We continue our fintech series on how fintechs deliver payments services that were formerly brought to market by banks or were just unavailable.
Key hallmarks of these fintechs, and innovators in general, are:
- Market entry at a point the incumbents aren’t serving well
- Rapid expansion of service offerings to more deeply embed their services into the customer’s operation
- Rapid geographic expansion based on customer demand
To illustrate those points, and more, George welcomes back to Payments on Fire® Marwan Forzley, CEO and co-founder of Veem, a company that exemplifies that rapid evolution.
Veem is now an international payments network serving SMBs with domestic and international payment services.
Its creation story is fascinating. Initially, Veem used crypto rails to move money between the countries it operated in. Now, it is a multi-rail firm with its own operations in major markets and a wide array of partners to serve payment corridors with less volume.
To drive volume over its network, Veem has taken a number of steps. A few examples include:
1. Provide domestic payments without charge.
2. Embed Veem payments capability into accounting systems like Xero, QuickBooks, NetSuites, and more.
3. Turn accountants and bookkeepers using those systems into a sales channel
4. Let those accountants tee up payments for their SMB customers and provide a customer facing dashboard that supports multi-party approval (CEO and CFO, CFO and controller) for payment initiation
These non-payment capabilities smooth the adoption of the Veem service into the customer’s business processes and expands its value.
Surprising uses of the service included cross-border labor payments and even intra-company transfers to balance books across multiple geographies, a service that once required the use of correspondent banking services.
Marwan and George also discussed the epidemic’s impact on the company. As a firm with a customer base heavily involved with e-commerce, the shift to that channel was beneficial.
Their conversation concludes with a discussion of stablecoins, CDBCs, and NFTs.
Take a listen!
Read the Transcript
George Peabody:
Welcome to Payments on Fire, a podcast from Glenbrook Partners about the payments industry, how it works, and trends in its evolution. I’m George Peabody, partner at Glenbrook and host of the podcast. We’re continuing our fintech series. And to do that, we’re examining what and how fintechs are delivering services that were formerly brought to market many times just by banks. Several hallmarks of fintechs, and indeed innovators in general include market entry at a point where the incumbents aren’t serving well. And then once that beachhead is established, not only to go up market it with the client base, but also to go sideways, to expand the service offerings to further embed their services into that customer relationship. And to illustrate that point or those points and more, I’m delighted to welcome back to Payments on Fire, Marwan Forzley, who is the CEO and co-founder of Veem, a company that really, to my mind, exemplifies this fintech journey that we’ll be exploring. So welcome, Marwan. Great to have you back.
Marwan Forzley:
Thank you for having me, George. Thank you for having me again.
George Peabody:
Yeah. So this is cool. Again, this is his third appearance on Payments on Fire, and I thought a good place to start, Marwan, would be, if you would recap the evolutionary story of Veem, did I get it right in terms of innovation? Where you came in and you’re hitting markets that were being served?
Marwan Forzley:
Yeah. So just for a context, Veem is really all about making simple payments for SNP. It’s the simplest way for SNPs to pay and get paid. It’s a way to give you control over your payment processes. We started with zooming in on wire as the key problem that we’re fixing.
George Peabody:
And when you say wire, you mean international wire, yes?
Marwan Forzley:
Bank wire. Yes. Both domestic and international, but the [crosstalk 00:02:03] is higher international.
George Peabody:
Yeah, that’s for sure.
Marwan Forzley:
And so we fixated initially making it really simple for you to send money around the world and get paid from around the world, so heavily international aimed at simple processes to bank. And the initial idea was actually really simple and where it came from is , “Okay, when I go to buy coffee, I don’t think of how I pay. I just do it.” When I go to do international payments, man, that’s complicated. I got to think about this wire form that I have to fill. I got to log in to my bank if they let me actually do it online. Some banks we’d have to show up and do it in person. And then got to figure out all the details of the beneficiary, the bank name, address, [inaudible 00:02:56] , SWIFT codes, currency pairs, got to pay a bunch of fees. And then I send this money and I’m not sure what happened to that money. And I got to wait for the receiver to tell me that, “Hey, I received your money.” So all that is complexity, complexity for both the payer and the payee. It’s all around business payments and, in particular, international. So we wanted to simplify that part, so that’s where we started.
