Ep. 10: How is open banking in the US developing? Sarah Stapp of Aeropay explains pay by bank adoption

Welcome back to the Payment Shed podcast live from Money20/20 USA. We are joined this afternoon by Sarah Stap, CCO from Aeropay. Sarah, welcome to the show.

Thank you for having me.

Thank you for joining us. Please introduce yourself. Tell us a little bit about your career in payments today and a little bit about Aeropay as well.

Yeah, so I am a self-proclaimed payments nerd. I realised when I was talking around at Money20/20, I’m now at 16 years. I kept saying 15 years, but then I would go through the spiel, I’m like, ooh, I have to add another year.

We’re very similar tenure then.

12 years of that, I was at Braintree PayPal. So, I was employee number 20 there, very early days, and was a part of the team that did the international expansion outside of the US.

And when we first started, we were just reselling First Data before they were Fiserv, right? And we got an ISO, we upgraded to an ISO in the US, and the executive team was like, “Oh, that was easy. Let’s do that everywhere.”

So over the next 10 years that I was there, we launched 37 markets in Europe, Hong Kong, Singapore, Malaysia, Australia, New Zealand, Canada, Brazil, and we got everything production-ready for India, although we never went live. It got shuttered right before we were ready to launch it, but we did do the work.

So, very interesting global remit. Got to learn a lot of different payment methods around the world and how things are just completely different than how it is in the US.

After 12 years of that, I needed a palate cleanser. So I did payment consulting for about three years. Merchants and payments, kind of a combination of payments companies, fintechs and merchants.

How did you find that transition into consultancy?

It was very nice because I think towards the end of my time at Braintree PayPal I wasn’t in the thick of things working with merchants as much anymore, and it was really nice to be able to be in the trenches with merchants solving problems and looking at the data. How do you reduce interchange and how do you do that?

I know some people that have gone payment side to merchant side employed as well, and I always ask them, would you go back the other way? And I think 80% of them say no.

Yeah. Merchants are the belles of the ball, man. I always pick the wrong side. I think of them like I’m on the acquiring side and I’m looking over at the issuing side. I’m like, wow, you guys make a lot more money over there, but such is life, right?

But yeah, I did payments consulting for a few years and then I joined Aeropay about a year ago as Chief Commercial Officer.

Aeropay is a US pay-by-bank provider. So not the, you know, where you’re putting in an account and a routing number. You’re logging in with your credentials. It’s secure. It’s seamless. It’s modern.

And just very excited about where we’re at in the US as far as pay by bank. We haven’t had, nor do I think we’re going to have, a Pix moment like in Brazil. It’s going to be this gradual increase of adoption with innovation and fintech players and the consumer base gradually bringing it more to the forefront of regularity, if you will, in the US market.

So really excited to be part of Aeropay right now.

And how does open banking, specifically the pay-by-bank element, differ between the US and Europe in actual mechanics?

Pretty similar, right? But what we don’t have, which Europe has had, and I think I’ve talked to many friends across the pond on how that’s rolled out in the UK and across Europe, and they actually tell me that they’re jealous of the US because we don’t have the standardisation and the regulation.

I think I was part of the PSD2 project at Braintree. Well, I was volunteered. But it was actually a very interesting project.

But we don’t have a common framework. We don’t have all of that regulation, and even with the administration today, a lot of that is kind of up in the air.

So it’s been up to innovators and companies within the ecosystem in the US coming together and saying, this is what we’re going to do in lieu of regulatory oversight or a regulatory framework.

So it’s been, I don’t want to say Wild West, but it’s been a very innovative framework of everybody coming together and being like, how should we do this instead of somebody telling us what to do?

Do you do anything data side as well? Because obviously that data topic is very relevant at the moment when you talk about the regulatory changes and the seven years working towards one framework that then gets torn up very quickly, and we’re talking about charging for data here now.

Is that a world that you guys dip into or do you purely focus on the payment rail?

