Zachary Martinez, CEO of PAYARC | Episode 313

Ever wondered how a leader in the payment processing world thinks and innovates? Zach Martinez, the CEO of PAYARC, joins us to peel back the curtain on the intricate workings of digital transactions and customer relations. With a blend of Philadelphia grit and global savvy, Zach takes us through his formative years, from Boston University to the vibrant streets of Madrid, before steering PAYARC to $5 billion in annual merchant volume. He passionately discusses the bedrock of their success: a commitment to humanizing customer service in an industry where automated responses have become the norm, and how their new payment facilitator product is set to redefine the market.

Beyond the technical aspects of payment processing, Zach shares his commitment to a philosophy known as extreme ownership, inspired by former Navy SEAL Jocko Willink. This philosophy, according to Zach, is the cultural bedrock that has allowed PAYARC to cultivate resilience and accountability at every level of the organization. By championing a mindset that encourages employees to embrace and learn from failure, Zach fosters an environment of continuous improvement and leadership development.

Transcript

Speaker 1 0:01

Welcome to the Leaders in Payments podcast, where we talk to C-level leaders from across the payments landscape. We'll be discussing the products and services that impact the payment space today, as well as trends and predictions for the future of payments. We will also hear stories from our guests about their journeys to the top.

Speaker 2 0:18

And that's true to our mission of being the best part of our client's day. So you know, it's just a personal goal of mine, or a personal mission of mine, to always have businesses that are known to be the best of the best when it comes to customer service especially.

Speaker 3 0:37

That was Zach Martinez, the CEO of Payark, and he is my special guest on this episode of the Leaders in Payments podcast, and I'm your host, greg Myers. Payark's seamless experience eliminates the need to work with multiple third-party providers, empowering businesses to perform better, think smarter and increase profit. Zach and I dive deep into Payark, both what the company does and its culture. We also talk about Payark's new payment facilitator product and what makes Payark unique in the marketplace. We've got a great episode ahead, so let's get started. Hi, zach, thank you for being here and welcome to the Leaders in Payments podcast.

Speaker 2 1:16

Hey, greg, thanks for having me.

Speaker 3 1:17

Absolutely. So let's dive right in, If you don't mind. Tell our audience a little bit about yourself, maybe where you grew up, where you went to school, where you currently live, a few things like that, and we'll circle back to your professional journey in a few minutes.

Speaker 2 1:28

Yeah, fantastic. So I was born and raised in Philadelphia, pennsylvania, went to Germantown Academy and graduated and went to Boston University where I studied economics, and then I moved to Madrid, spain, for a couple of years, worked for an international real estate company and then made my way back to New York City.

Speaker 3 1:47

Well, let's talk about the company PayArk. So what does PayArk do?

Speaker 2 1:50

So PayArk is a payment processor, we process payments for all types of merchants and we support SaaS providers and the merchants that they support internally through their products and services. Basically, what we do is we enable payments for our distribution partners. So, whether it's an agent that sells door-to-door or an agent that sells online, or a ISV that sells through their software, we support them and offer payment solutions to their merchants.

Speaker 3 2:20

So is your end customer actually the merchant or more the partner?

Speaker 2 2:24

It's both Our distribution partners we rely on to grow our business, but we're ultimately providing services to not only them, but their end user, their merchant.

Speaker 3 2:34

Gotcha Okay, and are there specific verticals that you focus on?

Speaker 2 2:38

Yeah, because of the nature of our business and where we support all types of partners, there's no specific vertical that we associate with or prioritize. We support all different verticals and it's really dependent on the partner that's bringing us that business.

Speaker 3 2:52

And are there certain size merchants that matter, or can it be any size it can?

Speaker 2 2:57

be any size. It could be a mom and pop retail shop on Main Street or a publicly traded enterprise on the stock market. We service all types of merchants. And when did the company start? We started the business in 2017. We processed our first merchant transaction in October of 2017. The greater part of 2017, you're dealing with a lot of administrative stuff, like getting your own bins and ICA set up with Visa and MasterCard integrating to the card brands, and that takes some time. Sure, and how big is the company? We have approximately 130 employees throughout the US, mostly, though, concentrated in the New York metro area. We process about $5 billion in annual merchant volume, and that represents close to 75 million transactions a year.

Speaker 3 3:43

Okay, and are you just focused on the US market or others At the?

Speaker 2 3:47

moment, we're just focused on the US market. The US market is a very robust, strong market. Some of the facts and figures you may have heard in the past are roughly about 50% of businesses don't take credit cards yet. So there's this huge opportunity to transition a large portion of commerce to credit card processing, and there's more than enough business to go around to many different payment processors.

Speaker 3 4:09

Yeah, it's hard to believe that in this day and age there's still that many companies that aren't accepting cards.

