Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're inside the ICE House. Our podcast from Intercontinental Exchange on markets, leadership, and vision and global business. The dream drivers that have made the NYSC an indispensable institution of global growth for over 225 years. Each week we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism. Right here, right now at the NYSC and at ICE's exchanges and clearinghouses around the world. And now welcome inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
Come on. You know you've seen some of the spots for the What's in Your Wallet campaign from Capital One. That's NYSC took a symbol COF. You know the high comedy from entertainment icons like Jennifer Garner, Samuel L. Jackson and Jimmy Fallon. But despite playing it for yucks, their fundamental question, what's in your wallet, is deeply rooted in American history and innovation. To borrow the legendary line from the great character actor, Walter Brooke, who played Mr. McGuire in Mike Nichols 1967 Classic, The Graduate, one word, plastics.
Video:
What are you going to do now?
I was going to go upstairs for a minute.
I meant with your future. You're alive.
Well, that's a little hard to say.
Ben.
Excuse me.
Mr. McGuire.
Ben.
Mr. McGuire. Come with me for a minute. I want to talk to you. Excuse us, Joan.
Of course. Excuse us. Thank you.
He is such a man.
I look at him and I can't believe it. I know him.
I simply can't believe it.
I just want to say one word to you. Just one word.
Yes, sir.
Are you listening?
Yes, sir, I am.
Plastics.
Exactly how do you mean?
There's a great future in plastics? Think about it. Will you think about it?
Yes, I will.
Enough said. That's a deal.
Josh King:
That's a deal. Over the years, the currency we use for everyday transactions, both large and small, has evolved from paper to plastic with 1000 innovations under the hood. But let's take a step back. The Mint Act of 1792 established the coinage system of the United States and introduced the dollar as the principle unit of currency. In 1950, as I learned during my years at First Data, now Fiserv, the Diners Club card became the first charge card after businessman Frank McNamara forgot his wallet during an evening out in Brooklyn. Then there was Satoshi Nakamoto, the pseudonymous person or group in 2009 promulgating the theory behind Bitcoin, the first major cryptocurrency. An idea that first popularized by the legendary economist and Nobel laureate Milton Friedman all the way back in 1999.
Milton Friedman:
So that I think that the internet is going to be one of the major forces for reducing the role of government. The one thing that's missing, but that will soon be developed is a reliable e-cash. A method whereby on the internet you can transfer funds from A to B without A knowing B or B knowing A. The way in which I can take a $20 bill and hand it over to you, then there's no record of where it came from, and you may get that without knowing who I am. That kind of thing will develop on the internet, and that will make it even easier for people to use the internet. Of course, it has its negative side. It means that the gangsters, the people who are engaged in illegal transactions will also have a easier way to carry on their business. But I think that the tendency to make it harder to collect taxes will be a very important positive effect of the internet.
Josh King:
That's Milton Friedman 25 years ago, 1999, but let's get back to plastics. I grew up in an era when the ubiquitous chip and pin and tap and pay credit cards we use today were really a figment of the imagination. Whether it was a product from Visa, that's NYSE ticker symbol V, American Express, ticker symbol AXP, or Mastercard, ticker symbol MA, we all started by watching our cards run over a piece of carbon paper in the infamous knuckle buster machine. Then we had to figure out that tricky move of swiping our card through a slot so that a reader could capture our account number through a magnetic strip that was embedded in the plastic, never quite knowing which way to make the darn thing work. Learning over time through trial and error. So whether it's cash or coins, credit cards, or cryptocurrency like Bitcoin, they all share the common concept of storage in a wallet.
And while traditional leather bill folds still reign supreme until the iPhone and Apple Watch completely eliminate that bump in our butts, we are well on our way to fully entering the age of the digital wallet. These enable transactions using various currencies and have positioned a company like Paysafe, that's NYSE ticker symbol PSFE, at the forefront of the payments industry led by today's guest, CEO Bruce Lowthers.
Paysafe is a leading payments platform with an over 25-year track record of serving merchants and consumers across different sectors. With more than 3000 employees, Paysafe connects businesses to its clientele across dozens of payment types and currencies worldwide. Bruce joins today's episode to discuss the company's global reach and the different industries that Paysafe serves. We're also going to detail Bruce's journey into the role of CEO and how the payments industry has evolved alongside his career. All that and more, it's coming up right after this.
