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Adyen Presents: Embedded Finance, your go-to resource for understanding how SaaS platforms can unlock the full potential of embedded finance. Hosted by Hemmo Bosscher, each episode dives into real-world success stories, industry insights, and practical guidance from experts in a variety of industries, analysts, thought-leaders, and fintech specialists.
Designed for SaaS founders, CEOs, CFOs, product heads, and tech decision-makers, the show demystifies the complexities of embedded finance, covering everything from integrated payments to business banking, capital, and card issuance.
Welcome to Adyen Presents Embedded Finance, real talk for SaaS leaders on embedding payments and financial products. Software platforms today are no longer just about software. Winning platforms embed payments and financial products like business loans, accounts, and cards to become full service operating systems for customers, building loyalty and new revenue streams. Now the opportunity is clear, and we've heard much about it. But tactics are largely undefined still.
Speaker 1:And that's why we're launching this podcast to hear from the platforms and experts shaping the strategies. This episode explores the role of compliance in embedded Finance. I'm joined by Ash Forsyth, GM at Modmed, the leading cloud based software for US healthcare practices, enhancing operations and patient care with AI driven solutions. And Mariette Smart, Adyen's Chief Risk and Compliance Officer. First up, we have Mariette.
Speaker 1:Welcome back to Embedded Finance. Today, we have a very special guest, an Atyen board member by the name of Mariette Swartte. Mariette, can you please introduce yourself and explain to us a bit about your journey towards ATJAN and what you do here today?
Speaker 2:Yeah, love to. Thanks for having me. My name is Mariette. I'm ATJAN's Chief Risk and Compliance Officer. I'm generally responsible for all compliance and regulatory matters.
Speaker 2:I joined the company almost ten years ago, a long time. But the last couple of years, I've been mainly focused on building out our regulatory licensing framework because within Arjen, we made the very conscious decision to build everything on our own regulatory licenses. That's probably very different from many, many other fintechs has taken in the past. And that's the reason why we now have banking licenses in Europe, UK and US, amongst other. But that requires quite some efforts.
Speaker 2:And that's where I've been focusing on the last couple of years.
Speaker 1:Absolutely understandable. And if I can ask a question, we got our first back license in 2017. Is that correct? Yeah,
Speaker 2:exactly. We started the year because I think that's where we first built out the company. We then moved to The US and two years ago we got to UK.
Speaker 1:Awesome. And how long was that sort of run up to getting that license in 2017? Do you talk a bit about that process? Was it an arduous one or quick and easy?
Speaker 2:Yeah, we already had a payments license. Getting a banking license, I think, is a different league, is a different ballgame. So I think it took us two years to get there to our first banking license, though. Getting then subsequently also a license in US and UK was much easier. But getting that first banking license in Europe was quite of a lift because you need to make substantial investments in your organization, especially in your operational framework.
Speaker 2:So yeah, it took us a while.
Speaker 1:And the work doesn't stop, right? Once you have it, there's some work in maintenance there too.
Speaker 2:For sure. I think you operate at the highest regulatory framework against the highest professional standards. That is something that we like. We always try to get better. We always want to be at the highest professional level.
Speaker 2:But of course, we are being audited against those standards on a regular basis. I think last year we always had one regulator coming in every single month. So yeah, a lot of time and effort goes into that.
Speaker 1:Every month. And then I assume someone from your teams has to sort of take them by their hand and shove them everything.
Speaker 2:Explain the control framework that we have and the continuous improvements that we make. So it is a continuous effort. That's also what we like.
Speaker 1:Heavy investment. Okay. Exactly. Switching gears slightly to the landscape for SaaS platforms. Obviously, lot of them have popped up recently.
Speaker 1:There's new legislation constantly coming up. PSD3 is one example. There are companies collapsing. Silicon Valley Bank, for example, a few years ago. The environment shifting a lot.
Speaker 1:How do you see that? Are you seeing more regulatory scrutiny or less or what's Yeah, the
Speaker 2:there's a lot of changes there. I think when we look at our early entry markets, their regulations are relatively slow in introducing new laws and regulations. But if you look at our newer markets, which are oftentimes a little less mature from a financial regulatory perspective, they introduce new laws and regulations at a higher frequency. And whilst the objective of those laws and regulations should be the same, there are quite some nuances to it. But also in a more established countries like in Europe, in UK and US, we're facing a lot of challenges because we see that oftentimes regulators take a very different interpretation of existing laws and regulations.
Speaker 2:And that often stems from the fact that they don't truly understand what fintechs like us, but also SaaS platforms or PayFacs are doing. What we generally see is that all those new laws and regulations are really focused at improving the KYC and AML framework. And of course, the traditional banks have always been subject to those AML regulations. Regulates are now broadening their scope to other actors within the payments chain, including fintechs, including PayFacs, including platforms.
Speaker 1:All of this to protect the individual or?
Speaker 2:Exactly. Well, to really encourage those actors also to take their responsibility in fighting financial crime, right? And also being able to flag fraud and money laundering, all On of
Speaker 1:the whole, it's becoming more difficult.
Speaker 2:For sure. What we see is that it really changes the way all of us operate because it brings us here to complexity that especially our customers' platforms really have difficulties in dealing with.
