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Leaders In Payments
Leaders In Payments
Navigating the Payments Ecosystem: Insights from MAPP Advisors | Episode 384
The payments ecosystem is evolving rapidly, creating both challenges and opportunities for every player in the industry. In this thought-provoking conversation with Alexander Renzi and Aleks Teichman of MAPP Advisors, we dive deep into how ISOs, ISVs, banks, and fintechs can navigate this changing landscape.
Alexander and Aleks bring unique perspectives from their decades of experience across all facets of the payments industry. They offer invaluable insights into the practical realities of growing a payments business today. Their firm, MAPP Advisors, works collaboratively with companies across the ecosystem, providing actionable guidance rather than theoretical advice.
For ISOs facing unprecedented pressure from all angles – regulatory scrutiny, processor competition, and integrated payments solutions – the message is clear: adapt or perish. The most successful ISOs are evolving beyond transaction processing, building deeper relationships with merchants through value-added services.
Bank-fintech partnerships represent another critical evolution in payments. What was once a vendor-client relationship has transformed into essential collaborative partnerships. Banks are no longer just fine print on merchant applications – they're strategic partners whose sustainability and approach are key considerations for fintechs and ISOs alike.
Whether you're running an ISO, developing payments technology, or working within a financial institution, this episode offers strategic insights to help you navigate growth, regulation, and partnerships in today's complex payments landscape.
Welcome to Navigating Payments Insights from MAP Advisors a special podcast series from the Leaders in Payments podcast. In this series, we sit down with the experts at MAP Advisors to explore the evolving payments landscape. From ISOs and ISVs to sponsor banks and fintech partnerships. Map brings real-world experience and strategic insights to help businesses scale, adapt and succeed. Whether you're looking to navigate regulatory challenges, optimize growth strategies or prepare for an acquisition, this series will give you the knowledge you need to stay ahead in the industry.
Speaker 2:Hello everyone and welcome to the Leaders in Payments podcast. I'm your host, greg Myers, and on today's show we have two very special guests, alexander Renzi and Alex Teichman from MAP Advisors. So, alexander, alex, welcome to the show. Thanks for having us. Thank you, absolutely. So let's dive in and talk a little bit about each of you. So, alexander, why don't you go first? Why don't you tell our audience a little bit about yourself, maybe where you grew up, where you're from, where you currently live, a few things like that.
Speaker 3:Sure, and obviously, before we get started, thanks for having us on the show. We've been following the podcast for a while and it's great to hear all the thoughtful discussions you have with leaders in the payment space. I think the work you're doing is very valuable in terms of lifting the curtain underneath the payments industry. So excited to be part of that conversation. I grew up in the Metro Detroit area, live in Los Angeles. Today Our whole team is remote, so we talk to each other all day via screens. Yeah, it's pretty much about me.
Speaker 4:Okay, alex. Yep, thanks again for having us, and just to resonate with what Alexander said, I've been following your podcast, so this is a real treat. I grew up and still live in outside of New York City. I have two kids. They're 15 and 10. We've been here for a long time. Consider myself a New Yorker through and through. Most people agree with that then, don't we Right, alexander?
Speaker 3:I would agree with that.
Speaker 2:Great, let's go ahead and dive in. So first question, alexander, for you. So let's start with the origin story of MAP Advisors. What gaps in the market did you see that led to its creation, and how has MAP evolved to meet the needs of payments companies today?
Speaker 3:Yes, so MAP was actually founded over a decade ago by my partner, Jim Padista. Jim started his career in payments. I think he was one of the founders of the first e-commerce ISOs back in the late 90s, which he later sold. He then went on to start a gift and loyalty company that he also successfully exited. So I think after that, a bunch of founders in his network started approaching him and asking him for advice how do I build my company? How do I position it to a sale? And I think that demand ultimately led to the creation of MapAdvisors.
