People were afraid to bite off the elephant of digital transformation, and really just sort of pick it apart. And and then COVID happened.
TheCustomer sat down with Chris Kronenthal of FreedomPay to catch-up on their business, their learnings through the pandemic and how they have ushered enterprises into genuine digital transformation through it all. Among other things, we discuss FreedomPay’s unique approach to omnichannel and their recently released report, co-produced with JP Morgan, entitled “Preparing for the Return of Demand“.
To read the full J.P. Morgan & FreedomPay survey report: PREPARING FOR THE RETURN OF DEMAND –
How America’s Retail & Hospitality elite are fighting disruption with new commerce investment
I’m here with Chris Kronenthal, President and CTO of FreedomPay, and I’ll let Chris to go into describing what FreedomPay does, and why the explosive growth recently, except to say that if there was a company that was primed for operating during the pandemic, it probably was you and your business model.
Yeah, I appreciate that very much,
you know, to kind of start it off with a couple of different contexts there. So, we, FreedomPay, provide what we call our commerce platform as a service. And that commerce platform has three key pillars to it, which we call demand generation, consumer experience and business intelligence. And to your point when the pandemic happened, and everything went digital, yeah, we found a real strong interest in tools. And I would say, you know, maybe selfishly, particularly our tools that were really consumer centric, which is how do you drive consumer behavior on particular channels, which in this case, is mobile? And once you’ve got an ability to engage with that consumer in a digital fashion-how do you drive his or her preferences, right? – maybe to specific skews, which was obviously a topic during COVID. With limited menus and staff and options. Also, how do you drive them towards specific channels? When you think about the migration to order-ahead, order online drive thru, everybody went crazy for drive thru? So yeah, we sort of had right product right time. And I think we definitely saw a response to that.
So you know, that the pandemic created the universality of the need for digital transformation, specifically touch free payment type products was already underway. You and I had spoken previously, you know, a year, actually a year plus ago. And that was already a big line of business for you guys. But the pandemic accelerated that to this enormous degree. And I know that there are degrees of obstacles and degrees of need, within each particular sector you guys address, but, you know, let’s talk about what hurdles live between getting fully transformed into touchless. digitally accelerated commerce, what it looks like now, and what it could look like in the next six months to a year.
It’s a great topic. And you know, to your point, this study that we did, the reason that we set out to do that study, which was our CTO research that we did with JP Morgan, in a partnership, the genesis of that was this meandering path of digital transformation that many organizations were already on. And we would see it time and time again, because we offer such a broad platform where companies just weren’t getting there, maybe it was a lack of executive sponsorship, or a lack of, of technology, you know, people were afraid to bite off that elephant of digital transformation, and really just sort of pick it apart. And and then COVID happened. And everybody said, Well, this is now this is now lifeblood, you have to get there. And the study itself was really interesting, because we started the study before the pandemic hit. So we got to sample responses about what is transformation mean to you, in a once in 100 year crossover. And and So to your point, I think, just resoundingly across the board, people finally started to reconcile that there was almost a problem to kind of say, in a different way, everybody always started with the end state of digital transformation, which is, here’s what we want to do for the customer. Here’s how we want to change behavior. Here’s how we want to drive channel behavior and things like that. And everybody said, Let’s start with the analytics and how that’s going to help us have this utopian vision where in fact, the actual problem was data collection, and integration, and how do you get all your systems to talk? Everybody focused on just what’s the end state, right? And they never really focused on Well, well, how do you get there?
And I think what we saw in this in this time of asking questions, pre and post COVID, the light finally went off for people that it is all about the infrastructure that you have in place, which is to say that you’ve got to have everything connected to pull in the data. But you’ve also got to have everything wired up to push back out the data to create those unique consumer experiences and even more to that, people then then got to the evolved thinking stuff well, okay, not only do we need a data collection strategy, and a data use strategy, but now we need a strategy that says, and how does that data get used in a way that creates a better customer experience? And how does it create an empowered associate, because everybody’s world has changed. So, it’s not just enough now to change the consumers experience, because if the associate isn’t kept up with that, it’s disjointed. You know.