Audio:
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Josh King:
Our guest today, Bruce Lowthers is chief executive officer and executive director of Paysafe, that's NYSE ticker symbol PSFE. Lowthers, appointed to his role in March 2022, Bruce brought to Paysafe three decades of experience, including 15 years at Fidelity National Information Services, that's ticker symbol FIS, where he served among other roles as its president. Bruce, thanks so much for joining us inside the ICE House. Welcome to New York Stock Exchange.
Bruce Lowthers:
Well, thank you. It's great to be here today.
Josh King:
Do you have memories of the old knuckle buster?
Bruce Lowthers:
I do. I do. I actually chuckled a little bit when you mentioned it earlier and hadn't thought about that in a little while, but I do remember it
Josh King:
First for our listeners, we're going to get much deeper into the company, but from a 30,000-foot level, what is Paysafe?
Bruce Lowthers:
Just like you said, Paysafe really is a pioneer in the digital wallet side. We really have two parts of our business, the digital wallet side of the business and a traditional merchant acquirer. But we're a global company, 26 years old, 1.7 billion in revenue and do business in over 100 countries, so it's really a great little company.
Josh King:
You were here about a year ago for Paysafe's Investor Day. I'm curious how often you make it north from your adopted home in Florida to visit us here in New York or head back to your childhood home in Medford, which is really just down the street from where I grew up in Newton.
Bruce Lowthers:
Yeah, I don't get up north very much. I think I've taken to the southern lifestyle, so it's a pretty good living down at Amelia and we really enjoy it down there.
Josh King:
You grew up as one of three children. Your dad made a living as a butcher. I'm sure, because I think you and I are roughly the same age. You remember Sam the Butcher from the Brady Bunch days, who surely would've maintained a house account from Mike and Carol Brady and allowed Alice to put the latest pork loin on the family tab as well. Was that what it was like at Lowthers Butcher or how did your dad manage the accounts?
Bruce Lowthers:
No, we actually did. We ate a lot of meat. It was a great childhood. We're very fortunate. A lot of family around the traditional kind of Irish Catholic family up in Boston, so there was always lots of people around and always things to do with the family.
Josh King:
Your dad was a butcher, mom a nurse exposing you to these two different career paths, but then you went off to UMass Lowell where accounting, finance and payments caught your eye. What sparked in your youth in college years, an interest in those fields versus taking over dad's business?
Bruce Lowthers:
Well, just in all kinder, I don't know that they did. I think like many college kids, I wasn't really sure what I was going to do, and I had moved into an accounting degree while I was there at UMass Lowell and was very fortunate to come out and go on to be a CPA and work at Deloitte and ultimately Ernst & Young before I moved into the business world.
Josh King:
You drive over 495 in those years around Lowell, you look up into the skyline such as it was in Lowell, you see Wang Labs up at the top of the building. Were you sort of intrigued by what the latest cutting edge in technology had to offer at that time?
Bruce Lowthers:
I don't know that I was that forward-thinking back then. I was probably just trying to get through school and figure out what the next step was, and I think the world really opened my eyes when I got to the firm at Deloitte, really exposed me to a lot of different things. And so that was really a tremendous learning experience as a young kid, getting to go out and see all these different companies, ask CFOs questions that probably I had no right asking as a 21-year-old kid right out of school that didn't know anything.
Josh King:
Was Deloitte Ernst & Young at the time or...
Bruce Lowthers:
No, when I joined, Deloitte hadn't become D&T yet. Ernst & Young was when I moved down south later on.
Josh King:
Okay, right. Okay. Was that on campus interviewing and pull you into this career track and really what Bruce was going to aim for?
Bruce Lowthers:
Well, I think like so many people in the blue collar family, you were getting a lot of encouragement for your family to pick something that was going to get you a job, and there was always this theme in the family that you could always get a job as an accountant, and that's really what pushed in that direction. I had a natural enjoyment of accounting, which it sounds really weird and probably very boring, but I really enjoyed it when I get into school and found it came very naturally.
Josh King:
Accountants are curious, investigative, you need to sort of probe sometimes deep into the books to find the story behind what's really going on at a company. The same is true sometimes when you're running a cutting edge FinTech business, especially with this rapid technological advancements. What do you do to stay informed of the latest technology? I used to go to Money 2020 a lot when I was at First Data. There's not enough hours in the day to watch what's happening in this industry. What's your diet for making sure you're at the cutting edge?
