Leaders In Payments

Frank Arellano, CEO of Revolv3 | Episode 398

• Greg Myers • Season 6 • Episode 398

Share episode

Frank Arellano, founder and CEO of Revolv3, peels back the curtain on a staggering $600 billion problem plaguing the payments industry that few executives fully understand. False declines - legitimate transactions incorrectly rejected by payment processors - account for a shocking two-thirds of all credit card declines. For subscription-based businesses, this translates into devastating levels of involuntary customer churn.

Drawing from his 25 years of experience at companies like Ingram Micro and Experian, Frank explains how Revolv3's intelligent payment optimization platform tackles this challenge head-on. Unlike traditional payment gateways, Revolv3 analyzes over 100 different data elements in every transaction to build trust with issuers and dramatically improve approval rates. The results speak volumes: merchants using Revolv3's platform achieve an average 14% increase in approval rates and nearly 30% growth in total revenue from decline management alone.

What sets this conversation apart is Frank's holistic view of the payments ecosystem and its future trajectory. He predicts embedded finance and predictive capabilities will dominate the next few years, with increased focus on tokenization and regulatory compliance over the next decade. 

For professionals entering the fintech space, Frank offers invaluable advice: understand how money moves throughout the entire ecosystem, rather than focusing on just one aspect. 

Speaker 1:

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.

Greg Myers:

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, frank Arellano, the founder and CEO of Revolve.

Frank Arellano:

So, frank, thank you so much for being on the show today. Thanks for having me, greg, excited to talk about payments.

Greg Myers:

Yeah, let's do it. Before we get into Revolve and what the company does, maybe 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.

Frank Arellano:

Yeah, thanks, I was actually born and raised in California, one that I think very few traveled all over the world but loved California still live here now. Went to school in Cal State University, long Beach. Grew up in Central California. My parents were farmers Very boring Could have been Iowa or something like that so I didn't have that typical California experience growing up and as soon as I hit college I was excited about culture and all of the action and activity. So I've since made my home base Southern California, married with three boys and live in Laguna Beach.

Greg Myers:

Great. So my daughter goes to Chapman University, so I'm sure you're familiar in Orange County.

Frank Arellano:

Yeah, I love that school. My niece went there A phenomenal program. My old boss, the CIO at Ingram Micro, is a professor there now.

Greg Myers:

Oh, okay, awesome. Yeah, she's a junior going into her senior year this fall and we're out there every once in a while, definitely head over to Laguna Beach when we're there. So that's great, I'm familiar with the area. Thanks for sharing that. So let's go into the company and talk about Revolve, so tell our audience what you guys do.

Frank Arellano:

Revolve is a payment optimization platform, so think about us like a payment gateway right, your traditional type of service that allows merchants to transact payments through a number of different acquirers. We are a bit more intelligent in the way that we route that traffic very dynamic, all with the goals of generating more value for the merchant. So one thing you'll learn about is particularly companies that start to scale or sell different product lines across multiple geographies is sort of approval rates. Approval rates have been going down quite significantly over the past 10 years and I'm talking mostly credential on file type of business. So we help optimize those and drive incremental revenue by improving those false declines, if you will.

Greg Myers:

And who are your typical clients? What's your sort of verticals you go after?

Frank Arellano:

Yeah, great question. We've got about 350 clients to date and I would say they vary, right? The one beautiful thing about payments is it spans every industry. About all industries now support subscriptions and credential on file type of business. We do a lot in the SMB mid-market space, primarily because of the integrations or plugins that we have already developed on front ends, like Salesforce, Commerce Cloud and a lot of the e-commerce solutions out there. Right, it makes it a very easy integration or lift for a customer If they choose to go with Revolve. It's a pull down on a configuration menu choose Revolve, start transacting. But we're also attracting a number of the large scale enterprises. That's where we drive a tremendous amount of value and that's our background. Most of the leadership team come from large enterprises like that that have to deal with multibillion dollar subscriptions and trying to ensure that you're improving those churn numbers, particularly on the involuntary churn side, as much as possible, and so we're getting a lot of traction in that enterprise space. Now.

Greg Myers:

And you guys have been around since 2020. Did I get that right? We?