Speaker 1:Well, lucky that we exist then. On the spectrum of embedding payments versus embedding financial products, is that an order of magnitude more complex if you look at it through a regulatory lens? Or is it more like step one, step two? If you start with payments and then later want to go into bank accounts
Speaker 2:versus Payment services in itself are highly regulated. So when you have as a company, you have the ambition as a platform, you have the ambition to embed payments in your broader service offering. You have basically two options: either you get your own financial regulatory license or you work together with a financial institution who you can leverage that license. Yeah. Payment services in itself are highly regulated.
Speaker 2:They are relatively low risk because you know the seller, you know the buyer, and their is always a contextualized transaction. It's the purchase of a good or a service. And you can really check, I mean, is the $50 for a pair of shoes, a pair
Speaker 1:of sneakers? They're reasonable.
Speaker 2:Yeah. Reasonable. Or is $500 for a pair of shoes reasonable? So that in itself is relatively low risk. If as a platform you want to start offering banking products, financial products like cross border payouts, bank accounts, issuing cards, they are of a much higher risk from a fraud and money laundering perspective than payments.
Speaker 2:And it means that if you want to offer them, you need to collect much more data to be able to get to a more holistic, enhanced risk profile of your users, of your customers. Still, I think it can be incredibly beneficial to go that way, right? I mean, you can help your users with their broader financial needs and it creates a certain stickiness. But it's incredibly difficult, I think, for a platform to be able to offer that on their own license. It really requires you to be licensed.
Speaker 1:Especially when you know what you just said about the regulatory environment and its evolution, we can assume it will get more complex.
Speaker 2:Exactly. Exactly.
Speaker 1:And then if we take one more lens, the geographical one, two things: what would you say are the major nuances between, for example, The US and then Europe and The UK? If you're a platform founder, if you have international ambitions, how would you think about that and try to tackle that?
Speaker 2:Again, whilst I think the rules of regulation, both in The UK and The US, the objectives of these rules of regulation should be very much the same, there are nuances to it. I mean, there is no harmonization. It's still very fragmented. That brings certain challenges with especially from an operational perspective, to your point. I think three things are most important.
Speaker 2:I think biggest and also, I think the most obvious challenge that platforms are facing is that they are needs they need to onboard users quickly and at scale. For that, they need to build an infrastructure that allows them to identify and verify those data points of those users. And not only do they need to build an infrastructure for that purpose, they also need to have a really good understanding of all of those local KYC requirements, because the requirements in The UK may be very different for what you see in The US. And next to that, oftentimes those documents are submitted in local language. When you go out of English UK speaking countries, then you're very much relying on local experts.
Speaker 2:So that's the first challenge. Once the users are on your platform, you need to constantly monitor their acts, both from a content as well as a behaviour perspective. As I mentioned, regulators are looking to other actors within the payment chain to also take their responsibility in fighting financial crime. And they really expect platforms to be able to filter out illegal behavior like fraud and money laundering. So you should be able to build your tools for that.
Speaker 2:And I think the third challenge they are facing is that in a very multisided set up that they operate, where they service oftentimes both the seller and a buyer, you see the concept of multisided frauds where both the seller and the buyer can be a fraudulent actor. And that creates new type of frauds that oftentimes are far more complex that we see with enterprises. And especially when you are on a platform with multiple users, a lot of users, then this can quickly become a true risk from a financial and reputational perspective. We see that all of those challenges are typically not front of mind with these platforms. And it's not your core, right?
Speaker 2:If you start building your company, you think of completely different things than these kind of challenges. Yet at the same time, I think they're so important.
Speaker 1:Yes, have a So
Speaker 2:focus big in these glomerulases. So I think it should have the focus because if you do this really well, then it can truly be a differentiator.
Speaker 1:A massive differentiator. Because I assume that if you mess up blunts, you're benched essentially. It's going to be really difficult for you to catch Exactly. Up in the we are staring in the face of PSD3, Which is imminent. How have you seen the reaction a few years ago to PSD2?
Speaker 1:And what do think are some lessons from there for businesses as they work towards PSD3
Speaker 2:There being was quite a shift because all of the sudden platforms became regulated right here in Europe. And we both basically saw two options. It would get your own regulatory licenses and become, for instance, by becoming a PayFac or you would leverage the license of another financial institution. Or actually, saw three. There was also a group that just ignored the whole thing, did nothing and hoped that you would stay on the radar.
Speaker 2:But I think that one failed miserably. So back on those two groups, especially I think our larger platform customers decided to apply for their own regulatory licenses and they did that. The decision was very much triggered by their by their desire to stay in full control and to not have dependency on one specific service provider. And whilst I can relate to that, right, I can understand it. I think they very much underestimated all that comes with becoming a regulatory institution, the regulatory burden and scrutiny that comes with it, because you need to make significant investment in your organization, especially within your operational teams.
Speaker 2:And if it's not your core, then it's a really heavy load to carry. So I think many have come back from that. And what we see now is that most of our platform customers ultimately make the decision to work together with a financial institution that has a regulatory license because it will still allow you to monetize payments and make them part of your broader offering. But you have another institution that will carry the load. Right?
Speaker 2:Exactly. The regulatory, the operational overhead is not yours to carry. So that is what the direction that we see most platforms, especially when you have the ambition to ultimately also start offering financial products or banking products, because that will require a banking license. That, I think, is incredibly difficult.