Bruce Lowthers:
Yeah, for me, I've talked a lot about over the years of being your chief learning officer, right? It's really important to, as you said, to remain curious. And I usually start every day with at least an hour of reading a whole variety of things from the latest consulting reports, white papers that come out, to arbitrary things about NASA and rocket ships going up and why they work. Or more recently probably like everybody else, AI and quantum computing and those type of things. So it really is about just having a curiosity, being willing to continue to read and learn, and I think that's one thing that I tell people a lot is I wasn't a reader as a kid, I was very much into sports. But as I moved along in life, I always kind of said, "Man, I can't consume enough information. I should have been reading all along." But I put a lot of effort into trying to catch up and read as many things as I can.
Josh King:
Beyond the work in terms of running the businesses that you've run, you sort of take a wider aperture and in some ways represent and advocate for the industry that you're in. You're the former chairman of two prominent payment industry associations, the American Transaction Processors Coalition and Payments 20. What did these two bodies under your leadership aim to accomplish for the sector as a whole?
Bruce Lowthers:
So I think when the group of us came together and we started talking about what was happening in the payments industry, we really felt that there wasn't a voice articulating what the processors were going through. And so for us, it really became about education. Education for our political leaders, education for regulators about the practical impacts that these changes that they were trying to make from a legislative standpoint would have on the consumer interaction. And so we really said, "Okay, let's come together as a group." So we had all the major payment providers come together and we started expressing thoughts on what the payment industry should be doing and how do we help. We weren't necessarily trying to influence an outcome per se, it was more about just educating people on what the outcomes will be if they move down these various lanes. And we felt at the time there was a lot of discussion in Washington and in the local states, but it was really being skewed by the massive guys.
It was the Visas, the Mastercards, et cetera, of the world that were really leading those discussions. And we just felt that it was the right time for us to kind of engage and really start bringing forward a more complete vision of what was going on. I think with P-20, what we were really trying to do there was I had been working with the World Economic Forum on a KYC project, and that really sparked an interest of how do we get countries to work together to make better experiences for consumers to level the regulatory playing field? And we really started working with the UK and the US and we brought the business leaders together, we brought the main regulators together, we brought politicians together all in one room to just have open conversations about what was evolving in the space. And I think both of those organizations have gone on to have great success. ATPC is celebrating their 10th anniversary this year, which is great to see and great to see that both of those organizations continue to move forward. Great things from both.
Josh King:
You spent 15 years at Fidelity National Information Services, that's NYSE ticker symbol FIS, as I said in the intro, ending your tenure there as president. You oversaw the organization's 65,000 employees, Bruce. How did that experience contribute to your preparation for leadership at Paysafe over the last couple of years?
Bruce Lowthers:
Yeah, that's a great question. I think it probably sounds silly. I did four startups before I got to FIS and came in through the e-funds acquisition. And this is probably bad for anybody listening, I didn't really have a career path in mind. I wasn't trying to become president of FIS, I was very fortunate that I worked with wonderful people and I was probably content just learning.
One of the great things about being at FIS was that we did business all over the world. We were leading in a lot of technology fronts from real-time payments to pick your favorite one, and I was given the opportunity to continue to grow and learn, and that's really what drove me. And then I woke up and I looked around and we were now talking about very senior roles in the company and what I wanted to do, and I didn't realize that 10, 12 years, it kind of clicked by pretty fast. But that was, for me, it was the opportunity to be around people that I cared a lot about and continue to learn and grow and face really unique challenges and very fortunate to be part of FIS over my 15 years there.
Josh King:
During an interview that you did at Sibos 2019 in London when you were president of banking solutions for FIS, you highlighted innovation, modernization and enhancing the customer experience as key priorities during your tenure. As you've transitioned to new roles, new companies, does the importance of these three foundational pillars remain the same?
Bruce Lowthers:
Yeah, I think so. I mean, as you know, one of the great things about the payments industry is you're really only limited by your imagination. And if you really take that to heart and you focus on the consumer or the customer and creating great experiences for them through all this great innovative technology that's emerging, there's really nothing you can't do. And so those pillars still really are the foundational items for me. You hear me today talk about Paysafe and the same type of constructs around client experience, sales organization and great product innovation. And so very much continuing to keep that as my foundational building blocks.
Josh King:
What's your diet for sort of staying in the office, making sure the operations are good, your employees are happy and contented versus kind of being out there with your customer in the office with your sales team kind of hearing what the customer really needs?
Bruce Lowthers:
It all starts with the customer. Even when I came into Paysafe, one of the first things I did was run out and go talk to our customers, our top customers. Try to understand what's making them happy, what's making them grumpy, really get a good handle on what it is that they need for us to help them be successful. And so that's really the big part of it is staying focused on what your clients need. Even when I think back to all my startups, the four startups, we always used to joke that I wasn't smart enough to figure out what the product was that they needed, so I just cheated and I would go visit them and ask them, "What is it that you need help with?" And I've kind of carried that throughout my whole career. So while all the operational components are absolutely critical, it always starts and ends with the customer.