Speaker 3:I was fortunate to meet Jim over a decade ago. He represented the buyer in the sale of my first payments company and we ended up staying in touch over the years, and about five years ago, when I exited my second payments company, we decided to partner up. So we've grown it from the two of us. We're, I think, over a team of 14 now and we work closely with all players in the payments ecosystem. I think, at our core, MAP is deeply committed to helping founders achieve successful outcomes. We've built, we've scaled, we've sold payments companies ourselves, so we understand the challenges that founders face, whether it's navigating growth, attracting the right partners, finding the right partners or maximizing value. Our firsthand experience allows us to provide actionable guidance right. A lot of people will give a bunch of fluff. We've been there, we've done that and we can help founders really grow. So I think that's kind of the differentiator.
Speaker 1:And.
Speaker 3:I think I'd turn it back to you, greg. I mean, you're obviously in the space From your perspective. What do you think makes MAP different from other advisory firms?
Speaker 2:Yeah, I mean, I think my experience in the industry is there's people who know the space and there's people who kind of say they know the space and I think that you know you guys, just the team, that you have the experience. I mean you just went through the list of companies that you've grown and sold, and Jim as well. So it's just, I think, that experience and then, as the team has grown, you guys have brought on even more experience. People who are true payments geeks, like a lot of us, have really understood the industry, have built things themselves. So I think to me that's like the biggest difference is, you know this isn't someone who no offense to the people coming from the big consulting firms, but you guys have been there. You kind of know how the sausage is made. So definitely think that's kind of what differentiates you guys.
Speaker 3:Yeah, and I think, if Jim and I don't know it, we go find the best and brightest to hopefully join our team, and obviously that's why Alex is here with us today. So it's been great.
Speaker 2:Great. So, alex, over to you. You've built a career at the intersection of payments, banking and fintech. What led you to join MAP and how do you see your expertise complementing the MAP advisory practice?
Speaker 4:I always think of myself as somebody who just wants to continue to learn and continue to understand. I think the payments industry is continuing to evolve. I've been in payments for about 20 years now and, like you said, kind of at an intersection of payments, fintech, banking, I started in the ISO space and kind of have gone through an evolution kind of in my career. I feel like I've done a full rotation around all of those industries. I've been in two different networks. I've run sponsor bank programs for acquiring specifically, so it's been a really interesting journey that I've been on. I think at least over the last few years I've seen some fundamental gaps, particularly in the kind of in the banking space as it applies to acquiring, and with MAP. I've been following MAP for many years. I've been friends with Alexander and Jim, I've built close relationships with them and I've seen the way they navigate and just the deep expertise that they have across payments from a network standpoint, from a just kind of understanding where the landscape or in the industry is growing.
Speaker 4:And I think, at the core of what Alexandra just mentioned, it's not about just ideas and decks. Strategy is also about execution and outcomes and it's about making sure that you're getting them to the finish line as well, and that's always been my approach is how do you kind of make sure that you get to the finish line or at least directionally go in that direction? And it's a really grounded approach, right? Not a here's an exercise or here's a deck and you kind of go do it yourself. So that's been really interesting for me now that I've joined the team. I've been here for a few months and it's been a wonderful ride so far.
Speaker 2:Awesome. So Alexander, back over to you. So ISOs have historically been the backbone of acquiring. So what are some of the biggest challenges that they face today, and what does the future look like for the ISO model?
Speaker 3:It's never been more challenging to be an ISO today. I think they're facing pressure from all angles. So your acquiring banks they're under intense regulatory scrutiny. Most of that's come from bad actors on the banking as a service side, but it's spilling over to the acquiring side, so that's challenging. You have your processors, who not only are they competing directly with ISOs, but they're also limiting their investment and support in the ISO channel. And then, obviously, on top of that, you have more competition from the integrated payments and the software-led acquiring right. These software companies are embedding payment solutions. They're making a closed loop.
Speaker 3:It's really hard for ISOs to create differentiated models to their sales channel or to their end merchants. But ISOs are nothing if they're not resilient. People have been predicting the death of the ISOs since Square launched its dongle in the early 2000s. Right, but ISOs continue to adapt and they continue to thrive. Predicting the death of the ISO since Square launched its dongle in the early 2000s right, but ISOs continue to adapt and they continue to thrive. I think the ISO model is hard to predict. Generally speaking, the most successful ones are shifting more towards value-added services and building deeper relationships with their merchants and with their resellers, beyond just payment processing. So I think those who integrate into software data analytics and automation will continue to stay relevant. So the ISO model is not dead, it's evolving.