Speaker 1:Yeah, significantly more complex. So you anticipate with BSD3 that more folks want Sure. To partner it. As At the end, of course, we've invested heavily in obtaining and then maintaining our own banking licenses. And we believe this is on strategy because we believe fundamentally this is the best way to serve our customers.
Speaker 1:But if you had to argue the other position, if you had to play devil's advocate and say, no, that's not the right way. What we should do is piggyback off of someone else's license, you know. Sure, we don't have control and we lose a few basis points with the deal here and there because there's cost, but we have none of the overhead and none of the worries. Well, pitch it to me.
Speaker 2:I can can fully understand because when we made the decision a couple of years ago to apply for our own licenses, it was really seen as an old decision. I think we were even mocked for it. I think a lot really mocked
Speaker 1:by who?
Speaker 2:Yeah, I know. I think a lot of people thought, Okay, this is going to really burden them with so much rules and regulations, so much bureaucracy. This is going to make you slow. This is going to really
Speaker 1:change the company.
Speaker 2:Exactly. Exactly. I think. And of course, there is a risk. It is you operate at the highest professional regime.
Speaker 2:So there is a heavy load. I think there are a lot of rules and regulations you need to comply with. You have regulators coming in every single month to audit you whether you still comply with those rules or regulations. And of course, you need to translate all of those rules or regulations also to your customers and take them along in that framework. Nevertheless, I truly still believe that it
Speaker 3:is. Okay.
Speaker 1:Couldn't make you couldn't argue the other side. All right. On the regulators, I wonder, do they find it like interesting and exciting working with a business like ours? Because I assume in their portfolio they have like eight very old traditional banks and then one or two, maybe, I don't know, companies like UPS. How do they like it?
Speaker 2:It's a good question. I think we find it important that we take them along in our journey and how we make them take the suits off not much more in a way that we've brought innovation to payments. And quite similarly, we now try to bring innovation to financial products in the banking space. And the products that we offer are oftentimes quite different from what they've seen with traditional banks. We find it important that we take them along in that journey and that we do not catch them by surprise.
Speaker 1:Right.
Speaker 2:And that we have regular interactions with them. That is incredibly beneficial because we get to tell them what we are building and what innovations we will bring to that industry. And at the same time, we get to learn from them what's coming. I mean, because this space is changing fast. Again, to our earlier point, rules and regulations are introduced at a high frequency all over the world.
Speaker 2:Not necessarily are the objectives always the same. It's important for us that we get to learn what's coming and that we can translate them back to our customers and help them to prepare for that.
Speaker 1:That's very cute. You touched a bit on embedded finance already. If you look at the space for the next five to ten years, is there anything particularly stands out to you as especially exciting or something you look forward to changing sort of in the world around you?
Speaker 2:Within Artem, we always had a thing for payments, right? And I'm just really happy that others are now also getting appreciated of the value that payments can bring. But I also believe that we've not yet fully gotten to the full potential of it, right? Because people understand that it can improve your checkout flow, that it can increase authorization rates, but there's so much more value that it can bring insights for the platform, but also for their users in the best selling products. Where do you see the most refunds coming on helping your users with the cash flow forecasting?
Speaker 2:There's so much more that we can do. I think it's on us with these kind of podcasts to really educate people the true value of it, especially when we tie it to financial products, banking products. There's so much that we can do.
Speaker 1:Thank you so much, Mariette. Today, I think we learned that compliance is not a box ticking exercise. It is something to consider as a fundamental part of your business. It can be a tremendous differentiator when done right. Perhaps to conclude, would you like to say a few words on the sort of unique position I think we find ourselves in where we are both a regulated bank, like all the traditional ones, but we're also a fast moving fintech.
Speaker 1:And in that, we are probably the only company in the world that exhibits that combination.
Speaker 2:Yeah, I think we made that decision consciously a couple of years ago and it required huge investments to get there. But I'm really happy with where we are today as uniquely positioned as we are, because if you look at what our customers need, it is a true asset. It allows them to go to markets globally with us as their infrastructure end to end, not only for their payments, but for their broader financial needs. And for us, it means that we can act completely independent. Many other fintechs still require the help of the traditional banks.
Speaker 2:We are truly independent in the course that we set. That makes me really happy and looking forward to the future.
Speaker 1:Create our own path. Exactly. Thank you, Mariette.
Speaker 2:Thank you, Hemmel. With the big picture in
Speaker 1:mind, let's shift to the platform perspective. Ash, welcome to the podcast. We have with us today Ash from Modernizing Medicine. If you'd please like to take a moment, Ash, to introduce yourself and Modernizing Medicine and what it is that you guys do.
Speaker 3:Yeah. It's great to be here, Javier. Modmed is a EHR company, an electronic health care records company based out of The US. We primarily serve several thousand private practice specialty medicine clients, meaning we work primarily in specialty medicine. We are largely started in dermatology, but we expanded across about 10 different other specialties.
Speaker 3:And then we work primarily with private practices, meaning your local doctor down the street and then also some large enterprise clients, but typically don't work with big hospital systems. And ModMed's really about providing an end to end solution for all the practice health care business. So both the clinical side, which is where we started, so tracking all of your healthcare records, as well as now in the business side of medicine. So what we call practice management generally is tracking everything from the claims and the bills being submitted out to insurance, all the way back through to trying to collect payments from patients, which is obviously where we partnered with Adient several years ago.
