Hi guys, welcome to the Fintech Coffee Break. I’m your host, Isabelle Castro. This week, I sat down with Tim Astanov, SVP of product commercialization and partnerships at Tabapay to talk about the company’s support of digital tipping platforms.
This was a relatively new area for me. So, we delved into the importance tipping has on the economy, looking at how tipping platforms can change the lives of millions of employees. We also spoke about how Tabapay’s solution can support these platforms, navigating the difficult regulatory implications and bringing transparency to the system.
Isabelle Castro 0:42
Hi, Tim, how are you today?
Tim Astanov 0:45
Doing well, how are you?
Isabelle Castro 0:46
I’m very good. Thank you. It’s great to reconnect.
Tim Astanov 0:49
Yes, it’s been a while. Yes. Thanks for having me.
Isabelle Castro 0:52
Well, I’m really glad to have you on the show. I’ve been looking forward to this. So to start with my first question, what gets you up in the morning?
Tim Astanov 1:02
What gets me up in the morning, I have a Shih Tzu puppy, which about six months old. So she tend to be showing up in my bedroom about 5am or 5:30 or so. And because she’s too short, she can’t jump on the bed quite yet. So she’s she’s nagging me to pick her up and put her into bed. So she can say hello to her parents. But no kidding aside is I enjoy solving problems and challenges, I guess. And so part of my job is talking to a lot of partners and, and clients, as well as internal internal clients. So ability to get up in the morning and face another issue, we have plenty of them in the payment space. That’s what gets me up in the morning.
Isabelle Castro 1:51
Nice, nice. Tell me about your journey to Tabapay.
Tim Astanov 1:56
Oh, that’s a loaded question. I spent roughly about 20 years or so. And I’m going to call it broadly banking and payment space. And prior to Tabapay, which have joined about two and a half years ago, now, I spent most of my time working for the card networks, as well as the issuers of cards. Part of the rationale of joining Tabapay was around, you probably will make me a more well rounded individual in the payment space. If I were to join an acquiring site, then I kind of been an all around it. As well as getting to know RTP because I haven’t spent a whole lot of time on I’m going to call it traditional banking payments. That’s more of a rationale of why. And with respect to the journey, I was fortunate enough to know in my previous capacity, when I worked at Visa, I spent a decent amount of time with co-founder team of Tabapay, as well as saw their performance of this day just looking at the internal data back in days. So the attraction was again, from a logical perspective is to get to know acquiring and bank payments, as well as the the the the my collaborations with a with a co founders of Tabapay, which made the companies more attractive.
Isabelle Castro 3:23
Nice. Okay. So turning to Tabapay enables instant or near instant it is instant, isn’t it payments for fintech innovators? Right?
Tim Astanov 3:35
Yeah, we are a combination of everything. Which means our we are laser focused or historically have been laser focused on instant and by instant I’m referring to be cards transaction and it’s a question of how do you define instant so my definition of instant, and I’m let me tell you what my definition of instant is. And then we can go from there. My definition of instant , when you pushing the button as a consumer or a business, and you receive or send money in real time, and it’s deducted from your account or it gets added to your account in real time. If you look at that, from that lens of the things then we primarily instant meaning that we doing. Think of us as a full stack acquiring which means we can we can support a purchase transaction because you guys transaction can funding transaction in any flavour you can think of those transaction types. That’s one money in if you think about it from a business perspective on the business on the money out we support push to card capabilities and recently added net new product that was developed by Visa called Visa Plus, that’s specific to cart. Let’s revert back to the more traditional bank payments so we support ACH, all type ACH and this ACH is can be money, it debits as well as the ACH credits which is to be tend to be slower Right, it’s the same day next day and not overlay that back to the instant piece is RTP. In an RTP world, you have primarily credit flows today, meaning that you can send money to somebody else as a business. So we support RTP, as well as a request for payment. Now, we operate primarily in North America in North America is not really quite there yet from a scale perspective and, and adoption. But we were hoping that RFP will kick in at some point as well with FedNow recent announcement and etc. Again, I think most of our transaction, if you look at purely from a volume perspective, I would argue over 90% of the volume is instant. And the rest is this the legacy rails that we have to support.