So, there was just a tremendous amount of learning and perspective change that happened in that in that period of time. So, I’m really interested in the dynamic that you guys encountered when pandemic first hit, and, and brands’ lightbulb started going off probably en-mass, like a lot of people said, Oh, no, we’re just not ready to hear of what do we do? You know, and there are platforms like, like your own, and several others that could have been kind of plug and play in a sense, and, and solve some big problems in that way. But in your view, the brands that you talk to, and you talk, you know, you guys deal with some very, very big brands globally – were they, by and large, ready and receptive? But were they ready to take on these kinds of challenges? Or did you have to kind of nurture them through it?
I think it was a bit of both. I think it was a bit of both, you know, but it wasn’t as many shades of grey as you thought it was. I mean, folks were really in two camps, which is this massive transformation as forced upon you. And I think it was, it was almost pretty 50/50, there wasn’t a lot of variation there where you either plugged in five or six different things right away, and then just hunker down until this passes, and then you’re going to reevaluate your whole strategy, because you realized if you didn’t have a platform approach, your business couldn’t plug in stuff and make it actionable fast enough to then the other camp that was already aware that of the concept of orchestration and and data Ingress versus applying that data and understanding that there is a strategic play here and a platform approach. And for those customers, they just jumped right in, they were like, great, this is going to create the business case that we needed to push through that, that executive sponsorship, and operational responsiveness to the change that we want to make to push our company on a platform.
And so you know, the folks that did that publicly with us, you saw FootLocker do that in the middle of a pandemic with us. That’s a huge change for that large event organization. And they were like, yeah, the time is, now we’re gonna go ahead and move these kinds of projects forward versus, you know, other folks, which I’d say are, you know, those folks just moved, I think what we’re seeing almost a lot of now is the other camp that said, Wow, we were really unprepared for this, we plugged in a lot of stuff faster than we thought. And now we got to clean it all up. But if we don’t clean it up, there’s going to be there’s going to be I’ll say, sort of career pain to be felt, if they put their organizations in this situation again.
And that’s really a fun thing to see is those companies. I literally just got off a call with an unnamed, very large sort of C-Store petroleum provider that said, you know, we spoke with you folks a year ago, and you were telling us this story about how you need a platform approach. And, sort of this, you know, consumer centric platform that’s going to allow you to plug and play and go after the consumer. And yeah, we need to understand what you were talking about, because clearly we didn’t get it, and we were unprepared for this kind of transformation. So
I’d like to just take a look backward, you know, 2020, hindsight. And you’re talking about companies that were ready and able to transform themselves so radically, and then you’re talking about other companies who were in the all the also-rans, kind of got there, but kind of didn’t, you know, got there partially. Were there any commonalities you saw in the ones that were ready for it? I mean, were there sector commonalities, everybody in healthcare looks like they’re just ready to do this thing? Or was it more like they had an organizational structure that just allowed them to think across silos? amid? I don’t know, any insights? Any thoughts you have as to what those were their commonalities? Maybe there weren’t any.
Yeah, I think I think there were commonalities. I do think that lodging, the lodging industry was already dealing with an event and for them, the event was AirB&B and VRBO that proved to a very entrenched physically, you know, moded industry that digital disruption was very real, right? Because if I’m if I’m thinking of staying at a property, well, Airbnb in VRBO can own that customer just by getting them to download an app, and they have no physical assets. So that was an industry that was mentally prepared and had already experienced what it meant when your customer goes 100% Digital. So, I do think we saw those organizations really move very quickly. I think another industry that we saw move really quickly and is, you know, in full force now is the gaming industry, right? They were already tracking to the dawn of a sports betting AI gaming, when you think about, you know, it’s very public. Those organizations, were also already dealing with a huge digital transformation, because the legislation was changing, and now you can do you know, sports book and sports betting online. So, I think those industries, were really ready to rock.