Speaker 2:Okay, great. So Alex, back over to you. So we hear more and more about banks and fintech and the partnerships and how that's sort of shaping the future of payments. So what do you see as the biggest opportunities in these partnerships and where do ISOs and payments companies kind of fit into this ecosystem?
Speaker 4:the intersection of kind of bank fintech partnerships for probably most of my career. I think this is going to sound maybe really simple, but partnering between really close partnerships between banks and fintechs are no longer options Generally. The past may have been a vendor-client relationship and those are very different than a really close collaborative partnership, and I think that's really important in order to continue to grow and be sustainable. In a relationship between a bank and a fintech, the biggest opportunity really, I think, lies in the structured collaboration. Usually, banks bring the regulatory expertise right and fintechs bring the innovation at speed. When it's done right, you can really launch interesting innovative solutions to enable financial inclusion to continue to push the value and the innovation in the space.
Speaker 4:I think when it comes to ISOs specifically and payments companies, the key is moving beyond just processing transactions and really again looking at it like a transactional relationship between a vendor and a client. I'll even say this I think banks have traditionally been seen as a very commoditized part of the payments ecosystem and they were just the sponsor that sits in the background. I remember my old ISO days. The bank was just a small print that was on the very bottom of the merchant application or somewhere online right. It wasn't really a big part of the consideration.
Speaker 4:More and more now, fintechs are thinking first about who's my bank. Isos are first thinking about who's my bank partner. Are they sustainable? Are they going to be here tomorrow? Are they a good partner for me to release it at the table across and work with and make sure that I'm building with? For me to release it at the table across and work with and make sure that I'm building with and that I'm collaborating with, as opposed to doing it behind closed doors and just sending them transactional fees or basis points. So I think that really close collaboration again, I know it sounds super simple, but I can't say that enough A trusted relationship really goes really, really far. And finding the right partner that's for you and that understands do you really need the bells and whistles that maybe one bank has, or rather, do you need somebody that's maybe larger and is able to support you at a scale standpoint? So those are different considerations.
Speaker 2:So sticking with you, alex. So with increasing regulatory pressure and the evolving market dynamics, banks are rethinking their role in payments. So how does MAP support banks and developing strategies that help align both with compliance and the regulatory environment and with their growth objectives?
Speaker 4:Yeah, so the thing that you mentioned I think that's really important is it's compliance and growth objectives, it's not one or the other, right?
Speaker 4:Ultimately, banks get into the sponsorship business or really any kind of payments or transaction business in order to continue to drive growth and revenues, particularly from a non-interest income perspective.
Speaker 4:And how do they kind of diversify their overall revenue and drive the revenue that is not connected directly to interest rates? You know, what we've seen in the past is banks coming and asking us kind of really a range of different questions, right? So one may be can you help us revamp our existing acquiring program? Because you know you have the compliance expertise, but then also you understand from a revenue standpoint how to build it the right way so we can bring on the right types of customers. And then, on the other side, you know we've had partners that come to us and ask us to build our acquiring programs from scratch and really be able to help them from soup to nuts, whether it's the business strategy, getting approvals at the board level, getting buy-in from the networks, from regulators, and then launching those programs. We've kind of seen the full spectrum and are able to support banks that are interested in payments across the board.
Speaker 3:And one thing I'd add to about banks that I found the most surprising and Alex continues to remind me of this every day is just how compartmentalized the different departments are right. Just because the payments group wants to drive non-interest income, the chief compliance officer, the chief credit officer, is looking at it from a totally different lens. So I think it's really important when we start talking to banks is to make sure there's buy-in and what the different drivers are for each group within the bank as to why they want to have the program Okay.
Speaker 2:So, alexander, over to you. So what are some of the reasons that payments companies come to MAP? Is it kind of only when they're ready to exit, or other reasons? Can you maybe outline those? And then second part is how has MAP helped partners overcome some of those blind spots when they're looking to scale their business?
