In this Payments on Fire® podcast, we examine the role of a payment service offered through a commerce solution targeted at the small and medium business (SMB) market. To do that, we talk with Nan Siler, Head of Payments Strategy and Operations, at Kabbage.

The small and medium business market is important to both the national and local economies. It’s big. According to the U.S. Small Business Administration, over 40% of GDP is generated by this segment. Over the last decade and more, SMBs have come to face new competition (Amazon and the high concentration of Big Retail) and a less willing lender community of traditional financial institutions. Kabbage has stepped into that environment.

Kabbage has loaned over $9B since its inception to some 220,000 customers and last fall added a new service, Kabbage Payments, to ease payment and invoicing for its SMB customers.

SMBs live and die on cash flow. If a big customer’s payment doesn’t come in on time, the business owner can end up paying her employees but not herself.

Kabbage has built sophisticated onboarding and lending models around the needs and realities small businesses. Cash flow management includes, of course, timely access to money, via lending, to fill funding gaps or help expand the operation.

Nan takes us through how Kabbage’s Payments solution complements Kabbage Funding, its lending operation, and how the two come together to provide better insight on the business’s cash needs. With better insight, the goal is to help the small business borrow less money for shorter periods of time when funding the day-to-day with the expectation that Kabbage can provide larger sums to meet the capital requirements of business expansion.

Many independent software vendors (ISVs) bring payments capabilities to their merchant customers to meet functional expectations as well as enjoy payment related revenues. Indeed, the ISV is now the channel through which many SMBs acquire payments acceptance capabilities. The payment-focused PSP group, and especially the Independent Sales Organization (ISO), no longer control that channel.

Kabbage, while not an ISV, has built its payment service to help merchants get paid faster. Every SMB wants that. So, take a listen to Nan as she discusses both the lending capabilities of her firm and how the new payment service complements that funding function.

Direct download: EP113_Kabbage.mp3
Category:general -- posted at: 5:21pm EST

As our lives shift online, our providers needs strong digital representations of each of us in order to make authentication and authorization decisions. Besides payment transactions, there are the diverse risks they must manage when, for example, we establish new credit relationships, add new payees to our online accounts, and move money in new ways. The providers of these capabilities—and often a single party offers multiple services—must be concerned with the associated risks each poses.

This is the special domain of risk and fraud management companies. In this conversation with Payfone’s CEO Rodger Desai, we focus on digital identity services and the role of the mobile ecosystem in particular. Take a listen.

Many risk and fraud vendors base their services on different data types, such as the email address, SSN, or phone number.

In Payfone’s case, it is the combination of the mobile number, the device it is connected to, and the mobile network serving it that have powerful attributes to measure against. Relevant data attributes include:

1. Tenure. How long the mobile subscriber has had the phone number tells a lot about the subscriber itself.
2. Phone’s Aren’t Free. Unlike email addresses which are cost-less, almost anything to do with a phone costs money, i.e. the service and device costs. Therefore, phone-based frauds, for the fraudster, cost money. Such hacks don’t scale as well as a card data breach. But when there is a phone-based hack, the impact on the victim can be particularly severe.
3. Lots of Activity to Examine. With 50% of American eleven year olds having phones, we generate a rich history using our phones. For billing purposes alone, that activity is tracked by the mobile network ecosystem and, given appropriate privacy controls, can be used to support risk decisioning.
4. Even More Data. Biometric unlocking of devices, behavioral fingerprinting—how we actually interact with the device user interface—and device fingerprinting—the digital portrait developed from such rich data—expand the data available for risk assessment.

The union of all this data paints a crisp digital identity once algorithmic power has been applied to it.

In this episode of Payments on Fire® we discuss the risk assessment capabilities the mobile ecosystem provides with Payfone’ CEO Rodger Desai. His long experience in mobile “phone intelligence” informs this discussion. He explains how some very large clients are using Payfone’s scoring capabilities to assess transactional and account risk while addressing the challenge of improving the user experience. Risk and convenience are often at odds. Payfone’s services are designed to mitigate that conflict.

Today’s digital identification capabilities are powerful. But fraudsters are fast moving and well funded. For the relying parties—those enterprises that take on the risk—the role of defense is a tough one. Priorities, cost, business goals, even awareness vary. Each and every party’s approach to risk assessment is unique. Risk tolerance for the same transaction will differ from bank to bank, from enterprise to enterprise.

In other words, individual enterprises can assemble strong risk assessment and mitigation capabilities while, from a systemic view, there will always be gaps to be exploited. The best we can hope in today’s environment is for each enterprise to raise its security game.

Direct download: EP112_Payfone.mp3
Category:general -- posted at: 7:57pm EST

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