Josh King:
So if that was the first thing that you did when you got to Paysafe, go out and listen to the customer and find out what's making them grumpy. You had, Bruce, 15 years inside of FIS. You probably could have played that out longer, but there's this company that's only been public for two years. What attracted you to make the jump into this world at Paysafe?
Bruce Lowthers:
I think as I started looking at my next role at FIS, it got me to stop and start thinking about the realities of life that I was getting older. And all of a sudden I'm 55 and 56 and I started thinking about, well, how do I really want to start driving towards the end of my career? If I've got seven, nine years left of corporate life, not to say that that's the only thing I do, but of corporate life, what is it that I want to accomplish?
I've been very, very fortunate to do a variety of things from my startups to the associations to running one of the largest FinTech organizations in the world. And so I really had the freedom to just say, "What do I want to go do?" And what was appealing about Paysafe were a few things. One, it was in the payments industry, which I loved, and I always had this thesis around the consumer segment and the merchant segment, which I still believe is really something as we move forward will be critical for all payments organizations. And then it was the ability to have an impact on a company that needed a little bit of impact at the time to put it in the right position to get it back on the rails and really drive it forward. And I liked the assets that we had, the people that I knew were really good people, and so a lot of it just kind of came together.
Josh King:
So Paysafe offers a diverse array of payment options and a legacy spanning these 25 years of managing risk. I want to listen to a recent Paysafe ad highlighting what makes the company really stand out
Audio:
All over the world, every day people trust Paysafe with their online payments. Because of Paysafe, we understand the transaction is just the beginning and the adventures, ambitions, and memories we experience are the destination. Opening the door to possibilities and a future we're proud to be shaping. Where some just see payments, we see more.
Josh King:
Where some just see payments, we see more. Bruce, where do you see that makes Paysafe different from its competitors?
Bruce Lowthers:
That whole piece there started from a little paragraph that I wrote for my team trying to articulate what I envisioned Paysafe being, and they took that and ran with it and really tried to capture what was in my head of what I was trying to accomplish. And so I really love what they did with that, because what we tried to focus in on was really about experiences. When you're talking about payments itself, it becomes very transactional, and what we were trying to do is really lock into the fact that we create a lot of great experiences for people, whether it's making that bet at the Kentucky Derby or buying the tickets to go see the Super Bowl. Those are things that we were passionate about and we wanted people to start thinking about it in a different way other than just executing a payment.
But now really creating memories for people and their families, we were the start of that journey that they were doing, and that's really what it was about. And so for us, the differentiators are that broad array of product offerings that we have in the payment sector, strong regulatory frameworks and controls. We've been doing this for a long time, really executing real-time payments for two decades where other people wouldn't make those. So between the product offerings and the regulatory side and the ability to do business in 100 different countries, we think we're very well positioned to really set ourselves apart as we continue to move forward.
Josh King:
I'm going to go to my first Kentucky Derby in May.
Bruce Lowthers:
Awesome.
Josh King:
So bucket list moment for me. Talking about places, not necessarily Louisville Kentucky, but London and Jacksonville, Florida, that's where Paysafe is duly located up in Jacksonville. You grew up alongside Black Knight, which ICE acquired last year in its journey to fully digitize the mortgage ecosystem. But Paysafe stretches even further into Europe and Latin America serving diverse regions and consumers. How do you adjust how to best operate in each unique location that you're in?
Bruce Lowthers:
I think we've done a couple of things. One, we have centralized a lot of the operational functions, but in each of those cases, whether it be marketing, sales, whatever, it's critical for us to have local people so that we can understand what's happening in that market. The client bases that we have, we all may have commonality within the vertical that they play, the Peru market for example, has different operating styles or things that you need to be aware of versus things in Germany or London or Italy or the US for that matter. So for us, while we can gain efficiency by centralizing some things, it is critical for us to have that local voice within our teams, especially in the product team, sales team, and marketing teams.
Josh King:
And so that's the way you are operating inside as various teams, but as you spread globally, Bruce, how do you figure out the operating environment externally, working with different municipalities, localities, governments, complying with local regulation and legislation across all these diverse markets?
