Payment Orchestration and the Rise of Alternative Payment Methods

Episode Overview

Tom Randklev is a distinguished professional in the fintech and payments industry, currently serving as the Head of Product at Sell Point Digital. With over a decade of experience, Tom has a rich background in finance, economics, and technology. He earned his Bachelor’s and Master’s degrees from the University of South Carolina, where he developed a strong foundation in finance and economics. His early career saw him dabbling in telecom and category management, which sparked his interest in technology and led him to the fintech sector.

Tom’s journey into payments began serendipitously in Atlanta, a hub for transaction and payment processing known as “Transaction Alley.” His deep understanding of the payments ecosystem and his innovative approach have positioned him as a thought leader in the industry. At Sell Point Digital, Tom focuses on payment orchestration, a cutting-edge solution that optimizes transaction processes, enhances fraud prevention, and integrates various payment methods to meet diverse business needs.

Episode Transcript

Kevin Rosenquist: So anyone who listens to this show knows I like to bring up football.  Are you a big South Carolina Gamecocks fan? Given that you spent six years there getting your bachelors and masters?

Tom Randklev: Absolutely. Gotta always pull for the home team.

Kevin Rosenquist: Awesome. Great great great. I,  I think your previous quarterback, Spencer Rattler might be kind of good in the NFL. I think he might actually be able to do something.

Tom Randklev: Yeah I’m really excited to see how he does. You know at the same time we’ve been cheering a lot more for the Lady Gamecocks. They’re,  an unmatched season here just recently. And I know it’s been amazing, so.

Kevin Rosenquist: Did you lose me?

Tom Randklev: I lost you.

Kevin Rosenquist:  All right.Well, that’s a good start. That’s weird. Okay. All right, let’s try this again. We don’t have to start over. Um, to the editors out there. I don’t know what happened there, but, uh. Yeah, my. I got a new camera. Hopefully that doesn’t happen again. Anywho. Um, yeah, I actually,  I watched a lot of women’s basketball this past year, and. Yeah, undefeated. Pretty pretty remarkable. I kind of followed the WNBA to some degree. And being originally from Chicago, I kind of follow the sky. And that big center of yours,  was drafted by the sky. So it’s kind of fun to see her play at the next level.

Tom Randklev: Yeah, absolutely. In fact, this has been a super exciting team in general. My brother in law is the creative director for the university. Oh no kidding. So it’s been fun to see all the excitement showing up in his different feeds. And, and even when we get to see some of the commercials, you know, online or on the television, it’s fun too,  fun to have that added extra twist. That’s it.

Kevin Rosenquist: Yeah, that’s really cool. That’s really, really cool. Okay. So anyway, let’s get into what this podcast is about.  you’ve been in fintech for well over a decade now, particularly in payments.  I noticed your education was finance and economics. Have you always been interested in tech as well?

Tom Randklev: Yeah, I’ve always had kind of a tech angle. In fact, before I even got into payments, I was doing a little bit of telecom. I was doing some category related management prior to that. So, you know, really once I hit the telecom side of it, I really got interested in the technology piece. And, you know, it was really just good luck and good fortune that I wandered into payments in Atlanta. You know, this is really kind of the home base of what they call the transaction alley and all of the big acquiring companies. Plus, because of that, a huge startup community that’s building out some really impressive stuff in the payment space. So, fintech was something that I wandered into as opposed to hunted down. But I’m always happy that I made it in.

Kevin Rosenquist: That’s cool. Were you a tech guy at all in your younger years?

Tom Randklev:  not really. You know, I think that it’s funny. There’s a I think it’s a generational thing more than anything else. I’m not going to use that as an excuse, but,  you know, since the bulk of my coding was limited to my Commodore 64, Vic 20, I didn’t chase it further into the rapid upswing that became,  you know, really target rich for a lot of young developers and engineers.

