.jpg)
Leaders In Payments
Leaders In Payments
Dan Battista, CEO & Partner at Factor4 | Episode 395
Dan Battista, CEO and Partner at Factor4, takes us on an journey through the rapidly evolving gift card landscape. With genuine passion and deep industry knowledge, Dan reveals how Factor4 has grown from just 3 employees to 22 staff serving over 21,000 merchants in just a decade.
The conversation illuminates Factor4's remarkable approach to customer service – answering emails within 10 minutes and phones within two rings – which has become their true competitive advantage. Unlike competitors owned by large payment processors, Factor4 focuses exclusively on gift and loyalty solutions, allowing them to devote 100% of their investment and attention to perfecting these offerings.
Dan walks us through the transformation of gift cards during the pandemic era – from traditional plastic cards to essential digital solutions delivered via email and SMS. What was once a "nice-to-have" became a critical business necessity, pushing Factor4 to develop comprehensive omnichannel capabilities that seamlessly connect online and in-store experiences.
Particularly compelling is Dan's insight into loyalty programs as customer relationship management tools. When pandemic restrictions hit, merchants suddenly realized they had no way to communicate with their regular customers about changing hours, outdoor dining, or reopening plans. Factor4's customized loyalty solutions filled this gap, helping businesses build valuable customer databases while driving repeat business.
The conversation also explores Factor4's innovative approach to technology, including their development of iOS and Android apps that enable gift card transactions without additional hardware – simply using a smartphone camera to read barcodes. This adaptability has allowed them to integrate with over 50 different POS systems and expand internationally across ten countries.
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:Hello everyone and welcome to the Leaders in Payments podcast. I'm your host, greg Myers, and on today's show we have a very special guest, dan Batista, the CEO and partner at Factor 4. So, dan, welcome to the show, greg, thanks for having me Appreciate it Absolutely. So, if you don't mind, start out by telling a little bit about yourself, maybe where you grew up, where you went to school, where you currently live, a few things like that.
Speaker 3:Sure, born and raised in the Philadelphia area, home of the world champion Philadelphia Eagles, as of this year, always been here, stayed here. Our office is still here at Factor 4. I'm the father of four and I've got four stepkids. So we were just in the grandchildren stage at this point in time in our lives. We've got three grandkids, and fourth on the way. I was in the paint industry for 20 years before coming into the gift card world back in 2003. Been there for over 20 years now, a variety of different positions and companies, factor 4 being the latest. Like I told you, we're almost celebrating our 10-year anniversary here at Factor 4 in a couple of days. So it's been great. I still play golf. I still play men's hardball Over 55 men's league. Yeah, I got the aches and bruises to show that Nice.
Speaker 3:Scraped some of my hands and stuff like that, but still play baseball and just have a great time. It's a good time in life and things are good, great.
Speaker 2:Well, let's talk about Factor 4. So tell the audience what you guys do.
Speaker 3:So Factor 4 is a gift card processing company gift and loyalty right. So we do loyalty transactions as well. Started back in May of 2015. We purchased a portfolio of ISO book of business from a former company called Sparkbase. Sparkbase was a wholesale provider, bought about 4,000 locations. With a couple integrations Realized, there was a real opportunity. We started with three employees Really focused on two pieces of the gift card world.
Speaker 3:We know gift cards are really like an accessory product or almost a hinge product when it comes to merchant processing sales. So two things that really matter is the number of integrations you have, the amount of terminals and POSs that you work with and our customer service. So when a rep or a merchant processing salesperson is out selling an account and they're ready to close someone, then the merchant says, oh, you can do my gift cards too. There's that deep breath. We know they need an answer. So we've really pushed the customer service side here. We respond to emails within 10 minutes. We answer the phone within two rings. We're here from 6 am to 8 pm Eastern time. So we really focus on the customer service side and in our world, in the gift card world, I think it's second to none what we do as far as customer service and the amount of integrations that we've completed through POS and payment terminals, we've completed through POS and payment terminals, maybe talk about kind of the traditional gift card of back, when it was plastic, to more of the common 2025 gift card.
Speaker 3:Yeah. So it's really changed and I'll tell you that what we've seen. We were most worried about the standard plastic gift card going away. When all the technology and merchant processing moved from the swipe to the dip, right, we were like, uh-oh, the swipe's going to go away. Right, that's going to be a problem because it's a mag stripe on the back of a plastic card. How are you going to process a card? So what we did is we put a barcode, a printed number and a mag stripe on every one of the cards plastic cards we print.
