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When we think about embedded finance one of the biggest opportunities is bringing financial services to vertical software companies. These software companies already have the relationship within their vertical and it often makes logical sense for them to add financial services as an add-on offering, as long as it is simple and easy to implement.
My first guest of 2024 on the Fintech One-on-One podcast is Tom Bell, the CEO and co-founder of Maast (as in Money-as-a-service plus). They are a wholly-owned subsidiary of Synovus Bank and have been in business for two years. They are bringing embedded payments acceptance and embedded banking to vertical software companies but doing it with the backing of a 130-year-old regional bank.
In this podcast you will learn:
Why Tom decided to come to Synovus and start Maast.
The founding story of Maast.
Why they decided to create a new brand rather than do it under Synovus.
The suite of services that Maast provides today
Who they are working with today and their target market.
Why software providers are a perfect match for embedded finance (see Tom’s article here).
The most interesting innovations in payments today.
What is involved in integrating Maast into a software provider.
How Maast stands out from other embedded finance providers.
How they approach compliance requirements.
Tom’s view on the main trends in embedded finance that will be in play in 2024.
How he thinks embedded finance is going to play out long term.
Read a transcript of our conversation below.
Peter Renton 00:00
Happy New Year everybody and welcome to the first podcast of 2024. My name is Peter Renton, chairman and co-founder of Fintech Nexus. I hope you all had a restful holiday break. We have some fantastic guests planned for you this year. I’m really excited to bring these interviews to you. And we are kicking it off with one of my favorite topics, embedded finance.
Peter Renton 00:36
Before we get started, I want to remind you that Fintech Nexus is now a digital media company. We have sold our events business and are 100% focused on being the leading digital media company for fintech. What does this mean for you? You can now engage with one of the largest fintech communities, over 200,000 people, through a variety of digital products, webinars, in-depth white papers, podcasts, email blasts, advertising, and much more. We can create a custom program designed just for you. If you want to reach a senior fintech audience, then please contact sales at fintech nexus.com today.
Peter Renton 01:13
Today on the show, I’m delighted to welcome Tom Bell. He is the CEO and co-founder of Maast. That’s M-A-A-S-T, and I wanted to get Tom on the show because Maast is one of the, a new breed of embedded finance companies. They’re going to be really bringing financial services to software companies. And we talk about exactly how they do that, what their approach is, we talked about sort of what they’re focused on as far as different types of verticals. We talk about why embedded finance is a perfect match for software providers. We talk about what it’s like to integrate Maast into an existing operation. Obviously, we talk about the different types of financial products that Maast offers. We talk about the competitive landscape, compliance, and trends for 2024, and much more. It was a fascinating discussion. Hope you enjoy the show.
Peter Renton 02:18
Welcome to the podcast, Tom.
Tom Bell 02:19
Glad to be here. Thank you.
Peter Renton 02:21
Let’s get started by giving the listeners a little bit of background about yourself. And once you just hit on some of the high points of your career to date.
Tom Bell 02:30
I started my career and was a partner at Accenture for more years than I want to admit. So we’ll move past that quickly. But I was always, I’ve always been in the software and high tech space and kind of transitioned into payments and financial services as part of KKR’s buyout of First Data back in 2007. I think it was, and since then have been involved in the fintech and payments space with First Data, Bank of America – Merchant Services, Merchant e-Solutions, and a few other stops along the way. That ultimately led me to Synovus, and running the payments business here, as well as our now in-house startup, Maast.
Peter Renton 03:10
So was the idea when you came to Synovus to do this startup as well, or was it really just, it was the payments, the third party payments role that you were most interested in? Tell us a bit about why you came to Synovus?
Tom Bell 03:23
Yeah, I think it was, the answer was both, you know, I was originally asked to come help bring the merchant business in-house. But through that conversation, through that relationship with the executive team here, it was always, but there must be something more, there must be something more that Synovus can do to really be a meaningful player in the fintech space. Because if you think about Synovus as a sponsor bank, Synovus as the proud parents of TSYS, and you know, a multi-decade player in the fintech space, I think there was always this belief that we could create more value, we can maximize the value of Synovus. So we started down that path, we started down the path of how is it that we could leverage the assets of Synovus to really kind of change the game when it comes to finance and embedded finance specific.