Kevin Rosenquist: It’s really funny you brought up the Commodore 64 because my last interview last week was with somebody who we kind of bonded with because that was my first computer, too. And he was like, you gotta see this. He just bought one. So he, like, held it up for me. And he’s like, I just wanted to just try it. He’s like, I just, I have such fond memories. So I was just like, nothing to mess around with. So I was like, wow, I haven’t seen one of those in some time.

Tom Randklev: That is fantastic. The old floppy drives and everything. Oh.

Kevin Rosenquist: Okey Okey Kevin’s getting upset. All right, I’m hooking. I have my old camera on standby here, so I’m hooking it up now.

Tom Randklev: Yeah. No worries.

Kevin Rosenquist: Sorry about that.

Tom Randklev: Don’t even sweat i

Kevin Rosenquist: Okay All right. Editors, I brought a new one. I bought a new camera, but it keeps cutting out on me. I have to figure out what’s going on with that, but I know this one will work. So just so the editors know what the hell’s going on, we peace it together.

Tom Randklev: Perfect.

Kevin Rosenquist: Okay, so now we should be good. I don’t believe this one’s going to mess up at all. Okay. All right. So one second to get my settings set up here. And we will get back to going. All right.

Tom Randklev: Okay.

Kevin Rosenquist: And now you’re head of product at Sell Point Digital. You guys are all about payment orchestration. So for those who aren’t familiar with the term talk about what that entails.

Tom Randklev: Sure. You know, you know, Kevin, I think on this one, payment orchestration has become one of the big new buzzwords for the payments industry. All the fintech guys previously were talking about omnichannel. There have been a variety of other big buzzwords, but payment orchestration has gone from something that, you know, sell point pursued way back in 2014 to a today pretty common household name in our little fintech space. And really what it refers to because there’s also unfortunately, you hear a lot of it because there’s a lot of noise around the term payment orchestration really refers to a smaller piece of an overall financial supply chain orchestration. And what payments orchestration does is creates a lot of routing and business and just technology rule based orchestration of not only payments. So not only just the processing piece, but a lot of value added services, probably one of the biggest being fraud. And so when I talk to people about payment orchestration, I really quickly equate it more to like a managed services ecosystem of connectivity.  There’s a lot of confusion that payment orchestration is equivalent or the same as a gateway. But, you know, my argument there is that a gateway. Certainly from a sell point standpoint, we’re more of a tier one platform play, which incorporates a gateway for the purpose of routing and processing transactions. But to say that payment orchestration is just a gateway or akin to a gateway is not correct in that there’s so much more logic and so much more rich content and purpose built into the machine. Again, more of that managed services. A gateway allows you to orchestrate, if you will, a variety of connectivity points, but they’re all kinds of dumb pipes that do a marginal amount of things that really don’t do the smart routing. And, and then the optimization related work that comes with having the full platform.

Kevin Rosenquist: Okay. So when you mentioned the noise, you were kind of saying like, it’s just that people are kind of just confused about exactly what it is.

Tom Randklev: Sure. There are a lot of incumbents. I you know, I’ve worked in the acquiring space as well, just coming into into sell point. And in that acquiring space, you have a lot of guys that have kind of a bundled offering. You know, their your one stop shop to processing and to a variety of services. But it’s the old fordism. You can have any color as long as it’s black. That’s exactly what that is. . Payment orchestration the way that sell Sailpoint handles it really unbundles that whole piece and creates kind of a hub and spoke model instead, so that you have one single point of connectivity which provides the access to a host of alternative payment methods, PSP acquirers and aggregators for processing fraud providers and any variety of tools that will help you optimize your business.

Kevin Rosenquist: Yeah, you mentioned the alternative payments space. How important is it for businesses these days to have a seamless payment experience across multiple channels and being able to, to, to take many different types of payments?