Speaker 3:Yeah. So I think at our core and you know one of our first core value is advisor, not banker. This means our approach is collaborative, not transactional. So it's very rare that we're meeting with a client and immediately selling their business. Our goal is to work with the client for at least a year to really position them for a successful exit or whatever it is they're trying to accomplish.
Speaker 3:Running a business we've been there can be all consuming, right and it's easy to lose sight of the bigger picture. So that's kind of where we come in. You know we will look at your business through the eyes of a buyer. We'll try to accelerate your strengths. We'll try to address any weaknesses, because we've seen the pitfalls ourselves, both personally running companies and advising companies over the years. Examples of overcoming blind spots, you know. We'll help audit your vendor contracts to make sure you're getting paid correctly. That'll increase your EBITDA. We make sure transactions are qualifying at the best interchange rates. We'll identify key executives you may need to hire for the next phase of your business Simple things like go-to-market strategies or sales channels, you know, and even finding new partners, be it vendors or sales partners.
Speaker 3:We help with that because we're active in the space and I think, because we advise all the players in the ecosystem, we can help a payments company depending on what the life cycle is of the market. Today we keep bringing it back to this, but right now the pain point is sponsor banks. Well, we've helped multiple sponsor banks over the years, launching our other programs, so we know how to help you position that bank or we may know a bank who's the right fit for you at the time. So a lot of it is switchboard operating, but because we've had engagements on all sides. So what we like to say within our company is that's really our flywheel of success, right? So our domain expertise will lead to successful outcomes. Successful outcomes will lead to new and exciting opportunities, you know, and then we learn more and create the domain expertise. So it's been really, really exciting to learn more about the payment space over the last, you know, five to 10 years, when I just started out plugging in a merchant terminal.
Speaker 2:Right. So double clicking on something you said there. You said you typically like to work with these clients for up to a year, sometimes before the exits. Was that purposeful, or did that just a learning that happened and you kind of realized that, hey, that's the best way to get the company the best exit. I mean sort of how did that come about?
Speaker 3:I can sound smart and say it was purposeful, but it was really. We were very fortunate that we get to pick and choose our engagements and the people that we work with, and what both Jim and I and the rest of the team have found is, when we don't know the company to its core, it makes it very hard to tell the story and to really believe in them and help them achieve that outcome. The last thing we want to do is, you know, bring someone to market and be totally blindsided by something, knowing that we could have waited two months and help them fix that Right. So it's definitely become purposeful, right, but it's been through the growing pains of. You know, when you first start, you take on any assignment and you're like, ah, that didn't feel good, right, so it's, it's.
Speaker 2:Okay, makes sense. So, Alex, over to you. So for ISOs and ISVs that are looking for their next move to scale their business, whether that's becoming a payback or FSP or whatever it may be what are the most important factors they need to consider before making that leap?
Speaker 4:no-transcript resources, bandwidths and really, from a product standpoint, from a customer standpoint, what do you really need to add in or optimize in order to take you and your organization to the next level? Becoming a pay fact, for example, offers you more control right from a merchant relationship standpoint, because they end up being your users and not necessarily full merchants of the acquiring bank, but it requires significant investment from a compliance risk operation standpoint. There's a tremendous amount of responsibility that you then take on. You really become a payments company and if you're a platform, do you really want to do that? I get it.
Speaker 4:Andreessen said everybody's going to be a payments company, but do you really want to be in that and create that part of your organization as a core of what you do? Fsp, for example just another example allows you a lot more flexibility from a portability standpoint, but still demanding right from an underwriting banking relationship. You've got incredible responsibility and fees that you need to pay, so it really depends on what you are looking to accomplish. You know more and more we have ISVs that are coming to us that really want to understand how do they right-size their business in order to optimize from a payments perspective, or how do they now lean in and monetize payments. I think those are really all very important conversations really to have one-on-one with the individual organization, and the answer varies. I can sit here and sell for and against a payfac all day long. It really depends on the company and what their goals are.
