The Tech of Moving Money: A Conversation with Leo Patching on SaaS

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Alexander Ferguson 0:00
In this episode of UpTech Report, I interview Leo Patching the CEO of DigitZ, a company that’s making it faster, easier and more secure for large and small SAAS companies to integrate payment systems into their websites. In our interview, Leo talks about the unlikely genesis of his company, and some of the complex problems they’re solving, such as controlling fraud at the checkout, and how to make SAS a more fluid experience. Thank you, Leah, so much for joining us. And I’m excited to learn more about digits and how it started, the growth, the end and also how you’re trying to stay innovative and continue to grow into the future. So starting off, what year did it start? What year did you join?

Leo Patching 0:44
Yeah, as we we chatted about. So the company actually was formed in 2014. And the kind of core team who started the company really did it around the whiteboard. So it was a bunch of friends, Laura Wagner, who’s who’s the kind of principal founder, kind of initial CEO, David, who’s who, to this day as our chairman, who was the first CFO of PayPal, Linda Perry, who was kind of head of acquiring a visa for a while, and who was an Apple Pay and a bunch of other people. That kind of that was the core team who really came around a whiteboard, and with a deep experience of the FinTech space payments, and generally, like a solid kind of background, looked at what problems they could solve in the payment space, what they could do to create something innovative. And that’s where digital was born. And I knew a couple of board members and connected with Laura and David at the point they were looking to augment the team, with the CEO. That’s when I came in to kind of help lead the company alongside Laura.

Alexander Ferguson 1:51
So you’re joined 2017 going forward? Obviously, there’s been an evolution. But right now, what is your focus your industry that you’re focused on kind of market segment that you’re looking to help? Yeah, so

Unknown Speaker 2:02
we kind of we talked about ourselves as a FinTech infrastructure company. Kind of specific area that we operate in is payments. And so kind of the the stage we are very much an API driven solution, kind of servicing SAS platforms and marketplaces.

Alexander Ferguson 2:23
And the pain points that you solve for then the SAS platforms is what?

Unknown Speaker 2:29
Yeah, um, so with our initial solution, that core focus has been around user experience. So the user experience of payments within a platform or within a SASS company, and how they actually provide a good experience for their customers. And so they use us as an infrastructure behind them to help enable that process.

Alexander Ferguson 2:54
I like actually on your site, he says, think of it a way to almost baking it in into the actual platform itself. So when I when I always think of payment processing, I think of PayPal or stripe, which is stripe, a competitor.

Unknown Speaker 3:11
Stripe is a trailblazer in our space and has done some amazing work and helps stripe doing fantastic don’t help reimagine what payments can be. So we are very different. But I would love to be kind of be mentioned alongside those guys. I think they’re doing amazing work.

Alexander Ferguson 3:32
Yeah. Sketch so but the real kind of key point that you hone in on is white labeling, like your Your name isn’t actually necessary need to be seen by the end consumer. That process? Is that correct?

Unknown Speaker 3:46
Absolutely. Yeah. So we’ve done everything from from creating a rest API’s to allow user experience should be within the platform, to embeddable reporting to drop in check out everything to make sure that we are truly the infrastructure behind and we enable what’s already happening on the front end, just in a more clunky way.

Alexander Ferguson 4:10
Gotcha. Okay. Well, how many customers do you guys currently have,

Unknown Speaker 4:14
with a an initial set of kind of launch customers that we went to when we were testing out our product we had, I think we could launch with five kind of initial platforms, I might have expanded that this year to 10. And we were in the process of scaling with that. We have a number of others in the pipeline and different we’ve gone at the market to look at it in terms of kind of the datasets we get and the kind of intelligence we can gather. We’ve got a different different platforms in different verticals. So we are we’re not truly fully agnostic, but we are fairly can able to be broad in the way that we can enable payments for a ticketing company and a dealer management software and have the same thing same API is service those companies, because essentially, the end functionality they’re looking for is the same. The front end is a different part.

Alexander Ferguson 5:08
Gotcha. So it’s, it’s it’s baking it in, and it’s really any online SAS solution that wants payments and receive payments, they could potentially be using your service? Absolutely. No, as far as pricing and plans, what does that look like there? If you’re accepting more customers?

Unknown Speaker 5:25
Yeah, for sure. So we very much and this was another key part of the genesis of the product was to make this simple, transparent, easy to go kind of approach. And so we work as a partnership with the platform that we work with. So we actually, our kind of goal, rather than almost a pricing kind of straight platform play is to help them monetize payments within their environment, to align both of ourselves and our technologies. And we are essentially, in the way that most technology products are working, we are moving to we kind of gone with a usage based pricing. So there’s no there’s no kind of minimum flat fees, on fees, whatever else was in the legacy kind of payments world that you’ve got to charge for any works or what it was. It is purely a kind of baked into our technology to utilize functionality. And we then, like most FinTech companies, kind of make our money on the back end, at the point of transaction.