Bruce Lowthers:
We've had a great fortune to have Richard Swales who leads our risk organization. He's really created a wonderful framework for us that both mitigates risk, but also is very proactive in dealing with each of the regulators on a country-by-country basis. So his team does a phenomenal job with that. Highly talented people, I would stack them up against anybody in our industry. But for us it's always just about open communication and communicating with the regulators and legislators to make sure that we're all aware of what's going on and being proactive, trying to get out in front of things as they emerge.
Josh King:
So you achieved 8% revenue growth in the fourth quarter last year and 7% year-over-year growth in the number of three-month active users, which is a group that you define. You can give us a little color on how we should think about that. What factors do you credit for the progress and how does the company plan to sustain and build on those numbers going forward?
Bruce Lowthers:
Yeah, so fantastic question. I think when we came in, it'll be two-year anniversary next month, and when we came in, we looked and said, "Okay, what's working? What isn't working?" We tried to simplify the business so that we looked at our e-commerce business, we looked at our digital wallet business, we looked at our e-cash business and our merchant acquiring business on the SMB basis. When we looked at those entities, when I came in, we were having trouble basically across all of them. And so we said, "Okay, what are the two businesses that are high value items? The things that when people were very excited about the business coming public, what were the products that we were looking at?" And it was really the digital wallet was what they were excited about and our e-commerce platform. We really focused in on user experience within the digital wallet. That did a lot of things for us as far as making it easier to load cash into the system.
The experience was better so people started using it. You'll see in our trend line that the number of transactions were going up, our revenue per user was going up, and all of those things came from changes, product changes that we were making within our product on the digital wallet side. On the e-comm side it was really just about getting that focused in, making sure the operations were what they should be, putting in the right frameworks for those. And what you saw over the year was we were able to take those two businesses from declining businesses to growing businesses. That really set up the year for us as far as returning to growth. And then we said quite openly at the end of Q3, Q4, "Hey, we're not done. We still have these other two businesses we still got to go solve." But these first two were really important with e-commerce and digital wallet to show that we can get these growing again, and that led to that 7% growth and we feel very good about our growth profile as we're moving forward. We expect it to accelerate.
Josh King:
We're going to dip a little bit into each of those businesses in the second half of our conversation. But as we begin to wrap up the first half, I mean the company ranks high. You're talking about what you did when you got in two years ago and going to listen to the customer, but you rank high now in customer satisfaction in the 2024 U.S. Merchant Services Satisfaction study according to J.D. Power. What strategies, since your arrival, after listening to them go back to the office and say, "This is how we're going to do things differently?"
Bruce Lowthers:
Yeah. So I'm very proud of the team for what they were able to do. I think when I came in, we were near the bottom of the list on that J.D. Power survey. This year we've moved all the way to number two right behind Shopify. So a tremendous transformation really from the hard work of our team. It was really more just about getting them focused on are we onboarding people right? Are we responding to people? Listening to the suggestions that our customers are asking? Are we out talking to them, giving them clear guidance on who they should be reaching out to if something goes wrong or if they just want to know what the next product is that we have? And so the team really rallied around that and has put us in a much better position, now a position where we can really start executing and building on these relationships.
Josh King:
A guy comes in after a company's got almost a quarter-century of history. You've got plenty of experience in this industry, but you don't know this culture. You get told where your office is going to be and brought in. How do you roll up your sleeves and get a hold of that culture, make them follow you instead of the path that they've been on before that?
Bruce Lowthers:
Well, when I think back now, two years into it, what you saw was a company that had come together through a series of acquisitions and everybody has a culture. The culture was really just driven by each of those companies that we had acquired and probably just maybe bad luck to a degree. While we acquired those companies, COVID then hit, and so the teams never really had an opportunity to come together and play as one Paysafe. And what we did when we came in was really focus on that. How do we build a team at the very top and then how do we drive that down into the organization? And I feel very good about the progress that we've made there. Culture never is an end state. It's just something you continue to nurture and hope that it moves in the right direction. The momentum in the organization is palatable. You can sense people coming together. You can sense the excitement that's building about doing things that are Paysafe-centric.
Josh King:
Coming together, playing as one Paysafe. After the break, Paysafe CEO, Bruce Lowthers and I are going to discuss the company's investment in iGaming as well as the recent fourth quarter earnings call, the more things that Bruce said. All that and more is coming up right after this.
Audio:
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It's raising capital to help companies change the world.
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And driving the world forward to a greener energy future.
Opportunity is setting a goal.
And charting a course to get there.
Sometimes the only thing standing between you and opportunity is someone who can make the connection.
At ICE we connect people to opportunity.