Speaker 3:I would double click on that. In terms of the ISV, we really feel for them. You go to any payments website and everybody says they can do everything. So it's really, really challenging, and ISVs have existed long enough now that they've gone through the pains of integrating and something not working, and it's really allowed us to have a lot more in-depth and fact-based conversations and be able to help them much easier now than five years ago. So it's gotten great how educated all the different players in the space have been, because it allows us to be more effective.
Speaker 2:Yeah, and if you've been around the space a long time, you know you heard every software company should be a payments company. You've heard death of the ISO, like. We've heard all these, all these things over the years and it's kind of funny that none of them are really true. There's just kind of modified versions of all of them.
Speaker 3:Yeah, I have 50 merchants. Should I, you know, have my own bin? Yeah, go for it.
Speaker 2:Right, right, right. So, alex, sticking with you. So lending and issuing are becoming critical revenue drivers for payments companies. I think it goes back to what we talked about earlier. Are there other things beyond payments that ISOs and other companies in this industry need to offer? So talk about, maybe, why this is happening and how should companies think about these as part of their growth strategy.
Speaker 4:Yeah, I mean, I think about just broader fintech right Financial services and kind of two buckets right. One is consumer facing financial innovation and fintech. That's out there and there's been a lot of, from my perspective, a lot of deep saturation in consumer fintech, whether it's neobanks or lending or BNPL a tremendous amount of innovation in that space and that does settle where it will and there will be successful companies that come out of it and the full range that goes beyond that. And then there's, of course, on the merchant side and I think, given where the regulatory environment has been recently, more and more within the payments ecosystem whether it's issuer processors, whether it's lending kind of entities, right Lending fintechs they're really refocusing and they're pivoting into B2B or merchant and all of a sudden merchant has become sexy again. Why? Because A consumer is inherently more risky. There's again very saturated markets. So, just from an industry landscape, that's one perspective of the opportunities that are. At the end of the day, whether it's consumer or a business, all roads lead to, unfortunately, our economy lead to debt of some sort and our country and our economy was built on the ability to have credit and to build upon that and to build a business based upon that and so, kind of coming back to your question, yeah, I think there's a tremendous amount of opportunity when it comes to lending, issuing other types of embedded products specifically for the merchant community, and so there's been a lot of talk about embedded finance, for example.
Speaker 4:Right Again, that can go to consumer or business. It doesn't have to be one or the other, it could be both. But what I would say for a payments company that's really focused on businesses, especially SMBs, what is an adjacent value that you can offer your customer and that doesn't necessarily mean they need a bank account I'll be the first one to say that that could be it. It could be a great opportunity. But why is an important question what are you trying to accomplish? What's the problem you're trying to solve?
Speaker 4:I think those are really important considerations when we think about well, square is offering, or Stripe's offering, a bank account and they're winning my business, so I should as well. I should be able to extend value to them as well. I think, ultimately, what I've seen, also in the ISO space, is the ability to really be a consultant to your small business customer and to be available for them, and I think that will stand out above and beyond a lot of other things that are available Now. If you can also then add in adjacent value, such as potentially a lending product or an issuing product, where applicable, where it makes sense, that is a sure way to win.
Speaker 2:Do you think that the days of kind of the transactional part of payments is kind of going away? When I started in payments the sales guy would get out of his car, went into the strip mall and walk to every single business and then walk back to his car and unload the terminals and plug them in and very transactional it wasn't relationship oriented. Do you think the days of those transaction kind of method of doing business is kind of over?
Speaker 4:I would argue that those are actually more relationship-based and transactional right. I would say that if you call Stripe and you're a customer of theirs and you try to get somebody on the phone, it's really difficult. I think there is still inherent value and I'll be the old-timer maybe to say this, but I think there is still inherent value in having a person available. Is that enough? I don't know. I think those organizations, the ISOs, the agents they still need some sort of product. They still need something in addition to the relationship and the ability to offer transactional processing, so to speak. There needs to be something that adds stickiness.