No, we do. So it’s actually very interesting in the US ecosystem. You have players who will focus on one piece of the money movement or risk or the bank-linking piece, right?

We do it all. It took us a long time to get there, but we have a full end-to-end in-house solution where we have the bank linking, we use AI to make the risk decisioning, we’ll move the money and we will do recovery on the back end if there are returns that come through.

There are other companies that do it, but we’re unique in that respect that we have it all in-house. We built it all in-house versus partnering or leveraging other tools.

But data is literally the most important thing to our business because that open banking data will feed into our risk decisioning engine. It also feeds into our recovery engine, and that’s how we’re able to provide a guaranteed solution. That’s how we’re able to keep acceptance rates high, keeping fraud rates low, etc.

And that’s ubiquitous across all payments, right? Where more data is usually better.

There can be a bit of a misconception around who owns the data as well. I think the JP Morgan news came out talking about charging for data, right? And it reminded me a little bit of that whole narrative with the schemes around, “Oh, you charge too much.”

I always take it back and go, what are you benefiting from from that product or service? Maybe there’s something in the amount of API calls that can be pushed through. There’s a cost to that, right? Somebody has to pay for it.

So I just feel like that narrative was very much like you shouldn’t be charging for data at all, but then you kind of scratch below the surface a little bit and you’re like, maybe they should be charging for data. Maybe a little, to keep the lights on, maintain the connections and things like that.

Yeah, I think so. I like the fair usage idea though, right? If you’re hammering those APIs, you’re going to pay more of a premium for it than someone that’s not hammering them to the same level.

But even on the credit card side, a lot of companies don’t know it, but the acquirers, they’re paying per packet use. They’re being charged for their API usage as well. It’s buried in a scheme fee somewhere, but there is a cost for sending that data across the interwebs.

Yeah, of course there is.

So what does the future look like for Aeropay then? You’ve obviously got a very rich stack, like you say, servicing pretty much all parts of the open banking ecosystem.

I don’t know if you lean into one product more than the other. What’s the next step in your journey?

Yeah, I think we’ve been quite successful at bringing this bundled solution to direct merchants.

Especially over the last, I would say, 12 months, where we have initially seen a lot of success is in regulated and high-risk industries where, one, acceptance rates are lower than low-risk industries, chargebacks may be higher and the card brands are deeming it a high-risk category.

You’ve got to pay additional fees and registrations and things like that, right?

So where we’ve seen a lot of success is in gaming, for example, and now we want to expand that into medium and low-risk categories.

Think marketplaces where you’ve got to pay in and you’ve got to pay out. Bring those cost savings and bring payment methods that more and more consumers are not demanding but are at least curious about.

There was a Payments.com article or white paper that was published recently that said 81% of US consumers are at least interested in trying pay by bank, although only about 10% of them have used it in the past 12 months.

So I think folks are looking for that, and merchants are interested in figuring out how to make it work, either through incentives, loyalty programmes, bringing them in through a payout process or something like that.

Because at the end of the day, I think consumers will do what is easiest and most convenient.

And that’s our challenge. What we think about every day is how can we make a pay-by-bank solution or checkout experience be just as easy, if not easier, than an Apple Pay, Google Pay or credit card transaction?

And open banking is certainly not in its infancy anymore, right? It’s probably not even in its teenage years. It’s now, right? What is the next stage for open banking?

There’s been some consolidation in the market. There have been some great use cases. There have been some not-so-great use cases as well.

But it’s a really exciting time, I think, going into that next phase of the open banking ecosystem in general.

So we’re at Money20/20 in the USA. Why is this such an important event for you guys?

Yeah, I think Money20/20 is always super exciting. It’s a time when, I joke about it, but it’s funny because it’s true, it feels like a payments high school reunion, right?

You’re seeing all these people that you knew at former companies who have now gone to this place or that place because it’s not an incestuous industry, right?

No, no, not at all. Not at all.

And hearing where they’re at now, what their challenges are.

