the way I would say it is, is that if you went to the it's like, Why Why is it any any CFOs asking earnest about this is because they've got a system that works, they know when and how they're making their payments. And so what's the use case? What's the business case for somebody who's a manufacturer to say, I have to send money to somebody and I have to do it right now. So I have one, I have one. I'm going to share it with you at you probably don't have any because dude, we got this old right here, folks,

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Ernest Rolfson  

you're hearing it here first.

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Dave Peterson  

Here it is. a rancher in Texas rolls up to a stockyard. Are you are you from Texas? Are you not? Oh no, you're not Born and raised in Florida, and I live in Georgia, oh, Ranger rancher from Texas rolls up the stock yard with a big with a bunch of trailers, he's gonna buy 100 head of cattle, he does not have a previous relationship with the stock yard, he picks out his 100 head of cattle and he owes them, let's pick a number $250,000. Now, before he drives away with 100 cows, the stock yard wants to know that they have good funds of $250,000, because he's gonna leave with the cows, right? It's not something he arranged ahead of time, he didn't arrange for credit ahead of time, he's going there and saying, I'll buy these cows and I need to do something so that you can see that you've got $250,000 in your accounts, that's good. cash is king, as they say that's it. So you obviously don't have $250,000 in cash. So that ability for him not to have a previous relationship with this company, but still affect the payment within a reasonable period of time share. There are similar examples on the consumer side, right where a consumer wants to buy something to garage sale, and it's more money they can get from the ATM, but they're not going to take your check you're from California. And you know, you happen to be visiting your sister in Georgia, whatever. I mean, there's a lot of use cases where it would be really helpful if I could push a credit to you and you knew that you had the funds secure. So going back to your earlier question. A lot of these models like the RTP model, the Fed now faster payments model require the financial institutions to integrate with their core system to give those systems access real time to somebody who's available balance to know whether or not they can fund those payments. And similarly to credit somebody for the receipt of those payments. I think that there's a lot of opportunity in the EFT POS rails. Well, using

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Ernest Rolfson  

buy now pay later ideals.

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Dave Peterson  

Right? I'll do that I can, that I can push you a credit that without us having to have a previous relationship or even be on the same app that I could push you a credit through the debit rails, and you would see it because you would look at your online banking through your mobile and see that $750 had shown up to your account from David Peterson that has legs and I think you're going to find that for a lot of faster payment scenarios. Whereas RTP i think is going to be great as it rolls out and eventually replaces some wires on the b2b side. It's wires are expensive. And and it's it's a little bit more difficult to see it as a day in and day out sort of p2p solution. Morais Right, right.

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Ernest Rolfson  

So really, if there is a loser, perhaps in real time it, it would probably be the wires that that's the only way to get same day today. But it's if you're charging 20 bucks. 50 bucks. That's right. That's right, done manually.

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Dave Peterson  

Cut it again. Banks, banks, look at that, how many wires they do and the wire income and they think well, how much is it going to cost us to go do something else like RTP? If that's a you know, that's a decision point.

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Ernest Rolfson  

Turns out these are businesses. And remember when when the was it, Dodd Frank, I guess right when they kind of had the Durbin amendment to Dodd Frank, and they reduced the debit interchange down dramatically. And at the $10 billion issue or cap. Banks increased all their small business checking fees and ATM fees and more shocked, right, these banks, they're evil, they're charging consumers, it's like, well, there was just some regulation that took away billions of dollars of their revenue.

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Dave Peterson  

Yeah. And to be fair, I've said this all the time, banks are different than any other kind of business, right? So So to me, banks aren't any different than the dry cleaners, you go to the dry cleaners, you take your suit, and they do a valuable service and you get your suit back, you pay him, you know, 1250, and you're happy about it. You give your bankers your money, and they perform a valuable service. But if they try to charge you $3 for it, it's all of a sudden, like, wow. So people think about their money differently than any other product service. So banks and credit unions really do have it tough, simply because people don't look at the way that banks provide service like they would any other vendor.

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Ernest Rolfson  

Hey, you know what? Yeah, I mean, look, it is not free to move money, it costs money to move money, as we know. And these checks, these checks are costing, like $16 a check to move, right? Somebody's got to make, make a profit here, you know. And, look, the more we move to digital, the more money we can save, and the more we can make together and the better it is for everybody, you know, everybody.