Speaker 1:So I'm a small town GP. I use MoltMed software, and sort of all my needs are taken care of. Is that the way to think about it?
Speaker 3:Exactly. So we kind of launched the end to end solution. We started in dermatology, but now go all the way from derm right down to gastroenterology and surgery centers. And then we really provide a single solution for all the practices across everything from the actual software they use, the doctors use day to day, all the way through to new AI tools that help automate processes, and then obviously being a payment facilitator. And more recently, we launched a procurement platform to help practices build their costs into a more streamlined process.
Speaker 1:That's really cool. And when you sell the software, like, how do you monetize?
Speaker 3:So we have a few different approaches. So we work typically as what's called a per provider per month, so per doctor, and then a per month monthly fee for our technology software, and then payment processing with ModMed Pay sits on top of that as the, you know, traditional percentage rate and a per transaction rate for the practice.
Speaker 1:Okay. So there's a SaaS fee and then the transaction based. And is there any way you play with sort of incentivizing them to take ModMetPay? Or how do you think about that? Or is it just such a no brainer for them that they all want it?
Speaker 3:I think because we are very heavily regulated and the US government has lots of aspects to it, it is both an easy and a hard sales process for payments. Because one, legally, we can't just say, hey, you have to use our payment software. So we definitely have a sales engagement to go into those clients and teach them about it. But what we're really, really focusing on is value. So we've thought about not just, hey, let's just add a terminal payment and then add maybe a bill payment page, which is sort of the typical offering.
Speaker 3:We've really thought about it of how do we build value for the practice to reduce their accounts receivable over time and then improve their speed to pay. Both of those things are sort of the key metrics that we say, if ModMed Pay is being successful for the practice, both of those things will be improving. So really focusing in on giving them tools that let the practices streamline their collections, meet patients where they are. So text to pay, sending out a text message so the patient gets their bill sort of straight away. They can see the detail in an e statement and then make a payment using a card on file basically from day one.
Speaker 3:So kinda really creating that streamlined value. So when we go out and sell to a practice, it's really about conveying, hey, there is a strong value proposition here today to streamline your operations, save time with your staff, and get to a more efficient financial position.
Speaker 1:Yeah. And I would assume that once you had sort of a critical mass of folks using this, that it was easier to sell. Did you see that sort of snowball effect?
Speaker 3:Yeah, definitely. I mean, I think we launched ModMed Pay literally at the peak of when COVID started. So we went into beta in November 2019, and we started a beta for like three local practices in South Florida. And then I think we literally launched on March 1. So three weeks later, everything sort of changed, and health care changed as well.
Speaker 3:So we had all of these radical changes in our core software that we now have to spin up telemedicine. We had to introduce, like, wait lists for people sitting out in the car park because they weren't allowed into doctor surgery until they actually had to see the doctor for their procedure. So we were in this really challenging place of pivoting our core SaaS offering as well as trying to launch payments. But I think we initially saw really strong traction that we weren't expecting from some of our larger customers. So we thought, oh, we'll go out as kind of the smaller customer base, one location, one doctor sort of thing.
Speaker 3:And then we saw this sort of massive interest from our larger enterprise clients from day one, and I think that created a little bit of that snowball effect where people then started to see the technology in place. We kept adding new features to it, and it definitely kind of moved forward pretty productively after that. And we've just continued sort of a methodical growth factor where most of our net new clients coming on board have ModMed Pay as the base offering, and then continuing to outreach and engage with the existing practices, particularly as they add new products, as they change their businesses, then and as we add new features that are really valuable for them.
Speaker 1:And then of your current wallet, is that something you can share? Like what percentage is on the embedded payments offering currently?
Speaker 3:It's the majority of clients. So we've definitely reached that sort of critical mass where the vast majority of our clients are all using ModMed Pay. And I think particularly this year coming, we'll see the last sort of handful of clients that are particularly the smaller existing clients that are more difficult to reach out to on a one on one basis come on board as they add new products and features that we're launching.
Speaker 1:That's great. And let's say you once you reach saturation with payments, is there any sort of next horizon you're looking at what else you could monetize and what other problems you could solve for your customers?
Speaker 3:I I think it definitely continues to evolve. So we have a lot of space to continue to expand, to add new features and functionality, which will continue to grow volume. Got a couple of exciting products that are coming down the path with our procurement platform that I mentioned, where we're looking to build in payments into that function and streamline the AP side of the practice, but then also start to think about some of the other embedded financial sort of solutions out there, whether that's tying in sort of card issuing, tying in bank accounts, and sort of really and lending, I think, is the other big one, sort of understanding where they fit and when ModMed has sort of a right to play with those customer bases.
Speaker 1:So really exploratory at this stage, you're not quite sure yet of the fit.
Speaker 3:Yeah. AL twenty twenty five is really looking at expanding some functionality into some new areas that we're getting a lot of feedback from our clients on. I think a lot of our focus definitely derives from where our clients say, hey, you've got sort of feature x is missing, or I've just come from your competitor and they did this thing. It would be really nice if you guys could do that. And then obviously, the changing kind of payments world where surcharging and these other things are sort of cropping up in that space and starting to become more of a dominant narrative in
Speaker 1:the industry. Yeah, that's really clear. Hey, you talked earlier about the industry being quite heavily regulated. Can you share a bit about your challenges in going to market? Because, I mean, we have all these examples of successful software platforms, for example, in food and beverage, but we can all appreciate that a doctor's office is very unlike a restaurant.
