Prepaid International Forum (PIF) recently interviewed Suresh Vaghjiani, MD of Global Processing Services (GPS), about the current state of the fintech sector.
From the rapid growth of new entrants and their impact on the prepaid sector to working with an abundance of new players as the industry strives to bring more choice, greater security and better resilience to the sector.
When we look at fintechs with prepaid at the hub, do you think consumers understand what prepaid is? Do they get it or are they just concerned with how the product works?
It’s not about prepaid, it’s about the user experience. The average consumer just wants a product that comes with the added features fintech can offer, simple things such as retrieving your PIN from your app, multi-currency solutions and live notifications. Traditional providers are struggling to do things like this.
The sector is growing so quickly that it will take the incumbent banks two years or more to catch up by which time the products will be outdated. New entrants are getting products to the market very quickly and they are providing better value and better services. Fintechs are delivering the enhanced user-experience that consumers buy into and develop rapidly based on behavior driven development.
Some fintechs have failed and this has led to some investors pulling back. We saw a dip in innovation for a period of time but in the last 8 months we’ve seen an acceleration. What do you think is driving all of this?
We can see a fair amount of defensive play, where traditional providers are snapping up companies for fear of the market moving on without them. They want to be part of it and they are acquiring companies to learn from them.
And then there is the widely held view that some valuations are excessive, especially when products could be launched for half the cost. The real valuations are based on the number of the customers they have, the user experience and ultimately the problem the product will solve such as the ability to send money around the world in a certain way. But there are providers of similar products getting vastly different valuations.
I think that there will be a few casualties in the fintech space. The casualties will be the ones who try to copy products that are already available. The people who are copying solutions are almost killing our identity and I think these copy-cats will struggle.
The elephant in the room is revenue. Many companies aren’t making any money despite their high valuations. I wonder how that can be justified. The way these solutions have been sold to investors varies considerably. For example, some are looking to commercialise their business model by selling value-added services such as travel insurance and using data to push service providers, such as utility companies, who can undercut a consumer’s current provider. You need to look at how a solution has been sold to an investor. Ultimately these companies are valued on how they use big data to provide added services that end customers really value and desire.
Can you tell us about GPS and its journey?
GPS didn’t enter the market as a processor. We began as a programme manager specialising in open and restricted loop gift cards such as shopping mall cards that run on scheme rails. We still process the Westfield Gift Card today. In the beginning we used a third-party processor. But we soon felt that we could do a better job by processing for our own programme. We thought that it would be an easy process but it certainly wasn’t!
The most striking learning in this process was that we built the GPS platform not as a processor but as a programme manager. As a result, we created a platform that was very rich in APIs. We have pages and pages of APIs that do different things, from PIN reminders to Luncheon Vouchers configured to only work at certain times of the day. You only need to look at our clients to see just how diverse the GPS platform is.
Having a processing platform is not financially viable unless you are processing millions of transactions a day, so GPS was formed as a separate company with separate resources and staff. When I joined GPS three years ago we had 40 members of staff. This has grown to over 140 today.
GPS has grown very quickly and has become one of the key processors in the prepaid industry. What are your learnings from this rapid growth from a standing start to a key provider of services?
Historically, GPS has been lucky to attribute its growth to word of mouth and client recommendations. This is because we quickly learnt that you have to employ the right people in the right place to attain exceptional results.
Our success is down to our staff and our attitude. For example, we have tried to learn from our competitors by looking at what we like and doing it better and looking at what we like less and doing it differently. As an example, we insist that all our account managers must have completed a least one year of implementation work before they can become an account manager. This may sound simple but it means that they have the technical knowledge to address things rather than act as glorified mail box.
You have over 100 clients globally, what are the challenges of working with them?
We have been very fortunate that to date no clients have chosen to leave us as a service provider. We pride ourselves on the power and flexibility of our processing platform GPS Apex, which is harnessed by our team of payments engineers to optimise each individual programme. Each programme comes with its individual challenges and our aim is to collaborate with each client to ensure any issues are efficiently and rapidly solved.
Comparisons are often drawn with credit and debit cards – that they always work, that transactions always go through. But this ignores the fact that prepaid processing is far more complex. Unlike standard processing for credit and debit, prepaid prohibits negative balances.
GPS has a great story to tell. We are pushing boundaries and we are doing things that no one else has done before. We have clients who are using our technology to deploy first-of-its-kind products and services but you may not know that GPS is behind it all.
The market is made up of lots of new entrants so it is very important that we can communicate our success stories and how our relationships with our partners and the press work.
What advice do you have for start-ups?
Don’t try to copy someone else! Have a product that solves a problem. I have heard some crazy ideas but if you have something that solves a problem that people face every day then it will grow.
Whether we love it or loath it, the fintech industry has made our sector more mainstream because their solutions appeal to the mass market. I have never seen so many prepaid cards being used on the London Underground. And that’s not because they’re being sold as a prepaid proposition, it’s because they’re being sold as a solution.
Keep pushing the boundaries and question everything, but don’t break the rules or the whole sector will suffer!