Because when I was at PayPal, Braintree, for example, I was literally covering almost every time zone there was to cover, but just credit cards. Now I’m with Aeropay, I’m very hyper-focused on the US and ACH.

It’s really nice to just pop your head up every once in a while, right? And be like, “What’s going on over there? What’s going on over here?”

And hearing perspectives from merchants, from payments companies, figuring out collaborative opportunities and just staying in touch with what’s going on.

Like I said, I am a huge payments nerd, so I just love hearing about challenges and use cases and how people are overcoming them, the innovation and the solutions that folks are coming up with.

Quite an open industry as well. We weren’t always. I think there used to be a bit more secrecy around what each other were doing, but now it’s kind of open house. We’re building this and we want everyone to know we’re building it, and that leads to faster innovation and developments from other players, right?

It’s really interesting you say that.

I was having almost an identical conversation. I did a little panel here earlier in the day with a lady from Synchrony and another lady from Mastercard, and we were literally just talking about how not just AI and all that, but tokenisation, all of these things are coming together to where it’s almost this connective tissue, right?

Where we all now have a playground where we can play nicely together.

I think we’ve all had to increase our game to keep up with AI. I mean, I’ve never, I’m only 40 years old, but I’ve never seen innovation that has just skyrocketed like AI.

And we have to keep up as an industry to protect consumers, to protect our merchants, to make sure that we maintain an ecosystem.

That’s why payments is so interesting to me. I don’t know why you got into payments. What I say to my friends with payments is why it’s such a great industry to work in is there’s always something new.

There’s always a new product or service. We drive so much of the global movement of money, right? So things have to move forward.

No year is ever the same, even at the same company, and that keeps your job really, really interesting.

My team when I was at Braintree, we would say, “Payments never sleeps.” There’s always money moving.

And I would say, you know, we’re not doing open-heart surgery, but it matters what we’re doing.

People would say, well, what happens if you’re down for two weeks? And I’m like, if we’re down for two weeks, we have bigger problems to think about. There is something cataclysmic happening. Global issues are happening.

But it’s just such a critical part of our global ecosystem.

And merchants want things faster, consumers want things faster, right? And we have to adapt and lead the charge with that as well.

And easier. It has to be easier to pay, too.

100%.

Somebody told me, one of my payments friends coined this phrase, which I’m trying to make a thing. So if you can help me with that, that’d be great.

“Couch payments.”

I was like, what is couch payments?

And she said it’s if I have to get up off my couch and off of my mobile device to make a payment, it’s not good enough.

I hate it when occasionally you have to get a card out now. You’re scrambling around like, where’s my wallet? Where’s my card? I have to put in a CVV code. Come on.

I probably won’t do the transaction anymore. That’s how lazy I am.

There’s a lot of people that say to me, if I can’t pay Apple Pay, I’ll go somewhere else. And that’s something merchants need to think about.

Look, super interesting chat. We have a final section of the show. All of our guests are asked to nominate something for the Shelf of Shame, never to return again.

It can be from business, payments, fintech, whatever you like. What’s your nomination today?

I’m going to go with paper checks.

Okay. Paper checks.

Well, you know, the IRS in the States, by 2030 they said they’re not going to...

We said in the UK a few years ago we were going to get rid of paper checks, and they’re still around.

Still around. Yeah.

I would love for that to be the case. We’re very cash and we still have a lot of cash and checks in the US.

And I look at Sweden and they’re cashless and all that. It’s like, that would be great.

So I’m going to go with paper checks.

I would quite happily get rid of paper checks.

The other thing they do in the UK, if you ever get a refund from a utility company or whatever, they love to send you a check because they know then you’ve got to go and cash that, and there’s not many branches on the high street anymore for banks as well.

It feels like a deliberate ploy to not [laughter] give you your money back.

So 100%, we will put paper checks on the Shelf of Shame.

And thank you very much for joining us today.

Yeah, thanks for having me.

Cheers.