Peter Renton 04:12
Interesting, interesting. So this really, from the get go was, sort of it’s been an embedded finance play. So maybe, then, tell us a little bit about sort of the genesis of Maast, and how how that all came together.
Tom Bell 04:26
So we started really studying the problem, as I like to say, thinking about what are the assets that Synovus has, what are the needs in the marketplace, as well as what are the trends in the marketplace? And what we quickly came to realize that, just like with embedded payments, financial services are going to become more and more embedded. Financial services are going to be sold through distribution channels, financial services are going to become an integrated, you know, seamless user experience, you know, within software platforms. If you think about small businesses today probably greater than 50% of small businesses in the United States today use some form of integrated software to run their business. So it’s logical that financial services would be an extension of that. We did some work, Voice of the Customer, some primary research, and out of that, it became very evident that this is where the industry was going. And then there was a real Greenfield opportunity for someone like Synovus, to take advantage of that. So in January of ’22, we formally launched Maast, under the brand of Maast, with the objective of building out a line of business, building out a business, if you will, to go capture that opportunity.
Peter Renton 05:40
So why do a new brand that no one has heard of, versus doing this under Synovus, which everybody has heard of. What was the thinking there?
Tom Bell 05:50
The thinking was that being that this was net new, being that this was a service line, an offering that really didn’t exist in the marketplace, that we felt that creating some differentiation from Synovus, while still being connected to Synovus was the best way to go. And as well as, Synovus is a five state regional bank. And our appeal, and our market, and our go-to-market strategy is nationwide. So we felt that we can create a map, if we had a new brand, you know, with, you know, some some fun with it, you know, the money-as-a-service-plus meaning of our brand to really kind of create some interest in terms of what we were doing.
Peter Renton 06:28
Right, right. So that’s where Maast comes from, M-A-A-S with a plus sign, which is actually a T.
Tom Bell 06:34
Peter Renton 06:36
Got it got it. So just to be clear, is this is this a wholly owned subsidiary of Synovus? Or you have other investors?
Tom Bell 06:43
No, it’s a wholly owned subsidiary of Synovus. We are set up with our own leadership team, our own technology, stack, our own go-to-market strategy, our own pricing, all of those things are unique to Maast. So it is an in-house startup, is probably the best way to think about it. We brought in a number of different industry professionals, as well as moved some high performing people across from Synovus. So that we now have it, you know, a team that really brings the best of the fintech world and the best of a regulated bank, if you will.
Peter Renton 07:15
Right. Gotcha. Gotcha. And you’re still doing your old job? Or is this, are you 100%, dedicated on Maast?
Tom Bell 07:23
I am still doing my old job as well, running Synovus Merchant Services, some might argue not well, but I still do have responsibility for that.
Peter Renton 07:32
Right? Maybe you could describe the suite of offerings that Maast provides.
Tom Bell 07:38
So at its core, and this was our original premise, and it’s proven to be very true in the marketplace, is that we believe that creating a unified underwriting and onboarding experience will be very powerful for merchants and customers of an ISV. So if you think about a software provider that is serving, let’s just say music stores, right, because that is actually our pilot customer that he had developed a piece of software that serves brick and mortar music, as well as lessons, as well as repairs, as well as rentals, etc. And kind of one integrated piece of software. Well, by doing that, basically, as he goes out and markets his software to the customer, to the merchant, that merchants able to go through a unified underwriting experience. And when approved, they immediately get a merchant account, as well as a business checking account. And yeah, business checking account, that’s not a new concept. But the integration of the two when it comes to faster funding, cash flow management, the ability to really see, you know, the full picture of their financial situation, on the platform that they’re using to run their operations is really where the power comes in. So our first use case was having integrated payments and business checking. We will be moving into other products, lending, etcetera, there’s going to be high yield savings. These are all things that are on our roadmap. So that those financial services that are now available to that merchant, just continue to grow. And since they’ve already been underwritten, the activation, if you will, or the adoption of those new products will be fairly straightforward. What we’ve also found is though, is that there are larger partners, ISV, SaaS platforms that may have a very mature payments product, they may already be a payfac, for example. And what we found is that there is also a market for us to bring just the financial services part of it, not the payment side, but just the financial services part. And that’s what we’re working on now as a second use case, to where as an ISV, as a SaaS platform, you’ll be able to resell just banking, without the payments, on your platform.