George Peabody:
And I recall when you got started and maybe this was back in the days when a press release that had the word Bitcoin, and it actually got a lot of attention. So I recall you actually used the Bitcoin rails at some point in your early development to move money from one country to another between your operations.
Marwan Forzley:
Actually, no, the way we did it is we picked up fiat from the payer, convert that to crypto, send crypto to the other country, to our wallet in other country. Liquidated that crypto to fiat, send instructions to our partner to send fiat to the receiver. So essentially we did remittances, B to B remittances over crypto. Early days, this was 2015 when the Bitcoin what is Bitcoin? We did this really early and by the way, we still do that. And we do it quite a bit. It’s just that the system evolved significantly to evolve to supporting multiple types of payment options for the sender, multiple types of payment options for the receiver and a whole bunch of routing that happens in the middle that optimizes among a whole bunch of rails of which one of them is the blockchain way. And I call it blockchain because I’m not holding Bitcoin. And I don’t care about the Bitcoin price. You just go in and out of crypto instantly so that we use it for as a synthetic cross from one country to another. So that’s where we started. [crosstalk 00:04:54]
George Peabody:
But to you while you’re using it between your operations, as a quick way of knowing the values in transit, that’s going to get to the other side and you’re either you, your operation in another country or your partner who’s operating in another country knows to pick that up and convert it back into Fiat and then deliver it into the customer’s account.
Marwan Forzley:
That’s accurate.
George Peabody:
That’s cool. And I also assumed, and cheque me on this, is that as you’ve grown and had more resources, frankly, in particular Carters, that you’re actually able to fund transactions out of your own accounts once you’re assured that the funds are coming from the sender, that’s a way for you to quickly deliver funds. It’s another set of rails, Veem’s own rails. That’s the way I [inaudible 00:05:45]
Marwan Forzley:
Yeah so, the journey now has five different rails we work with. We started with one, which is the crypto rail initially because it was going after very specific corridors in the corridors we wanted to start with had good crypto infrastructure to work with. That’s why we started that. Over time, what you learn is that it’s a big world with a lot of industries, a lot of segments, a lot of use cases, different types of transactions, different sizes of them. And so there isn’t such a concept as one size fits all. You have to have adaptive rails depending on the seventh is mainly who’s the payer and what is it that they want to pay with? Who’s the receiver? How do they like to receive? And then how do you optimize the payment options to tailor to the best use case?
Marwan Forzley:
So the way the system evolved, we started with the crypto side and we did that in countries Philippines, Mexico, Brazil, India. Then over time we added our own bank accounts, we have a bunch of bank accounts in basically all the key markets, US, Europe, Canada, UK, Australia. So these are large currencies. There’s a lot of volume to these markets. And basically we have our own bank account infrastructure in this market. And over time, some folks wanted to do real-time payments. So we plugged into visa and MasterCard to do direct send, MasterCard send and visa [inaudible 00:07:19] card to send money through your bank account associated with your debit card. Over time, some customers want to send a lot of money to China because that’s the world’s largest supplier base. That’s a complicated country. And so we have relationships on the ground with payment processors that we integrated into and they do the last mile for us in China.
Marwan Forzley:
Same thing in Brazil, it’s the more complicated market. Also have access to swift. And we do swift as well in multiple currencies, we did them for large transactions. And so as you can see, the system evolved quite a bit to route between multiple rails based on what’s best for the user. And we even opened up the choice of payment options to the sender and the receiver. So the sender side, you can pay through the bank account. You can use a cheque, we can let you pay with a card. And on the receiving end, you can receive in your bank account, you can receive on a wallet, you can receive on your debit card and you can receive by cheque. [crosstalk 00:08:23]
George Peabody:
So I got to stop you there by cheque is hurting my head. How does that work? [inaudible 00:08:31]
Marwan Forzley:
It’s that crazy thing because in the US market, this is US domestic. There is still demand for payers to pay with a cheque and for receivers to receive their payment via a cheque. And this is only for US domestic. And we actually added that recently. And the reason we added that recently is because customers were asking for it and in particular, because we have a tracker that tracks what happens to the payment, what’s super interesting during COVID, nobody showed up to the office to pick up any of their mail, which included cheques. So people wanted a way to basically say when the cheque is initiated, please notify me and the receiver, please notify me so that they actually make a trip to the office and pick up whatever I have in there, which includes the cheque.
