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Embedded finance is a term that has only been around for a relatively short time. But some fintech companies have created services that could be embedded in non-financial firms for many years. It really began in the payments space and became a part of lending and we often called it lending-as-a-service before embedded lending was a thing. One of the pioneers of embedded lending is LiftForward.
My next guest on the Fintech One-on-One podcast is Jeffrey Rogers, the CEO and founder of LiftForward, an embedded lending fintech that has been around since 2013. They have a fascinating story and might hold the record for the youngest fintech to partner with one of the tech behemoths.
In this podcast you will learn:
The founding story of LiftForward.
How a small fintech company was able to land Microsoft.
How their multi-faceted relationship with Microsoft works.
How lenders are involved in this process.
Details of how all the different parties come together.
The demographic changes that are driving their business.
The different types of payments plans and subscriptions they do.
What the Mastercard Engage partner network is and how LiftForward is involved.
What brands want to see when it comes to embedded lending.
How LiftForward makes money.
The changes they needed to make to become an international company very early on.
The scale that LiftForward is at today.
Where they are focusing this year when it comes to new markets.
Jeffrey’s vision for the future of LiftForward.
Read a transcription of our conversation below.
Peter Renton 00:01
Welcome to the Fintech One-on-One podcast. This is Peter Renton, Chairman and co-founder of Fintech Nexus. I’ve been doing this show since 2013, which makes this the longest running one-on-one interview show in all of fintech. Thank you for joining me on this journey. If you liked this podcast, you should check out our sister shows The Fintech Blueprint with Lex Sokolin and Fintech Coffee Break with Isabelle Castro, or listen to everything we produce, by subscribing to the Fintech Nexus podcast channel.
Peter Renton 00:31
Before we get started, I want to remind you about our comprehensive new service. Fintech Nexus News not only covers the biggest fintech news stories, our daily newsletter delivers the most important fintech stories into your inbox every morning, with special commentary on the top story of the day. Stay on top of fintech news by subscribing at news.fintechnexus.com/subscribe.
Peter Renton 01:09
Today on the show, I’m delighted to welcome Jeffrey Rogers, he is the CEO and founder of LiftForward. Now LiftForward is a super interesting company. They have created this fintech infrastructure that’s really embedded finance for brands, merchants and banks, and bringing those parties together in a unified system. It’s not easy. Which he describes obviously, in detail, how he’s able to do that. And some of the leading brands globally that they’re working with today, we obviously talk about how that all works. We talk about the demographic changes in the world and how that’s kind of changing the way consumers are purchasing things and the impact that that’s having on LiftForward. Then we talk about their partnership with MasterCard, and what that means, we talk about their international business and how they they went international very early on in their development, and what that meant for their company at the time, what it means now. We also obviously talk about how they make money, the scale they’re at. And Jeffrey provides his vision for the future of the company. It was a fascinating discussion. Hope you enjoy the show.
Peter Renton 02:24
Welcome to the podcast, Jeffrey.
Jeffrey Rogers 02:26
Great. Thanks, Peter. Thank you for having me.
Peter Renton 02:28
My pleasure. So let’s get started by giving the listeners a little bit of background about yourself. I know you’ve been doing LiftForward for a while now. But tell us some of the highlights of your career before that.
Jeffrey Rogers 02:41
Been a while, it’s been a bit of a journey. It’s been over 10 years at the company. But before that it has a pretty mixed background, I have a mix of, outside from entrepreneurship, law and finance. So I actually am a JD/MBA. Actually had a short stint practicing law for a bank. And then I moved into investment banking, worked on Wall Street a couple of years before finding my passion of building companies.
Peter Renton 03:08
Okay. Why don’t you tell us the sort of the impetus to launch LiftForward back 10+ years ago now. What’s the founding story?