Frank Arellano:

started the company in 2020. Most horrible time to launch a company was when COVID lockdown happened Launching in January, lockdowns happened in February, so it took us a while to find the right people and the right team. Plus, building a payments ecosystem is hard, as you can imagine, right and the number of compliance things you got to go through PCI, gdpr, ccpa, visa registrations, like all of that sort of stuff takes time. So we spent a couple of years building that platform, making sure that we got it right and we launched it live on February 2023.

Greg Myers:

Okay, and are most of your clients in the US, or are they global as well?

Frank Arellano:

Yeah, most of our clients are US based, but quite a few of them process payments globally. They may be a US based, but quite a few of them process payments globally. They may be a US entity, but they sell products into Germany or a place like that.

Greg Myers:

What do you feel like is your differentiator? So how do you compete against your competitors? What do you feel you stand out at?

Frank Arellano:

Yeah, our focus generally payments have been a bit of a commodity, right, and it's interesting when I became responsible for payments at Experian, as an example right, a lot of focus on churn as a company that had almost a billion dollars in sort of subscription type of business out there and lots of focus on the voluntary stuff. Right, is the product right? Are we delivering the right services? You know, if somebody is choosing to leave us, can we provide them with an offer to stay as a customer, all of that sort of good stuff. The interesting thing for me, and sort of running a company like that, is that there's a significant amount of this involuntary churn and in some companies I've been with that's been as high as 75% of their overall churn number. Right, that's a lot of opportunity out there. So these are customers like yourself that didn't choose to leave but for whatever reason, we couldn't get your payment approved and so we're kicking you out from that sort of service, right, our value is to focus on getting those approvals on the first attempt. We do that by understanding sort of who the customer is, what the merchant does, what the services they sell.

Frank Arellano:

Data matters across the board. I talked to some executives who believe a 16-digit account number and expiration date is the most robust information you can have maybe a billing address or something like that and kind of pray for the best and there's over 100 different data elements that make up that payment transaction. Right, it's all about getting trust with the issuer and making sure that they believe that that's great, buying that service out of that country and feeling confident that that's who they say they are right. Our goal is to keep that consumer fraud type of stuff out, but deal with those involuntary false declines that happen. Just to give you some perspective, last year it was $600 billion in false declines and of all declines that happened on credit cards, that was two-thirds of the declines. That's a significant amount there. Right, these are valid transactions that should have been approved and that's really where our focus on and we deliver on that. Our merchants today get an incremental lift about 14% on approvals and close to 30% on total revenue being generated off of the decline management.

Greg Myers:

Are you yourself a SaaS platform, or how do you get paid typically?

Frank Arellano:

Great question. We are a SaaS platform and we have a number of different ways to sort of integrate with us. We have the plugins that I mentioned right. So if you're a Salesforce Commerce Cloud user, we have a plugin for you to be able to connect with us. We have a full suite of APIs.

Frank Arellano:

So if you have a bespoke internal billing app or something custom, you can integrate to us Very sort of easy lift, not too complicated, and then we manage all of that data. We can either manage the billing record on the merchant's behalf and so become that billing platform, or we can simply act as a gateway. If they want to keep and use their own billing platform, they can send us the traffic and then we optimize and route that across a number of different payment processors on the back end. So we're integrated to all of the big ones out there and have great partnerships with the likes of WorldPay and Nuve, addion, et cetera, and so it can help them not just route their traffic based on who they're already configured with, but give them some advice and data on other opportunities depending on their product and their geographies they're going into.

Greg Myers:

So do you typically get your business from these partners or do you also have like a direct sales force?

Frank Arellano:

Both. This is a great question, so quite a bit of it is organic, just people hearing about us searching for ways to make improvements in their business. Customer retention is a very big goal across a number of companies out there. I'm learning as we're talking to them. There's a lot of sort of organic SEO that hits our way through these partnerships on the processing side, as well as some of the front end partnerships. There's some CRMs that are integrated to us that we've done some co-marketing with and stuff like that Get a lot of our traffic that way as well. Conferences and podcasts and these type of things like that are very important. One is provides education out there, what there seems to be a lack of in the payments ecosystem compared to sort of other areas there, so that's all helpful as well.

Greg Myers:

Yeah, it seems like there's a lot of discussion around the broad topics and payments, but when you get into something specific like you, brought up some big numbers right, those should be some things people are really focusing on. So I would think leading in that kind of creating the content and the messaging around that is a great opportunity. It sounds like you guys are taking advantage of that.