Speaker 3:Now fast forward back to early 2020, when we decided to have the pandemic right and everything was just crazy. You know, the plastic card product was what it was. It was a good product. That's what people wanted, that's what people did Post and during pandemic. You know you needed the e-card, you needed that SMS card, you needed the digital card piece. Whereas before it used to be a very much a nice to have, now it's a must to have.
Speaker 3:So what we see is our plastic card product really is not just an in-store plastic card product, but you can email a gift card, if you need to, from a store, you can SMS gift card from the store, and then we can build a link for you that enables you to sell both a plastic card and an e-card right from your website. So then we can build a link for you that enables you to sell both a plastic card and an e-card right from your website. So those things are really pretty much standard in today's world, and what's nice about it is that we do all that internally and it all integrates together, so the card you sell online can be redeemed in store and vice versa. It's all done together, so it's sort of an omnichannel solution that allows it to happen and you mentioned the integrations and partners.
Speaker 2:Is that your sole go-to-market strategy or do you do any direct-to-merchant? Great question.
Speaker 3:So when we took over the portfolio from SparkBase back in 2015, it was 99% through ISOs. That was the play right. That was the book of business. They wanted to white label it. We can white label today still and we can and we do for certain people. But what we found is that the ISO and the POS was always sort of like an afterthought as opportunity. Many POS products come to us and say, hey, can we connect with you Because we've got enough software projects to work on and the ability to connect with you gives us a full service gift card product from day one. So we found that as a huge opportunity and the opportunity to go direct to merchants has allowed us because of our integrations. We've got integrations with Toast and Micros and all the latest POS products and that really allows us to go direct to merchant groups, small franchise groups, to handle movement of funds and things like that. Absolutely. So I would tell you today we're probably 60% through partners and 40% direct to merchant.
Speaker 2:And typically those are relatively larger merchants that have the volume or the location.
Speaker 3:Franchise groups that are sort of growing, that you know that one to a hundred range that are growing, that look to need a partner that can be helpful and help them through the process. You know groups that may have done business with us in the past and say we're moving to this POS, you might not be integrated, we want to stay with you. Can you work with us? That type of thing. So really it's a wide variety of different groups and again our development pipeline, which is just endless. At this point I think we've got 50 different POS integrations we're still working on today, which is just it's mind-boggling, greg. It just really is.
Speaker 2:Maybe talk about that, because we were talking, before coming on air, a little bit about being in the payments industry a long time and when I first started there was Ingenico, verifone, hypercom. I mean that was probably 90% of the market and now a lot of companies fintechs have built their own solutions and a lot of POS system integrators like you mentioned some of them so maybe talk about how that's changed over time.
Speaker 3:Yeah. So one of the things we did early on and again I would tell you that if we were this smart, we would have been really smart, but we weren't. You know, back in the day and again I use this is that there was nothing worse than getting a call from a merchant saying my terminal's down, I can't run transactions. And what we used to panic about is oh, we got to build a new download, we get a terminal, we'd have to overnight it, and things like that. So early on in Factor 4, we built both an iOS and an Android app and that app allowed the merchant to be able to run transactions from any smartphone and it's a free download. So that app has really allowed us to sort of grow into those POS integrations as well as those payment terminals, because a lot of those are built on Android-based products. So when we have the ability to go on our Google Play Store and download a Factor 4 app, that app really is the basis for a lot of our different integrations and apps that we can use.
Speaker 3:And what's nice about it is that app. You don't need additional swiper, you don't need a piece of equipment to plug in the phone. It uses the camera on the phone to read the barcode on the back of the card. So you don't need to swipe, you can log in pretty simply. You can run transactions on any PC, on any phone, anytime, and it's just like adding another terminal to that merchant. So that's really been a huge help, for that Android-based product has really been. You know, we revise it for terminals like Point, terminals like Pax and things like that. But once you revise it it sort of works like a charm. But it's a great base for the product.
Speaker 2:And you're US only. Is that correct?
Speaker 3:No, we're in 10 different countries. We're in South Africa, ireland, england, all through the EU, canada, mexico and a variety of different places.
Speaker 3:So yes global and that's come from integrations, typically Like we're on Clover. So we've got thousands of merchants that use us on Clover Again, very interesting play, because obviously Clover has its own gift card product. But back to what we said before, Greg, if you try to call the Clover gift card department and try to call Factor 4, you're going to get somebody on the phone to answer your question with us and we're going to be able to solve their problem pretty quickly. So that's been really the edge for us.
Speaker 2:Well, I think that's a good segue into the next question. What would you say are your key differentiators against your competition?