Isabelle Castro 5:47
Okay. And you’re focused primarily towards fintechs. Right?
Tim Astanov 5:53
Yeah, so I’ve again, company was in existence for about six years now. And I’ve joined the company about two and a half years ago. So I didn’t get to, I’m not going to take a credit of why fintech because it’s been decided prior to me joining the company. But ultimately, based on my number of conversation, why fintech why we stick to fintechs, at least at the moment, is all around it, I’m talking about traditional fintechs think of retail banking, think of retail lending and etc. without the bank charter, that was the traditional focus where we focus on and the reason why we were focused on the fintech space is they were simply underserved. And it is a it is a complex problem that they were facing, unlike traditional advice, although the problems are similar. But for them, it’s even more challenging because they do not have a fight charter, especially in United States where you can’t really do anything without having a bank charter. So we that’s the reason primarily why we focus on fintech. I think the definition of fintechs continues to expand, at least in my world. I would argue there’s so many customers or not customers, but clients and verticals are becoming the fintechs. It’s an evolution of technology. And when you start embedding payment payments or cards or anything else into the stock, then you ultimately become a fintech in one way or another, although your core might be something else, retailer, etc. So we at least the top of AFC in moving away from it. I’m going to call it the true fintech and core because we see the migration or evolution of fintech definition getting into different verticals. Hence, we kind of continued to own this fintech track, but the reality is the fintech, the the world of fintech just expanded significantly.
Isabelle Castro 7:49
Okay. And so your network of networks and banking partnerships has expanded with it basically.
Tim Astanov 7:59
Yes, I think it’s a one way to disturb Yes.
Isabelle Castro 8:03
Okay. Cool. So one major pull of Tabapay, I’d say is this network that you offer this client, to you offer to your clients. It’s something that we focused on during our panel earlier this year. I think it’s 15 banking partners and 14 networks across multiple geographies its huge. Right? Yes, yeah. It’s massive. Why is this such a powerful attribute to have, particularly in the current macroeconomic climate?
Tim Astanov 8:38
Yeah, that’s a it this is a very big question. So let me parse it out in a couple of different things. I think A- the reason for the network connectivity, you’ll see a lot of acquired processors or that including our competitors, that that have a, I’m going to call it the multi market global focus. So for them, it’s all about speed to market to open up yet another geography. And in that case, the focus is primarily to partner with somebody else to be because it’s impossible in the payment space to connect to hundreds of networks around the world. It’s too labour intensive. Too time consuming. So most of folks who are getting into the space in the processing space, they tend to outsource a lot of network connectivity to somebody else. For those who are focusing on a sole geography or maybe a handful of geographies. We’ve, we’ve in the beginning we made a decision that we’re going to be a vertically integrated process processor and what it means we do not want to outsource anything related to the core of payments. We want to control it all and there’s multiple reasons behind it. The one is vertical integration or control of the entire payment stack means you have a high reliability because of lower chance of breakage and etc. We control everything ourselves, Because of our focus on networks, we, we have to have a very sophisticated back end operations specifically to liquidity management and Treasury. Because we have to settle across multiple networks, we really don’t get help, so to speak from a third party who is actually going to be connected to the network. And the and the last thing is when you cut out the middleman, so to speak, and when you manage the entire thing yourself, that means you extract more economic value from the traditional payment chain, and and can provide a superior performance at a lower cost. Okay, that’s, that’s that’s the key to it. I think the reality is, once you We not only did we have multiple connections to the network, you also starting to see as I depicted earlier, we’re not just traditional inquire processor, we also support our RTP for banks, and etc. And all of that becomes a super powerful message to the market, because it’s you connecting to a single player that can virtually connect you to any rail at least in the US and Canada. At the minimum, and you can play around depending on your use case, do you want money into your money out? Do you want one use case only or 15 use cases, everything can be done through a single connection to TabaPay via unified API with literally only two API calls just to validate the whether it’s a bank account or card number is real, it’s taking its life. And then it’s actually created transaction itself. And what it means is that I’ll take this validated payment credentials, and just simply send $50 to a payment credential, whatever it might be.
