It took a bit longer than I expected to release part II of the Payment Partnership article because of work & travel. Publishing this article from the gorgeous Lisbon, Portugal (perfect San Francisco sister city).
In my career, I have worked as an engineer, led data teams, led risk & payment products. Notice all of these are tech roles & none of those involve any operations. This came up at one of my career coaching sessions. I have worked closely & alongside Operation teams & some of my closest friends are from ops background. However, my career coach suggested if I were to take up a GM role or a broader leadership role it would help if I had some operating experience under my belt. She had a point! Fast Forward to my current role at a seed stage startup - as a ‘Head of Payments & Risk role,’ I spent a majority of my time in Payments Partnership & Payments Ops, especially early on. I couldn't be more grateful to get to see this side of FinTech.The depth & width that I got from playing this role are phenomenal. It was all about moving fast, negotiating, managing a P&L, no-code, & very operational albeit crucial.
I partnered with payment processors, a vertical SaaS FinTech vendor, many wallet and BNPL partners (additional payment method), group payment services FinTech startup, and networks (Vis, Mastercard / AmEx etc). That doesn’t cover the gamut of potential partnerships there are, but it checks the boxes on most - processor(s), network, vendors.
After talking to some of my friends in key partnership roles, I want to clarify that partnerships can be of various kinds.
Types of partnerships:
BD - Business Development
BD - Business Development as the name suggests means developing the business with partnerships a.k.a deals. For e.g. Block - SQ & Cash App’s partnership with Marqeta. Recently JP Morgan Chase’ partnership with Gusto to offer payroll for SMBs.
Corp Dev - Corporate Development
Corp Dev usually deals with M&A - mergers & acquisition, acqui-hire, etc. For e.g. Block & Afterpay’s Corp Dev teams scouted for the acquisition deal & worked out the numbers, price, negotiations etc.
Vendor management
Risk partnership for the most part is Vendor management. It deals with a lot of contracts & then integration. For e.g. a merchant like Uber would have partnerships with emailage, sardine, chargebacks 911 etc.
Account Management
SaaS FinTechs & most risk or payment vendors have account management to manage the portfolio companies. For e.g. I have an account manager for our Stripe & Adyen partnership.
I want to focus on my lived experience which I modeled as:
Payment processors, wallet, and BNPL partnerships, would have to underwrite you as a merchant. Anytime there is a risk, fronting of money & lending etc involved, the risk/underwriting team on the other side is going to be heavily involved. They are going to assess your business model, the cash flow & then approve or reject you. Typical questionnaire from these risk teams is really long. Sample list:
Please explain how you ring fence funds?
Please explain who holds liability for refunds.
Please explain your business liability
Who is your largest vendor? What share %?
Confirm the current flow of funds process?
Does your business have a MTL? OR, what gateway does your business use to process funds?
What steps does your business take to vet the vendors you onboard on your platform?
What steps does your business take to protect themselves from monetary losses in the cases of unforeseeable circumstances?
Does your business act as the Merchant of Record for each transaction?
What is your Dispute/Cancellation policy?
Submit 3 months of merchant processing statements & 3 months bank statements the main operating account a.k.a Merchant Processing Statements
Profit and Loss & Balance Sheets
Are they audited?
Cash Flow Statements
Operating Account Bank Statements for last three months
Booking to Arrival Report
I partnered with Legal & Finance very closely as most of these questions are around cash flow management & vendor /B2B contracts & T&Cs refund policy etc. Having a good grasp of your business & cash flow helps tremendously but even if you didn’t, by the end of it you would have mastered it.
These can take time as their questionnaires tend to grow & there could be a lot of back & forth. It’s especially challenging as an early stage startup in a disruptive/trail blazing industry, since the underwriting team does not have an existing model to build your case off of.
I’d say know what you (your company) cares the most about. Knowing is the key & will help you set a proposal or counter proposal based on what is offered to you.
For e.g. If you are a low AOV, thin margin business which most businesses are, then I’d imagine you care the most about the rate, negotiate aggressively on that even if it comes at the cost of committed contracts or long term lock ins.
On the other hand, if freedom is more important to you than committed contracts, then give up a few BPS on cost for the choice between different players.
These are just some broad stroke examples, but the key is to optimize to one or at most two metrics - cost of processing, reserves or orchestration → multiple processors, connected accounts etc. & then aggressively strategize to get those one or two metrics in control. You can’t have it all at the first go. So try to eat the elephant one bite at a time.
Having this longer term approach helped me a lot.
AMs & sales team are on your side. Their incentives are aligned to help you win but you have to nurture that relationship & articulate what’s important to you.
It helps tremendously if you know the domain so you can triage & have a long term view while selling this view internally to your company as well as continue optimizing with vendors.
If you are new to this domain, then hire external consultants. Knowledge is power during negotiation.
I like to keep my articles succinct so I’d end here, but If you have specific questions on your negotiation strategy, or partnership or roadmaps etc., don’t hesitate to reach out. Good luck & I hope that helped!
Thank you Trupti for this article, very insightful as always. Looking at managing the partnerships with card networks, what do you think are the main challengs to take into account? Do you have any advice on how best to navigate and overcome those challenges?
P/S: I was in Lisbon 3 weeks ago for the first time and definitely loved it. Such a charming city :)