Alexander Ferguson 6:24
Gotcha. The partnerships or rather, what you’ve established here is you made all the connections needed on the back end of finalizing the payments. Yeah. What kind of partnerships does that look like? That you have that have kind of been simplified, then for SAS developers don’t have to worry about it.

Unknown Speaker 6:41
Yeah, so we kind of worked with a number of financial institutions. And we we’ve got integrations that are live with a larger FDIC insured kind of payments processor on the back end of us. So we, we utilize what they already had as legacy systems and have help help them make this more of a seamless process for integrating with today’s kind of web 2.0 companies.

Alexander Ferguson 7:09
So the bridge between kind of the old and what the new really want.

Unknown Speaker 7:15
Yeah, and I joked with you when we spoke last time, via and want to Loris favorite metaphors is the rocketship of sass companies. Somebody who’s built their own product and is going to market with it, and the kind of horse and buggy that’s connected to it. That is the legacy financial institutions.

Alexander Ferguson 7:35
That’s a nice bridge that you guys can make that hopefully, SAS helpers, or entrepreneurs can not be held down by the old financial industry. Now, for you personally like and and your organization. How are you guys innovating? Because obviously the technology things are changing? What what are you doing to stay innovative?

Unknown Speaker 7:58
Yeah, sure. Well, one of my benefits. For myself personally, as I’m surrounded by a fairly extensive team of people who are constantly thinking, Laura, one of our other team members, Ben is on the forefront of all this stuff. And so as we build out our product we are one of the nice things of going live with customers who already have their own customer sets is that we’re solving real problems in real time, and adapting to the way that the market is shifting. And so one of our core focuses on this last kind of year has been building out our checkout product, driven by the nature that we see opportunities to integrate intelligence and fraud controls at the point of the checkout, and have things that we can enable seamlessly at that side. So it’s, it’s interesting to have this real time innovation, because it is a when we actually see these things, oftentimes, they are an actual need. And they are fairly rapidly needed solving those problems, but also future proofing them. And this is the thing Ben CTOs kind of incredible at is getting something that we can deliver now, but building it in a scalable fashion, where we can go in the future. And as we’ve talked about that, we we’ve created some interim solutions that do pattern recognition and enable us to kind of take the data we have or take the parameters that we’re going to dive into our API’s and then build on that, but doing it all the time with database elements, looking to be able to use those models as we go forwards in the AI ml space.

Alexander Ferguson 9:43
That’s really obviously with the data just going through you there’s so much that you can do with it. And so the opportunities are there, but you’re taking it one step at a time obviously as you grow and it’s smart that you you have your fiber or how many 10 you said right now, customers that you’re able to work with Everything is, you know, the pain points that they need as you work with them. So you can build it in as you grow for you. Uh, wow. Or is there any places you look for just stay relevant on new technologies, or are there any technologies that you’re interested in right now?

Unknown Speaker 10:18
Yeah, yeah. So I mean, always benefit from industry events and podcasts.

Alexander Ferguson 10:26
Do you have a favorite podcast that you listen to?

Unknown Speaker 10:29
I have a very good friend who has a podcast called Jordan Harbinger, his show the Jordan Harbinger show. He’s amazing. has fantastic guests. And yeah, I have to give him a shout out. Yeah. Somewhat technology focused. He’s here in the Bay Area as a kind of has a broad set of guests.

Alexander Ferguson 10:47
Gotcha. Do you have a books? You have any books here or audio books you’re listening to?

Unknown Speaker 10:53
Yeah, I knew you’re gonna ask that question. I actually just got into a debate last night with a friend. I recently read Sapiens know Harare? And it’s a I mean, it talks about the kind of the journey from Homo currently answer, what are all the types and he didn’t know there were different variants really, until I read the book to, to how Sapiens became the predominant species. And then the end part coach Lincoln’s technology is, as the promise species, and as the most kind of capable, kind of developed species we’ve had, we are doing a fantastic job of destroying the planet to in doing so it talks about how how technology, automation, AI, goes into some of the UBI conversations. But that does a fantastic job of that. So that that was a recent book I read is fascinating.

Alexander Ferguson 11:45
Interesting. And it is interesting, where hopefully, we can use the technology to help us do better not make things worse. Where do you see digits in five years from now?