I do think retail got crushed. Right. And, and so there were a couple folks that got off of, you know, I would say, for retail, the transformation that’s happening for them, that they’re sort of a little behind the eight ball is, you know, retail was a very entrenched industry. And they thought of things as vertically integrated silos, you know, when they would go after a commerce project, their solution is, well, how nicely can I vertically integrate this with my website or my mobile app? And can they get a tightly coupled with acquiring and fraud, and it’s this vertically integrated payment discussion? Well, when COVID happen, and everybody just took up their phones, I think they finally understood what those in the service industry understood, which is it’s actually this horizontal journey. And you’ve got to get to that consumer when the demand starts, not just vertically integrate them to your loyalty program when they check out. Right? And you even saw companies really embrace the different components that make that up, right? When you think about a typical consumer journey, there’s a research element, a social element, probably a discounting element, and ultimately, the payment and then feedback that goes into that. And if they had been following this vertically integrated siloed approach to, you know, commerce, architecture, they couldn’t make that horizontal. And so, I think that industry is still sort of plagued by a little bit of a historical mindset there.
Anecdotally, I’ve talked to a lot of those folks, they’re feeling the pain of that lag. And there seems to be an awful lot of motivation to change that. But as you said, those are entrenched industries with you know, they’ve got their silos and, and that’s going to be a rough road to try and get those things bridged.
But you know that’s really a testament – to be fair to the ecosystem, that was a testament to again, success. That’s why that company blew up is because the mindset of retail, I mean, that’s clearly a strong market for them was vertical integration and cleaning up the complexities of the payments stack. And then I think what we see now is that, well, everybody just woke up, it’s actually a horizontal problem. And it’s a systems integration problem across that consumer journey. And if you sort of hemmed yourself in, because you were trying to solve for this vertically integrated problem, we’re seeing people really struggling to get back out of that box.
Yeah, it’ll be interesting to watch that over the next 12 months or so and see how these companies are going to deal with that. So, I think because of your line of business and also the way you approach the market. I mean, we mentioned this earlier on in this conversation, but you’ve been ahead of touch-less / touch free payment technology for some time, as locked down took hold touchless went very quickly from being this is a cool thing to being like holy smokes, I’m out of business. I don’t have this.
In my view, that meant that FreedomPay had to scale up operations to a magnitude that probably you never had to before. So how did FreedomPay manage that kind of transformation?
Well, you know, I think part of the reason why we’ve patented our stack of technologies because we felt that we had a unique way to solve for the nuances of an omni-channel ecosystem. You know, Omni-channels probably been a really prevalent buzzword for the last five years versus at FreedomPay when we launched our platform a decade ago. Our first customer was a multinational online digital web – and physical brick and mortar organization.
So that’s sort of in our DNA. And it’s built right into the platform. So, from us, I think from a technological perspective, we were excited about this. You know, the ground game is baked into our DNA. So for us, scaling up to meet that challenge was really just doubling down on that distribution network where we’ve got those third parties in places that can that can drop, you know, 1000 feet on the feet on the ground, to go out and do these massive Field Services campaigns, or the FootLockers of the world where we were rolling out 200 stores a week, because of the way our technology can be deployed. So, I don’t think we had quite as much of a disturbance, maybe as others had, dealing with that type of an ecosystem.
So, if anything, we’re just, we’re just going after as many engineers as we can, right now, I mean, we’re really, really looking for talent. So, if anybody sees this, and you know, we’re open, we’re open for hiring, we’re putting the word out right now on the word right here.
So, let’s talk a little bit about the report, because you call out four distinct tech related investment priorities, I’ll just run through them here, but I’m interested in two of them in particular. So, challenges and opportunities, of course, return on investment and value, I do want to talk about that stakeholder expectation, and ethics and compliance. And honestly, all four of those could take us well into the rest of the day to talk about because they’re interesting, and they’re critical.
