The banking industry is waking up to the realization that merchant experiences are a useful way to provide additional services to SMB customers. They are also recognizing the threat posed by new entrants to the financial industry - such as Square, SumUp and Stripe - are now providing services higher up the value chain themselves, beyond just ‘commoditized payments’. As such, there is a growing desire to bring merchant acquisition back in-house, rather than provide it through third party players.
To compete and be profitable in this area, the banking sector is seeking platforms that use data to fuel useful commerce experiences for SMBs, providing them insights into how they can drive more revenue through their businesses. This is the thinking behind Pollinate Global, which was initially incubated within NatWest, one the UK’s largest commercial and retail banks, and later spun out as an independent business.
Pollinate is using Confluent Cloud, the Apache Kafka platform that uses streaming data to provide real-time insights to organizations, to build out these experiences for merchants, as well as provide additional insights to the banks themselves.
We got the chance to speak with Nick White, Chief Product Officer at Pollinate, who said that the organization’s “strong belief” was that it could create an experience that took merchant acquisition beyond payments, and help small businesses run their business better. But the key to this is data. White said:
Fundamentally, our belief is that you can create great experiences - but you need data to do that. The data helps us understand the customer. It helps us improve the experience.
We only offer the services that we think and know they might want. We do that in a targeted and relevant way. We give them access to data so that they can run their business better. We use that data to give them insights to help them make decisions about how to grow their business. And so it's all about the intersection of creating great digital experiences and using data in a really smart way to do that.
White said that banks in the past had primarily been concerned with lending, and that being an acquirer was not trivial in terms of regulation, security, risk, compliance, and the operational overhead that comes with terminal certification, management and logistics. He added that creating great experiences also wasn’t traditionally in the DNA of many banks. But the competitive threat has been a wake up call for the industry. White said:
When you see the emergence of the likes of Square, Stripe, and all these other new entrants that have come in and started taking market share, it's no surprise that a lot of those providers that look like they are just simple terminals, like they’re doing some simple pricing for merchant payments, are suddenly now doing things like lending products. So now [the banks] are feeling the threat.
They're now doing it because there's a huge advantage both defensively and offensively in the market, if they take back control of that part of the experience.
Pollinate has always been a “huge fan” of Apache Kafka, White said, but Confluent Cloud in particular provides the organization with what it needs around scalability, elasticity, resilience, performance and security in a bank-grade environment. Pollinate is sitting on an enormous amount of data, he added, which by its very nature needs to be real-time. The primary requirements of a merchant’s business is that they need to know that transactions have been authorized, settled and reconciled.
White explained that Pollinate knew that processing large amounts of data at scale was the “beating heart” of what it was doing and that Confluent Cloud’s streaming data capabilities “ticked all of the boxes”. An additional benefit to Pollinate is that the organization’s technologists are not focusing on the operational part of the technology, Confluent is taking care of that. Instead, they can focus on innovating and building features and functionality for clients, rather than worrying about the infrastructure that supports that.
Three layers of value
Pollinate is prioritizing three principle value-add use cases for its use of Confluent Cloud. Firstly, merchants need to know the basics - they need to know the transactions that have been taken, the transactions that have been authorized, and the transactions that have been settled. That’s level one. White said:
They want to go to their dashboard at the end of the day, or anytime during the day, and see right up to the second what has been going on in their business, and is that matching their expectations? That's all accessible through the transaction management elements of our merchant portal.
The next level up is providing insights off the back of that. Pollinate uses the basic transaction data and combines it with other data source to help provide further insight. White explained:
For example, with NatWest, we take our issuing data, which the bank has asked to access, combine it behind the scenes with the merchant acquiring data, so the merchant can now see what kind of person is coming into their store.
All anonymized, of course, but you start to see patterns. So now the small business owner can see what people coming to the store look like, whether they're traveling five miles to get here, they can understand their demographic.
That can then inform their local marketing campaigns or local loyalty campaigns, or offers that they want to create. And so you start to then look at that dashboard as a way of helping them run a better business, as opposed to just reporting and reconciling on transactions.
Your small coffee shop owner or your small entrepreneur on the high street is not a data scientist. They don't give a monkey's about any of this. But what they do like is little nudges and signposts. Did you notice this? Have you thought about that? So on our dashboard, those are the sorts of things you're seeing.
For users, this then provides Pollinate the opportunity to provide them with benchmarks and comparisons, so that these small businesses can see how similar other businesses are performing - to get an understanding of if they should be improving on certain things.
Then the final level of value being prioritized by Pollinate, using Confluent, is helping organizations think about how they can use this insight. It has created a marketing toolkit for small businesses, where on the same portal, users can log on and see, for example, Saturday afternoons are not a great time for them. The portal then prompts them with a question, such as: do you want to create an offer to drive footfall on Saturdays? Users can then type in the offer, which is created on the merchant portal, and is then published to different endpoints to hopefully drive more traffic to the business place. White said:
So, you go up the pyramid to more value adding activities. And that really was our hypothesis: payments are probably commoditized, but if you can help a small business grow, then you're really starting to add value.
And then the really interesting bit for the bank is, what else can I sell them? Do you need short term cash to bridge a quiet period? Do you want a long term loan to open another outlet? Do you need insurance? That's the kind of journey we're on with our bank partners. But all of that data is the foundation of it.
To support this work, Polliate has also changed its organization design within the past year to be focused on domains, in an attempt to distribute the knowledge around Confluent Cloud across the business, as opposed to it being stuck in a central team that tries to make all this happen from the center. White said:
We effectively took a monolith of what we offer, broke it up into domains - we have a transaction management domain, a merchant boarding domain, a merchant maintenance use case domain - and in each of those domains, it’s a pretty common approach.
We put cross functional teams and skill sets into those domains to make them as self-sufficient as they possibly can be. And within that, we have effectively taken the DNA of the skill-set around Confluent Cloud and put it into the domains. There's a horizontal team of experts, but really execution is happening in the domains.
In terms of how Pollinate is measuring the success of its use of Confluent Cloud, White said that the benefits include:
There's clearly a total cost of ownership that's important to us. We use to spin up instances of our platform on a client by client basis, that was our model because of the requirements of a particular region and a particular bank. That's been one of our heaviest lifts, so being able to find a better way to scale and keep the total cost of ownership under control is super important.
I also think productivity and making sure that developers and the infrastructure people are working on a roadmap and new features, and less on the underlying infrastructure is a big thing. Ad we're certainly measuring that a lot, we want their attention to be focused on value added stuff.
There is also a time-to-revenue element when we do land a new client, which is super important to us. We tend to have extremely long sales cycles, and then extremely demanding implementation timelines. Banks take a while to make decisions, but when they do decide, they want to go. So we need to be able to spin up quickly and have time to revenue as short as possible.