Frank Arellano:

Yeah, the numbers. We do a lot of POC or we'll do an analysis of the prior data and help provide sort of projections. And it's interesting to me because sometimes there's some disbelief, right, I've had a CEO recently that we projected in their billion dollar company, right that increased the revenue by 250K a month. It's a lot of money, you know, a million dollars a year. You know he was like wow, that's almost too hard to believe sort of thing. Right, but through some testing we're able to sort of demonstrate that uplift. Who doesn't want that value, right, right?

Greg Myers:

I mean there are existing customers, right. It's not even going to get new customers most of the time, right?

Frank Arellano:

Which is hard enough, right the cost of getting a new customer, and my understanding is it's significantly more expensive to get back a customer that left.

Greg Myers:

Absolutely.

Frank Arellano:

So when you step back and kind of look at the payments industry as a whole and obviously you can answer this in the lens of what you do but where do you see the payments industry headed, say, in the next three to five years? Embedded and predictive is where I see the future. I mean, embedded finance is obviously being talked about quite a bit. The use of AI to help merchants certainly everything's AI. Now we're an AI platform, but it seems like everything is.

Frank Arellano:

I think over the next two to three years you're going to see a lot of focus on retention, as I mentioned right, we're seeing that now. Margin recovery, viewing payments as a cost center, a way to sort of generate some revenue, a lot of these retry systems and dunning systems out there. They're creating a lot of market share and they're fantastic and focus on the right things. But being able to optimize that routing entirely is going to be key. And then over the next 10 years, I think you're going to start to see a lot more use of like tokenization, embedded finance, regulatory compliance. There's going to be a heavy focus on that, particularly with the new VAMP rules coming out. So a system that can provide sort of end-to-end value, not just in sort of one vertical. There are going to be the winners, for sure you not just in sort of one vertical.

Greg Myers:

there are going to be the winners, for sure, and for you guys it doesn't really matter if, hey, some Bitcoin or stable coins become a payment method. It doesn't really matter to you. Basically, in your model, is that correct?

Frank Arellano:

Yeah, in our model it's any sort of payment. We do cards, we do ACH, P2P, it doesn't really matter. We can optimize across that and it's necessary. I think most of our merchants accept lots of different ways. We even pull into it. We have a very robust data analytics program and we don't do retail. There's lots of great companies that do that. Not something we're looking to jump into, but for some of our customers that do both retail and a heavy e-commerce presence, we pull all that data in there and be able to provide them that analysis and then our optimization will help understand that retail data as well and that helps generate better response on the e-commerce side.

Speaker 1:

Okay.

Greg Myers:

I know you've read the news the global and world pay kind of thing. Is there any implications to your business or do you think more of those kinds of things will happen in the future? What's your thoughts on that?

Frank Arellano:

There's going to be more of that. That happens. Right, ft Partners published their report on this sort of fintech space. I was surprised how much the M&A activity is growing year over year right 30% from last year and so I think we're going to start to see a lot more of those deals. Worldpay has been a phenomenal partner of ours and we're super excited about that sort of merger. I don't know any details there, you know, but we're hopeful that it's going to provide us with a tremendous amount more value because you got two fantastic companies coming together and, I think, coming out of the FIS acquisition for WorldPay. You know there was perhaps a little bit of hesitation there, right, and sort of how you know how they're best going to move forward, but hopefully this provides a clarity and things start opening up again for us.

Greg Myers:

Okay, so let's switch gears a little bit and talk about you. Maybe walk us through your career journey, how you got to starting the company. Maybe walk us through all that, if you don't mind.

Frank Arellano:

Yeah, technologists by trade. Part of a couple amazing startups early in my career. Love that tremendously. Three if you count the pieces of software I sold when I was in college. You know kind of gave me the taste of entrepreneurship. But after nine years it's a lot of work. Right To be part of that ecosystem. Even though we had good exits, I wanted to learn from some of the best out there and kind of jumped into corporate America because I wanted that experience. So you know, 25 years for companies like Ingram, micro and Experian and consulting out there I learned a tremendous amount and I also got exposure across a lot of different functions within the business. So everything from leading e-commerce strategy to IT architecture to running operations for a business, I think was important to give me the insight to be able to look at everything holistically as a CEO. That was very valuable for me. It was business school over a number of 30 years. How did you make the leap from corporate to starting the company.

