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The Green Sheet Online Edition

April 12, 2021 • Issue 21:04:01

Street SmartsSM

Embedded finance: The time is now

By John Tucker

Editor's Note: We are delighted to welcome back John Tucker as author of Street SmartsSM for the coming year. His emphasis on rebranding during his prior commitment was timely. Now he will continue that discussion in light of the fintech shift toward embedded finance. Stay tuned. The year is bound to be revealing.

As the saying goes, "The more things change, the more they stay the same." With that said, it's great to be back as quarterback of the Street SmartsSM column. I enjoyed my run from April 2016 to March 2017, and when the time was right again (and the slot was open) I always wanted to come back for a round two. I believe the time couldn't be more ripe in terms of the importance of bringing a different discussion to the column.

Recap of previous run

During my prior run, I emphasized why it was time for the merchant level salesperson (MLS) to rebrand into leading in with something other than basic bankcard services. The larger vision was to not just create differentiation, but also to truly begin to resolve unmet challenges of many merchant verticals.

My supposition was that going forward, creating a sustainable career and growth in the field of merchant services would no longer be based on actually selling merchant services using the old, mismanaged 1099 agent model.

For example, companies used to bring in 500 random 1099 people on 100 percent commission, throw them some brochures, show them how to get a statement and how to push saving on rates, and then send them out with canned pitches to either randomly make calls from the Yellow Pages or park their cars on streets, and walk into businesses at random and attempt to speak with decision makers.

This worked in the past not because of charismatic magic on the part of relentless salespeople, but because MLSs/agents, quite frankly, were one of the few available sources where merchants could get in-depth information on bankcard services.

Banks and credit unions usually did not provide such information, there was no internet, and the space wasn't significantly overcrowded. But in 2016 and 2017, I hammered home the notion that all of this had changed, and the old strategy was dead due to the following reasons:

  • The long-standing low barrier to entry created significant overcrowding in our space, where anybody with a pulse could become an MLS/agent on a 1099 basis.
  • The internet provided merchants easy access to information on interchange and the actual value of a terminal (typically $350 at best). This delimited the value of the MLS/agent's knowledge, an asset that had been considered to be valuable due to its scarcity before the internet's explosion.
  • Finally, banks and credit unions were actively (and heavily) playing in the space. This led to mass consolidation within the industry, where the majority of the U.S. bankcard processing volume was consolidated to 10 to 20 companies, many of which were banks.

The fintech shift

Fast forward to 2021, and we are seeing that my supposition has largely rung true, as the old 1099 MLS/agent model is dying out to a large degree. Many companies have slowed on contracting with 1099 agents.

They are instead focused more on hiring W-2 employees with a base salary, commission, benefits package and a relative long-term investment in the development/success of said employee. Throwing a bunch of 1099 guys against the wall and figuring that perhaps 30 of them would stick is now no longer seen as viable.

This is all a part of a fintech shift that is a result of the third wave of fintech. This wave is all about embedding financial services (payments, lending, insurance, banking and regulations) into the systems, processes and experiences that merchants are already using, and doing so in an integrated fashion to increase efficiency, lower costs and provide greater accessibility.

The time is now for embedded finance, and over the next 12 months, my discussion will break down the different aspects of embedded finance with an emphasis on the embedded payments portion of said phenomenon.

According to Forbes and other sources that have surveyed top executives across the country, the COVID-19 pandemic has significantly sped up the third wave of fintech, and companies are rapidly investing in integrated, digital and embedded fintech solutions.

Now more than ever is the time for you to pivot to thrive, not merely survive, in the payments industry going forward. I look forward to the next 12 months and thank you for joining me on this journey. end of article

John Tucker is U.S. enterprise sales director for TreviPay, www.trevipay.com, and has over 14 years of B2B sales experience in commercial finance. Tucker is an MBA graduate and holder of three bachelor's degrees in accounting, business management and journalism. To connect with him, please send him a connection invite via LinkedIn at: www.linkedin.com/in/johntucker99/.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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