Isabelle Castro 11:38
Okay, so yeah, it’s super flexible and super powerful. I wanted to go good. It’s a good goal. So I wanted to focus because recently, I think a couple of months ago, you came out with a new facility, which supports digital tipping platforms. Tell me a bit more about this.
Tim Astanov 12:02
Digital tipping, yes, absolutely. So as I mentioned to you earlier, from kind of moving from traditional fintech to less of traditional fintech. If you look at the tipping world, and I think it’s generally varies market by market, I’m going to focus focus on United States for the purpose of this conversation, we’re not going to boil the ocean. If you look at European markets, right, so i , I’ve been fortunate to travel enough, all over the world. And there are certain expectation of consumers as well as employees as well as as an employers, how they treat cash, not cash, how they treat tips, and etc. I think so the reason why we got into it, and if you think about every flow, you have a guest, who shows up at the restaurant pays the business, and then that business a portion, a portion of the proceeds potentially can be tips. And those tips have to go to employee. It’s requires pull and a push, this is a describing flow of money in and money out. So because of how flexible the solution is, as well as payment mediums, whether it’s a money in or money out, it was natural for us to start supporting use case like tipping. And it is pretty complex actually. There is tax implications, the relationship, contractual relationship between multiple parties and etc. We’ve built pretty much everything we needed to support tipping industry with a couple of different pivots and or tweaks to the platform. So it was a natural extension for us is once we saw a demand, I think generally there are a lot of things we can do and it’s up in space is the whole for us. And the reason why we have number of partnerships, I think we now have around a handful or actually more, probably a dozen or so customers it somehow is embedded in the tipping flow where it’s a customer who issues products that simply given to an issue products I’m talking about think of cart that is given to the employee and All proceeds go directly to this card. We support in that particular instance, taking money out or provide some sort of p2p functionality. Once the money is in the account. We support for some for some players, we support only pool set think of you tapping a device or providing your credentials to be able to tip and it says in the Think of logic industries. We support payout only if you think about a restaurant who is already have embedded so to speak, acquiring relationship and a banking relationship. They take part of that they take a billion for servicing you a meal let’s say it’s $100. In US I would say 15 to 20% is probably an average 20% of the bill has to be paid out to the employee. We provide ability to employee to pull money on demand net and what else And we want to make sure we separate the enablement of teams in the first place. We are the payment infrastructure player. So which means we provide access to all the rails, all of all the IT services and everything else, and underwriting and etc, to the to the SAS platform who ultimately is embedded into the POS itself, or any other form factor that or any other form factor how they want to interact with the guest and employee. And they’re the one who is calculating the tips and doing a lot of different things on behalf of the I’m going to call it the merchant. We sit below the SAAS platform that and we help them to move money in in a very simple matter, and provide all the choices to both guests as well as employees. Okay, so it was a natural extension.
Isabelle Castro 15:49
Yeah, no, it sounds it sounds like it. But I mean, when I first went to America, which was last year, I was taken aback by the tipping culture, which coming from Europe, I mean, we do tip but not as prolifically. Is this an area that has become more important or it’s just stayed the same, and then now people are trying to address it digitally.