Josh King:
Welcome back. If you're enjoying our conversation, want to hear more from guests like Bruce Lowthers, CEO of Paysafe, that's NYSE ticker symbol PSFE, remember to subscribe to Inside the ICE House wherever you listen to your podcast and maybe give us a five star rating and review on Apple Podcasts so folks know where to find us.
Before the break, Bruce and I were discussing his background and payments, Paysafe's transformation under his leadership and the challenges and changes upon his assuming the role of CEO back in 2022, right after the COVID pandemic.
Bruce, Paysafe has positioned itself as a leader in payments in iGaming, encompassing what you might describe as sports betting, video games, online gambling, each perhaps in the early innings of their ascendancy. During your recent fourth quarter earnings call, you announced the expansion of Paysafe's existing partnership with Hard Rock BET in Florida. How's the company tackling this burgeoning sector? How does this strategic partnership with Hard Rock move the ball forward for Paysafe and generally, you're allowing our listeners greater understanding of where online gambling and gaming really is.
Bruce Lowthers:
Yeah, look, I think as you said, the iGaming is really early innings. It's very early innings. So while we're in 30 states, we'll expand in 24 to a few more, it's still just coming together. Each state has their own regulatory framework. They all have a little bit different version of how they want it to move forward, but we have great customers. We built off of a strong customer base in Europe, so we've been doing the gaming business in Europe for a very long time, and so it gives us a tremendous amount of insight as to what's important to our gaming operators.
So it was a natural extension for us to move into the US and there's a high degree of trust, because we've been doing it for so long from a regulatory standpoint, from just managing the day-to-day complexities of the gaming vertical. So we feel very good about the growth that's coming there. I think we're very well positioned. I think as most people have seen, where we've got substantial growth within that vertical in North America, close to 50% last year. We'll continue to drive that business and it'll be a strong growth engine for the foreseeable future.
Josh King:
I mean, speaking of Europe, we hosted the US listing of Flutter Entertainment, that's NYSE ticker symbol FLUT, here on the floor of the New York Stock Exchange a couple of weeks ago with legendary Patriots tight-end, Rob Gronkowski leading the delegation onto the floor. I want to listen to Amy Howe, the CEO of FanDuel, which is one of Flutters divisions during a conversation with CNBC's Squawk Box discussing the sectors potential growth.
Amy Howe:
Five years, we've come a long way in opening up the US market and regulating it and providing a safe haven for consumers to bet legally, but we still have a long way to go, right? California, 13% of the population. Hope to be in Nevada someday, but we still also have Florida and Texas, so there's a lot of hard work to do. But so far five years in, we're protecting consumers and we're doing exactly which is intended is to also help provide great revenue back to the states.
Josh King:
Bruce, you mentioned that you're in 30 states, Amy mentioned Texas, California as states where gambling isn't even legal yet in person or online, those two huge potential markets. As the number of legal betting states increases and that 140 million potential people covered by legalized gambling grows, are you prepared for potential influx in the transactions that might come? If you just do Florida and Texas alone, that's 70 million people to add to the TAM?
Bruce Lowthers:
Yeah, we feel very good about it. I think part of what we've been focusing on in this past year and continue into '24 is our infrastructure and making sure that we're prepared to scale. That's something we talked a lot about when I first came in, is making that transition from those small entrepreneurial businesses to a business that can scale and grow with our market. We're very fortunate about the verticals we play and have huge TAMs, really strong CAGR's for the foreseeable future. So that's what we talk about every day. How do we get better? How do we become really operating at an extraordinary level?
Josh King:
Paysafe's digital wallet has two components, the classic digital wallet and the Skrill and Neteller wallets used in Europe and Latin America. How do these wallets differ and what developments are expected as they continue to evolve?
Bruce Lowthers:
Well, I think when we came in, we have a long history with Skrill and Neteller, those have been in the market for 20 plus years. Those are very much just a branded wallet that is focused on video gaming, gaming, those type of things. The real value proposition around those has been for people, consumers who do like to make a bet or who do like to buy things from a video game that centralize their wallet and be able to move that money from one operator to another with relative ease, all in real time payments. So that's really the big value proposition around that, whether it's video gaming or iGaming. So that's really the strength of it.
What we've now tried to do is that, okay, great, we've brought these platforms together. We now have one platform for Skrill and Neteller. We've really transitioning that into a multi-tenant platform that allows us to offer white label wallets all over the place, and that seems like a tremendous opportunity for us. We just announced one in our Q4 earnings call with Xsolla, a payments company that focuses on the video gaming space. We have a series of other deals that we haven't announced yet, but will very shortly. So we really see that white label wallet platform as a tremendous opportunity for growth for us as we're moving forward. We see no end in sight to the adoption of digital wallets, and really just in the early innings as we start thinking through how we create those communication links with end consumers to those operators or merchants.