George Peabody:
We’ve heard similar stories over and over again about lockbox providers. These are the companies that big billers will hire to [inaudible 00:09:39] cheques in for their regular payments from their customers and how things got delayed and the reconciliation to accounts. Yeah it’s tough. But Veem handles the money, you move the money on behalf of the customer. So they have an account. Both sides have got an account with you. Take me through the money flow with a cheque. I write a cheque to Veem for the payment.
Marwan Forzley:
The way it works is basically, essentially let’s say you want to send money to this company. If you’re in California and you’re looking to send money to this company in New York, and you don’t happen to have their bank account, you have their address and you know how much money [inaudible 00:10:26]. So basically you log in on the system and you say, pay this company in New York, ABC corporation, here’s $5,000. So we pull money from your bank account, and that’s usually ACH. We create the cheque and sent back out to the recipient. So [inaudible 00:10:46] as a payer, you don’t need to know the bank account details of the receiver.
George Peabody:
Classic B2B proposition. Yeah.
Marwan Forzley:
And what’s interesting is in that model, when the payer launched into assistant and say, here’s my $5,000 to ABC corporation. What’s interesting about that too, is that we notify ABC corporation that, “Hey this company in California, paid you and that cheque has been initiated and it’s on its way.” And so then when the cheque is received by ABC corporation, we tell the other side that, “Hey, the cheque has been deposited and that’s all part of the fabric of Veem and the way it works, [inaudible 00:11:29] that actually goes into quite a bit of detail on what happens to the payment. And so it just became handy in the context of a cheque because people were not even showing up that office to pick up their payments. And so this was a notification thing that you built on top of the cheque process.
George Peabody:
So there’s only one cheque that’s been cut that’s from Veem to the payee, and because it’s coming off of your account, you get to see what has been deposited. By the way, I’ve had the remarkable experience, lately of, I walked into a bank the other day deposited a pretty substantial cheque at 15:30 on a Friday. And it was in my account an hour later. Chequeing rails are pretty great. How do you do the risk management on one of these transactions? You said you go and ACH the funds out of the account to get it into the Veem account. Are you not issuing the cheque until you see that money 24 hours later? How are you doing that?
Marwan Forzley:
It depends on you’re a new customer, [crosstalk 00:12:36] you are an existing customer, even if they’re famous with us. We know you, we don’t wait for the payment. We cut the cheque. For a new customer though, if, depending on the amount, depending on your profile, risk management and determines whether we wait for the cheque on that. But in general, for new customers, we wait. We wait to receive the funds and then we cut the cheque and then send it out.
George Peabody:
Sure. Then build a little history and go from there. So I spent some time in your website because it changed so much since the last time we spoke and one of the things you do is, that caught my eye, courses for these domestic transactions that they’re free to the account holder. Okay. Well you’ve got some small costs, but you have some real costs associated with that. Where is the advantage here is this just added customer service so that they will do other things with you? [crosstalk 00:13:34]
Marwan Forzley:
Our view is that domestic payments are a way to establish relationships with customers. They’re like [inaudible 00:13:44] milk in a grocery store. You’d go to that grocery store, you pick up other things along the way. So in our context, it’s the same idea. A customer that do domestic, but then ended up doing international. We make money on that tax, some do domestic [inaudible 00:14:02] use cards, we make money on cards [inaudible 00:14:05] interchange, the basic structure for ACH and cheques and all that stuff. We do it for free and ends up being in customer service. It became handy also these days with COVID, the businesses are looking for, I call it low hassle setups where they just want to get going. They don’t want to pay monthly service fees, set up fees, transaction fees. I mean, there’s enough on their plate that they’re worried about that they just want to send my payment and get it over with. And so we tailor it to that sort of mindset.
George Peabody:
We’ve talked about how you’ve expanded your geographic footprint and in each market you’ve connected to the relevant payment rails. But we just started now to talk about how expanded your customer acquisition muscles. And one of them is keep the domestic transactions free and provide the other services that checkout right next to all those high margin chocolates that are right there by the cash register. Talk to us about how you’ve evolved that set of services. For example, one of the things I know you’ve done is made it straight forward, maybe you had to do a lot of work to do this, to connect an accounting software in the SMB space like QuickBooks and Zero. I could be in QuickBooks and right from inside of QuickBooks, I can make a payment via Veem and go on about my day. How much work was that for you to do that integration?