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Dave Peterson  

Again, that's that's why the strategy of checkout isn't to say we're going to be all electronic, because to go to a business etc. It is not realistic possible to do securely and safely process your checks, and then work collaboratively with you to move those checks over to electronic payments.

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Ernest Rolfson  

That's the right strategy. Hey, look, half of my business is checks. We're printing and mailing checks for companies but I can send those checks with robots. I don't have to have people sending those checks. So I'm helping you know Amherst College. Or Lino Morgan and Morgan, the law firm where they're printing and mailing checks with people. And I'm like, You know what? I can kill half your checks, put those to digital, the rest, I'll use a robot to print. Right? Everyone's happy. Everyone saves. Yeah, there you go. And as the checkout so the world's and others come in and help us further digitize that life will be good. Right?

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Dave Peterson  

I agree.

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Ernest Rolfson  

It's one of those one of those things. So, back to your example real quick. I know we got to wrap up here shortly where those were those meat cows or those leather cows. The guy in Texas I wanted didn't that didn't come up and it was at 10,250k. So those were those were meat cows. Those were Texas was

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Dave Peterson  

this is kind of like the Kobe like high end Kobe beef. You know, a lot of marbling marble,

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Ernest Rolfson  

it's about the marbling, well, it's not just the marbling, you have to massage them as well with the with the

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Dave Peterson  

it's the very first podcast, you're going to be getting actually messages in for people in Texas, like wait a second, the council cost that much.

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Ernest Rolfson  

I want to know, we went my wife and I went to New Zealand, and that's where the right there's more sheep than people. And we said, it'd be awesome to move here, along with Peter teal, have our own sheep farm. So I started doing research that on how much it costs to buy these by the sheep, and it's not that much money, you can get a bunch of sheep, the harder part is the land. So you got to get the land. So So um, so I guess, I guess two things here, as we're as we're kind of before we go, I guess, you know, look, you've been in this space a while you've you've started companies, you've been running companies, you've got to innovation driven growth podcasts. I mean, what some of the, you know, what, some of the, I guess, if you have a big interesting learning over the past few years or over your career, what is that been around that it could be about the space? It could be something else? What What is something that? And I have a follow up around this, but anything impact?

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Dave Peterson  

Yeah. It's, it's amazing, because I actually work with some young people who are starting companies. And, and, you know, unfortunately, Millennials have been sort of passed with a broad brush that they, you know, that they they don't have, they never, they've never had to experience any kind of adversity there. They've been handed everything, everybody got a trophy. And you know, that's, that's obviously a gross exaggeration. But what I will say is, is that there is there is great learning and failure, there's a lot of people who want to start out and do something, and don't really have an appreciation for the value of mistakes, value mistakes. So when I talk about innovation, innovation comes from creativity. But creativity isn't innovation, to get creative. You got to come up with ideas. Everyone's trying to think of good ideas. Maybe they're trying to think of great ideas. And it's a huge mistake, stop trying to think of good ideas, just come up with ideas. So somebody, you know, I'm speaking at a conference, somebody comes up afterwards and says, Hey, David, you know, I'm struggling, you know, to come up with some good ideas, you know, what's the what's the secret? And I say, Well, how many bad ideas have you come up with this month? Like, what are you talking about about? I'm not trying to come up with bad ideas. I said, exactly. That's your problem. If you try to come up with a good idea, you're struggling, all you got to do is come up with ideas. Because what happens is is bad ideas. Meaning that just not feasible, or it doesn't, you know, it doesn't work, whatever. But bad ideas, spur more ideas. When I do group brainstorming, one person throws out something, it's crazy, but nobody ridicules them. But somebody in their head goes, Oh, that's a crazy idea. But you know what wouldn't be crazy. And they think of something that they now say that they would never have thought of, but for the quote, crazy idea, so we have to stop stifling ideas. If anyone ever in any company throws out something, oh, that's a crazy I that's a bad idea, whatever. They are literally stifling innovation, keeping that person from coming up with other ideas. And so if somebody comes up with an idea, and it's nuts, and then their fifth ideas, really wacko, and their 15th ideas just out of this world, you know, maybe their 25th idea is something that all of a sudden saves the company $2 million a year, we have got to stop this, this whole thing of we're going to get around and think of a good idea. Harvest ideas, collect all ideas that work those massage, those might be the seed of idea, give it some, give it some good soil and some water and some sun and let it blossom into the fruit of innovation.