Jeffrey Rogers 03:16
I was running a pretty sizable company at the time. And this was during a major liquidity crunch in the country. And banks started to pull back just because there weren’t a lot of… Banks got very conservative. And this was at kind of the height of the fintech boom, right? It’s kind of, which led a lot of companies like LiftForward, to come out to try to fill in that gap to provide funding to both consumers and small businesses. And when we came out, what we tried to do is focus just at the time on small businesses, because if you remember, this was back in 2013, there was a lot of already action around the consumer. And we saw that small businesses still needed a way to get capital efficient, efficiently. And there was some companies out there like OnDeck, that had kind of a funding platform that small businesses could apply directly. But we tried to do something different where we wanted to work with OEMs and manufacturers that were providing actually tools and devices to small businesses, and try to find funding around how do we get these tools in their hands for a funding mechanism, but in a time that it would take you to underwrite a consumer. So basically adding tech around, around financing, working with OEMs. That’s really what’s kind of the grand vision of how we started. And then as we dove deeper into it, we learned that around this whole ecosystem of providing financing kind of within, with OEMs. A lot of this is done through either vendors or retailers, and that there was a whole need for a tech solution that really could integrate all of the interested parties in, so that you can have a smooth transaction. And that really kind of brought us fast forward to where we are today.
Peter Renton 05:16
Right. Right. That’s interesting, because I remember when we first came across you guys, I think it was actually Geoff Miller from GLI, that’s a blast from the past, I know. I think he was the person who introduced us originally, but, and you were doing, like I said, the small business marketplace. So it’s been really interesting watching you kind of evolve over the last decade. So maybe you can sort of talk about what is the core product suite today? What are you actually offering?
Jeffrey Rogers 05:44
You know, maybe Peter, we can back up and take a case study.
Peter Renton 05:48
Jeffrey Rogers 05:49
One of our larger, largest clients, Microsoft, had been a client for years, but we have a number of programs with them. But one of the more recent ones was with a division called Xbox, which a lot of people may know from the gaming, but they have a gaming device. They also have software, they have accessories. And before we came along, the Xbox was just sold through retailers. And if the retailer offered financing, great, but they didn’t really know how the customer, the end customer would be able to consume the product if they wanted some type of financing. So they said we wanted to take control over that, because they really cared about the customer experience and how they got the product home, and how they use it, and how they paid for it. So I said we’re going to put together a subscription, but we are a multinational company. So we’re going to put this together initially in 15 countries. So we need a tech solution that will allow that the customer no matter if they’re in Sweden, Italy, or the US when they apply, they have the same experience. But in that experience, we want it to include one – that the different accessories that we sell around the world, that they can attach, two – that they be able to get financing for this. And we’re going to dictate kind of how we want that financing to look around the world. And three, once they plug that machine in, all the software that comes with the subscription will get digitally attached. And that’s what essentially we provided. So that was kind of the, the need. And then the solution is you know what we call now, let’s kind of fast forward out, embedded finance platform. So what we do, so for every retailer that they sell Xbox in, we go and we integrate it in with the retailer. For every region that they’re in, we integrate it in with a bank or multiple banks that finance those transactions. And then for every third party that need to touch that transaction, like for example, this is sold as a subscription. So you’re meant to own this device for 24 to 34 months, you send it back. And then for the new iteration of that model, you are sent a new device. So the 3PL that takes that device back is also integrated into our platform. So all this information flows to all the parties when they need to have it. But everyone gets the same information. And the customer has the same experience around the world when they consume the product.
Peter Renton 08:20
That’s fascinating. That’s fascinating. So can we just back up a second? And I’m curious about how you were able to get into Microsoft. You’re a small company, Microsoft’s one of the largest companies on the planet. How are you able to kind of convince them to go with a little fintech company?
Jeffrey Rogers 08:37
Yeah, well, we didn’t start with Xbox. We started with a smaller device and Microsoft, and the kind of the, what their surface product
Jeffrey Rogers 08:45
You know, Microsoft, at the time had 100 retail stores around the US, and they had one in the UK as well. And so we integrated our tech solution in those retail stores. But they essentially sent out an RFP and went out to their constituents to find the best tech solution. And fortunately, you know, we won. I think a lot of it was at the beginning, especially since we were starting, all this was back in 2013. We were able to build kind of a flexible solution as to what they wanted, rather than someone that had something out of the box that didn’t fit. And then from there, we’ve kind of molded into this, you know, embedded finance for lending, if you will. We’ve learned that we’re able to build a core software platform that works for, you know, almost every brand now.
Peter Renton 08:45
Peter Renton 09:39
All of these transactions have to have a lender behind them. Do you kind of come in with this package that includes access to bank finance or some other kind of financing?
Jeffrey Rogers 09:51
We can. Now that we have a number of lenders around the world on the platform, we can. Typically with some of the brands we work with, they want their own lenders. And sometimes it’s done with an RFP. So for example, we partnered with RBC and Canada, for IKEA. We won that RFP, but that’s a situation where, you know, IKEA wanted RBC, RBCs partner in Canada for that transaction. So I say it varies, we can bring the bank, but in a lot of the brands we work with, they have relationships already with banks, so they bring them.