Marwan Forzley:
I mean, we like integrations because we like the idea of plugging in payments to systems that you already use today. Schismatically, we’ll look for more situations like this to enable. We’ve done QuickBooks, Zero, Net Suite, we’ve done Magenta, we’ve done Zapier. We’re always looking for systems to plug into. Each system, the type of connection you have on that system varies. And it has to do with the mechanics that connect them. So some systems are lighter than others. So for example, [inaudible 00:16:13] we’re plugged into when the bill is created, Veem shows up as a payment type, you can click on it, it takes the data from [inaudible 00:16:21] and sends it out. So that’s a very closer type integration. So each one of these situations takes quite a bit of work to set up the relationship, do the integration, get certified.
Marwan Forzley:
And then figure out how to handle customers and also maintain the relationship with the partner that you’re working with. Production cycle that requires quite a bit of work to actually get it done. But it’s all in the service of making sure that the customer is happy, they’re delighted and they’re doing something from what they use on a day to day basis, because our view is [inaudible 00:16:58] if you are using a package that you like, I’ll plug into that package, so that’s the way we built the philosophy of doing this.
George Peabody:
Sure. If you plug in as many places as possible, it makes for additional transactions that you’re going to be able to handle. What are some of the things you learned about going into specific verticals? Did you find any particularly challenging or interesting changes you need to make in terms of how you operate?
Marwan Forzley:
Yeah, I think we have a good flow of customers from accounting, for example, which is a channel for us. And we have to make adjustments to the product, to service that base, to get them to manage their clients in a simple log in, I can see the various accounts that I have linked into my account [inaudible 00:17:54], and I can manage these accounts. I can make changes to payments or invoices set up things for the account owner to log in and approve the payments. So there’s been quite a bit of new developments in that flow to tailor to that audience.
George Peabody:
That’s fascinating, here you are, you’ve built the integration to QuickBooks, which has a big, as you say, a big number of accountants who know how to use it and sell it, or use it as a service platform for their own operation. And yet you’ve also built a dashboard essentially for their customers to log in, approve payments, inspect invoices, and the like.
Marwan Forzley:
The businesses, one of their influence points is actually their relationships with their accountants and bookkeepers. I’m using the word accountants collectively. So they’re setting up the bills for them, they manage the account on a day-to-day basis. And so we needed to make changes to appeal to that user base so we empower them to manage their accounts in a really simple way. So I can add accounts, remove accounts, make changes to an account, log in and set up the bills, get everything ready for you then, if you’re the business owner, just log in and you see everything. And it’s like, “Pay, pay, pay.” Everything is set up. That requires dashboards, management of accounts, approval processes. And it sounds all simple, but it’s all work especially when you start going into approvals, who’s authorized to approve what they [inaudible 00:19:23] invoices for what amount or what payables for what receivables, all that requires administration that we have to enable the A the customer to be able to do it, and B the relationship they have with that [inaudible 00:19:36] because you’re giving them a view to do this on their own.
George Peabody:
This really illustrates the point I started with about broadening what you do in order to increase volume and deepen the relationship with now, to two customers, there’s the accountant bookkeeper and also their customer. So that’s really interesting. One of the things I know you also handle for your clients is, of course, this is huge in B2B payments is invoicing. And as you know, at Glenbrook, we’re pretty fond of talking about how important, not only is the payment itself to the business, but it’s almost as important as the information about the payment. What does this cheque for? What is this deposit for? Or here’s my invoice, please pay this. How do you handle that? Because there’s so many different ways to generate and receive that information. Reconciliation is a big deal on the receive side. Let’s really talk about Veem’s role in this data exchange of business information.
Marwan Forzley:
Yeah. I remember having this discussion actually early on with Aaron that told me, [crosstalk 00:20:56]
George Peabody:
[inaudible 00:20:56] Glenbrook partner. Erin McCoon is our B2B Marvin.
Marwan Forzley:
Yes. And I remember we were having this discussion and we were having coffee and she was explaining the reason why cheques are popular because cheques and invoices come together and they [inaudible 00:21:13] payments are integrated.
George Peabody:
Often with the paperclip.