Speaker 2 4:15

Yeah, covid definitely accelerated that, I think, to a great deal, but there's still a tremendous amount of business to be had.

Speaker 3 4:20

Well, let's talk specifically about some of your products. I think you recently launched a new product. Do you want to talk about that?

Speaker 2 4:25

Yeah, we're super excited about this. I mean, this is kind of a game changer for us. We launched our payment facilitator product this past month. Basically, most people want the Stripe and Braintree or PayPal as the forerunner in payment facilitation. However, I think one of the things that separates us from most payment companies is our customer service right. We answer the phone in 30 seconds or less.

Speaker 2 4:46

Our real main focus is the customer experience. Yes, we have great technology, but in the end, we're really selling service and we're something we're really proud of, whereas with some of the larger companies like the Stripes and the Braintrees of the world, you can't even call them. You're starting with a ticket. It's probably a computer or a bot. Then, depending on the severity of your issue, you'll transition to a live person over email support.

Speaker 2 5:12

We are providing a payment facilitator product that has fantastic cutting-edge technology but at the same time, we're providing that customer experience, that intimate human-to-human interaction, where if a customer or a distribution partner has an issue, they can call us, and a lot of times we're calling them right.

Speaker 2 5:25

Even if we get an. A distribution partner has an issue, they can call us, and a lot of times we're calling them right, even if we get an email inbound on an issue, we may respond to that issue and then follow up with a phone call just to make sure that they're satisfied with the resolution. So that's a big part of it. But basically, payment facilitation is allowing partners, mainly ISVs. These are CRM companies, any kind of software provider that has merchants and users, crm companies, any kind of software provider that has merchants and users, with the capabilities of providing split payment solutions so they can process a transaction and route a portion of those funds to one entity and then another portion to another entity and even more entities. So an easy example of that would be a delivery service you got to pay the driver, you got to pay the restaurant and then the SaaS provider the ISV needs to keep some money for themselves. So you're able to split that payment up into three segments.

Speaker 3 6:08

Is that the challenge that some others might face is being able to split that payment up into multiple areas.

Speaker 2 6:13

Yeah, for sure I mean payment facilitation is not an easy thing to accomplish. That product offering takes a lot of technical skill, so development work. It takes a lot of understanding of risk because ultimately PayArk is what we call the master merchant, so we're ultimately responsible for that transaction. So there's a lot of moving parts that most payment providers and payment processing companies either are scared to take on that responsibility or don't have the technical skill to do so.

Speaker 3 6:39

In that space, just curious. So if you're a software company and you have merchants, you're probably doing something today, right? You could be a referral relationship with someone or potentially processing through someone, like you said, a Stripe or whatever what I've heard. Some of the challenges are you get that base of business right that you need to move over, but that's easier said than done. And then so you have that core set of merchants that the ISV has right. Okay, so that's one set of kind of business, but then they're adding new customers all the time. So are there things that you guys do to sort of help facilitate getting the new to the software company merchants up and running?

Speaker 2 7:20

Yeah, that's a great question actually. So we have different arrangements with our ISV partners that take advantage of the Payfax solution, depending on what that relationship looks like. We have a sales team that will help're doing some of that work and we're also supporting it in another manner. So there's really three different ways that can play out and we offer and support all three solutions. And you mentioned customer service as a differentiator. So what are? A lot of flexibility in terms of how we price out relationships. We also have a lot of flexibility in how our partners can invoice or charge for their services. Whereas some providers have just flat fee and they're very rigid in which way they can facilitate charging their customers, we offer a wide variety of different billable methods to our partners which they seem to like very much.

Speaker 3 8:26

And the customer service. That's just something that you guys decided. Hey, this is missing in the industry and we want to differentiate on that. Is that sort of how it started? I mean for sure that's definitely true.

Speaker 2 8:38

Not too many people do service well in this business, especially with some of the mergers and acquisitions that have occurred in the past years. Obviously, customer service is probably the first to suffer, I would say. But from my personal business experience over the years, I've had businesses where we were the low-cost model and the customer service in a low-cost model just isn't. You're not the Apple of mobile phones, right, or digital products, right, Like you're the low-cost model. And I found that through that experience I said to myself I never want to be the low-cost model, poor support or reduced support business ever again. I never wanted to be in that business again. So anything I did, I wanted to be known as this company has the best support and best customer experience I've ever had in my entire life, and that's true to our mission of being the best part of our client's day. So it's just a personal goal of mine, or a personal mission of mine, to always have businesses that are known to be the best of the best when it comes to customer service especially.

Speaker 3 9:35

Well, I've been in payments for almost 20 years and I've always believed that there was an opportunity for companies to differentiate on customer service. I just felt it was always a challenge in the industry as sort of a mentality of one and done like let's just sign up, the next merchant move on, kind of mentality, and so I think you're definitely hitting on an area that you can definitely differentiate on.