Tom Randklev: I would say that this is one of the single most important elements of many big companies’ businesses today, right? I’d say at the enterprise level especially, what you see is the world of payments and the world of retail in general. The participation in how an individual buys services from any variety of customers is becoming wildly and increasingly complex. Primarily sell point works in the airspace. We just issued our 2024 Airline Payments report called The Payments Coming of Age. And within this one, we worked through some pretty intimate discussions with about 150 global airlines, and 30% of those folks were most concerned about limited availability of alternative payment methods. This becomes really important. Of course, there are a variety of other interesting findings, but this one in particular becomes important for two reasons. A lot of the global environment either is not as supportive of a credit card world. So they operate off of local payment methods and or you’ve got a lot of people now that are just turning on payments in a way where as a consumer, they want to be dealt with a certain way. You know, there have been developments in the world of PayPal and Apple Pay and Google Pay so that people now have an awareness and understanding of payment wallets. But in a lot of other geographies, it goes even beyond the wallets, because in Asia you’ve got, you know, WeChat and Alipay that are somewhat of a wallet, right? They’re more of a QR code type disposition. But using just those simple points, all of a sudden there’s a world of these alternative payment methods, some of which have grown amazingly quick and become kind of the de facto payment method. In Brazil, it’s Peixe, and now Peixe is being used across Latin America, and so in a traditional credit card model, what you’re seeing is a lot of greater conversion. When a company is willing to meet their customers where they want to do business, when they want to do business, and with the payment method that is most familiar or most popular to them. And thankfully, that’s what orchestration really provides.

Kevin Rosenquist: Yeah, it’s interesting to me, like I feel like the alternative payment methods, you know, you mentioned how some of them are growing so fast, like, it seems like they just keep their just keep becoming there’s just more and more like and they happen really quickly. Like it just went from you having this handful, you know, handful of ways to pay to you having this just bucket full of ways to pay. Why do you think that so many alternative payment methods are becoming so popular?

Tom Randklev: You know, let me use Latin America as a great example. There’s not a ton of infrastructure and support for credit cards in that area. I mean, it’s very low penetration, for example, it’s largely a cash driven community and or mobile driven community. And so when you have the ability to take a cash payment at a bodega, for example, and convert that into some kind of a stored value card or stored value that goes directly to a phone, everyone has a telephone. Not everybody has banking as a service of some sort. Right? And so, at least in Latin America, a lot of what I think is driving a lot of this is just the easy availability of mobile. And then on top of it, the innovation and acceleration of mobile driven commerce. So you’ve got a lot of folks that suddenly can use their phone to make a payment. And that becomes a hot commodity, more so than a card of any sort. And I think that’s probably true in a variety of the larger markets. I think that the cost of doing business with the credit cards, both on the merchant side, as well as fees incurred by consumers, has led to an exposure for the alternative payment methods as well. So I think it’s a variety of different elements that have come to play all at once. But I mean, the numbers certainly speak for themselves that this particular category of payments is really exploding.

Kevin Rosenquist: Yeah. You brought up it’s interesting. You brought up the, the,  payment,  or the fees associated with credit cards. I feel like more and more now, more states are allowing merchants to pass the fees along. I know for a while there you weren’t allowed to do that, and you had to get creative with cash, check discounts and things like that to avoid the terminology of extra fee for credit cards. But yeah, it does seem like more and more places now are like, hey, there’s a 3% fee if you use a credit card or, you know, this is the price if you use something else.

Tom Randklev: Well, and a lot of people are reporting that suddenly they’re getting their new terms and conditions and, or they’re seeing it their favorite merchants signs that say, you know, if you want to use this particular card or, you know, Amex is really big for this, you know that there will be an added fee or that, you know, anticipate that there will be X percentage to cover the increased interchange fees that are associated.

Kevin Rosenquist: Yeah, absolutely. And I’ve, I’ve done some bookkeeping for, for a small business I used to work for. And those things are they kill you? I mean, the credit card fees. When you really start to add them up, it’s depressing. It’s like. It’s like what? For one transaction you’re like, okay, whatever. But you start you added up across a year and it it it’s a lot.

Tom Randklev: Yeah. I mean listen I tip my hat to the schemes. They hold a very special place here within our, you know, fintech ecosystem. Sure. But you know, I think that it’s also creating this whole world of alternative payment methods that have either varying or more simplified or lower fees of some sort and just make the barrier to entry much lower for consumers.