Peter Renton 10:32
Right. Okay. Okay. And so, it seems to me, it’s a complex solution, because you’ve got, on one hand, you’ve got Microsoft, and the other hand, you’ve got the retailer, where they’re actually purchasing the product, which have their own systems. And then you’ve got the lender on the back end. I mean, like, do you have to go and get all these pieces together? I mean, how does it all come together?
Jeffrey Rogers 10:57
So you know, we work with the tech teams, and each of, you know, for the retailers we work with, there’s a you know, huge tech team that integrate these programs in. At the bank, there’s a tech team that we’re, and with some banks that we’re closely working with, like, you know, a Citizens or an RBC, we are, our tech teams are constantly working together, improving the product and adding new, and adding new programs. So, you know, I would say, for a lot of this, the hard work has already been done. Because once you have the integration, and it’s, it’s good, now. Now, there’s always an upgrade and things to change. But getting those first integrations in were difficult, but for like a lot of the major retailers around the world, we have that integration completed.
Peter Renton 11:42
Right. Okay. It’s interesting to me, because you’re kind of, with your embedded finance products, it’s almost like a subscription type product that you’re offering here. A lot of the new generation they, they’re used to paying subscriptions, that don’t necessarily like to pay on credit card. I’d love to get your perspective on the demographic changes that are driving the growth in what you guys are doing.
Jeffrey Rogers 12:05
It’s partly financial. But also another part is that it’s just a mentality standpoint of, for items over a certain amount, they just don’t see why they need to pay the full amount for it, right. They’re, even if there’s a device involved, they want to pay for, they consider it a service. So they just want to pay for the device, and the service that may come with it, and pay on a monthly basis. That’s really what’s driving how they want to consume it. And if you look, at the end of this year, you’re going to see some, like for consumer transactions online, we’re going to reach over like $6 trillion. It’s absolutely massive. If you look at the SMB world, and this is SMB if they’re buying with some type of financing, some call it device-as-a-service, but it’s subscription as well, you’re looking at over, you know, $300 billion. So those numbers, and those numbers are growing at, you know, great clips. You know, on the SMB side, it’s 40% on a CAGR, and then you know, 100% on the consumer side. So a lot of that drives a want, you know subscription and monthly payments. And just to level set Peter, our platform, really, if you look at kind of all of these installment loans, right, and then under installment loans, you can have buy now pay later, where you’re just paying that smaller term, right? It’s three or four payments, or you can have what we call split payments, general finance where you have, it could be a longer term, but you’re not going to own a device. And then, you know, to the third we put subscription, where as you’re paying for a certain term, you’ll wanna return a device at the end and start the process all over again.
Peter Renton 13:48
Do you do all of that?
Jeffrey Rogers 13:49
Yeah, we do, we do all of that. So the depending upon the client, you know, they’re might not be need for a subscription. It’s more just a finance. So the work we do with RBC with IKEA is just, it’s just finance, where Xbox is a subscription.
Peter Renton 14:08
I’m interested in your partnership with MasterCard, I saw that you’re part of the Engage partner network. Maybe you can explain what that is, and why it’s important.
Jeffrey Rogers 14:20
Sure, so MasterCard, they’re looking to solve two problems here for banks. So this is, you know, really a reaction to the boom in buy now pay later. But it’s really expanded again as I was trying to explain, to installments because it includes buy now pay later, but it could be for longer terms as well. So as we know, there are companies like Klarna and Affirm. They’ve done a great job of offering a buy now pay later product in their own in-app purchase experience. And then some credit card issuers can offer a post transaction, installment. product as well. So after you do a credit card transaction, you probably see it sometimes on your bill, you can pay it over, over, you know, four or five payments instead of paying it all at once and sometimes interest free. And what MasterCard Installments does is allowed banks to offer it at the point of sale, or pre-sale. So for example, you don’t see it now a lot, but you’ll start to see when you swipe a credit card at a retailer, it will come up and give you options to have it as a regular credit card payment, or you can pay in one, two, three, four, twelve payments. And you can choose at the point of sale whether or not you want to split it up. The other thing that solves is, if you want, if banks have, want to put together a program with their existing customers. Say they have 10,000 customers and they say, and they can go to them and say, Hey, you each have $5,000 worth of credit for and you can pay over, you know, whatever six months for you know, with no interest, and you can shop at these retailers, then this product allows them to do that. So MasterCard built this technology bend that allows you to do this at the point of sale, and they started to feel and then determined that was easier instead of banks integrating directly into MasterCard to do this, that if they had technology partners to aid them in this. So we then integrated our technology platform into MasterCard, and then banks can integrate into LiftForward. And it saves them about 80% of the time of integration to offer these products.