Peter Renton 09:51
Right, so then, so you’re a SaaS platform, and you want to have your own kind of branded bank account. I presume then the ultimate bank account is held with Synovus, right?
Tom Bell 10:02
It is ultimately held at Synovus. Exactly. All this is reflected on Synovus’ balance sheet. And you mentioned something earlier, Peter, I think is really important is a branded bank account, a branded banking experience, which is what we also offer. It’s up to the partner to decide whether or not they would like to brand it Maast, or brand it to their software platform, or create some third brand, which is one of our what our partners did, they actually created a third brand to like sit on top of all of their software products.
Peter Renton 10:30
Interesting. So then, well what is the target market exactly? And maybe, like, who are you working with right now?
Tom Bell 10:37
One is an ISV, that has created a vertically unique piece of software for the music industry. And so what’s unique about it is, is that they’ve incorporated much more than just a brick and mortar retail, they’ve incorporated rental/leasing, if you will, repairs, those types of things, all the things that kind of go into what really happens in one of these music stores, lessons, etc. The other one is, which is one that we’re boarding as we speak, is an ERP solution. It’s an ERP solution that focuses a lot on wholesale distribution, lumber and building products and things like that. And so basically, we will be their payments and banking provider. And that integration is underway right now. And we hope to be going live with our first pilot merchants within the next couple of weeks with them. So being that, it’s interesting, that actually is a horizontal solution, right, because they serve various different industries, although they do have some niches where they’re most strong. So there is that piece of it, we have a company that does software for gyms. So if you think about CrossFit gyms and other types of things, they basically have the software for that business owner to run their gym. And we’ve now added banking and payments to that solution. So they can now resell it. Before they were not participating in the payment stream. The gym was getting payments somewhere else, we’ve now brought that to the table so they can get it through the software.
Peter Renton 12:02
Okay, that makes sense. So you wrote a guest post on our web site earlier this year that I’ll link to in the show notes. But were you talking about that, like software providers are a perfect match for embedded finance, and you’ve just sort of touched on it already. But I’d love to sort of tease that out a little bit more. And what just describe exactly what you mean.
Tom Bell 12:25
It’s interesting, if you think about how software’s continuing to evolve in support of businesses, right. It used to be, you know, everything was typically very horizontal in terms of those business platforms. But now they’re very vertical. They’re very specialized. And it becomes really the operating system, right. And I don’t mean operating system like Linux, I mean, operating system is what they use to run their business, right. And so that portal, that screen, that laptop is where that merchant goes to many, many times a day probably spends most of their waking moments in that portal running their business, whether it’s scheduling, ordering, taking orders, payments, paying employees, all of those different things. It’s happening through that platform, right? Well, to me it’s just, to us it was just a logical extension, that there’s this whole other part of them running their business, which is the financial, right. The financial in terms of managing their money, paying their vendors, accounting, all these other different things that needs to come together, so that that portal is now incredibly more valuable. That portal is much deeper, that ISV software is much deeper, it’s much wider. And so it becomes obvious that with an ISV, that SaaS platform, they can bring, you know, exponential more value added services to the equation. So that small business owner when they’re sitting around their kitchen table at 11 o’clock at night, because they’ve been in the store all day, right? When they’re sitting around the kitchen table at 11 o’clock at night. They’ve got a very seamless, unified customer experience so that they can manage their business but not spend all night doing it.
Peter Renton 14:05
Right, right. There’s been so much change happening in the payments space in the last five years, embedded finance began in the payments space, and particularly in the last decade with the likes of Uber and that sort of thing, sort of having payments kind of be part of the platform. From your perch as sort of you’ve been in the payments space for a long time now, what’s the state of play in payments? What do you think are the interesting innovations that are happening today?