Marwan Forzley:
Exactly or a staple used to hold it all together. And you send [inaudible 00:21:20] we followed the same principle at Veem. So when the payment is sent, you are sending a number of things with it, depending on the size of it. So you are sending to begin with the purpose. Why are you sending this thing? So it starts with that. And then you have the option to add invoices contracts, even if you’re sending fairly large amounts, the system will require you to add very specific information. For example, if you’re sending 5 million to Germany, for example, and this is for a container shipment, this is when they ask you, “Well, what’s in the container? Where’s the shipment of that?” Because that’s a big amount of money.
Marwan Forzley:
So the interesting part is when the receiver gets that payment, all the data is coming with the payment. So when I log in, as a receiver and I see the payment, and I see the data with it. And the notes from the payer saying, “This is the payment I’m sending you for that shipment for these laptops that you shipped me.” Which includes the free form tax, as well as the invoice that you attach so that you receive [inaudible 00:22:31] they understand that this payment belongs to that invoice. The other thing that’s important is the invoice numbers, so this system, when I asked you, “what’s the invoice number on this invoice?” And that’s the field that’s visible to the receiver, that’s exportable in the data. So when you export your payments into your accounting system, it matches up. So you can all reconcile.
Marwan Forzley:
So in your system. So let’s say I’m in Germany, I’m logged into my equivalent of QuickBooks. Generally you need some form of identifiers that reconcile that this payment belongs to this invoice [inaudible 00:23:06]. And so when you export the data, as you important it, that field maps into the open order that you’re trying to close [inaudible 00:23:18]. And so these are all ways to give value to the recipient so that they know what payment are they’re dealing with. Because think of it, if you’re sitting in Germany and you sound 20 invoices and they’re all in us dollars, and then all of a sudden Euro [inaudible 00:23:37] your bank account, you actually not sure which Euros belonged to what US dollars that you [crosstalk 00:23:44]. And other thing that happens foreign exchange makes it even more complex because what you thought you were going to get is different than what you actually got because the foreign exchange moves on you and a bunch of fees that got attached along the way. So it makes it even more complex. The entire setting is more complex in international markets.
George Peabody:
Got it. And thank you for this great update on Veem and how you’re working today, but let’s transition over to a couple of other topics. First of all, having been a small business person myself, Glenbrook’s a small business too, the pandemic hit, we were all holding our breath to see how we were going to survive. I’d love to hear from you what you’ve observed with your customer base during all of this.
Marwan Forzley:
So we had the same reaction at the very beginning of COVID. It’s like, “Wow, what is this going to do to the business?” And we did very well, and probably because we think of COVID as a large event that created two different worlds. One world did very well and the other struggle to stay alive. And it has to do with one basic formula, six feet apart. So if you are virtual and you’re doing business somewhere, you are just fine. And if you are dependent on a six feet apart form where there’s physical exchanges of goods and services and that stuff, and we just happen in our portfolio to have a lot more businesses that are virtual [inaudible 00:25:18] online businesses, startups e-commerce, we have a lot of that and we had very little exposure to physical retail and travel and things were really tough too. That market got impacted the most. So some depending on where you are in the market, some have done well, some have been hit. It just all depends on the type of customers you carry. And the more you are tailoring to physical goods and services being exchanged, the tougher it has been. That market has been more impacted.
George Peabody:
Care to prognosticate on how enduring this shift is going to be.
Marwan Forzley:
I actually think that there are two solid use cases that are going to influence the market for a very long period of time. It’s going to do very well. A number of players in FinTech. In these two use cases are the following. One is the rise of e-commerce, it is not going to slow down. Habits have changed. Pre COVID, you used to shop in the store and if you’re a stuck and you want something that’s not in the store, you would shop online. Post COVID, habits have changed. We all learned that you start online and if you’re really stuck and you can’t find something online, I really need something, I’ll, don’t pick it up in the store, but I’m going to start online. I think that behavior shifted and it’s going to shift for a long period of time. [inaudible 00:26:47]
Marwan Forzley:
Then the second interesting use case also result of COVID is the rise of remote labor. Pre COVID super important for everyone to hire people that work around you. You’re in San Francisco, you hire people in San Francisco post COVID. That formula also got blown up. So you find people wherever you find people that really help you out. And so that remote labor use case is going to continue to increase. And that’s another structural change in the market because we all learned that if we both had zoom, doesn’t matter if I’m in California, you’re in New York. Or for that matter in Vietnam or anywhere else in the world, we’re all on zoom. [crosstalk 00:27:33] it might as well leverage the world of online and push on that. And I think that is another structural change that will continue.