Speaker 2 9:56

Yeah, and maintaining that is probably the hardest part. Right, We've got to maintain that high level of customer experience and that takes a lot of training. We train our employees constantly. Every month they get retrained. We have a shadowing program to help develop general knowledge of what the company does across many different departments, and it's a big focus. But it's tough, it's not easy, but we're up for the challenge and we're excited about what we do every day. That's awesome.

Speaker 3 10:22

Well, where do you think the industry is headed? Say, maybe in the next three to five years?

Speaker 2 10:26

Yeah, that's a good question. So obviously general payments has become commoditized. It's a race to pennies and basis points, or fractions of pennies and fraction of basis points, right. Obviously, software comes into play and merchants are willing to pay for software or new capabilities like payment facilitation, where you have split payments. And then obviously there's a strong foray into push-to-card services, which I think is going to be very disruptive to the payments business in general, where you're going to see push-to-card overtake ACH, maybe not in five years, but certainly in 10 to 15 years. For people that don't know, push-to-card is basically the ability to use the Visa MasterCard rails to instantaneously pay somebody. And you see that with the peer-to-peer payments now with some of those apps like Venmo but Venmo is really Venmo to Venmo, where push-to-card is you could push $100 to a vendor if you owe them $100 or $1,000 or whatever it is as opposed to initiating an ACH transaction submitting a file a, not your file to your bank, the bank submitting it to the Federal Reserve and then the next day the entity is funded.

Speaker 2 11:36

This is a real-time payment transaction and the cost is on par with ACH and sometimes cheaper.

Speaker 3 11:42

Do you see the kind of you mentioned real-time payments, account-to-account. I've always been curious if that account to account payment will ever reach the small business sector. Do you ever see that happening?

Speaker 2 11:56

Yeah, there's already instances of it within small business in terms of payroll, if you're paying out tips we're seeing some of that there's rebates, a million different use cases where this comes into play. That makes the business's life a lot easier and also makes other people their customers or whoever they're paying or whoever's's life a lot easier and also makes other people, their customers, whoever they're paying, whoever's getting paid a lot happier. I mean something as simple as or not as simple as, or something that people don't think about is just clinical trials with pharmaceutical companies. Right, I mean they're paying out $5,200 a week for a clinical trial. Once a certain phase has been completed, I mean their ACH and I are sending a physical check. If they could just push the $50 payment to the patient, that solves a tremendous headache for pharmaceutical companies. And that's just one example out of thousands of examples where I pushed a card that was going to make an impact.

Speaker 3 12:42

Okay, well, let's switch gears a little bit and talk about you. So tell us about your journey, how you became the CEO there of PayArc and maybe some of your background.

Speaker 2 12:50

Yeah. So, as I stated earlier, I initially got started in commercial real estate and I thought I wanted to be in real estate since I was a little kid. But after working in real estate I realized that maybe that wasn't what I wanted to do and I moved back to New York City and started a healthcare business with my brother. It was a healthcare software services business and we grew that business and I sold that in 2010 to an individual that was rolling up these types of businesses. And then I kind of stumbled into direct-to-consumer home services and I started a direct-to-consumer home services business selling antivirus, home support, home internet, home TV, home security, and that business grew fairly quickly.

Speaker 2 13:33

We had a lot of success early on and then I realized that the payments world was not what I thought. It was A fast-growing B2C business that has online transactions I thought was fantastic, while my payment processor didn't think it was fantastic If they couldn't look out their office window and see the business. They weren't comfortable with the merchant. So that opened me up to this whole different world of payments and I did some research online and I found my now business partner, jared Ronski, and I spoke to him. He was a payments agent broker and he enlightened me to this fantastic world of payment processing. He had originally worked at the PaySafe, which was formerly Optimal Payments, and he helped me out and found me the appropriate payment processors that supported my business and we became friends and then I looked at his business and I said you have this fantastic, amazing company agent business. Why aren't you a full-fledged payment processor? We got to talking and one thing led to another and we ended up starting Payark and it's been a fantastic journey ever since.

Speaker 3 14:36

They often say once you get in payments, you can't figure out how to get out.

Speaker 2 14:40

Why would you want to? You know, what's great about the payments business is that even our competitors are our friends and everyone's so nice and everyone's excited to be in the payments business.

Speaker 3 14:54

You don't find that in many industries, really, yeah, and it's a fascinating business when you step back and think about how big it is, not just in the US, but you look at globally. You're talking about every aspect of moving money that affects commerce across the world. There is some part of payments whether it's your traditional card rails or ACH or others just amazing at how intricate it is. And what always amazes me is you have to get it right to the penny 100% of the time to be successful, and that's just fascinating to me. So, yeah, I agree, it's a great industry to be in, so thank you for sharing that background. So what are some things you're passionate about? So, maybe one work-related passion and one personal passion.