Tom Bell 14:36
Yeah, I think it starts kind of at the base level and then kind of goes up. So I think we’ll forever see payments providers continuing to innovate on making their product seamless, making their product transparent, zero friction, all these different things that are important today. And they’re going to continue to be important. There’s going to continue to be advancements in terms of now applying machine learning and AI to other things. Because if you think about the underwriting experience today, right, it’s to a certain extent, a lot of it is done the way it’s always been done, right. And I think there’s now opportunities for payments providers and their partner ISVs, to take advantage of some new tools like AI and machine learning to really advance that underwriting onboarding process, where there might be companies that using old methods that appear to be too risky. But using new methods, you can now suss it out and realize that this is actually an acceptable risk. So I think there’s that piece, which is table stakes, right? Because that’s, that’s kind of what happens, that has been happening in payments since the beginning. I think the next piece of it is the user experience itself, right? There’s so many ways that payments can be part of the experience in a very positive way. And I think you’re continuing to see that both on the mobile experience as well as the online experience to where payments just become more and more part of the value proposition. And I think the next wave is really going to be on different, different payment types, right? We all know Faster Payments are coming. We all know that pay by bank is coming, and all these different things that are out there. And so how is it, how is that payment provider going to really take those and make it a value added option, right? Because being able to do real time payments or real time settlement? It’s obvious what the value of that is, right? But how do you really make that a positive experience for the merchant or the customer? The same thing with pay by bank? When you pay by bank, the concept is great. But there’s got to be value in that transaction to the customer, why would they adopt to pay my bank? Right? So I think that’s where you’re going to see a lot of innovation around those new payment types coming along. And I think as well, like I said, all that getting wrapped up in, you know, the whole craze around AI, which is going to be really interesting just to see how use cases continue to evolve.
Peter Renton 17:00
So let’s, let’s dig into the details here. And what’s involved in integrating Maast into the software provider? What like, how long does it take? What’s the process like?
Tom Bell 17:14
Yeah, absolutely. So first of all, we have multiple options, depending on what the ISV is trying to accomplish. We have a full API forward stack, if you will, where and those API’s are available on Maast.com, if anybody wants to go interrogate them,. Where an ISV can fully integrate the experience into their platform and their user experience using APIs, right. And that’s probably the most advanced form of integration. And that probably takes the longest because it takes work on their side from an (unintelligible). But we can go full the other end, where people want to just be able to leverage our user experience, which we have a full user, we have a full banking and payments user experience to where we can brand it, we can make it look just like their, use their color scheme, their brand, etc. But they’re actually just actually transitioning from their platform to our platform. They just need a single sign on, which is also really important on this is that we’ve wanted to make sure any partner that we’re working with that the single sign on is available, so that it leads to the merchant, that user experience is very seamless, and they’re not coming in and out of platforms and signing in and signing out and all of that, and kind of everything in between. We’ve have some, for example, that have done a very tight integration with APIs from the payment acceptance and settlement standpoint. But then they’ve chosen to use our merchant portal, with our UX for the backend. You know, when they when they want to go research a payment or look at an authorization or process a chargeback or whatever, they’re fine to use our portal, but the actual acceptance part, you know they’re tightly integrated.
Peter Renton 18:50
Interesting. So I imagine that the time period would vary greatly depending on the complexity of what you’re trying to do. But can you give us some sense of like how long some of these different types of integrations are?
Tom Bell 19:00
We’re looking at about three months to really, once they initiate a project, and once we start working together, being able to get that done. Three months is an important time as well, because it’s not a, we tend to like to think about overlapping activities during that three month period, because one of the things that we focused on from the get go is probably because about many of the people that are on the team, including myself, have been involved in partner led sales, been involved in technology lead sales. And as I always like to say the easiest part of going to market via a partner is signing the agreement. The hardest part is actually making it a productive relationship. And so what we’ve done is we’ve built out what we call it performance marketing offering. And so from the very beginning, during that three months of integration, we’re working with the partner to activate the partner. We’re working with a partner to come up with a go-to -market strategy, we working with a partner in terms of how we’re going to make offers and have a compelling call to action and all of that. And then inside of all that, if the partner would rather, we can actually run all of that for them, we’ve built a martech stack that enables us to run that entire customer acquisition process for them if they so choose. And we’re getting a lot of interest in that. Because if you think about it, right, I’m a software provider, I’ve built a very elegant piece of software to serve whatever industry I’m working in right? Now, you tell me I gotta go figure out how to sell banking?