Speaker 3:Yeah, and again it really. You know, thinking about this, about what we did, was when we took over this company, we knew that there was a need for a customer service piece. Right, because most of our competitors are owned by merchant processors. Right, because they own their own gift card product. Let's go back to Chase Payments Act, to GiveX, all those, all the value techs, all of our competitors are owned by a processor. So the typical residual on a gift card product is about one-tenth what it is on a merchant sales product. So that product in the merchant processing world doesn't get a lot of investment.
Speaker 3:Well, in Factor 4's world, that's all we sell is gift and loyalty. So it gets 100% of our investment. That's the nice part about it. So our integration list is second to none. So we can run a transaction. We can have a group of merchants that have a Clover, have a Micros and have a Toast POS and they can run transactions across all those POSs, those transactions across POS. So that's one of the big differentiators for us. And the other piece, greg, by far, is our customer service, our ability to solve a problem or to get somebody set up. And hey, listen, I need this merchant set up in an hour. We can do that for you, and our ability we print some cards in-house, we can turn things around. We can solve a problem that just helps that merchant processing salesperson make it a lot easier for them. Well.
Speaker 2:I want to go back to the product for a second, because you've mentioned loyalty a couple of times, so maybe for the audience that may be unclear on what you mean by loyalty, can you explain how? Maybe that's a little different than gift card or what the two are. So yeah, loyalty is a great product.
Speaker 3:Loyalty is one of those products that really became one of those items that people really need after the pandemic. Because when pandemic hit most of the merchants didn't know who their customers were. They needed to get in contact with that customer and say, hey, listen, we're still open, we're often dining outside and things like that. So loyalty became a product where they really need to understand who their customer was, how often they were in there, what they were spending. So in our world loyalty is a way to really help manage that CRM for that merchant so they know who their customer is Typically a custom product, right. So something to say.
Speaker 3:Loyalty products for a coffee shop is not the same as a loyalty product for a furniture store. Their average typically are way different, their customer's way different, their promotion is way different. So we're able to sort of sit and talk to that merchant and say, all right, what are you trying to get out of it? Are you trying to collect phone numbers? Do you want email addresses? Do you want to send them rewards? How do you want to do it? There's all different levels to it. So we'll take the time and sort of spend that time with the merchant and sort of build that loyalty program for them.
Speaker 2:When you step back and look at the payments industry and obviously you can answer this with the Factor 4 lens, but where do you see sort of the payments industry headed in the next, say, three to five years?
Speaker 3:It's amazing to me to always see the technology getting better and better and better. You know the toast of the world and all the different technology, the handheld Like I was just out of the country for the last week. It's amazing to see every time you use the credit card, the person brought the credit card terminal right to the table. There's things like that that have to get done. So I think the more the technology continues to ramp up, the better off it is for the payments world and I think at some point they're going to have to take that legacy technology and sort of start turning it off. Payments has always sort of let it work until it dies and then replace it. It's time to sort of move on from that because it'll make things more secure, make things faster and more consistent for the merchant. Because the merchants are just sitting on old equipment and it just tends not to be very good for them. They get frustrated by it. So I see a lot of the new technology In the gift card world.
Speaker 3:Plastic has seen its growth slow. It's still growing. Plastic gift cards still grow. There's still a value in that perceived value, right when you give a gift. Giving an emailed gift card isn't always the best option. There tends to be a little bit of feeling of it's not as important. So the plastics are still there, but we see the growth in the e-card, the growth in the rewards card, having the ability to be able to send a $5 gift card via email to 100,000 customers to get them to come in on the last three days of the month, because it's an opportunity. There's where the opportunity comes in. So there's a lot of marketing opportunities that we see through digital, which is really huge for merchants.
Speaker 2:Well, let's switch gears a little bit and talk about you and you talked a little bit about your background, but maybe give us sort of your high-level overview of your background and professional background and then maybe why you did Factor 4, how you got involved, why you decided that was the place to be. Yeah, so again.
Speaker 3:So I came out of college, graduated college, I went to work for a local paint company that had 150 locations. Did a whole variety of different things with them, started with an accounting department, had an accounting degree, knew the bases in business, did real estate site selection, lease negotiation, ended up being a regional manager of sales and stores for the largest group they had. They sold to a national chain, sherwin-williams. It was a good time for me to get out. At that point my brother had started another gift card company previous to Factor 4, needed someone to for me to get out. At that point my brother had started another gift card company previous to Factor 4. Needed someone to come on to run sales. So he says come work with me. So I did.