Tom Randklev: Yep.

Kevin Rosenquist: Absolutely.

Tom Randklev: You,  you.

Kevin Rosenquist: Mentioned before that you guys are big in the air space. What is your product so good for the travel sector?

Tom Randklev:  especially air. And then we’re finding and lodging as well. There’s already so much complexity just built into that category. You know, at any given time, you know, an airline’s got a multitude of different business units. And,  and the payment needs across those different business units wildly vary. And so it’s the ability to kind of break down some of those silos and create some level of optimization where, you know, payments go from a cost center to almost more of a profit center, where they’re able to capitalize and charge for different services. And, and all of a sudden, this department that used to just be a drain on the PNL suddenly has the ability to become a revenue associated center. And and in particular, it’s the optimization side. It’s having having the ability to take an international payment and move it to a localized payment processing for for lower interchange fee. It’s the ability to highlight where there’s some fraud that maybe a company didn’t know about. And when you got so many moving parts, sometimes the fraud is,  you know, it. It’s not as visible, not as clear as,  as it seems. You know, when you’re reading a story about it and and finding these different points where through the expertise that we have in the airline industry in particular, it’s got a lot of guys on our team that have done a variety of different roles at airlines. And so they’ve had a chance to see behind the scenes, and now they have the tools to come in and kind of address the if I was still sitting on that side of the table, I would have loved to have had this. And now that we’re able to share that with more and more airlines, we’re finding that, you know, our pipeline is rich. And and the folks that we’re dealing with are finding a way to recapture tens of millions of dollars in revenue.

Kevin Rosenquist: You mentioned fraud, too. Like, how does Sailpoint help detect fraud?

Tom Randklev: So Cell Point uses a variety of partners, you know, in order to address both pre-auth and then post authorization fraud.  There are quite a few companies out there that still use just a post authorization, kind of a standby. And that tends to be pretty expensive. You know, dealing with fraud once it’s already kind of hit your internal system. But, you know, we handle everything from pre screening to avoid having to do the 3DS checks and the variety of other scanning checks. And, and it’s kind of that optimization of partnerships that allows us to kind of approach each problem from its unique flavor, but to also find kind of a repeatable process that most of these airlines and, and lodging companies, hotels are able to use then to to sniff out the trouble, identify it, and then work to mitigate it. And so specifically, you know, it’s really through the strength of our various fraud partners that we’re able to kind of approach, you know, solutions that either we combo together to create kind of a super solution or we just leverage kind of cherry pick the best parts as needed for the customers that are integrated to us and where the value sits there is that, again, through that one point of integration, a customer has the ability to receive the benefits of different elements, as opposed to having to make 5 or 6 different integrations themselves and then maintain those integrations and the cost associated.

Tom Randklev: Okay.

Kevin Rosenquist: Makes sense. I saw a recent blog on the Sailpoint website talking about a monumental shift coming in the travel travel sector. What is that shift that’s coming?

Tom Randklev: For the editors, I have no idea.

Tom Randklev: I like that question. Editors. Yes.

Tom Randklev: Monumental shift. Um, let’s noodle that one through a minute. Was that something that we recently posted?

Kevin Rosenquist: It was just something that I saw on your website. Yeah, that there’s going to be a monumental shift in the coming in the travel sector, but they didn’t really explain what the shift was going to be.

Tom Randklev: Huh? Yeah.

Tom Randklev: Let’s skip that one. I’d be happy to tell you some thoughts on that one, but I’d hate to misquote the article.

Tom Randklev: Yeah.

Kevin Rosenquist: No worries. No worries at all. Let’s, editors strike the question. We’ll move on. Um, how do you see the future of payments playing out? Will we see even more options, payment options become prominent? Or do you think some smaller players might fade away a bit and, and just kind of leave the, the stronger ones to survive, if you will?