Unknown Speaker 12:00
Yeah, so it’s it’s a it’s a fascinating kind of approach because the landscape is moving quickly. Although there is still a long way to go, I think, as as commerce and E commerce and kind of SAS continues to develop and change. We we’ve been kind of very mindful on creating ourselves in a position where we have a core offering that we can build upon iterate, and provide different services to different use cases. So we have our underwrite kind of infrastructure play that we have our core API’s built on, then we kind of were delivering the front end functionality. We’re looking to kind of branch out with our partnership base to continue to solve problems as we go. So I I see us being kind of continually innovative and continually delivering new new ways to solve problems in the payments and fintech space.

Alexander Ferguson 12:58
Do you have any desires or hopes? Do you want to be in like 1000, SAS companies a million, you know, on your platform, any any desires for goals or numbers for that? Yeah, so

Unknown Speaker 13:09
growth for growth’s sake is kind of something I’m, I’m always wary of, I would rather do good growth, profitable growth, I see us in the potential for where we get to, a lot of what we’re doing is to kind of reduce the friction even further from where we’re at to engage with us. So kind of current integration is reasonably frictionless, but we can always do better. So as we get there, and our support model grows with that, there’s no there’s no reason why we can’t scale to a large customer base. There’s also we have a one to many strategy. So our platforms we work with, we scale with their customer base, too. So it’s, it’s very simple.

Alexander Ferguson 13:49
You don’t have a need a million customers for to be working well for you guys, if you just had 10. That are depressing. A lot of payments. You’re good.

Unknown Speaker 13:56
Exactly. Exactly. Not

Alexander Ferguson 13:58
that you won’t take more?

Unknown Speaker 13:59
Of course, of course. And, yeah, I mean, but we we don’t always look at it purely as a direct play to the platforms. We’ve also been working on, we’ve done a licensing agreement to license the framework of our technology. Oh, two different geography. We are kind of core focuses on North America. Our best solution is US and Canada based. We work with a company that had presence over in Korea. So rather than try and solve a localization problem, we license our framework, we provided them with a way to implement our solution in their environment. And they actually had their own team that they used to localize that we see that as a as another growth opportunity and a way to actually allow people to build derivative works on top of what we’ve got, which we don’t claim to have all the answers. And so we always love having people engaged in lessons.

Alexander Ferguson 14:55
That’s called the ability to then license and never think about the fact that ever Every country, obviously, their payment processing would be different than how the banks are regulated and work. But it’s so you’re focused on North America, and then now licensed in Where did you say South Korea, Korea, South Korea? Now, for this future of making things even more seamless, and continue to iterate, what kind of hurdles Do you see that you need to overcome? In order to realize this vision?

Unknown Speaker 15:28
Yeah, so we are headed to the banking system. So what, what it’s actually a very healthy, robust conversation between technology and the industry, but the legacy payments industry playing catch up. And so being able to use different elements that are now available, different wallets, to the different ways people can approach, providing financial services, being able to provide that, based on legacy systems is what we have. And something we are always cognizant of is that we can do whatever we want, we can build everything, our own way. But we have to work with the ecosystem in order to make it actually work for the broader populace. I mean, we we have, again, kind of part of our kind of brain trust, we have a lot of people who look at blockchain and different different ways we can kind of expand our offerings in that area. And we we are fairly rigid and kind of focused on making sure we deliver our core offering whilst kind of having very strong opinions and very strong focus, but loosely held because we do see things changing. But you, you kind of the rescuing you skate to where the puck is, is going to be. But you’ve also got to make sure you you kind of you’re on the ice at the same time,

Alexander Ferguson 16:51
right and then keep paving the way for speaking of blockchain. I noticed on your site, Ben, he says the CEO of digits.io, which is a blockchain. So subsidiary So tell me more about like, you’re obviously developing another piece that will help going forward. What does that look like?

Unknown Speaker 17:10
Yes, that’s separate. We had enough demand and interest around the time to look at how we could actually utilize blockchain or where the future of of that technology is going. And Ben as he doesn’t always love the term, but kind of more of a futurist. It’s kind of has that approach and hasn’t been experiencing crypto has been involved for a long time and worked in the industry. And so we, we launched that as a separate company more as an r&d arm to make sure that we were staying, staying up to date and staying relevant and also being able to move as on when things became available.

Alexander Ferguson 17:56
That makes sense that you’ve got your arm to be ready for whatever that future may hold. Exactly.

Unknown Speaker 18:01
Yeah. And it’s that lock is rapidly changing, rapidly innovating, but also, first movers in that space have faced quite a lot of pain, so it’s making sure we stay current they stay consistent with making sure we in the space but without compromise the pain. But limiting the pain you can take small steps and go down some blind alleys. But if you take it all the time you get yourself in trouble.

Alexander Ferguson 18:27
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