Speaker 3:We got out of that in 2010. I was my own ISO for five years selling merchant processing, selling gift card, because that was really the basis of that previous gift card company. We were really an ISO who happened to have gift cards right, we were selling merchant processing and sort of giving you the gift cards. And then in 2014, sparkbase was looking to build a version five product of what they were doing, needed some money, wanted to sell a piece of their business, they decided to sell it. My brother and another partner, craig Davis, decided to take a run at Factor 4. So we opened the doors in May of 2015 with three full-time employees, me being one of them and then weren't sure where we were going, had about 4,000 merchants and sort of figured out what was next.
Speaker 3:Fast forward and today we're about to move into our third office. In 10 years that's 8,000 feet. We're 22 full-time employees. We've got over 21,000 merchants using our service, got the longest list of integrations out there, and we just see the opportunities. As just it amazes me the opportunities that are endless, the integrations opportunities, the new partners, merchants that are looking to us. Again, customer service really has been key for us, as well as the integrations, but we just had some really good people. Hard to believe it's been 10 years. I don't see any slow to the growth. I just see it just moving on.
Speaker 2:Well, what are some things you're passionate about? Maybe one work-related passion and one personal passion.
Speaker 3:Yeah, so work-related is. The first thing is for us, especially when someone calls or emails in. For us, especially when someone calls or emails in, I'm very passionate about solving that person's problem before you figure out why there was a problem, right, and there's always that, hey, listen, this shouldn't happen. Let's figure out what happened. But that needs to be chapter two. Chapter one needs to be hey, we need to get you up and running. We need to get you process transactions. Here are four or five different ways we can do that today, whether that's overnight, your terminal, download an app, run the transactions for you. Whatever we need to do to get you holing up and running, because most merchants we deal with are owners. They're Joe from Joe's Pizza and he's got things to do.
Speaker 3:So the more we can solve the problem and then go back and figure out why that problem happened and then try not to have that problem happen again. Right, but that's really two and three. We really focus on that. So that's a passion of mine, sort of get that done right, then, and there High energy is all that I'm about. Let's get it done, let's move it on. And family Family is my passion. We've got eight kids between my wife and I and three grandkids and growing all the time. We've got one graduating down at UNC. She's got her doctorate in two weeks, so a lot of good stuff happening. It's great to see them all sort of thriving and growing Awesome.
Speaker 2:So one final question If someone comes to you maybe they just graduated from college and they're looking at the payments or fintech industry and they say, dan, I'm looking at getting into this industry what advice would you give them to help them be successful in this space?
Speaker 3:The payments industry is a very incestuous business. So first and foremost I would tell you is that be fair, be honest and always create some great relationships, because you never know when that relationship is going to come back around and you're either going to talk to that person or need that person, or ask for that reference or have that person as a customer again. One of the things that's really important here is you can see how the payments industry evolves and people evolve in it. So that person you talk to today may be a technical assistant answering a call, but in three years they may be a partner at a brand new ISO and in five years they may be a partner in the largest ISO. So you always have to remember that. So always remember who you're talking to, be kind, be thoughtful, be considerate, be honest with them, help them solve their problems and then really grow your LinkedIn family right. Connect with a lot of people, know who you're talking to, because that's really going to help you.
Speaker 3:And the second thing the opportunity in payments is huge. It always will be. As much as you hear the big people stripe and square and all that stuff. There's nothing that beats a handshake, a phone call, a face-to-face meeting. That's simply never going to go away. People are always going to want that. There's that relationship that you can build. So as long as you can care about what the merchant needs and help them solve a problem, you'll do well.
Speaker 2:Well, Dan, before we go, is there anything else you'd like to mention before we wrap up?
Speaker 3:It's been a really interesting run here at Factor 4, and I feel as though we're hitting a point where we're going to continue to grow. And you know it's been amazing to see you know we've been really lucky here with employees how they've sort of taken on the task and sort of taken on it. Like I said, we started with three of us and there's still two of us of the original three here. You know our people and how good they are and how much they care. So whenever any customers or merchants or partners or agents call in, they can tell there isn't a day that goes by here that we don't get a couple emails or a couple phone calls saying, hey, you guys are awesome, you guys are great. So I think that's what makes a difference.
Speaker 2:And just seeing everybody sort of succeed here has been really nice for us. Okay, great. I think that's a great way to end the show. So, dan, thank you so much for being on today. I know your time is very valuable, so thank you so much for being here. Thanks, greg, thanks for having us, and to all you listeners out there.
Speaker 1:I thank you for your time as well, and until the next story, 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.