November 5, 2015
LTP: You mentioned the following in one of your recent interviews - People say Braintree, Stripe, and Dwolla in the same sentence. We’re not in that sentence. Can you explain how you are different? Is Yapstone not a payment processing company?
Tom Villante: YapStone is a global provider of full-stack payment solutions for global marketplaces and large vertical markets processing over $14 billion in payment volume annually. Today, YapStone powers online and mobile payments for the largest global marketplace in the vacation industry, HomeAway® and VRBO®, as well as thousands of apartment and vacation rental companies, homeowners’ associations, self-storage companies, hospitality establishments and non-profits. We build vertical-specific business rules and functionality into our payments platform. For example, in the multifamily and vacation rental markets, we seamlessly integrate with major property management software providers. We will also be providing a mobile portal for landlords and residents to facilitate interactions such as maintenance requests, property announcements and rent payments. In comparison to other payment companies, the business models for Braintree and Stripe are predicated upon simple APIs that are designed to make developers lives easier in terms of accepting payments. We’re much more focused on holistic business solutions for our marketplace and vertical market customers. We’re more of a one-stop shop for our customers and partners to completely outsource everything around payments, including customer on-boarding, payment processing, chargebacks, disbursements and customer service. And in doing so, we provide functionality that is tailored to them and their industry.
LTP: Is it fair to assume that you are also frequently offered to be acquired? What kind of companies approach YapStone?
TV: Unlike many companies in recent years, YapStone was built to last and not to sell. We’ve grown quickly and profitably for many years. We are approached all the time to be acquired by large payment processors, who see the value in our integrated and vertical approach, and by technology companies looking to monetize the transactions flowing through their ecosystem. Every time we stop and consider a sale, we see huge growth in the not-too-distant future. We’re projecting 45% revenue growth in 2015 and in 2016.
LTP: Are the rental and marketplace segments your primary targets? What other industry segments are you looking at?
TV: We power payments in large vertical markets and marketplaces.
Our vertical market focus has been property rental which includes apartment rentals, vacation rentals, self-storage facilities and Homeowners’ Associations. Those markets alone represent a payments opportunity of over $600 billion. We also like the non-profit payments space and a few years ago acquired ParishPay, the largest online payment provider for the Catholic church. Because non-profit represents $450 billion in annual payments, we look to expand the platform to more charitable organizations. Overall, you may notice a theme in many of the markets that we target – they are markets where paper checks are the predominant form of payment.
LTP: 45% expected revenue growth in 2015 is great. What are the bigger plans for 2016?
TV: We are going to be adding several large marketplaces in 2016 and greatly enhancing our mobile offerings in our vertical markets. And because our international operations will make up a much greater percentage of our revenue, we expect to triple the number of employees in our Ireland office. Finally, we will also be expanding to Southeast Asia and Latin America.
LTP: Where do you think is the payments industry going? What do the trends look like for the next couple of years?
TV: Consumers now spend more time on their phones than on their computers. Payments are going mobile, whether it’s ApplePay, Samsung Pay, Visa Direct, MasterPass, QR codes, or Chase Pay. While mobile payments may not happen as quickly as everyone would like at the POS, digital wallets certainly take the friction out of mobile on-line and in-app payments. We know that transactions convert at a much lower rate on mobile than on a laptop or desktop if the the consumer has to type in their card information. All of these trends play in our favor as we typically go after markets where the paper check is the predominant form of payment. If we’ve locked in the merchant acquiring side, we benefit when online and mobile payments are easier to make.
LTP: How have you been investing the $60 million debt financing from earlier this year?
TV: Most of the debt facility is not drawn down. It’s dry powder to invest in technology, marketing and acquisitions. We have grown from 130 people to over 300 in the last 2 years and we’re expecting to hire many more in 2016. It’s been one of the best environments to raise debt capital and it was an opportunity to secure low cost of capital, with almost no dilution to our shareholders.
LTP: In one of your other interviews, you said that Braintree sold too early. Why do you think so?
TV: Braintree was a very successful outcome for their investors and it’s continued to do well for PayPal. If you look at Stripe’s recent $5 billion valuation and healthy valuations for payment companies at scale, it’s fair to say that Braintree would be worth much more today as a stand-alone. If you were at Money20/20, you would have seen hundreds of companies in this space and many of them are just features and will never get to billions of dollars in processing volume like we have. You need scale to survive.
LTP: What do you think about accepting bitcoin as a payment method?
TV: We’re not considering bitcoin as a payment method. Yet, I think there are some interesting things to do around the blockchain technology behind bitcoin in terms of helping reduce risk and transaction costs as well as facilitating cross-border payments.
LTP: Is there one area that Yapstone needs to improve on? What keeps you up at night?
TV: Data security is the number one concern of every payment executive that I know and it keeps us up at night. It’s our top priority.