Tim Astanov 16:20
I think with digital payments, it becomes more visible i because you coming from Europe or you you have a European perspective, you need to understand the core, guess the fundamentals behind how we getting paid versus how I’m going to call you is European getting paid. And if you’re in a service industry, generally what you should understand is the difference between the two, based on my travels and my explorations is in Europe, it’s very common to get employees actually have a salary. And they work for X amount of hours a day for the duration of the week, or month and etc. In the end, the salary is actually pretty decent. In the US. There’s a salaries, there is no salaries, these are typically hourly employees, which means that I can today work three hours tomorrow, I can work nine hours. And folks generally don’t get paid as much because there’s a culture of partially these people will reveal will be reimbursed by tips. You also see this is my personal view, slightly higher and more friendly. I think service levels because people expect you to tip them and depending on the service you secure. It’s almost like a pay for performance you expect to hire if you love the service. And if you don’t you don’t. I think that’s why you see a substantial difference. Because anytime I go to Europe, when I leave tips, people don’t know what to how to react. Right. And it varies country by country. But in many countries, I just came from Portugal. And it was exactly that every time you tip their faces. They just shocked that somebody left them extra money. And I think they’re probably already at this point. They know who’s American who’s not because Americans sends a tip. But that’s the reality. So there is a very different, I’m going to call it the payroll structure that drives that. And for those who came to United, who come to United State, I am an immigrant myself. My first impression was very similar to you. Oh my god, I have to pay bulk of money actually, for the tips versus not versus for the actual services that I receive. So yes, we do tip quite a bit. I think it’s part of the culture at this point. And the more digitalization, you will see digitalization of payments, we believe that tipping will get bigger and bigger and bigger. We also see migration from cash to digital payments because cash is extremely expensive actually to handle and create transparency across the board. I don’t think we it just like almost with money, right? We still use cash. We use bank payments, we use car payments, you’re going to see the same maybe it’s not the same but you’re going to continue to see the split of famous in some cases cash is very appropriate in some cases is not but what we did see and the reason why we have focused on the tipping space is COVID. COVID changed everything because people don’t want to carry cash anymore. And with lack of cash would we at least anecdotal stories from from SAAS platforms the citizen that worked with us the point around once cash cat cash became obsolete at least in the point of COVID Because no one wanted to carry it with them. What happened is a lot of employees got hit because they were it was substantial contribution to their to their pay. And if people don’t care tips and there is no other way to tip them. It’s it’s affects the attrition of the employees with the employer right so people start to leave and look for another The gig that actually make the money. So there is a strong demand for digital tipping solution in the United States, because of the because of pattern change that’s created by COVID.
Isabelle Castro 20:09
Okay, that makes so much sense. And it sounds like I mean, particularly with the current economic climate, like tipping is going to become more and more important, right?
Tim Astanov 20:22
Absolutely. For a subset of people who work in a service industry, I think it is very important. And it’s I’ve been, I’ve seen a number of stats, but it’s varies from 40% of the entire pay, right can be up to 40% can be all about tips. So as you can imagine, if I lost that opportunity to capture those tips, because of lack of cash, or whatever it might be, and it’s a substantial reduction to my paycheck, so to speak.
Isabelle Castro 20:49
You mentioned transparency. I’m glad that you did. Because I noticed on the Tabapay website that there is quite a big focus on transparency. Where does this come into play? How are you making it more transparent? Why do you need to make it more transparent? There’s a lot of questions within that. But why is transparency such a big thing?
Tim Astanov 21:13
Yeah, um transparency I think, matters in a couple of different ways. So if you if you because we we actually. And I think it’s coming from the founders, they enjoy educating folks on how things work. Payments is extremely complex. So if you were to go to our website, literally, most of the documents actually going to be published and open. So theoretically, you can open a payment company tomorrow. And you can learn it’s a Wikipedia, so to speak of payments is actually on our documents is a lot of documents, but they all available. And again, partially, it’s all about open culture of let’s educate folks, let’s make sure that they’re smart enough, and let’s make sure they utilise tools where that’s necessary. That’s one. The second thing because we because we were historically servicing fintech folks, it was extremely important. And keep in mind, many of them dealt with the bank payments in United States primarily ACH. When