Speaker 1:So what should we think about there?
Speaker 3:Yeah. I mean, healthcare is interesting for sure. I'm Australian originally, so I've been in The US for fifteen years, and I still struggle to understand as a user of The US healthcare system how it works. So joining Modbed and trying to figure out the back end was also really interesting. Within our SaaS platform, we have a huge kind of regulatory overhead.
Speaker 3:So we have a dedicated compliance team who's focused on our annual certifications that we have to do with the US government. We have our providers and our practices have all of these different metrics. When they're working with Medicare, which is one of the largest the largest payer, they have all of these requirements around MIPS and different areas around care quality. And all of these things kind of cross over each other, but are all independent because like the US government, it's big and complex. So we have a dedicated team that's focused largely on the health care compliance aspects and work embedded with our product teams and our development teams to kind of streamline those things.
Speaker 3:So we just launched a product called AI Scribe at the end of last year. And it's really about automating the conversation so that the doctor can have the conversation with the patient. AI Scribe sits on the iPad, listens, transcribes it, and then takes all of that, puts it into a structured note in our system, and then the provider can simply go through and agree with the diagnosis, the treatment plans, prescriptions. It automates that entire flow so that our hope is that doctors can get back to having a conversation. But that sort of tool sounds great.
Speaker 3:However, you've got so many different compliance aspects coming out from a healthcare. We've got new AI rules that we have to comply with, and I think we'll be one of the first to regulate under the new set of guidelines. But then you've also just got the traditional areas of care where we as ModMed say, from a compliance perspective, we don't wanna replace the doctor in this flow. Instead, we wanna supplement them and let them focus on their job and kind of get the technology off into the background.
Speaker 1:Arguably, they saved many hours not having to input everything in the computer after the meeting, right, and they could help more people.
Speaker 3:Yeah. Mean, I was totally surprised when I joined MonMed that doctors literally have people that follow them around when they go into the practice, and like literally will use the technology for them because they're trying to have a one on one conversation and provide great care, and they don't want the technology in the way. So this is sort of our plan to try to bring that to the forefront for practices.
Speaker 1:Do you then view your being compliant, to put it that way, as part of your moat towards competitors? Is there a high barrier to entry here that doesn't exist in other SaaS verticals? How do you see that?
Speaker 3:Yes and no. I mean, we have a US healthcare industry and EHRs is highly competitive. You've got sort of very large players like Epic and then all the way down to smaller providers that sort of operate in more domain specific areas. There's definitely a moat there for people coming in, but at the same time, it's such a broad space that you have lots of new competitors coming in and targeting specific areas. So Modbed tries to provide an all in one fully integrated solution that streamlines the practice, but then you've got hundreds of vendors coming in, or hundreds of competitors coming in and sort of targeting specific components of things that we do.
Speaker 3:And some of them integrate with us because we have to allow integration into that core software. So it's really a complex scenario if you think about competition.
Speaker 1:Understood. You talked earlier about the doctor that was reluctant to use the technology themselves, and instead had the person following them around. If we view them at least sort of part of your target audience, how do you ensure that you basically have very innovative software, and you have a customer base that is perhaps much more used to more to like an archaic way of working, that's much more face to face based, how do you make sure that the two match? It's interesting because I
Speaker 3:think when we sign up and net new clients, a lot of it is not just displacing a competitor to ModVet, but it's displacing paper. You'd be surprised at the number of practices that still literally use a paper file and use that as their technology. So I think a lot of it is kind of education with the doctors and showing them how technology can really kind of drive their business forward.
Speaker 1:Is that just sitting next to them? How do I see that? That you visit the office and you sort of show them the software?
Speaker 3:Yeah, there's a good mix there, but there's a lot of outbound sales. I mean, I think our average sales cycle is six months for a practice, and for larger practices, it's years. So there's a there's a long kind of detailed process. And then even when we get to implementation, like, this is not just sort of like, hey, go onto a website, click in, and I've got a really simple interface to start sending invoices. This is the practice's entire business.
Speaker 3:So you've got massive set of clinical components, massive set of regulatory requirements coming out of there, and then you've got the entire business. So we'll typically have trainers go on-site, we'll spend a week with the practice making sure they're comfortable with the software, understanding how it really kind of works, how it benefits them, And then they'll typically drop into a hybrid care process where we're then touching base with them on a regular basis after their go lives because it's so overwhelming for a practice when they've signed up, they think this is all great, and then you get to sort of the rubber hits the road and now they've got to go forward and implement. And our process is sort of how do we keep them moving forward, progressing, understanding new technology.
Speaker 1:And is that a solved game for you now after all these years?
Speaker 3:I don't think it'll ever be a solved game. I think we do a lot better than what we did last year and the year before, and I think it's really just about incremental improvement.
Speaker 1:And what about in the realm of KYC in healthcare? I'm assuming it's more stringent than in other verticals. How should we see that?
