This interview is part of our Future of Fintech Series where we interview disrupters in Fintech. Tom Villante is Chairman, CEO and Co-Founder of YapStone. Founded in 1999, the company has raised over $110MM from investors, including Accel Partners, Meritech Capital and Bregal Sagemount. With a mission to change how the world pays, YapStone offers an end-to-end payments solution for global marketplaces and large vertical markets.
We live in truly revolutionary times. The world is changing at a rapid pace and we can pretty much get hold of anything we need whenever we need it. Thanks to this ease of access, consumers’ preferences are naturally becoming more demanding. Companies that fail to satisfy them will ultimately be replaced by providers who can.
The marketplace business model is an excellent example of companies able to identify and satiate consumer desires. By creating a new way of exchanging goods and services, businesses in all verticals are forced to sit up and take notice – or fall by the wayside like Tower Records and Blockbuster Video.
The rise and rise of marketplaces
From raising finances to online entertainment, transport and vacations to freelance employment, marketplaces are causing widespread disruption across the board. More than half of the workforce could be working remotely online by 2020, thanks to companies like Upwork and TaskRabbit.
Kickstarter democratized the once private and elite capital raise process and gave anyone and everyone the opportunity to participate. Since its inception in 2009, this crowdfunding platform has helped raise almost three billion dollars for products to come to market.
Uber (valued at $68 billion) has upset the taxi industry worldwide and turned our personal cars into personal revenue streams. Airbnb took on traditional hotels and monetized the extra rooms in our homes. HomeAway offered travelers their dream vacation while giving homeowners the opportunity to leverage their second homes. And Etsy gave independent artisans the ability to scale a local business, turning a hobby into a real career.
For the average consumer, these relatively new services have become intrinsic to our daily lives. All we have to do is download an app and we can organize our activities from our smartphones. But how is it that marketplace companies have been able to achieve such widespread market penetration and success?
Marketplace companies built their services with a number of goals, yet the common thread was paramount – ease of use. Regardless of service or industry, they had to make it easy for both the buyer and the seller to use, and they did so by leveraging our mobile devices. Considering that as many as 77 percent of Americans now own a smartphone, this was a sound strategy to follow.
With a revolutionary business model, desirable product, engaged audience and enviable potential, it would seem that marketplaces have it all figured out – or do they?
The complex payments issue
As marketplaces continue to disrupt, expand and scale, the issue of payment processing becomes ever more critical. They need to evaluate the payment transaction and process (as it’s one of the few areas where friction still exists for the consumer). This is where fintech comes in. Partnerships and products will be the next strategic area of focus for marketplaces.
With 17 years in the payments industry and experience powering online payments for global marketplaces, Tom Villante, CEO and Co-founder of YapStone, understands marketplace companies like no other. He comments:
"Payments are inherently hard and complicated and they will not be getting any easier for marketplaces as they scale globally. In order to fully support a transaction for the buyer and seller, these companies will have to build an entire in-house ‘payment company’ or create one as a subsidiary. But the simple fact is that marketplaces are not payments companies, they already have a business. A business that they have been very successful in building and growing. If they are running their business and building a payments platform, inevitably, it will take away their focus and could negatively impact growth.”
Online payments are critical when talking about marketplaces. These companies are responsible for millions of online or mobile transactions every day. The sheer complexity of the payment platforms needed to process these transactions is overwhelming. Funds must be disbursed to multiple entities in multiple currencies. Consumers’ information must be protected. Safeguards against fraud need to be applied and industry standards for security and compliance have to be met. Not to mention providing 24/7 customer service.
Add in the goal of hyper-growth and scale that marketplaces are reaching for, and the financial responsibility increases exponentially.
The need for fintech
“Most marketplaces do not want to deal with the complexity, and to be honest, the burden of online payments,” says Villante. “With the exception of Uber and Airbnb, which mainly manage payments in-house (or with support from partners), marketplaces are not willing to take on the challenges of going deep, building a team to manage payments and regulatory obligations, as well as risk and fraud.”
To solve this problem for marketplaces, YapStone began offering a customized, end-to-end payments solution for marketplaces. “For six years, we have been powering payments for HomeAway, the world’s leading online marketplace for the vacation rental industry. We have acquired in-depth knowledge and expertise on what these companies need in a comprehensive payments partner,” says Villante. “With this in mind, we take care of the entire payment transaction, from processing to customer service, so that the marketplace can focus on what they do best – their business and delivering a convenient product or service to their consumer.”
The quest for global expansion of marketplaces has created the need for business requirements that were never contemplated before. In fact, marketplaces are going where no one has gone before! And they need services that have never been designed, built or employed -- especially when it comes to fintech.
One major concern for marketplaces is risk and fraud. Villante states, “Fintech companies must protect their customers against fraudsters and the schemes employed across the globe.” This includes creating fake merchant accounts to pose as mules to drain stolen card accounts and posting photos of a fake property at a too-good-to-be-true price.
A marketplace could find itself in real trouble without a payments partner to help navigate the complex world of global payments, ensuring compliance, security and ease of use for consumers.
"Before we started powering payments for marketplaces, we had a small risk team. Now we have 70 experts, in addition to our ongoing financial investments in building and integrating next-generation risk and fraud solutions,” says Villante. “We have also developed a global view of the customers who transact in the vertical markets we serve. This helps us separate those customers that are known, safe and operating within pattern from customers that require closer evaluation.”
Because fintech companies have global experience and dedicated teams, they are in a better position to prevent fraud for their marketplace customers. As marketplaces scale and grow in their own businesses, it will become increasingly difficult to build and manage the inherent complexity of online payments. That makes fintech and marketplaces a match made in heaven.
In 1999, Tom Villante founded YapStone with the simple goal of converting bills commonly paid by paper check into online electronic payments. Today, YapStone processes over $18 billion in online and mobile payments and has raised over $110 million in capital. As Chairman and CEO, Tom leads the strategic vision, operational execution and global expansion of the company. With his experience and expertise in the FinTech industry, Tom is focused on positioning YapStone’s innovative and proprietary payments platform to meet the needs of global marketplaces and large vertical markets.
Prior to YapStone, Tom was a Partner at The Seidler Company, a private equity firm, and an investment banker with S.G. Warburg (now UBS) and William E. Simon & Sons. In addition to his role at YapStone, Tom is a member of Young Presidents’ Organization (Santa Monica Bay) and has served on the Boards of local schools and charitable organizations. With 20 years of entrepreneurial experience, he is an active angel and real estate investor, frequent speaker at FinTech and Leadership conferences as well as a contributing writer to notable business publications. Tom earned a Bachelor’s Degree from Princeton University.