the real time payment came about, it’s required a pivot and a pivot and how to think about real time payments. Because I’ve never seen real time payments, banks generally don’t accept cards, we don’t treat them as merchants and etc. So a lot of education had to a lot of age, we need to educate a lot, or we had to educate a lot, all of our fintech players of how to operate and what volume products to get, and what’s mitigate frauds, and etc, etc. That’s one thing, the second thing because we were providing a superior and more expensive rails, because of focus on the instant, it’s always good default in comparison to ACH, which is cheaper. It’s file based, and etc. So we we not only providing transparency around materials and education, but we also provide transparency around economics. So if you were to work with Tabapay ever, you will see like many processors and all over the world, as a matter of fact, will provide you. If let’s say I’m going to pick a network, let’s say it’s Visa, if we get a bill from Visa, and the bill includes a huge file, we will simplify the file for you for the purposes of how you use Visa rail, and a particular rail. That’s one, the second part we will do will bifurcate the costs to for you to easily understand what he actually paying for and we all know interchange and Visa fees. But within any card network, there’s it’s very complex business and there are 40, we’ll close maybe 10 or 20 billing lines, so to speak of why you’re getting paid. So we will show you you paid, let’s say $1 for $100 transaction, we took that we took that $100 transaction we sent to the network a we’ve here’s what we paid to the network a and is going to be itemised for every penny will be counted and you will see full transparency in cost. I worked on the merchants side in the past. I was one of those fintechs that happened to be accepting cards as well as issuing cards. And we could never tell what do you I have a whole view of how much we paid for a day or for a month. But I could never tell if I click on a specific transaction. Can I tell exactly what my cost was specific to that transaction? I could never do that. I’ve worked with multiple processors never do that. So top up a provided that level of transparency and anyone who is very focused on economics and how to not only monetize but also how to extract cost. We actually provide full visibility and it’s holding as I said, from the commutation perspective, why is certain product needed but all the way to the cost transparency.
Isabelle Castro 24:54
Okay. And you mentioned that before that in tipping, this kind of stuff. It’s quite a complex situation with tax and all that kind of stuff. So I guess this transparency is super important for that.
Tim Astanov 25:08
It is typically space specific complex for multiple reasons, because there are multiple entities involved. It’s not typically if I, if I were to support a t shirt sale shop, it would be pretty easy. I have to provide a service to accept cards. And that’s pretty much it. And I think most of the processing world is focused on that. And that’s where the a lot of volume is. In a tipping space, think of I have a customer who is a tipping digital tipping platform that does all the flunkies calculations integration, that that tipping company has to integrate with a POS device, potentially, as well as a payroll company that support a particular business, then I have to support the business, and then I have to enrol all the business employees. So that’s where complexity comes in. Because they touching so many parts.
Isabelle Castro 25:57
Okay. Okay. No, it sounds super, super complex. How are you addressing this? It sounds like a huge task to address it. How specifically are you addressing it?
Tim Astanov 26:11
Yeah, so we were fortunate, as I mentioned, because of flexibility of the platform, ease of integration, single API, single layer of API’s, I guess, that you can pick and choose from which one which rail you want to use, and etc, we were I would argue, at present there, that complexity comes in, in the US market, specifically around banking, how certain needs to be treated the contractual relationship between so many people, when you actually X time remove, how do you put controls in place to make sure that as a guest comes in, they actually tipping versus buying something illegal. And I think that’s where we had to make some tweaks to be able to accommodate and to feel feel comfortable to be able to serve that market, we also had to add, we’ve generally rely or we generally serve big enterprises, we had to pivot a little bit, for multiple reasons, tipping was one of them, we had to create an underwriting engine, that actually going to take not only I’m going to call it the sub client, so if you think about SAAS platform being a client, then on top of it, they have a business who is actually utilising the services, we need to underwrite not only the SAAS platform, but also the business behind them. And in a typical space, specifically, it gets even more complicated in case of do you work with the contractors or the zoom your employees, then in some cases, you need to extend it over on the writing down to the beneficiary of the tips.
Isabelle Castro 27:37
Okay, yeah, I did see a while to get there. Yeah, it sounds okay. When you set it all out like this, it sounds mind boggling. I did see on the kind of outline of the tipping product that you offer end to end, KYB KYC KYC on ultimate beneficial owners. So that’s all kind of integrated into that.