Tom Randklev: Sure. I think that we’re already seeing that. I think that this payment orchestration piece really within the past, let’s call it three, four years came out of the blue, became a talking point for everyone. And now we’re already starting to see a lot of consolidation in this particular area of fintech as it stands. Um, you know, the acquirer that I came from was a huge acquisition. And so as you see the interest and certainly the level of, you know, investing capital and funding available, you see a wax and wane in, in the growth of the industry. And so while there’s still a lot happening in the payment space, there’s also a lot of consolidation.  I’m seeing a lot of people change their business models, and I see a lot of,  a lot of our competitors,  you know, I think everybody right now is looking at how they monetize more efficiently and how they monetize better. So I think that especially what you’ll see is the right business models are going to quickly find a stake because they monetize correctly and allow for growth outside of just investment driven growth. So more organic growth. And the folks that have not found the right model yet or are the ones that are, you know, primarily a transaction driven company type, for example, I think that what you’ll find is the transaction world is already kind of a race to zero. And so it’s the embedded finance, it’s the value added services. It’s the managed services part. It’s the platform as a solution or platform as a service. These are the things that will begin to drive the next level of payments, more so than, you know, even what we’ve seen in the last couple of years. .

Kevin Rosenquist: I watched an episode of Nova recently on PBS. It was all about data and how companies collect and use it.  You know, we all know it, but it still was a bit alarming. Um, the methodology was sort of like, really? That’s how it works,   with technology evolving as rapidly as it is, especially with AI and people’s concerns about security and privacy. How difficult is it to build new products and innovate in the payments space while ensuring security and privacy?

Tom Randklev: You know, it’s always a trick and it always has been a trick. You know, the fraudsters, it feels like, are always right at the front door. There are a number of, I think, big security specialists in our industry that continue to keep folks informed and focused and moving forward. And every provider, even ourselves, you know, this is where we make a huge investment in not only internal security, but external facing again through more of our fraud partnerships. As far as the application of AI, you know, AI, ML have been around for a long time as well. Now you’re looking at a world of generative AI, which is more of this ChatGPT kind of a world. And as much as that will definitely play a role in fraud, it is countered and probably way offset by the volume of efficiency that it brings to any variety of things. You know, from an internal use case. There are things that we can do to improve our code and make sure that our code and operations operate much more efficiently. And then when it comes to, you know, the gold mine, our data generative AI gives us a much more efficient way to research, review and then utilize data in a way that not only helps us, but really helps our merchants. Right? It allows us to provide dashboards and alerts and a variety of different reporting related elements so that from one kind of command center, merchants are able to really run their entire business day. And I think that you’ll see this category is absolutely brand new. It’s evolving to the point where we’re ending up with multiple new tools on a week to week basis. You know, I’m excited to see where it’s going, but for sure, it’s also equal parts frenzied and equal parts scary. You know, it’s just a matter of trying to keep it all mitigated and and stay on top of the trends.

Kevin Rosenquist: Yeah. Absolutely. Does the AI piece, can it help? Is it helpful with fraud prevention and detection?

Tom Randklev: I think so because you’re getting kind of a machine insight on things that you might miss from a manual, you know, review. Yeah. And so it creates a lot of automation and especially, um, you know, really specific automation that I think helps measure out. It helps for sure capture different fraud vectors as they evolve. But it also helps with conversion and increased revenue in that it allows you to more easily identify false fraud. You know, there’s so much data that comes through, especially with transactions, that you end up with kind of that red, yellow, green variety of, you know, red for shirts, fraud, yellow, we’re not so sure. And green, it goes through that yellow space though tends to be a drain on the revenue center, certainly creates cost and forms of lost sales and or, you know, just false identifiers, false flags. And so being able to use AI to mitigate and thin up that yellow zone is a huge win for folks all the way across. You’ve got large teams doing it today that could use instead a generative AI tool and limit the amount of people needed number one. And then also a limited amount of false flags.

Tom Randklev: . Yeah that.

Kevin Rosenquist: Makes sense. Being ahead of product and fintech. You know, given how quickly things are changing in advance, it must be difficult to balance market demands with strategic objectives while ensuring that sell point is continuing to advance its tech. And, you.