Peter Renton 16:40
Okay, interesting. So then, who are some of the banks that you’re working with?
Jeffrey Rogers 16:45
MasterCard. We don’t have any, there are some in transition right now, we don’t have a lot that’s public right now. But RBC and Citizens, we have programs outside of the MasterCard program that we work with. But on the MasterCard side, that’s still in the early stages, so we haven’t made an announcement on who’s coming out first yet with that product.
Peter Renton 17:06
So I want to talk about embedded finance, because that is something that wasn’t really a thing when you started this company. And now it’s top of mind for banks, for fintech companies, for brands as well. And I’m curious, like, in your conversations now, compared to what they were even five years ago, do you go out? Like I look on your website, your homepage mentions embedded finance, right, front and center. So does that message now resonate with non-financial companies? Do they get what you’re referring to there?
Jeffrey Rogers 17:42
Yeah, I know, I still think it’s a term that’s, you know, very familiar within our world of fintech. So I think we have a little while before that term is, you know, when someone looks at that term, and they and they read it, and they realize, okay, this is what they’re talking about. And also even within embedded finance, right, we focus on the lending, but there’s a you know, it still means a few other things, right? It’s companies selling insurance, it could be, it could be a retailer offering banking services outside of what they normally do through some other third party. So even that term is, has a lot in it. So I think we still have a ways to go to, for that to become become a household term. But what you know, what we want people to realize is that really in the purchase flow, of when you purchase goods and services, there’s going to be some kind of embedded lending in that in the future from our standpoint, right. So, you know, our overarching goal, and what we want to see overall is that everything you purchase over a certain amount, of course that makes sense, that you have that ability to pay over time, and to pay in monthly installments. And we want to provide that tech layer, both to retailers, banks and manufacturers to allow that to happen, because that is the trend of, you know, not only technology products, but we see it in home improvement, we’re seeing it in travel. Obviously, elective medical care has been out there for a while, but it’s still very clunky the way it’s offered. So, you know, our goal is to make that easier through tech.
Peter Renton 19:21
Okay, so then, are you a SaaS company? What’s your business model? Are you charging transaction fees? Origination fees, what are you? How do you make money?
Jeffrey Rogers 19:30
Yeah, we make money by transaction fees that come through the, through the platform. We’re somewhat of a SaaS, of a SaaS model. The main, the bulk of the fees are the transactional fees that come through.
Peter Renton 19:44
Gotcha, gotcha. Okay. So want to get back to something you talked about when you, you were talking about Microsoft earlier, and you said that they wanted to roll this out in 15 countries and you sort of were, it looks like you were thrust into the international world pretty, pretty early on. I want you to go through and sort of tell us what that’s like. I mean, you obviously were motivated with such a big client, but how did you kind of level up to be able to handle expanding beyond US in your early days?
Jeffrey Rogers 20:15
We went through a lot of transition at that point, because we had to make some some choices. And this was one of the things that was, was driving it. And so one of the things you may remember at the time is that we also used to fund these transactions ourselves. So we used to borrow from, you know, asset managers and hedge funds, and fund these transactions. But, you know, unless you’re going to do this at some kind of massive scale, they’re really hard to manage, these type of, these credit funds. And also, we were very, you know, we were locked down. So a lot of our funds, you get approved for kind of where you operate at the top. So we couldn’t lend money outside of the US. So we couldn’t, we couldn’t fund transactions outside the US, but we’re going outside the US. So it was basically becoming kind of two businesses if we’re going to have these credit facilities. So we ultimately made the choice to ditch the credit facilities and partner, instead, with banks and financial institutions. And it was a move we had to make if we were going to be international, and it was, you know, one of the best things that we that we did, so that required a lot of change. Because, you know, once you have a credit fund, you have also all of the staff and controls in place that normally you would have when you’re, you know, funding transaction, and that we had to transition out of that, and then add in more more engineers to build tech, more people that can handle, you know, international relations and international transactions dealing with international companies. So that was a big transition for us. But that was necessary for us to be a complete software company and in this type of space. And also, you know, set us on a good trajectory as well.