Josh King:
Well, cryptocurrency is gaining traction in the gaming sector. You mentioned during the fourth quarter call that it's currently contributes maybe less than 2% of Paysafe's revenue. What are the company's plans for advancing in this rapidly evolving crypto sector, especially as we watch over the last few months the way the marketplace has moved?
Bruce Lowthers:
Yeah, I think it's something that we are positioned well because of our regulatory frameworks and things that we understand how to manage these high risk verticals. But we will continue to be very prudent about where we go in and what we do. For us, it's always important to kind of keep that AML framework, the anti-money laundering framework and the KYC know your customer frameworks so that we can give comfort to the regulators that we're doing the right things and helping people while doing the right things to execute transactions the way they want. I mean, if the gaming space is in the early and this is really just-
Josh King:
First [inaudible 00:41:03] pitches in [inaudible 00:41:04] training.
Bruce Lowthers:
Yeah, this is very early... But we're excited about it. We're excited about the opportunity that Web3 brings and some of the other things as we're moving forward.
Josh King:
Yeah, I mean, moving off then maybe gaming and crypto and iGaming sectors, I mean, talk about some of the other verticals that you're in, more traditional groups like travel and leisure, restaurant and hospitality, digital assets. How does the company allocate resources among these sectors allowing each to grow and innovate?
Bruce Lowthers:
I think for us we've really spent the last two years of trying to understand the business economically, operationally, and focusing on the metrics that drive those businesses. And so when we looked at our CapEx allocation historically, we had a lot of the CapEx being spent on things that weren't necessarily growth centric. We've now brought together a discipline around that CapEx allocation, and so we've got about a little over 40% of our CapEx allocation now driving growth initiatives where that was less than 10% just a couple of years ago.
So we're really starting to reallocate things based on the CAGR of the business lines that we have and the opportunities that we see as we put together new business cases for these new products and innovations. So I think we're moving down the right path there. Probably never get happy with how much we're allocating to new growth items, but it's exciting to see our pipeline of initiatives building. We've got real tangible things that we'll point to in '24 that we started delivering in '23. Now we'll see the outcomes of those in '24 and more importantly, it sets us up with great run rates into '25 to continue that acceleration of our growth rate.
Josh King:
Shifting focus to small and medium-sized businesses. You mentioned during the earnings call the goal of optimizing the SMB portfolio heading into 2024. What are your plans to achieve this and expand the SMB segment into the currently untapped regions?
Bruce Lowthers:
So for us, we've really had a great opportunity with the SMB book over the years, but we've been very limited to kind of where we did. We had three major states that drove a bulk of our sales activity and our operations.
Josh King:
Which were those?
Bruce Lowthers:
California, Texas, and Florida. So big huge states, but there was greater expansion opportunities for us. We were somewhat sub-scale, not somewhat. We were subscale with our direct sales force, because we came together through third party channels. So now we're trying to rebalance that to drive the opportunities in these other states that we have. And for us, it's about offering optionality to those merchants. In a lot of these instances, we're a reseller of multiple different products, whether it be Clover or your favorite POS device. And so that's really been a big advantage for us to go into a merchant and say, "These are the three main devices that whatever surf shops are successful using, we'll let you pick whichever one you want that is best for your business," versus some of the other guys are coming in and only pushing one, right? They're only pushing your First Data product or your Verifone product, whichever it may be.
Josh King:
As improvements and expansions occur for Paysafe, you have remained steadfast in your commitment to progress saying, I'm going to quote you here, Bruce, "We've sharpened our focus on new product development. We've made a number of organizational changes in 2023 and adapted our capital spend to support this renewed commitment to innovation." As Paysafe has undergone this transformation, Bruce, under your leadership, what factors drive innovation, the creation of new products and the areas of focus within the company?
Bruce Lowthers:
I think what drives it is just our desire to be better for our customers. So when we're out talking to customers, we're seeing the challenges that they're facing. We have a great customer base that anybody would be jealous of and envious of. We just want to do the best we can for them, and that's really driving a lot of the product innovation. So we've really staffed up our organization. We brought Nicole Carroll in to lead that, and she's an industry veteran, really understands growth and innovation. And so we're building out her team to really help our customers continue to grow and thrive, and that's really the underlying foundation that we're trying to build off of.