Peter Renton 20:33
(laughs) Right. Not the core competency.
Tom Bell 20:36
It’s not really in my wheelhouse. But it is in our wheelhouse, right. And so that’s where we’re seeing a lot of interest in, especially in the beginning, I think sometimes they’ll say, well, you know, we’ll let you run in the beginning, but eventually, I’ll bring it in house.
Peter Renton 20:50
Interesting. Which actually leads into my next question here, because we’re in a competitive environment here, you’re not the only offering for embedded finance, there’s quite a few players these days. And I can see, you’ve probably started to answer this question. But I want to ask it directly, you know, how is Maast standing out from the other embedded finance providers?
Tom Bell 21:12
In a number of ways, frankly. First of all, one of the things, and this was by design, from the very beginning, we’re bringing what I like to call whole product, right? We’re not bringing, you know, a series of APIs to link you back to your core banking system, or somebody’s core banking system. We’re not bringing an SDK or all these other things, we’re bringing literally the whole product. Complete integration, and then you have access to a fully functioning bank, a fully compliant bank, a fully well risk-managed bank, because we are part of the bank. So we’ve taken all of the regulatory 135 years of regulatory experience of Synovus. And we’ve embedded that into Maast, which is very different than a lot of fintechs out there that are offering embedded finance, because what they’re really doing is they’ve created an interesting front end, they’ve created a solution for integration. But then you turn around and there’s still a bank on the back end, there’s still a financial institution that may or may not have the same risk tolerance, if you will, as that fintech and so there’s a constant, there’s inherent friction, if you will. Just like, you know, (unintelligible) payments, right? There’s always friction between the ISO and the sponsor bank because of maybe conflicting credit policy and conflicting risk tolerance, and everything else. We’ve kind of taken all that off the table, because it is the bank that is bringing the whole product. And so an ISV, or SaaS partner who wants to start offering this, we obviously put the agreement in place, the integration gets done, and then we really take it from there. We’re running all of the banking services, all of the payment services for them in the background, you know, on their behalf, so that they can focus back on what they do, which is build elegant software.
Peter Renton 22:59
I want to talk about compliance. You mentioned it there. And it’s been in the news a lot this year with different fintech partnerships and different banks that have gotten consent notices, and what have you, that it’s top of mind now. I think for fintechs, for a long time, it wasn’t. So when you’re thinking about compliance, this is obviously all inside Synovus, but some of the things you’re doing Synovus has never done before. So how did you approach the sort of compliance part of all of this?
Tom Bell 23:30
First of all, from the beginning, we built out, you know, our risk regulatory compliance team in the very beginning, and started working with Synovus to make sure that we were building, adapting, enhancing the requirements, you know, of being part of a chartered bank. So if you think about risk policy, procedure, compliance regulatory frameworks, the overall control framework, we’ve basically taken what is proven and what we know works, because it was at Synovus, and we kind of put it into a digital form, is the best way to think about it, right. So some things that may have been partially digital and partially manual, you know, at Synovus, we’ve kind of fully digitized these. So for example, in the underwriting process, right, I mean, one of the things that we’ve been able to automate and digitize is the account opening for small businesses with multiple owners. Which is, if anybody’s listening to this who’s a small business owner, and is trying to open a bank account, you know, the trip to the branch with your passport, and potentially all your articles of incorporation, and your business partner, and you know that very analog experience, right, we’ve made that all digital, so there is no going to a branch. There is no sitting down with a bank or whatever. We can do all that digitally. So that’s, we took the requirements to open a small business multi-owner checking account to do that in a compliant way, and we just made it digital.