Greg Myers:

That was very valuable for me. It was business school over a number of 30 years. Right, how did you make the leap from corporate to starting the company?

Frank Arellano:

I always knew that I still had a little bit left in me and just kind of waiting for that right moment to the right business plan, the right investors, you know that sort of thing. And after leaving Experian and helping them with payment optimization there, I knew that there was an opportunity here. I saw the numbers. I did a bunch of market research, like that $600 billion false decline problem. I mentioned what companies are doing to manage their payments. The expense that they're having from an op-ed perspective just to maintain and not even sort of optimize was significant. So I knew I could drive a lot of market to the value. Probably spent a good year, not full-time, even sort of optimized was significant. So I knew I could drive a lot of market to the value.

Frank Arellano:

Probably spent a good year, not full-time, but sort of building a business plan, creating some partnerships with the issuing banks, the processors. I talked to lots of my contacts there and saying I want to do this company Like, give me some feedback and some input. So I spent a lot of time going through that and then decided to launch. My original thought was you know, I'm going to go find me a CEO that can help me with this, I'll just be the founder or maybe even the CTO or something like that. But honestly, just I love the company, I love what we do and it just was a natural sort of fit for me.

Greg Myers:

Okay, what are some things you're passionate about? Maybe one work-related passion and one personal passion.

Frank Arellano:

The thing that excites me the most is that conversation I mentioned earlier with the CEO, who didn't believe that the numbers were real sort of thing. It's doing that first month or that second month and getting that call going. Holy cow, buddy, you were right. This is amazing. How can we send more value? It's like that sort of thing. That's probably the most fun, honestly right, Is the response we get from the merchants and really helping them through that. Personally, you could probably see behind me here. That's not a background, it's real. I've always had technology or corporate jobs and stuff like that. I'm a musician at a hobby but also have done it professionally. I've written songs for over 800 television episodes.

Greg Myers:

Oh, wow.

Frank Arellano:

Worked on the Coke commercial that was launched this holiday season. That's just a personal passion is music in general. I think it also helps balance me. As an executive of a startup, you always look in ways to sort of keep sanity and music is one of those ways for me. So you know, I play with a number of different bands just local gigs around town, have a good time and it's also kind of a creative outlet.

Greg Myers:

Okay, awesome. So, frank, if someone comes to you maybe they just graduated from college and they're looking at building a career in payments or FinTech and they say what do I need to do to be successful in this industry? What would you tell them?

Frank Arellano:

I would say learn the entire ecosystem right, how money moves, not one aspect of payments. So pick a domain, go deep and then start to branch out and learn more. Right, there's a lot of opportunities there. There's also a lot of disparate solutions and I'm a big believer in that. If you look at it holistically, end to end, you're going to start to see a lot of value opportunities right, whether you build it yourself or you help your company that you're with be able to create some very value-add type of services for your customers.

Frank Arellano:

I think that's the most important thing. And then there's also a great ecosystem out there. I mean some of the networking you just go in some of these conferences like an ETA right, which is less go to market focused and more partnership focused. For me, so many smart people in the industry and I value that tremendously. And I think if you're a young person starting out and I know they provide sort of access to it right A lot of these conferences do free tickets for startups or whatever it is you know sort of thing, and that's just a great way to learn about the business. But also make those connections, because that's one of the most important parts.

Greg Myers:

Okay, great. So, frank, we've covered a lot of ground about you and the company and the industry. Is there anything else you'd like to add before we wrap up the show?

Frank Arellano:

I would say that. So, if you're a manager all the way up to an executive and payments are part of your process, get as educated as you can, because there's opportunities out there for you, for your company for sure and I know there's a lot of pressure and focus and stress related to sort of macroeconomics and things like that, but there's plenty of companies out there that are able to help, and so look at companies like Revolve as your payment consultants. Right, you don't have to have the deep knowledge, but there's others that do, and so reach out. I'd love to hear from you.

Greg Myers:

Great Well, frank, thank you so much for being on the show today. I know your time is very valuable, so thank you so much for being on today.

Frank Arellano:

Great Thanks for having me, greg, appreciate it.

Greg Myers:

Absolutely, and to all your listeners out there. I thank you for your time as well, and until the next story.

Speaker 1:

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.