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Ernest Rolfson  

Hey, I look the way that I started Finexio and created now like 50 jobs is because I was tired of having so many great ideas at a big company that we couldn't do anything about. We couldn't act on them. Everyone's like, Oh, that's we were at a big company. We said hey, why don't we partner with Uber or Lyft and help transport sick and elderly people to their medical providers. And we're That'll never work now that help. They've got healthcare divisions now, it Uber and Lyft. Right. So I was like, You know what, let's, let's go, let's go do this on our own. Let's go find find a path on our own if I can't get the ideas done here, so I completely agree with you. And I guess Lastly, I mean that we call the show, really paying it forward. It is a play on words that were in the payment space, but anything you would share in terms of advice around, you know, you being on the front line in payments, maybe it's someone maybe it's a fellow entrepreneur, or someone starting their company, or maybe it's other players in the space. What, what kind of advice would you have, to some of our listeners, it could be anything in this in this area.

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Dave Peterson  

Here's what I'd say, if you're a parent out there, or an aunt, uncle, you know, you have nieces and nephews, children, and if you want them to have the potential for an entrepreneurial feature, then I think there's two very important things. Number one, let them be entrepreneurial early, let them have yard, you know, yard sales, or sell lemonade or paper route, or I don't even know if they have those anymore. You know, go around and out anything they can do that's entrepreneurial as a young person is gold. And the second thing is, is let them ask questions. Don't stop stifling children from asking questions. Yes, I know, it can be annoying, you know, and so forth. But you have to allow them to question the world, and then provide meaning that don't give them you know, platitudes. Oh, and, you know, pony. We call it unicorns and rainbows. Talk to him in reality about some things that are top is difficult to, you know, talk to him about experiences, but answer and let them ask good questions and into my friends in the financial services industry. If you work in a bank and credit union, I would ask you to think about this. There are literally millions of potential customers right now, who are coming into the workplace who would never ever, ever think that they need to have an account at a bank or credit union. They don't even consider that you exist. They don't, they don't have any need. They don't. They don't, they don't feel like you exist for any purpose. That's for them. So So don't sit there and think that they're going to need you and then come into your beautiful lobby to ask about accounts, you are going to have to proactively help them understand why having a relationship with a primary banker is really, really important. A bunch of millennials had businesses that they weren't doing anything with banks, and then PPP loans came out and guess who was delivering PPP loans fintechs the bankers, the bank?

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Dave Peterson  

The bank accounts and now

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Ernest Rolfson  

that is true,

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Dave Peterson  

how do you how do you get a beat up so we need to be able to tell those stories and help them understand why it's important for them to have a primary banking relationship. So that's my advice,

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Ernest Rolfson  

you know, what they they do serve a purpose you need someone to hold the money and they're licensed and regulated to do that safely and securely and that's pretty important, you know, so they're gonna they're gonna stay relevant for a while. Well, look, this has been a lot of fun. We got some Gretzky quotes. We did some time traveling. We talked about beef and leather calves, we got some parental advice thrown in for good measure. a whirlwind tour de force, if you will, David, where can we kind of where do you lurk? Where can we find more about you?

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Dave Peterson  

If you would like to reach out to me I'm at david dot Peterson PE te RS o n at check. all.com c HECK ALT dot COM And if you want to know more about innovation driven growth, you can actually go out to David Peterson dot COM And there's a link on David Peterson dot com that will get you to a book that I've written and the podcast, and a lot of other I have a lot of information out there on social media on everywhere on social media, media, as DLP speaks with the exception of Facebook, which for some reason I'm dp speaks. So I would welcome anybody who wants to contact me and share information or say, hey, you're crazy about the cows or, you know, let's talk about financial services or innovation or whatever's on your mind.

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Ernest Rolfson  

Look, this has been a lot of fun, great conversation and looking forward to to keep it in touch and keep fighting the good fight together.

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Dave Peterson  

Awesome, Ernest, thank you so much.

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Ernest Rolfson  

My pleasure, man. Take care. Thanks for listening to B2B Cashflow Conversations. This is Ernest Robson, CEO of Finexio- I welcome your questions and comments. You can reach me at podcast@finexio.com. You can find me on Twitter @Finexiopayments to subscribe, you can go to finexio.com/podcast. Be sure to check out my new episodes on Apple podcast Spotify or wherever else you listen to podcasts. Thanks and talk to you soon.

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