Speaker 3:Yeah. KYC is really interesting because you've got sort of on our SaaS software side and the actual regulation, you've got doctors prescribing out narcotics, prescription medications, so there's DEA registrations that take place there. We have regulatory requirements to verify the identity and validity of registration of each provider or each doctor that we board onto the platform. So you've got sort of a big existing framework for KYC that the practices are familiar with. But then when we jump across the payments, it's like a whole new structure that they're not used to talking to ModMed or their existing HR company about payments because they're working with a non integrated, standalone solution they probably set up through their local bank ten years ago, and it hasn't changed in ten years.
Speaker 3:So now all of a sudden, they're kind of coming in and saying, Modmed's saying, hey, we need your company information, which is pretty straightforward from a KYB perspective, but now we need a driver's license from your owner or from the CEO. And that's a little bit different all of a sudden. Doctors are used to handing over their driver's license for these verifications, but the CFO or the CEO is in a little bit of a different place. So there's a lot of, I think, handholding education that we go through in that sales process because we are so high touched. We have, I think, the ability to kind of really explain here's the process, here's what's involved, and here's why it's important or why we need to do this step.
Speaker 1:Yeah, that's incredibly familiar for me out of blatant self interest. Is that something you found Adyen to be helpful with, being on this journey with you?
Speaker 3:Yeah, think it's been definitely a very interesting journey over the years, because I think when we launched way back in 2019, we were one of the first partners with Adyen for platforms in The US. And Adyen was sort of fledging in this space, so we were figuring out a lot of the stuffs a lot of the things around KYC at the same time Adyen was figuring it out. And that really kind of let us, I think, work closely with Adyen to come up with a really strong think we benefited from that because we got sort of a really strong base foundation back in 2019 because Adyen was working through the same sort of structure and the same setup that we were kinda able to join hands a little bit there. But, yeah, I think it's definitely been an experience. We've continued to kind of evolve it as both requirements change, as we understand how our users use the software, tweak how we communicate with practices.
Speaker 3:We originally used very legal terminology, and all of a sudden, like, people get confused by that because they're not used to it. So it's kind of that iterative process of really understanding how your practices understand the components and translating that kind of complex legal and regulatory requirement down into something they can understand without a big challenge in trying to step up or understand KYC and AML and banking secrecy acts, etcetera.
Speaker 1:Yeah. All the privacy regulations, just a bit of a pivot. So when you think about regulation like HIPAA, how does that factor into your compliance strategy?
Speaker 3:Yeah. HIPAA is complex. And it's complex because our practices are ultimately the person on the end of the line that has sort of the fundamental requirement for HIPAA. We have HIPAA requirements, but ultimately, because our practices are the one doing business with the patient, they're the ones that are now entrusting us to help them be compliant and drive those processes. So we've got to build our software in a way that helps them be compliant, as well as ensure that we've got compliant processes internally so that our teams, when we're interacting with PHI or personal health information, that we're doing so in a way that respects both the HIPAA rules, the practices, commitments that they make to their patients, and then finally ensures best practices.
Speaker 3:Because regulations, I think, set the minimum standard, and then you always want to be aiming for what is the actual best practice here? What is the right practice we should be doing and taking into account for the patient? And do you
Speaker 1:find then that your best practice is often a little bit divergent from the obvious approach from the regulations? I mean,
Speaker 3:think my compliance team would tell me to say, No, we are perfectly aligned with HIPAA compliance. But yes, I think we aim to step above and make sure that we've got a structure in place that puts us into a safe ground where we're never gonna be risking a compliance aspect. We have to make sure that we've got the right channels, and mistakes are gonna be made across everyone. So you can't ever have a perfect system, whether it's in the practice or whether it's in ModMed or whether it's in a partner. It's really about ensuring you've got the process to be compliant, but then also respond appropriately when something does go astray at the practice and beyond that, teach them and help them understand what that compliance and privacy requirements are.
Speaker 1:That's clear. But for you, definitely customer experience first by the sound of it.
Speaker 3:Yeah. And I think that's the interesting kind of mix where compliance is this thing that you have to do and it sits in the background, but it should be kind of overlaying, like, what's the customer expectation? What's the customer experience? How do we help them be compliant? Or how do we maintain our compliance, but not do that to the detriment of the experience?
Speaker 3:Right. Exactly.
Speaker 1:I mean, could be a strength too, right, Don Wright? Yeah. Absolutely. Is there ever been an innovation or an idea you guys had that you wanted to roll out that you couldn't because of regulatory constraints?
Speaker 3:I don't think there's a strict no, but it suddenly gets more complex. Everything we do, we have to think about how is this going to impact on the regulatory requirements from the SaaS software? What's the impact on the payments front? Even just simple things like, hey, we wanna have a new money flow for how we process payments with our practices, and then how we fund them on a daily, weekly, monthly basis, whatever that looks like. Even just sort of simple things like how do we make sure we don't accidentally become a money transmitter because we've decided to implement a slightly different workflow?
Speaker 3:So all those things kind of build on, you've got to create that customer experience, but then ensure you and the team have enough domain knowledge and you've got the right people involved in that kind of product design to really come in and say, actually, you know what? You don't want that money going to your bank account. We want to fund directly from Adi into our practices so that we don't go over go near that money transmitter world. There are so many different variations like that that you're really gonna kinda have that domain knowledge built into the product development process from day one. Yeah.