George Peabody:
Is that one you’re interested in taking advantage of? You got plenty of competition in that space.
Marwan Forzley:
By the way, this is the second most popular use case on Veem. So we have supplier payments. People use us to pay suppliers around the world. Second most popular use case is actually labor payments.
George Peabody:
So you’re already there.
Marwan Forzley:
Oh yeah. We have quite a bit of customers that use us to either individually pay payments to developers, QA, inside sales and you name it. And we also have customers that use quite a bit of mass pay functionality and just upload a file and the file just sends it out. These are the two most popular ones. We have customers that use us for intercompany transfers. They just want to rebalance their books in different countries. Some customers use us exclusively on the invoice side, they request an invoice payments from business buyers. So either you have a whole set of use cases that we support.
George Peabody:
I bet there are days you go in it go, I’d never knew that they were going to use our system for this purpose. That’s cool.
Marwan Forzley:
Yeah. Yeah, yeah. It’s part of the way of also supplier payments over time, we got quite a bit of labor of payments, [crosstalk 00:28:58]
George Peabody:
Yeah. So Marwan let’s wrap up and see things have changed a lot from when you started, we were talking about how you’ve used the Bitcoin rails. And of course now the whole topic of crypto has changed where no longer are we thinking so much about crypto as commodity, of course, if you’re holding Bitcoin, you are, but rather than Bitcoin or ether as a transport mechanism, we’re now hearing more and more conversation around either the stable coin model, where an enterprise, as some side commercial and entity has linked its crypto to Fiat. So these things don’t fluctuate any more than the underlying Fiat does. So that’s like the DM model. And then on the other hand, we’ve got markets like China at the one hand and The Bahamas on the other who are actually issuing digital Fiat currency, these central bank, digital currency CBCs. The use case for some of these is to make global payments easier. What’s your view on this stuff?
Marwan Forzley:
So I think crypto is also here to stay. This idea that crypto is this fake market that I all [crosstalk 00:30:26] I think that also, we all got to move on, it’s a real market that has its audiences and it has this believers and as actually worth a trillion dollar already.
George Peabody:
Wall Street’s got vehicles for Bitcoin and Bitcoin itself has been legitimized now by the streets. So that’s behind us. What about these other things?
Marwan Forzley:
Well I think there are developments and I would call them in two different timeframes. There is some really long-term stuff where you’re having discussion around Fiat in countries like using digital currencies and stable coins as a way to essentially do the initial idea of Bitcoin was just mobile payment rails. And my view is that stuff is still very long term and still under development. I think the stuff that is taking hold rapidly in short term, there are emerging interesting use cases of crypto are actually more like defy and NFDs. And that the world is where some of the short term action is driving usage. The other stuff is a little bit on the longer term side. So if you’re thinking of the market as two different landscapes, next two years, and then two years plus I would put the work around issuing digital currencies and countries for the purpose of global payments, still a long-term idea.
Marwan Forzley:
And I think all the actions that you’re going to see short term are going to be more around decentralized finance. And NFD’s that’s an emerging use case that [inaudible 00:32:24] become one of the dominant use cases for crypto. Because that’s a market, digital rights management and micro payments is actually something that have been outstanding for a long period of time. [crosstalk 00:32:39] And nobody had figured out how to solve it. I think we might have found something here probably by accident actually, but it doesn’t matter that market, there are important developments in that market to make it potentially an emerging substantially sizeable use case.
George Peabody:
It’s very interesting to see how, with these digital assets, that can be sold now without fear of copying or counterfeiting. It’s interesting how it might shift the power dynamic within, well, the distribution models are out there. Music labels may not have the same kind of power over the assets that they thought they did. Very interesting. Well, Marwan, I really appreciate you coming back on Payments on Fire, catching up. Fascinating to hear how Veem has evolved. You’ve taken the innovator’s playbook and applied it to payments and in all in the FinTech context. So well done, I’m going to have fun watching you and how this market continues to evolve.
Marwan Forzley:
Thank you. And thanks for having me again. Appreciate it.