But items two, and three, are, they’re always being considered, but they’re, they’re hardly ever really discussed. Because they tend to be a little touchy. Or because of the nature of the organization, the structure, they’re not really solvable issues. So, you know, return on investment and value, I would think that in FreedomPay’s world, you can attribute ROI really easily. And so, you can justify, I would think, investment in your platform pretty quickly. There’s not a lot of esoteric discussions to be made. It’s basically just plug and play. But when it comes to something like stakeholder expectation, that’s a little bit squishier. That’s a little bit murkier. So, let’s first talk about how you what you found in the survey? And
maybe your suggestions for dealing with it?
For the stakeholder part, you know, one of the one of the things that was really clear in the study, and we see through anecdote and experience in our own business is, again, I think it goes back to this verticalization versus a horizontal discussion. You know, historically, when folks thought about commerce or commerce related projects, they were done in sort of these vertical silos within the enterprise. And so, when you think about that, from a stakeholder benefit or stakeholder perspective, you would have a director of point of sale, VP of point of sale or someone and they would be in charge of payments infrastructure, or, you know, it would be a treasury function, and they would be in charge of payments decision. And when the digitization part happened, and people were trying to move to this sort of horizontally or integrated ecosystem, the stakeholders started to change. Well, now marketing is a stakeholder. Now, operations is a stakeholder and those are very different voices in that discussion. And it took what was at first a really simple discussion from let’s say, the finance organization reviewing multiple bids from acquirers to see who’s going to, you know, continue to race to the zero, or who can route a debit transaction ever, so better? You know, while the marketing team now wants to know, well, how do they provide tokenization? How do I link that, you know, to the data that we’ve got, how do we create a family account? If we’re using tokens based on credit cards? Well, how do we know who’s part of a family right? The questions that were being thrown over the wall now because you know, digital transformation, really tightly coupled payment with the consumer experience. And so now your stakeholders you know, from a business perspective is much broader and folks that are just trying to solve for a semi integrated payment solution or picking based on acquiring rates or, you know, certain companies vertically integrate gateway in acquiring or things like that. It’s not that simple of a discussion anymore, because those things are now impacting the business development side of the discussion. And they want to know.
So, again, I think it’s that that switch from, you know, these vertically integrated ecosystems to now horizontal, sort of democratized ways of looking at it, where you need to plug and play with a lot of partners, which now exposes you to the data team, the marketing team, the compliance team, you know, the operational folks and, and so the, the stakeholder breadth is much broader, you’re not going to see just the pause infrastructure folks, or just the finance team, making, you know, a unilateral decision about how their commerce works because of how proliferated that’s become.
Did you ever see freedom pay becoming a voice for the de-siloization across the corporate world?
For some value of No, I think it’s fair to say no, you know, FreedomPay’s genesis was always very tech-centric. And so, I think to be fair, if I’m honest with ourselves or myself, we had traditionally thought of our place, as a partner to the development organizations, within these companies. And when you look at how FreedomPay engages in enterprise versus the rest of ecosystem, most of the ecosystem starts through treasury or through that financial, FreedomPay is often engaged on the tech side. And I think to your de-siloization point, what we started to learn and as the industry shifted towards a more digital first consumer strategy is that now those tech organizations which were originally engaged on behalf of finance to figure out how to technically integrate payments, well, now they’re being engaged by marketing. And so, it’s now technology in those organizations supporting marketing, not finance. And compliance is just assumed where it used to be entirely, you know, these technical teams having to solve for finance and compliance requirements. Now, these technology teams are having to solve for digital teams and marketing teams and customer engagement and experienced teams. So that has been a shift from where we started versus where we ended up today, which was a change we’re obviously happy for, because now it allows us as a business, to get to the other question to have that ROI discussion about how does this impact and benefit your customer versus just how do we make this cheaper? Right?
Well, Chris it’s always a pleasure talking with you. Thank you for bringing context to the report. We’ll have a link to the report right below this video. But I want to thank you, it’s always fun, it’s always enlightening.