Speaker 1:That's really good. Is there any regulation legislation coming up that frightens you or inspires you particularly that you think, oh, this will be really interesting for our industry?
Speaker 3:I'm not sure inspiration and regulation go together, but I think it's more for us, it's the rapid amount of change. And particularly in The US, like, we're a US company. We're only focused in The US, but you've got so much kind of evolution with regulatory change from CFPB. You've got card networks sitting out there constantly making changes to their rules. We've got FinCEN coming in and making determinations around beneficial owners.
Speaker 3:So there's nothing that I'm really excited about or really afraid of. It's really more about staying on top of the kind of the constant level of change that's there.
Speaker 1:And how do you do that? Do you have like a public affairs type department that's constantly on the lookout for these things or folks in touch with the card networks?
Speaker 3:I mean, for us in the payment space specifically, it's really I have a very small team of people who are focused on what we call risk management and kind of underwriting and onboarding. And then for us, it's about engaging the tools in the industry that are out there. So leveraging training that's happening from a lot of the industry groups. We became members of a number of the different industry groups. We work with outside counsel to kinda get regular briefs as to what's happening in the world.
Speaker 3:And then our team just has to stay on top of every time there's a card brand update, we'll go through and do a little review as to is there anything major that's happening here. Fortunately for us, Adyen helps us with a lot of that compliance out of the box because you guys are ones that integrate directly to Visa or Mastercard, but we still have an ultimate responsibility as well to ensure we and our submerchants are compliant. So we still wanna do some of that due diligence. It's really kind of a good mix of everything between engaging with industry groups, staying on top of notifications coming out of the different government agencies, and then working with partners like Adyen who were also on top and doing the same thing.
Speaker 1:Absolutely. And that's something that you couldn't possibly have done alone this quickly. It's fair to say.
Speaker 3:Absolutely. I mean, Adyen gives us such a leg up to try to shortcut a lot of those processes. I think when we launched as a PayFac, there wasn't really sort of these other hybrid models of becoming a platform on Adyen, to speak. So we took on a lot of that responsibility as part of the PayFac as well and went through that registration process. But now who's a do over, there's a little bit of, hey, we could just work with Adyen directly.
Speaker 3:Adyen could take care of a lot of this for us and kind of create that easy flow, the easy button where you just sort of see, hey, Adyen is going guide us through these steps. But I think because we've invested the kind of time and effort initially, it's now a benefit to us and differentiated to some degree, even though it's kind of the differentiation is behind the scenes, because we now can have a level of control, we can have a level of understanding that our competitors don't necessarily have. And then that helps us really kind of drive home the better experience for our customers.
Speaker 1:That's great to hear. And I mean, in turn, you helped us improve our product too, by five, six years ago, already working with us in the stages of infancy. On geographical ambitions, I'm not sure how much you'd like to share, but say once The US is conquered, do you have any ambitions to go across the border or Transatlantic or I realize these are vastly different markets, but people go to the doctor everywhere. So how do you see that?
Speaker 3:Yeah, for us, we're really focused on The US. The US is such a big market across the healthcare industry. You've got so much different complexity between whether it's The UK who have a single payer solution up there, Australia, similar situation, but then you've got private health insurance as well. So for us we're really focused on The US.
Speaker 1:And do you think there might be a software platform one day that conquers the world, or is this just by nature because of the local regulation and legislation a completely bespoke thing that will need to happen in Germany, in The UK, in Australia, etc?
Speaker 3:I think so. I mean, I think at the end of the day, you'll have a lot of country specifics because each country is so radically different. The EU probably has a variation, and I don't know the EU market very well, but there's probably a variation where you can do 80% solution that covers most of the countries. But yeah, I think you're always gonna end up with Valley country specific healthcare solutions.
Speaker 1:Interesting. Thank you very much. Ash, you operate in a very high trust industry, and you also use a payment method called text to pay, in which the recipient gets a link by SMS or text with a little sort of pay by link device that outwardly obviously very much looks like a scam. How do you sort of marry that juxtaposition?
Speaker 3:It's such an interesting point, Hammer, because we have to balance the level of convenience, but then we also have to realize that our practices aren't just working with 20 who have grown up in sort of a digital native world. You've got everything from the 80 year old down the street all the way down to the 18 year old who's visiting doctors for the first time. So for us, it's sort of a couple of fold. One, we want to build the digital native technology first solutions because that's where kind of the future goes. That's where we help prices get more automation and more payment facilitation and streamline that inbound payment processing.
Speaker 3:But at the same time, we also need to be cognizant that we have the right tools in place for the 80 year old who still wants to receive a paper statement in the mail. So there's definitely a fine grained balance. And for us, it's not just about building those tools, it's creating the infrastructure for our practices to tailor their experience. A lot of our practices will focus in on specific demographics. So they might be targeting a younger audience who's gonna be more digitally native, or they might operate in an area that's gonna be more focused to someone who's on the the paper route.
Speaker 3:But for us, we have to kind of build our tools. And then I think I mentioned education is such a big part of it. We have to educate both our practices and then help the practices educate the patient around these different components. So when a practice kind of initially goes live with our engagement tools and text to pay, we help them with marketing materials so they can communicate to their practice, their patients, I should say. Not a scam.
