As a Fintech CEO, how important is “Data” to your business?

Data is critical to every business, but it is particularly important in the B2B payments industry. For instance:

  1. Payment and expense data repositories – today these are siloed. Payment data is held by the bank and the expense by the companies. A firm needs access to both types of data to verify that the purchase was actually made (i.e., it wasn’t a fake receipt generated and submitted for reimbursement).
  2. Patterns of expenditure – these are crucial in identifying fraudulent transactions. For example, multiple clients ordering the same items at a restaurant (appetizers, entrees, single dessert) could indicate an employee charging personal expenses or duplicate expenses to a company.
  3. Historical patterns of misclassification of expenses or inappropriate charges – these indicate an employee’s propensity to spend outside policy.

In the Payments space, data indicate that analog processes still rule the roost in many sectors of the economy.  Can you comment on the notion of “Digital Transformation” in payments and spend management and Zact’s role bringing it to fruition?

We are living amid the digital transformation of payment reporting from analog (paper reports and receipts) to electronic. I see three phases:

  1. Phase 1 – like web 1.0: Static. Analog paper reports and receipts -> electronic reports and receipts.
  2. Phase 2 – like web 2.0: Interactive. Payment control and reporting, where the reporting and controls are integrated and interactive.
  3. Phase 3 – like web 3.0: Collaborative. This is what’s next. Once the data is digitized and interactive, the next step is to have the machines draw semantic conclusions from multiple and decentralized sources of data, with no centralized body governing access to such data. Meaningful actions derived from such semantic conclusions can go a long way in removing friction from all aspects of expense reporting, in preventing fraud and mis-use, and in informing business decisions. Leading on this processing axis (as opposed to just lending) is Zact’s priority one.

You operate in a world that’s denominated in the “Trillions.”  Given that, how do Governance, Security, and Compliance fit into your work at Zact and how do you protect the data under your stewardship?

Zact is one of the only emerging companies that is fully SOC1, SOC2, Type I and Type II compliant, along with being PCI compliant. We have undergone multiple external audits of each type already and have come through with flying colors. We are committed to Governance, Security and Compliance at our core (unlike most of our competitors). We take this obligation very seriously.

What are the main challenges in Payments in general?  

Issuing-side payments is getting a lot of attention lately and garnering massive investments. There are many firms in the space that are in the business of saying “payments and expense”, while their real business is lending to firms that have no chance of otherwise getting an unsecured line (revolving credit card line) from a bank. These are nowhere near ideal loans. One high-flyer apparently has a 30% default rate… 30%! Most well-run lenders consider a 2% default rate exorbitant. Such companies tarnish the space where serious companies are doing the real work to integrate payments, expense management, and invoice payment to create the web 3.0 vision for Spend Management.

What is the main value proposition for the spending employee when using the Zact platform? How do you align the spending employee with the Finance and Accounting team?

Employees should be spending their time creating value for the company. Instead, they spend valuable time and energy manually reporting and justifying expenditures. Why? Because today’s systems exist to catch fraudsters, while forthright and honest employees waste their time and energy. Zact automates the reporting to save employees time and energy while preventing fraud and out-of-policy spend. Integrating spend policy and approval workflows into the card ensures that only those expenditures that are permitted within policy or budget are even permitted in the first place. As a result, the employee is provided with the tools and systems to ensure easy adherence to Finance and Accounting requirements. Furthermore, Zact’s automation not only covers the employee, but also the accounting teams by providing a complete accounting integration (debits and credits) directly into the accounting system. This automation not only saves accounting personnel time, but also aligns employee spending to corporate policy.