Tim Astanov 28:04
It is it is so it’s a bit I think we have more work to do in development to make sure it’s absolutely streamline, we’re kind of learning as well at the moment. But I suspect in six months or so we have a lot of talented people who working on this solution is going to be completely streamlined in and from a user experience perspective. And we had to create a lot of fancy as you can imagine, with touching very sensitive information. We’ve been touching sensitive information for years now. Card number, I would argue very sensitive, but that when you start talking social security numbers and government IDs, and etc, it gets a little bit more challenging. So we had to create a bunch of barriers to make sure that FDA can see only something NCB can only see something how do we deal with the privacy components of it and etc.
Isabelle Castro 28:52
Okay, yeah, no, that sounds you are the experts. I’m glad that you’re doing it in six months seems like a small amount of time to go through all of these things and come up with solutions.
Tim Astanov 29:07
Those things will change. Right? It depends vertical by vertical. I think the tipping is is very complex. And I think it’s very typically folks started with let’s crawl before we run. I think we kind of jump into running right away. And now everything will be easy after this one. Every other vertical we were contemplating not contemplating. We are powering today as an infrastructure layer to PayFacs. Now we think of it as another value add services we can enable. Or we can get ourself in the PayFac game if we if we decided to at some point in the future.
Isabelle Castro 29:38
Okay, cool. Well, I’m looking forward to seeing what you guys come out with. So we’ve come to the end of the like, major into the main questions. So I’ve only got a couple more questions unfortunately. My first one is what’s a piece of advice that you’ve been given that you would give to someone else? This This can be career orientated. This can be personal. Whatever you like.
Tim Astanov 30:09
Interesting. Let’s stick to career. I think one of my advisors in the past said something a lot of folks for payment industry or any other business, at least in the United States, we’re capitalists, of capitalists. It’s all about money. We work to get money we work to to earn more money. Wise advisor told me once money is a secondary thing, focus on what you do get really good at it, the money will come. That probably would be my, my sense. My suggestion to anybody who is starting a new career or actually thinking about how to make more, it’s again, double down on what you’re good at, and double down to get much better at it. And money will come.
Isabelle Castro 30:54
Okay, cool. I like that. That’s almost like a life advice kind of thing. I’m gonna tell my teenage brother that the curveball question. Okay. I picked this at random today. Tell me about something on your bucket list. What is it? And why is it there?
Tim Astanov 31:17
Oh, well, I can’t list I have quite a few things. But let me give you something different. I guess. i It depends on my financial well being. And I have two kids probably have another 10 years to go. So before they out of the house. But once that happened, if I am financially independent enough, I’d love to take a couple of years off and and do a sailboat ride around the world. If if I’m not quite there, or there are other 300 million reasons why cannot leave for a couple of years. I would love to take I’m going to call it a sabbatical for three or four months and travel the countries I haven’t been to.
Isabelle Castro 31:57
Okay, are there a lot of countries is this a lot that you have to go into? Is this big?
Tim Astanov 32:04
The list is big. So if there is 100, I’m going to ballpark it right now for you. If there are hundreds around 185 or 90 countries in the world, I don’t actually know exact number. Let’s assume that I’ve been at about 50. Okay. So the delta is quite big. The reality is, depending on age in multiple multitude of other things. If you cut off 20% Because it’s unsafe, for whatever reason, maybe I’d like to cover the rest of it. And backpack is perfectly fine with me.
Isabelle Castro 32:37
Nice. I like this. Okay, well, I hope you do this because it sounds super fun. Yeah, fingers crossed. That’s the end of the interview. Thank you so much for coming on the show. I really enjoyed our conversation. I’m sure our listeners will have enjoyed it as well. And have a great rest of your day.
Tim Astanov 33:02
Thanks for reaching out and have the rest of your evening. So nice evening. Thank you glass of wine to hopefully thanks for having me. It’s always a pleasure.
Isabelle Castro 33:12
As always, you can reach out and chat with me on my personal LinkedIn or Twitter @IZYCastrowrites. But for access to great daily content, check out Fintech Nexus on LinkedIn, Twitter, Facebook or Instagram. You can also sign up for our daily newsletter bringing news straight to your inbox. For more fintech podcast fun, check out the website, where you can find more fascinating conversations hosted by Peter Renton and Todd Anderson. That’s it from me. Until next time, enjoy your downtime.
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