Breaking Down the Payment Barriers in Ecommerce | #251 Ralph Dangelmaier

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Claus Lauter: Hello and welcome to another episode of the e commerce coffee break podcast that we want to dive into payment systems and break down how payment barriers in e commerce might hinder you from making conversions, making more money, increase your profitability. Now that's a huge topic and I have with me Ralph Dangelmaier, CEO & Board Member at BlueSnap.com. He's a sought after public speaker, broadcast commentator and thought leader, having published numerous articles. He serves on the board of BlueSnap, ETA, Stonehild College, and formerly on the board of directors of Mineral Tree, which has. Had a successful exit to global payments in 2020 with over 30 years of experience at FinTech and payments.

He's at the storefront of e commerce innovation, using his knowledge to raise capital and grow public and private companies. So Ralph has a huge background when it comes to payment systems. And that's what we need to talk about today. So let's welcome him to the show. Hi, Ralph. How are you today?

Ralph Dangelmaier: I'm doing great.

Class. Thanks for having me.

Claus Lauter: Ralph, payments in e commerce, that's a huge topic. And a lot of merchants have problems to understand how it actually works. There are so many parties involved in it. There's a technical part, there's a banking part, there's a payment processing part, give me an idea of what are the biggest challenges and misunderstandings merchants have when it comes to payments.

Ralph Dangelmaier: is understanding all the bits and bytes that you need to do to successfully accept a payment, whether it's online or using an invoice or maybe a marketplace, and then the different ways payments get processed properly or appropriately or efficiently in each one of the markets.

So we help merchants sell in 198 different countries. We're local in 47. We work with 35 banks around the world to localize transactions, which increases your authorization rates, lowers your costs. And you can do that in lots of currencies and payment types then you've got to create your value added services in each one of these.

So trying to unpack that understand that Becomes extremely difficult, which is why i'm embracing sort of a newer term in the market of payment facilitation or psps Marketplace is called payment orchestration. So I think a key thing is how do you understand payment orchestration? What's right for you?

Claus Lauter: I think having a request of behind that, is a good, example or a good picture on how it actually works.

Now, most merchants specifically when they're on go on Shopify, they start their business there, they start what they get basically in front of Shopify. Now there is a lot of, pitfalls in there when it comes to how cost of transaction, how many different payment options they can offer. Maybe we can break it a little bit down in these different parts and give me an understanding of what's actually involved to do a payment.

Ralph Dangelmaier: Shopify, great platform, really popular for selling things online. We're going to call that online selling more so than invoicing. Shopify has done a lot of great connectivity to multiple payment providers around the world. And they really help you through how to set up your store and your storefront.

I think where people need more assistance with Shopify is what is the best way to set up your payments? How do I set up payments in Germany or Argentina or Canada or Australia that's most effective. We found clients coming to us with Shopify that really needed. More guidance on the most effective way to do that.

Shopify has, as you know, built in solution, which I think works really well, particularly domestically, right? So in the country, but I don't know if it's optimized as well outside. Of the countries using all the payment types using all the currencies turning on and off the different compliance and fraud tools that you need in these countries, which is why they connect to a lot of people in the payment Cisco system.

But again, the merchant has to figure it out more on their own than not. And I think that is really the challenge for the merchant is how to optimize it.

Claus Lauter: When we talk about global, obviously there's different payment methods that people prefer in certain countries than in others. And as you said, it's on the side of the merchants to figure that out, which might be very, very difficult to do.

So how we help you with that?

Ralph Dangelmaier: Yeah. So what we tend to do with the merchant is we look at where are they? Where are they based? Where are they currently based? Maybe they're based in three or four countries where their shoppers based and then try to match their location with their shoppers as much as possible.

So keep the transaction in the country and where possible present the local payment type because, as people that like the Dutch, they like to use ideal for certain online transactions. The Germans like to use real time payments for certain transactions and they sort of go against. the card brands as a general rule for certain transactions.

So you need to serve them the checkout page that matches their currency, their payment method, and to keep the cost down and keep your conversions high. So as you brought up in the very beginning of your podcast, how do you make more money and reduce your costs? You localize the transaction. A lot of those transactions that are localized, A, are safer, so there's less risk, and B, you're going to get a higher authorization rate, and C, A lot of these countries have imposed regulations on the card networks that they're capped on their fees.

So by nature, those fees are going to be cheaper. When you cross a border with the transaction, Germany, United States, Argentina, you indefinitely hit a couple more things. There's more risk in the transaction. The transaction doesn't go through as well. The second thing is the transact cost is higher because it's not really a regulator regulating German and American payments, the other thing is it may not settle in the currency that your shoppers are familiar with. So they get a little confused on what they're really paying for sending back out of the transaction. So these are just some of the tips that we tend to do when we spend time with the client and say like, this is really what we think is the best practice for setting up and accepting payments in this geography where your shoppers are located.

