Q.) Just to start off with, how are things shaping up at Tipalti?
Chen: Business is fantastic. The company is growing quickly and the pace of growth is accelerating. We have had near perfect customer retention rates and our customers are very happy. Q4 2014 was by far our strongest quarter ever.
We also made some good progress on the recruiting front. We brought in Rob Israch, our CMO, who was previously a VP of Marketing at NetSuite. He and our head of sales were both busy recruiting and we’re starting the year with a strong team across all departments.
Q.) With the new round of funding and the setup of the new headquarters, what are key initiatives that the company is taking ahead from technology standpoint and the business standpoint?
Chen: We were fortunate to get funding when in the strong position where we did not need it. However we felt that it would allow us to invest in our growth and strengthen the company’s long term market position to have that equity, so we went and raised this recent round.
We have some pretty significant plans for this year. First and foremost, we will keep enhancing our offerings and increase our focus for our current markets – the Network Economy - including ad networks, affiliate networks, apps and gaming monetization, crowdsourcing, digital marketplaces, ecommerce, etc.
We are also constantly introducing more innovation and more value to our customers. Be it the integrated invoice processing, risk management, accounts payable supplier portal or document management to name a few of the recent enhancements.
In the development pipeline, there are some very important new solutions which we will be announcing in the coming months that will add even more value to our current customers, as well as expanding Tipalti’s global market coverage.
We are also working on important financial and integration partnerships which will add value on several fronts.
Q.) For its payments operation management services, Tipalti ensures that it meets all the regulatory and tax requirements across 190 countries. So what are the actual steps that the company has taken or the actual process that Tipalti goes through in achieving that level of compliance?
Chen: Tipalti is all about enabling global partner and supplier relationships and part of doing that is reducing the regulatory burden and risk from their plates. To do that we monitor the relevant tax and regulatory requirements across the globe and adapt our systems to the changing requirements. Almost every month, some regulator, somewhere around the world, will change some requirement around tax compliance, payment remittance, terrorism and anti-money laundering procedures, handling funds, etc. By managing the update process for our customer’s existing and new payees, we remove a major headache from our clients. Essentially, our team and technology handles the red tape so that our customers can focus their resources on growing and innovating.
Q.) Since the company is majorly focused towards handling pay-out processing, so besides the compliance issues, are there any other issues that the company faces in managing the payment processing? What are the steps taken in mitigating these issues?
Chen: We speak frequently with our customers to understand their pains and focus on making life easier for their finance and operations teams and on improving the partner payment experience.
Outside of tax and regulatory compliance, almost all of our customers had extremely time-intensive manual processes related to managing their global payment processes, from payee setup, processing payments to suppliers in different payment methods and currencies, resolving payment issues, gathering tax documentation, payment reconciliation, payee reporting, etc. We have been able to consistently automate well over 50% of the time our customers used to spend managing these operations. Again, our customers can focus their time on global growth and scaling their company efficiently rather than on using their resources to move paperwork.
As importantly, partners are critical to our customer’s success and we allow our customers to differentiate themselves from their competition by offering payments across the globe, in a wider range of payments methods, and in any currency and by increasing payment speed and accuracy.
Q.) What are the technological advancements that Tipalti has made in order to make its platform function at the required level of automation, scalability and robustness especially with respect to compatibility across various geographies?
Chen: Regarding scalability, almost the same team in Tipalti that handled operations when we had 2,000 payees now handles over 300,000 payees (we added one person recently). That speaks volumes about our platform. We automate every process that we can, and empower the payers and payees to streamline their entire payment operation process using our system. At the same time, our customers rave about our support and I think that the mix of deep automation and an excellent support team is key.
We partner with the best in the business in whatever we do – be it our banking and financial partners, or our infrastructure partners and this focus on quality has helped us deliver on our vision.
Q.) In order to manage its operations for clients across multiple nations, do you rely on some established partnerships across different geographies or is the company’s infrastructure self-sufficient? Can you cite some examples of prominent partnerships?
Chen: Our main partnerships are mainly around remittance/banking. We also have other payment partners (for Prepaid debit cards, eWallets, etc) and other global regional players. We are in advanced work with several other tier one financial institutions on some of our initiatives and will be announcing these in the coming months.
As an example, for geographic specific work, we recently added support for local currency remittance in several LATAM markets to address the needs of some of our larger customers.
Q.) How are you able to achieve lower transaction costs with respect to competitors?
Chen: While we are competitive in transaction costs, it’s not the key point in my view.
When our customers consider the complete operational cost savings, that’s when all the benefits surface.
Our customers speak about 50% or more operational savings since they started to use Tipalti as we remove a great amount of effort around the remittance, compliance, reconciliation and communication with the payees and, if you asked them, none would ever choose to go back to the way they did things previously.
One of our customers was able to free two full time employees to focus on other initiatives by using our solution.
Q.) Tipalti’s platform supports local currencies from all the 190 countries, but what about virtual and crypto currencies? Is Tipalti looking forward to integrating currencies like Bitcoin?
Chen: There are several aspects to consider with respect to bitcoin.
The first, which is a basic product management aspect, is – there is close to zero demand for bitcoin as much as we can see from our customers. Bitcoin is still not a commerce currency. It’s mostly an investment currency. The value that bitcoin can bring to our customers is minimal. One of the used cases for bitcoin is efficient global remittance. We already achieved that with our own capabilities, so the value add from bitcoin to our customers is limited.
Second – there are still compliance and regulatory uncertainties regarding bitcoin. I hope that this year the regulators will provide more clear guidance regarding the way to address bitcoin. I think that a crypto currency that takes the opposite approach to bitcoin – i.e. is fully transparent re the identity of the currency holder (rather than anonymous as bitcoin is today) has a better chance of succeeding with the regulators.
Q.) From an analytics perspective, how is Tipalti leveraging the large amount of payment data that it is gathering from its client across various countries?
Chen: We look at this data for our own analysis – geographies, currencies, amounts, payment methods, penetration, segmentation, etc. We can get good insights as to where we need to focus optimization efforts based on this insight.
For example, one interesting analysis outcome is that we see that payees (suppliers/publishers/affiliates) that select PayPal are only paid on average $300 and payees that select pre-paid debit cards average only $420 while those who get paid higher amounts select other methods as a significantly higher rate. Prepaid debit card use is much more focused on the developing world.
Q.) What are challenges that you feel will arise in the near future in managing payment operations of these Network Economy companies which form your client base?
Chen: The Network Economy calls for global solutions. The network economy participants are from all countries around the world. We need to keep on delivering good, fast, cost effective remittance solutions globally. The payees/partners should feel that we are local to them, in any market we operate in.
I think that one trend we see is that regulators are increasing their demands for network economy participants. Every time I see a new regulation being mandated, I feel for our customers, but at the same time I know that this is where we can add value and “shield” our customers as much as possible from these complexities.