Peter Renton 25:03
Interesting, interesting. So I have done that as a small business owner, had to cart myself down to our bank branch and go through all that sort of thing. It is, it’s painful. Anyway, we’re recording this in December, this is going to be actually this is out in the first week of January, this is actually our first podcast of the year. So I want to, for the next few minutes, I just want to do a look forward. So firstly, when you’re looking at 2024, what are the major trends in embedded finance that you think are going to be in play this year?
Tom Bell 25:35
More and more adoption, I think you’re gonna see more and more players that are either trying to do what we’re doing, which is kind of the whole solution, or bits and pieces of it. And I think you’ll probably see more on the, you know, the niche point solutions, right? Here’s a very specific lending product, right, here’s a very specific deposit product or something like that, where they, they’re kind of taking that more single product solution, I think that you’re going to see more and more of the incumbents, the larger processors starting to really look hard at this, starting to get really far. And you’ve seen it, there’s been some acquisitions by some of the big three, you know, that point to where they’re heading in the space where they realize that there is value in extending, you know, if you think about payments as financial services, just extending the financial services offering, you know, and making that available to the ISV community. I think that is clearly going to continue. And I think that you’re going to see more and more ISVs continue to evolve in the payfac space, I think that there was a big rush towards becoming a payfac, and then kind of the retreat, wow, that’s really hard, right. And then now, I think you’re gonna see more thoughtful people going into that space. So you’re going to continue to see more and more mature software providers becoming true payfacs, which I think is going to be interesting, especially as sponsor banks and card brands, and others will try to manage and regulate all of that. And I think that the last piece will be is that you know, as real time or faster funding comes online, which it is, you know, how does it, how does a payments company, how does an embedded finance company, turn that into value, right? And it comes to, you know, the obviously the value is speed, right? In terms of how, how does a processor create much faster funding, real time funding? Maybe it’s, you know, today, if you think about how the way settlement works, it’s a very batch driven process, right? Is there an evolution to more of a, more continuous funding model that can happen in that type of model? Problem is though, when you do that, there’s inherent risk, which is why I think some of the AI and machine learning things are going to have to come along in parallel, so that you can manage the risk of faster funding. Because today, batches are held, things are settled two days, because that gives the processor, you know, the time to make sure they’re managing the risk. Well expectations, the time windows are going to continue to compress. So think if you’re on the back end, you’re gonna have to see more and more sophisticated tools being put in place to allow processors to fund faster and meet customer needs, but do it in a very, you know, hopefully controlled manner.
Peter Renton 28:26
Interesting. Okay. So then last question, as you look further down the road, I’m curious, typically in like the small business space, where, as you say, all these businesses that are in a vertical, they have some sort of ISV they work with, do you think that there’s going to be a majority or a large number, say, by the end of the decade, someone who might have had a banking relationship with their local community bank, or one of the one of the major national or regional banks, that they’re going to now have a banking relationship, their primary financial relationship is going to be with their software vendor? And how do you see that playing out long term?
Tom Bell 29:03
Obviously, I’m biased. The answer is yes. But I think you have to kind of parse it, you know, it’s not a one size fits all, right. I think there are millions of small businesses that have relatively straightforward financial services needs. They need a place to bring money in, they need a place for money to go out in terms of paying employees and vendors, and they need a place to keep their money, right. And beyond that, you know, they don’t have very complex needs. Now, there obviously going to be lots of businesses that are even larger, and they have more complex treasury needs. And they have more complex cap, higher capital requirements and other types of things. And that is, there’s always going to be a role for financial institutions to partner with businesses to help them with their treasury needs, their capital needs, etc. But if you think about the number of total businesses in the United States, the vast majority of them are small businesses. And we believe that that’s where, we know that’s where our sweet spot is. And that’s where you’re going to see more and more adoption of people saying, look, there’s a ton of value in me getting my financial services directly through the software platform that I’m using to run my business on a daily basis. And that’s what we believe, we’re going to continue to see the adoption.
Peter Renton 30:19
Okay, well, I think it’s a safe bet that it’s going to be a growing segment of financial services. I think that’s for sure. Anyway, thank you so much for joining us here on the podcast today, Tom.
Tom Bell 30:30
It was a real pleasure. Thank you, Peter.
Peter Renton 30:34 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.