Claus Lauter: Now there's different levels to it. Obviously you have the technical level where you connect your store to whatever payment gateway is there to whatever bank is behind that. Then you have the legal part of it. That's the authorization and to become a client and all these things take some time to set it up and obviously you need to have the right knowledge.

Give me an example. Like for instance, you are based in the United States. You want to sell in, I don't know, somewhere in Europe. What's the process to get it up and running?

Ralph Dangelmaier: We have one integration. To a series of APIs, which is the same across all the countries. What's different is the, what we call the application, the merchant application.

The merchant has to apply for a call to bank account using multiple applications. Um, we can one holding company with multiple legal entities to set up these internal bank accounts that we set up on behalf of the clients because we're moving the money. And then once that happens, they will have access in their APIs.

To appropriately drop the correct payment type currency or value added services on the checkout page that applies to the shopper. We'll use at Germany as example here. That's the most effective way for them to check out. So there's a two step process, right? There's a technical integration, which is very consistent, and then there's the.

physical application. It's all online. It's all done digitally, but there's still a presence that you have to go through where there's a verification of the legal entity and the bank accounts and all those things that we do. And then we pay out to wherever that bank account may happen to be in those countries.

Claus Lauter: Let's dive a little bit deeper into payment authorization. If you do cross border payments, a lot of alarm bells go off. Fraud protection, credit cards are not being accepted. People getting a notice that some. strange country, foreign country wants to take money from your credit card. I have experienced that in my own shop.

How do you prevent this?

Ralph Dangelmaier: So what we always try to do is we always try to keep that transaction local. Because if you think about it, if the Sharper's in Argentina or Germany, United States, They're using a local bank, a card issued debit or credit card issued in that local bank.

If that local bank sees a card locally, it tends to give it a higher auth rate. So we're seeing usually, well over 95 percent auth rates when transactions are domestic. When transactions are cross border, so an Argentinian card or German issue card goes to the United States, that authorization can drop anywhere from 5 percent to 30%.

And just like you said, because there's rules put in by the issuer, maybe Deutsche Bank put a rule in and said, geez, causes never bought anything from Canada, maybe you're going to Canada next week for holidays, and you wanted to buy maple syrup, and you're online buying maple syrup, and they say, you've never done this before, so we're going to decline the transaction, right?

So these are the kind of things that and cause. Higher cost issues. You gotta really dig into each one of these, with examples. And this is what we tend to do with our customers. We have tons of examples of customers who started domestically, went internationally, and then we set them up in the national choirs and the authorates went up anywhere from two to 30%, depending on what kind of payment types they were taking.

So it's, you have amazing success by putting some analytics into this.

Claus Lauter: Keyword analytics reporting, what kind of support do I get from BlueSnap to understand where are my payments coming from? Is there a recharge management in there? How does that work?

Ralph Dangelmaier: A couple of things. Number one is, we'll start with the reports.

We have 100 reports and you can create all your own reports on top of that. Within those 100 reports we're giving you some of the basic things like sales, currencies, payouts, all those things everybody does. But we've added a couple of neat things in the reports and they feel like we can tell you the authorization by your product SKUs, by your countries, by your card issuers.

We can tell you by dollar amount so you can realize, geez, maybe when I charge. 99 versus 100. I have a 95 percent success rate. When I turned a hundred, I might've been 80 percent success rate. So you can get down to that level of detail that helps you effectively price your product as well. The other thing we're doing is we're showing you locally.

The success of your cards versus cross border. So that's why we have these statistics because that reporting is critical. And the last thing I think we do that's a little different as we give you fraud statistics, how many times we think fraudulent cards were coming in. And I know as we were talking earlier, you said you used to live in South Africa.

Well, I'm just going to pick on South Africa just for a second. But maybe people from South Africa, they're going through a big change down there. So all of a sudden, some of the people might be committing a little more fraud. And so you're seeing card testing going on. So now you know that there's a little more fraud ticked up in South Africa.

So what you need to do is be more careful in what you're going to sell and how you're going to ship products to South Africa. Maybe you're going to change your behavior of how you ship or buy or sell goods online. But all of this data is sitting at your tips. You can analyze it and create the optimal situation for your business.

Claus Lauter: I've never heard about such a granular reporting on payments. Usually the reporting that you get from your payment gateway provider is very little. And only if something goes wrong, then you get a message from them. So a complete different approach there. I like that. Where are the biggest cost savings using BlueSnap compared to the traditional way to do a payment setup?

Ralph Dangelmaier: Well, look at BlueSnap. It's done a great job of providing a global and domestic platform. We pledged that if we can't figure it away. To save you money when you convert from your bank, or maybe you convert from what I'm going to call more of a startup platform like Stripe or PayPal, then you're not going to convert to us.