Speaker 4:In banking, they used to say you need at least three products in order to have a sticky customer. I would say the same thing here. Relationship building is one of those products. It can't be the only thing. The merchant processing is one of those products and, by the way, it's becoming super commoditized because your competitors are selling technology and they're giving away the payments, and so how do you couple together the relationship component, which I still, at my core, believe is very, very important in any relationship, but also add in value, and that, by the way, by way of some sort of technology or some sort of product or something that will make that merchant's life a little bit easier. If you can bring those two together, I think it becomes very powerful.
Speaker 3:I think both are right. You have to have both. And I think that is the bull case for the ISO today. Because payments as table stakes and you're no longer going in and plopping down a VX 520 and hoping they don't notice. You did tier three pricing and why is this non-qualifying right? That doesn't happen anymore. You need to be able to offer them the payments as the table stakes but layer in other products.
Speaker 3:And because merchants want more solutions, they're more open to having those conversations. Back in the day they just wanted to know that their payments worked right. They didn't want to talk about marketing, they didn't want to talk about business insurance, they didn't want to talk about those things. So now the merchant wants to hear about them and to Alex's point calling in a software technology company that's going to send you to some call center or check out this document online and figure it out yourself. They don't want to do that. So I think the ISOs that are willing to have the conversations with their merchants and finding the right tools to value sell into I think those groups are going to do so well.
Speaker 4:The interesting thing that I'm seeing also, at least from a bank perspective not necessarily from a sponsor bank, but just in general banks that are going out and selling into SMBs is because they take a little bit longer to innovate.
Speaker 4:I think they've taken longer, but they're getting close, and so I would predict that if the ISO community is not facing a merchant who's saying my banker is here trying to sell me merchant services and, by the way, they've got tech and, by the way, they can beat your pricing and they also have my deposits today.
Speaker 4:So let me just make it easy for myself Again, if you think about those things, as just you know the value that's being offered, I can say with confidence that it's not just the technology providers and the fintechs that are coming in and winning market share of the SMB community. I would say that there's also banks that are finally getting to a place where they can launch their innovative products they've been working on for the last two, five, seven years and they'll be at the table as well, and that's a much more difficult competitor to overcome because they already have that merchant's business from the banking standpoint. So it's going to be an interesting, I think, kind of environment that we're in in the next 24 months when it comes to who's trying to win kind of the share of the SMB business.
Speaker 2:Okay, so Alexander, question for you. So if someone is interested in learning more, how can they learn more about MAP? And then second part of the question is how do you guys engage with people? What's that kind of look like?
Speaker 3:Yeah, so I'll answer the second one. First, each engagement is unique. I think the common theme with us is intellectual curiosity and a hands-on approach. We get into the weeds with our clients and we skew towards taking on projects that are actionable. If you're looking for a team to provide high-level general advice on a retainer, there's plenty of firms who can offer that to you, but we're probably not the right fit retainer there's plenty of firms who can offer that to you, but we're probably not the right fit. We want to solve problems and create enterprise value. Finding us you can go to our website, mapadvisorscom and bump into us at any of the trade shows we're sponsoring the ISV Village again this year at ETA Transact, which is just around the corner, so hope to run into you and all your listeners there.
Speaker 2:Okay, so obviously we've covered a lot of ground. We've talked about banks, we've talked about ISOs and ISVs and FinTech and the industry as a whole. Is there anything else that either one of you would like to add before we wrap up the show?
Speaker 4:No, I think this was great. This was a lot of fun. Thanks for the opportunity. Like I said, you've got some great prior attendees that have come on, so it's really an honor to be here and to chat with you today.
Speaker 2:Great. Well, thank you both so much for being on the show. I know your time is very valuable. So again, thank you so much for being on today.
Speaker 3:Thanks so much, Greg.
Speaker 2:Thanks, greg, and to all your listeners out there, I thank you for your time as well, but until the next story.
Speaker 1:Thank you for joining us today as we discuss the evolving payments landscape, the challenges and opportunities facing ISOs, isvs and banks, and how MapAdvisors helps businesses navigate growth, regulation and strategic partnerships. To learn more about MapAdvisors, visit wwwmapadvisorscom. Thank you.