Josh King:
You've got these new partnerships like Xsolla, the global video game commerce company to power the Xsolla wallet. You've launched a new pay by bank product targeting the American sports better. Then just to sort of circle back to the beginning of our conversation, we talk about your native curiosity and your diet for sort of understanding where the industry is going. You mentioned, of course, as we all do, AI. How's Paysafe using AI to improve its services and offerings for internal stakeholders, clients and consumers alike? We've seen platforms like ChatGPT increased productivity and efficiencies in so many industries, and I gather it's the same for payments.
Bruce Lowthers:
Oh, it definitely is for payments. It's something that is really just emerging for us, but in some ways there are things that are very traditional that we've used that technology for years already. So in our fraud, for example, is something every payment organization I would imagine is using to some degree in our fraud analysis and what we're doing there to mitigate risk for our consumers and our merchants.
I think when you start looking at basic operational functions, there's no question that those things are going to have an impact on our ability to interact with our customers. From a customer service perspective, we just launched internally this intelligent platform that allows us to see across all of our platforms and leverage that data so we can respond significantly quicker to questions and inquiries that come up. So we're very excited about some of the work that they've been doing just on creating operational efficiency, leveraging those data models.
So we feel like it's something that everybody's going to be doing. We need to continue to get better at it. One great advantage that we have is access to people like Blackstone and CVC who are really out there and leading the evolution of use cases for this technology. And so we try to stay close to those big guys, because we have access to them being part of that network, and it creates a great opportunity for us to continue to accelerate using those language models and technology.
Josh King:
As we begin to wrap up our discussion, Bruce, considering the growth of FinTech and payments alongside your career, where do you see the industry's next decade going?
Bruce Lowthers:
Oh, I think there's going to be a tremendous amount of change over the next decade. As I said before, the beautiful thing about our space is just limited by your imagination. And so when you focus in on how to make better experiences for people, you're seeing more and more things move digitally. I think those are going to create lots of opportunities for great experiences for people. And that's why we started talking about the experiential economy and how we're centered at a crossroads between the experiential economy and enabling the payments to execute these great memories that people are trying to go out there and experience. So we see a lot of change. We'll see a lot of legacy platforms kind of come and go, but we feel overall that whenever there's change, there's a great opportunity and we're positioned well.
Josh King:
When an analyst gets on the call with you, Bruce, and says, "Well, what are your priorities for the rest of the year, Bruce?" What would you tell him?
Bruce Lowthers:
Well, I think there's a couple of things. One, this quarter is very important to us to show what kind of our organic growth was. I think when you look back on '23, we talk about our growth rate of 7% for the year. Alex Gersh, our CFO, has been very clear with everybody that that's aided a little bit through interest income, interest rate changes in a positive direction in FX. So when you look at it from an operational standpoint, at an organic level, it's really about a 4% growth rate.
So what we're looking to show this year is that we're continuing to accelerate. And so Q1 is going to be kind of an opportunity for us to show that we're moving in the right direction, purely organic growth, and this is what we can start to show that we can do. I think when we look towards the back half of the year, it's continuing to execute, saying, "This is what we're going to do, and showing that we can do that," and building that growth accelerator to what our natural growth profile will be as we go forward. So it's really about setting up '25 for me, and operational excellence will be a big part of that. We're seeing really good things, and we'll hope that that plays out for the rest of the year.
Josh King:
Well, you've been in the seat for two years. You've been listed here at the New York Stock Exchange for two years. As you look forward to 2025 I hope you can come back to see us again, maybe when you're ready for another Rangers game at Madison Square Garden and tell us where the payment industry is, '25, '26, '27 and beyond.
Bruce Lowthers:
Thank you very much. I really appreciate the opportunity to be here.
Josh King:
It's great to have you inside the ICE House. Thanks, Bruce.
Bruce Lowthers:
Thank you.
Josh King:
That's our conversation for this week. Our guest was Bruce Lowthers, CEO and executive director of Paysafe. That's NYSE ticker symbol PSFE. If you like what you heard, please rate us on Apple Podcasts so other folks know where to find us. If you've got a comment or a question you'd like one of our experts to tackle on a future show, make sure to leave a review. Email us at [email protected] or tweet at us @icehousepodcast. Our show is produced by Lance Glynn with production assistance, editing and engineering from Sam Unati. Pete Ash is the director of programming and production at ICE. And I'm Josh King, your host, signing off from the library of the New York Stock Exchange. Thanks for listening. We'll talk to you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell a solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.