Peter Renton 22:07
So did you partner with like international banks? Or did you have to go and do local banks in each of the different countries? Or how did that work?
Jeffrey Rogers 22:15
Yeah. So international banks, and then, you know, like, United we work with, we even work with Klarna, in a couple of countries, BNP, which, you know, in multiple countries, so we did have to go with some international some local, but mainly we work with the larger banks.
Peter Renton 22:36
Okay, so can you give us a sense of the scale you guys are at today? Are you growing? Where are you at?
Jeffrey Rogers 22:43
We are growing. I mean, if you look back at COVID, COVID was a crazy time, right? Because I think a lot of companies, if they survived it, they went through this crazy, nothing’s happening, to like, okay, the world’s coming back, and you have this crazy spike, and then it slowed down again. And so now we just see kind of growth again, but there’s still a lot of uncertainty in the world. So kind of what’s driving our business now is just, is just expansion. And I would say the constituents that typically, whether it be banks, retailers, or the brands seeing the need to offer this, you know, across the globe. So you know, when you look at last year, we had about 1 billion, I would say 1 billion of GMS go through our our software around the globe, whereabout if you split us up, I would say we are I think we are probably 50/50 US and then, you know, outside of the country. And then my guess is, as we go through this year, we’ll probably be more outside of the country then, than US just because the expansion is more there. But I think we’re, we’ll go about, I would say 75% over what we did last year.
Peter Renton 23:58
Right. And so Microsoft is still a big partner today?
Jeffrey Rogers 24:01
They are. When we started back in 2013 with them, we were, we had one program with them. And now we have three, which is three different groups that sell you know, completely three different products. So they’re still pretty significant, important, and that relationship continues to grow as well.
Peter Renton 24:19
So are you then focused on like, the big multinational companies like that, or I mean, are you thinking about where you’re, you’re trying to get new business from? And there’s not many Microsoft’s in the world. You know there’s lots of brands, obviously, lots of people could use the infrastructure that you’ve built. Where are you focusing on?
Jeffrey Rogers 24:38
We still have a few big brands out there to go through and some that are coming on board this year. But you are right. So we were able to build this, I would say this kind of plug-and-play tech, that doesn’t require a whole lot of integration. That kind, they call it second tier retailers, or manufacturers can use, that allow for scale. Some of the other things we’re doing, Peter is, and you’ll see an announcement coming out soon, but we’re integrating our solution into other, I would say much larger companies that have a full suite of software services. So they will plug us into, you know, a network of, you know, thousands of retailers to where you can kind of turn on LiftForward, if you need it. So that is going to offer us a lot of scale as we move forward.
Peter Renton 25:30
And what’s your vision for the future of LiftForward? I mean you’re in a great spot, you got some really interesting technology. But where are you taking this long-term?
Jeffrey Rogers 25:40
You’ll see some announcements coming out in this year, where we’re going into, you know, new countries that we have, you know, major countries that we’re, we haven’t been in before, we haven’t announced, but we’re actually building the product there now, in conjunction with clients. In the long run, you know, I’ll tag line and we have it on, I look at these kind of old T-shirts that we made a long time ago. But it says we turn products into services. And you know, quite and we had that back in 2013 before, you know, before all this came. And we started to take a look at that again and put that back. We’re starting, you got to go back and make some new T-shirts, because it’s coming forefront now. But overall, the vision is that, you know, most products, you know, over over, you know, $300 or it’s offered through LiftForward for kind of monthly pricing. We want to be that platform that this all goes through. So it’s all about, for us on a go-forward basis, scale.
Peter Renton 26:42
Makes sense. Well, it’s a fascinating story. Jeffrey, we’ll have to leave it there. Really appreciate you coming on the show today. Thanks so much,
Jeffrey Rogers 26:49
Peter, thank you for having me. Great seeing you again.
Peter Renton 26:53
Well, I hope you enjoyed the show. Thank you so much for listening. Please go ahead and give the show a review on the podcast platform of your choice and go tell your friends and colleagues about it. Anyway, on that note, I will sign off. I very much appreciate you listening, and I’ll catch you next time. Bye.
Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s largest digital media company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.