Speaker 3:Exactly, not a scam. I learned this the other day, one of our more practices was teaching me, they actually send out a message to all of their new patients through our platform saying, Hi, welcome to my dermatology practice. We're going to communicate to you from this phone number with e statements, with text to pay messages, with appointment reminders. You're able to text us on this number and we'll get back and communicate with you backwards and forwards. So there's just this kind of really base level education that needs to happen that I think initially I never would have considered as part of our product development.
Speaker 3:It's like, oh yeah, we can just send a text message. Personally, as a technology person, I know that that's not a scam or I can pick a scam, but you've really got to build for the 80% of the community.
Speaker 1:Yeah. So the patient onboarding, you just do it thoroughly and then it works.
Speaker 3:Yeah. We do practice onboarding, but then you've got to help the practice onboard the patients.
Speaker 1:And as on product prioritization, assuming that sort of the digitally native generations are catered to, right, they understand the dashboard and where everything goes, how do you ensure that that experience of sort of the older small town GP, the one that will be harder to convert, How do you ensure that their experience is part of product development?
Speaker 3:I think it's listening and engaging with our customer base. So we do a lot of design workshops at Modmed. So a lot of our focus is working one on one with our practices and showing them mock ups, UIs as we're building big new functionality, working with those providers and practices to understand, does this sort of meet your workflow? We wanna understand the feedback of where their problems are, and then build that into our solution, but then validate that solution. Like, we don't wanna go out and build a spend a large amount of money building a product and then find that it's a miss in the market.
Speaker 3:So it's an iterative approach of gathering feedback, reviewing the feedback, kind of reviewing the mocks, then starting to look through a beta program, gathering feedback from a beta program, and then building that feedback into a GA solution.
Speaker 1:And do you then create like a little sort of a focus group or a small pool of small town GPs with whom you check and validate?
Speaker 3:Yeah. So we have focus groups. We have design labs or design workshops all the time. That's a constant running thing. We have at our user conference every year, we do face to face sessions with all of our users.
Speaker 3:And the key there is to make sure that you're getting the right demographic mix across that platform. You don't just want your big enterprise customers who drive big revenue numbers. You also want the single location, single rural doctor, the guy that's just come from paper records. You want them engaged in that entire process for you.
Speaker 1:Yeah. Really clear. And just intuitively for me, a high trust sector means that word-of-mouth advertising is probably more important than it is in others. Is that fair to say that once you get to sort of a critical mass in a certain area, everyone will sort of talk to each other and be like, you should go with MobMed? Does that happen?
Speaker 3:Yeah. There's definitely a snowball effect there where when we launch into particularly a new specialty is sort of where that happens. You have a large process to kind of get a base level. You find some anchor tenants, find some champions in that specialty, and then they become customer references for us. And then they tell their peers because particularly with so much private equity money flowing to health care, there is so much acquisitions and moving around by doctors.
Speaker 3:So a small single location doctor who no longer wants to deal with all their billing and claims and insurance processing might get acquired by a larger organization that can take some of that in house and let the doctor focus on the medicine side of things. But now that doctor is merged into a large organization, or they might go and merge two or three smaller practices in a local area and become slightly bigger to get some economies of scale. So now you get so much sort of word-of-mouth between the doctors that it's a critical mass for sure.
Speaker 1:And then you sort of leave it alone from a marketing perspective and go elsewhere.
Speaker 3:Yeah. I mean, we have still a lot of high touch sales because it is such a massive part of their business, but definitely word-of-mouth is a big part of it.
Speaker 1:Thank you, Ash. Lastly, if I were in the business of starting my own software platform, what would be your advice to me? What are some things to look out for since you've built a very successful business?
Speaker 3:Yeah. I mean, I think particularly from a payments perspective, it's really understanding what are the workflows that are gonna make a difference. I think when we talk about kind of payments, you've got sort of two aspects there. Is it a differentiator? Is it something that's gonna build value for your clients, or is it just something that kind of you need to do to be competitive?
Speaker 3:And I think if you think you just need to do it to be competitive, I'd really take a look at what the SaaS platform's end customer is doing and try to figure it out. Because payments is so integral to pretty much every SaaS platform that goes out there, and I think if you just approach it from a super generic, oh, you know, our other competitors out there are doing payments, so we need to do it, you're not really gonna add value to your customers. So it's really about thinking through what are the workflows your end customer is doing? How can you add value? How can you streamline their operations and build payments into that workflow?
Speaker 3:So for us, it's like, hey, how do we add automatic payments into the process flow so the practice doesn't have to send out a paper statement? They don't have to chase the patient for payments. They can use a card on file and collect that automatically. If we were just adding payments, then you'd probably just add a terminal and maybe a bill payment page, and that would be it. But it's really thinking through how do we make our end customer build their value and improve their workflows?
Speaker 1:The workflows that make a difference.
Speaker 3:Yeah. At the end the day, that's what the SaaS platform is doing.
Speaker 1:Thank you very much, Ash. You were excellent.
Speaker 3:Thanks, everyone.
Speaker 1:Thank you to our guests for sharing their insights. There's lots to digest from today's conversations, but if you take away one thing, let it be this. Overlooking compliance creates risk and friction. You don't have to navigate this space alone. The right partner minimizes fraud, streamlines onboarding, and builds trust for scale.
Speaker 1:Thank you for listening.