Tom Randklev: Know.

Kevin Rosenquist: Stay ahead of the competition. How do you guys make sure that you’re on top of all the new trends and everything as it moves?

Tom Randklev: You know, we I’d say that the great value that I have. Anyway, I’m really fortunate in that I have a lot of really awesome colleagues, and there’s a lot of overlap in what we do and how we attack the market from a sell point standpoint. And so it’s really on the strength of my fellow leaders that we’re able to keep all of this stuff coordinated from a product standpoint. You know, I make every effort to be out in the market and seeing and hearing live what’s going on with our different merchants. We spend a lot of time doing different workshops and making sure that we’re addressing more tactical, short term needs. And then when it comes to the strategy piece, you know, it’s opportunities to even talk with people like yourself where, you know, there are new things that come in on a daily basis. It just requires a lot of reading and a lot of interacting to make sure that I stay in front of it, which then allows me to keep my team informed. And then we all are allowed to kind of be right on that edge where it feels like we’re topical enough without being too mired down in day to day tactics, without being so head in the clouds that, um, suddenly we’re building something that nobody’s ready for, and then we’re in trouble.

Kevin Rosenquist: That’s a good point, too. Like, you can be too far. You could be too on top of changes, and you can knee jerk. You have knee jerk reactions to things that you hear or read.

Tom Randklev: This is something that I see a lot in this generative AI space. You know, I watch a lot of people chase things. They’ve had to create a problem to solve the problem because the tech is super cool. And while I love that myself, I think that’s the cautionary note when it comes to some of this AI stuff.

Kevin Rosenquist: I agree, I have some, I follow some AI newsletters, and sometimes, like, you know, they’ll list new products that are out there and you’re going through them and you’re like, who needs that? Like, I like, what is that going to do? Exactly? It just feels like so many people are just scrambling to create something as fast as they can, maybe in the hopes that someone will buy it too.

Tom Randklev: Yeah, I think that that’s kind of the exciting part that we’re in at the moment. I think we’re going to see a lot of a lot of use cases, period. And then what we’ll see is the use cases that are the winners. And then what you’ll see is from a thousand companies, all providing different tools. You’ll see a rapid consolidation there as well. Yeah. You know and I think it will be as rapid as we’ve seen it. This came out of nowhere. It feels like earlier this year. And now suddenly we’re already starting to see where a handful of companies are way out front and they’re going to be the trusted source.

Tom Randklev:  and they’re going to.

Kevin Rosenquist: Acquire the.

Tom Randklev: Products. yeah.

Kevin Rosenquist: Yeah I mean it’s kinda like with social media right. I mean you know Instagram was not meta originally and, and you know, like a lot of products, they, they kind of got scooped up by, by the big players and, and so yeah you probably see that in AI too.

Tom Randklev: Yeah I think so. And that will be great. I mean the competition is great. It makes for better products and solutions. I always believe that. And then all of a sudden you’ve got so much competition that then, then really the end users are going to start to dictate, you know, this is a lot of cool stuff, but it’s the paradox of choice. I’ve got too many choices. Yep. Yeah, I need to. I need to be a chick fil A model. I need to have six things done super well so that I know exactly what I’m doing every time. Yeah, a ten page menu isn’t going to work anymore. Yeah.

Kevin Rosenquist: It’s like when you,  it’s like when you go to, you’re like,  maybe I’ll watch something on,  you know, one of my streaming services. And an hour later you just go to bed because you. It’s like choice overload, you know? Like, just what do they call it? Something fatigue. They have a term for it. But yeah, I mean you almost have too many choices sometimes.

Tom Randklev: Yeah.

Tom Randklev: I couldn’t agree with you more.

Kevin Rosenquist: Well, Tom, it was great having you on the show. I really appreciate you being here.

Tom Randklev: Kevin. Listen, this has been a real delight. I hope we connect in real life soon. And I’d love to do it again whenever you get a chance. This is a really good time. Thank you.

Kevin Rosenquist: Sounds great. Thank you. Tom. All right.