So we have to provide you that value added service of the ROI, because you're just not going to convert because you feel like it, you have to show your conversions are going to go up, your costs are going to go down. I'm not gonna say every single time, but most of the time we work with a client, there's a little ROI spreadsheet that shows you're saving 10, 000 a month, 50, 000 a month, 100, 000 a month, as you're making this migration, because that's the only reason that you should reinvest and generally our customers are people that are already processing payments today somewhere, generally work with startups.

So that way we can really put a marker down on how to help them with an ROI.

Claus Lauter: Okay. Brings it to the questions. You just mentioned the startups. Who's your perfect customer? Are there specific verticals, industries, or niches that you work

Ralph Dangelmaier: more with? We don't have like a perfect vertical. We're generalists, but we do have, we work really well with people that immediately can be global.

SAS companies, retail companies charities, education, manufacturing, those guys tend to fall into BlueSnap. , so that's sort of a good verticals for us because they're selling globally, they're doing online, and they're doing, invoicing. Those are good verticals.

We tend to like businesses that already have millions of dollars in processing today because we can benchmark where it goes. And then it goes up to some of the biggest clients in the world. We do business with people like Schneider Electric, in Germany and France, big electric company.

We do business with Ford Motor Car. We do business with people like Edible Arrangements, big French conglomerate called Arbonne. So we have a lot of pretty big clients as well. But I do think the underserved piece of the market would be more in the middle. It's the person that's got their foot on the ground and taking the next level of growth.

At SMB going to mid market, the big market going to large cap. Domestically very good, but internationally it's great.

Claus Lauter: How does the onboarding process look like? How much time do I need to invest? What are the steps there?

Ralph Dangelmaier: There's two ways to connect to BlueSnap, right? One is you're on a platform as a plugin.

So that's simple configuration, or you may want to connect to us directly through an API. So that's a two or three week effort. once we get your merchant application, we have an automatic onboarding tool that boards you immediately to the bank that best suits your business type, your dollar ticket and the countries you're selling.

So it's sort of like a space engine.

Claus Lauter: Okay. So as a merchant, are there any kind of homework that I need to do before I ever approach you?

Ralph Dangelmaier: Well, it's funny you say that we have an incredible website, it's got 800 pages on it. It might seem overwhelming, but it's really full of content on how to best serve these markets.

So we always like it when people would actually explore the website. read about things that they want to do, understand some of it because it just helps go quicker. If you've never looked at a website, if you're trying to sell outside of your domestic country and you've never looked at the website, you're not going to know what your options are in Germany or in Netherlands or England or Canada or Australia.

So we find that we got to stop and educate people. So I find that that's something to do a little homework ahead of time is always a great idea. So our best customers. Spend, maybe half of the research already on the website. And then maybe the other half of their time evaluating, working with us directly.

Claus Lauter: Yeah, it definitely helps to have a basic understanding on what you're looking for. I think that speeds up the process before we come to the end of the coffee break today. Is there anything that you want to share with the listeners that we haven't covered yet?

Ralph Dangelmaier: No, but I forgot my cup of coffee class now that I think about that.

Darn. , no, I think you did a really good job articulating all the little things to grow your business domestically and internationally. And I think the only other point that we should make is, that some people use two systems, one for online selling and one for invoicing. And our whole story is you shouldn't need two payment providers.

You should be able to really get to one. And this is what payment orchestration is This is really the beginning of a journey. For almost all payment providers to become a payment orchestration provider to their merchants.

Claus Lauter: Yeah, definitely a very awesome solution you have there. I have set up in my professional past, a couple of payment systems for businesses that I was running.

It was always a pain in the neck. That's so much , more straightforward what you have to offer. Before we leave, tell me a little bit about the pricing. How does that work?

Ralph Dangelmaier: Well, our pricing is really based on your volume. So we've interchanged plus model and it's just tiered off what your volume is.

A price for 100 million price for 50 million price for 10 million per month. And then the same works for the alternate payment method. So it's really competitive generally in that time. We're competing with the banks because some of the providers that help smaller businesses don't really have that price.

It's kind of like 1 price suits all. Okay. And that doesn't really work anymore for the growing dynamic businesses.

Claus Lauter: Okay. Where can people find out more about you guys?

Ralph Dangelmaier: BlueSnap. com. Great website. Lots of contents, tons of white papers, great case studies, lots of great stories about our fantastic customer base.

And, we look forward to you visiting there.

Claus Lauter: Cool. I will put the link in the show notes and you just one click away. Well, thanks so much for the time today. I think there was a lot of good golden nuggets in there and a lot of insights on how to optimize the payments for your business. And I hope a lot of people will check it out.

Thanks so much.

Ralph Dangelmaier: Thank you. Thanks for having me.