Speaker 2 15:35

Yeah, so a work-related passion is promoting extreme ownership within the company. That's kind of a phrase coined by Jocko Willink, a former Navy SEAL who has his own podcast. Basically, extreme ownership is taking responsibility for failure and then celebrating the failure too right, we celebrate failure here at PayArc, but really taking responsibility for failure and then celebrating the failure too right. We celebrate failure here at PayArc, but really taking responsibility for it. So if someone fails as a leader, did I do everything possible to make that person successful? What responsibility can I take for that failure? Did I not train them enough? Did I not promote them to ask questions? Was I not clear in my instruction?

Speaker 2 16:14

And you can apply this to any scenario I really want people to argue over ownership, not over blame, right. So we want people to take responsibility, and practicing extreme ownership is very difficult, right? Especially for people that have never done it before. But it's a very powerful thing and it promotes camaraderie, it promotes leadership and it allows maybe some of the younger generation to learn from this leadership. So that's a company thing. On a personal note, I coach youth football. Both my sons play youth tackle football. Having two sons different ages, you have to pick which one you're going to coach that year, but we're all in the same practice field. But that's something I enjoy and look forward to every year. I played youth football myself and it was very impactful in my life to see my kids play it and enjoy it and that camaraderie is very rewarding.

Speaker 3 17:00

So are they linemen, or quarterbacks, or receivers? What position are they?

Speaker 2 17:03

My older son is a quarterback running back and plays some outside linebacker, and my youngest one, he's only nine, he plays running back and free safety.

Speaker 3 17:13

Nice. A lot of leadership skills can be taught through sports. I'm a true believer in that, for sure. So final question and I always like to get everyone's kind of perspective on this, because I think everyone brings sort of a unique view to this If someone comes up to you and says, zach, hey, I'm interested in the payments industry or fintech, whatever you want to call it and I'm looking at making a career in this industry Maybe they even want a job at your company what advice would you give them? What would you tell them they need to do to be successful?

Speaker 2 17:41

There's many different areas of the business that you can get started in. It could be a sales support, account rep type, executive stuff. It could be underwriting. It could be risk it could be underwriting. It could be risk operations support. So there's various different aspects.

Speaker 2 17:55

You got to decide what is most appealing to you and then, when you finally make that decision and you're fortunate enough to get a position within a payments company, you want to become an expert in your job. Right, and that's a difficult statement. Right, because some people are like oh, what does that mean? Right, being an expert in your job is first mastering the basics. Right, you've got to master the basics. Do what your responsibilities are to the best of your ability and then take it a step further and go deep into each responsibility. And if you're in support, maybe that means learning more about the gateway and the functionality. It could be anything, but you want to become an expert in what you do.

Speaker 2 18:31

What's great is that PayArk we've been fortunate enough to have some individuals that have started in one job and then they raise their hand. They're like this has been great, I enjoyed this, but I want to do something else. And they move from, let's just say, support to underwriting and then they're underwriting for a little bit, maybe two years, and then they raise their hand again and be like I really want to learn more about the technology side of the business and they move into the technology department. So that's what's really kind of exciting and great to see is when you have employees in your company that start in one part of the business and then make their way through different departments and grow that way. That's really exciting and that's just something that you just love to see.

Speaker 3 19:12

So do you think that curiosity or that desire to want to do that, do you think that's innate in people, or do you think that's something you can coach?

Speaker 2 19:16

We definitely promote that. We talk about that as a company internally. So when this does happen, we bring it up in our town halls and say so-and-so has raised their hand and we're excited that they're going to be moving from this department to this department. It is somewhat contagious, I would say, but I think some people are maybe a little bit more timid to make those moves and a little bit more scared to take that leap. But we also say that listen, if it doesn't work out, that's okay. You can always transition back to your original position. So don't think that you're stuck. Once you make that move, you're stuck in that new role. We applaud you for taking that risk and if it wasn't the right choice, there's nothing that's going to.

Speaker 3 19:56

You know you're not going to get penalized for making the transition back. Well, zach, we've covered a lot of ground so far, obviously, about you and the company and the business. Is there anything else you'd like to add before we wrap up the show?

Speaker 2 20:03

No, I just say thank you very much for having me. I really enjoyed this and I look forward to potentially speaking again Awesome.

Speaker 3 20:08

Well, zach, thank you for being on the show today. I know your time is very valuable, so I really appreciate you being here. Great Thanks, greg, and to all your listeners out there, I thank you for your time as well, and until the next story.

Speaker 1 20:18

Thank you for joining us this week on the Leaders in Payments podcast. Make sure you visit our website at leadersinpaymentscom, where you can subscribe to the show and where you'll find our show notes. If you enjoyed listening, please share on your social channels as well.