NMI’s Payment Playbook Podcast – Episode 18: Vijay Sondhi, CEO of NMI
Picture a world where all transactions are so seamless, they feel non-existent. Well, that's the future of payments we're exploring today with the insightful NMI CEO, Vijay Sondhi. Promising an enlightening discussion, we dive into the realm of Anytime, Anywhere Payments. An idea that's all about eliminating the friction from payments and creating experiences that are so smooth, they feel like they never happened. We delve into the evolution of smartphone payments, looking at how these handy devices are becoming the ultimate tools for transactions. Tune in as Vijay shares how different sectors such as ISOs, ISVs, Payfacs, and banks should approach this concept for a frictionless future.
Interestingly, the influence of Gen Z on the future of payments was also discussed. Gen Z, the digital natives armed with smartphones and short attention spans, are leading the charge towards a future of frictionless payments. They demand speed, convenience, and security, which are becoming the benchmarks for payment experiences. Vijay also pointed out that the COVID-19 pandemic has accelerated this trend, leading to a paradigm shift with card-not-present transactions becoming the new norm.
For those involved in the payments industry, this episode offers an insightful exploration into the future. It serves as a reminder to always strive to deliver the best payment experience - the one that never happened.
Greg Myers: Hi everyone, and welcome to our final episode of our anytime, anywhere payments series in collaboration with NMI. We’ve covered a lot of ground so far in this series, including episodes on text-to-pay, digital wallets, unattended retail, omnichannel commerce, QR code payments and more. My special guest on this episode is NMI CEO, Vijay Sondhi. So, Vijay, welcome to the show.
Vijay Sondhi: Thanks for having me, Greg.
Greg Myers: Absolutely, so tell our audience a little bit about yourself, maybe a little personal and professional background information.
Vijay Sondhi: I grew up in Vancouver, Canada, and I was one of those kids that learned how to program in high school. There was a computer lab and I ended up getting kicked out of the lab when the janitor wanted to lock up the computer science room. I ended up going to university and studying computer science, became a software engineer for about three years and then, through joining a startup, became a product manager, eventually made it to being CFO a few times and eventually CEO in the consumer payments part of the fintech industry and then getting to NMI. Well, I spent five years at the Visa Global Headquarters in San Francisco before becoming the CEO here five years ago.
Greg Myers: Okay, great. Well, tell us about NMI. What does NMI do?
Vijay Sondhi: So, NMI is, first and foremost, an enabler. We provide payments infrastructure through the payments industry and we enable our partners, who are a variety of walks of life, independent software vendors, ISVs, ISOs, banks, fintech innovators and folks that want to take payments in any modality. What I mean by that is whether it’s dipping, tapping, swiping at a point of sale, online and at purchase, you name it. We want to make sure that our partners can take payments where the consumer wants to pay, and our value proposition is that we offer choice, flexibility and modularity, and we do it at scale. So, an example of choice is 200 processors, 30 EMV devices. We do tap to mobile, we cover sign-up, to merchant management, to gateway processing, and we are a small company, only about 500 people, but I like to say we punch way above our weight class. We process over $200 billion of payment volume through our pipes, which amounts to about 2 billion transactions or about 400,000 merchants.
Greg Myers: So, let’s dive into the topic at hand, which, of course, is anytime anywhere, payment. So, let’s start at the 50,000-foot level. When you hear that theme or that term anytime anywhere payments what do you think of?
Vijay Sondhi: I think the key here is to meet the consumer where and when they want to make a payment and, Greg, if you had asked me that question a few years ago, I would have said anytime anywhere payments is about removing friction for the payment experience. That was the sort of the fashion or the goal of the industry a few years ago. Today, I would put it more simply – the best payment experience is the one that never happened. That’s what happens when you order, get in and get out of an Uber. There’s no authentication, there’s no checkout flow. It just disappears into the background, and that’s what we want to bring to the entire economy.
Greg Myers: As I think about these things, one of the common denominators is really the smartphone. So, can you speak to the evolution of being able to pay with your phone?
Vijay Sondhi: I think, just to ground ourselves. I think it’s great that we call these things phones. When my daughter was younger, she played with my iPhone, and I couldn’t find the phone icon on the phone and she said I moved your icons around and I deleted the phone app. And I said what do you mean, the phone app? And she said well, that’s just a stupid app. No one uses it. So, I just got rid of it and I kind of laughed and I thought to myself for the next generation, a phone is actually an internet connected device that is always on and it has security and authentication and that makes it the ideal vehicle to make and receive payments.
Greg Myers: When we think back, did it really start with just like a website on the phone and you could put your credentials in, and now we’ve evolved to the tap on phone kind of technology? I mean, is that where you’ve seen the evolution?
Vijay Sondhi: I think there’s kind of two ways to answer that question. I think the first one is if we go back to the beginning of the internet. It’s incredible. It’s 20 years ago, 23 years ago, whatever, dot com boom and bust. We had people buying things online on a website with a checkout flow, and that was the advent of the gateway. NMI was actually founded around 2001, when those shopping carts were a new thing. Then we moved to this idea of making purchases in app on a phone, and now we are actually in the world of software-led payments and actually automated payments that happen in the background. So, I think it’s the first way to slice that.
I think the second way is if we go back to the physical credit card and the card reader. Those are effectively two pieces of hardware. A physical credit card has an EMV chip on it. Today that’s actually a CPU with memory. It gets electricity by pulling it from the reader, and the card reader is basically a mini kind of computer that can take a cryptogram. So, there’s all this like incredibly complex technology and there’s data storage on a phone with a secure enclave and the ability to take payment credentials and to encrypt this and send it over the network. Guess what all of that stuff is on the phone and we don’t need any of that hardware. So that’s kind of a little bit of where it came from and where it’s headed to.
Greg Myers: I thought it was interesting in my conversation with Jenny Cheng, who’s the VP and GM of Google Wallets, as she was talking about payments is such an important part of the wallet, but really it’s everything else that everyone else wants. You want your ID, whether it’s a state issued ID or whatever. You want your tickets to your concert on there. Your phone is really replacing keys to your car, keys to your hotel room. That phone is becoming such a central part of everyone’s lives. It was just interesting to hear her talk about that.
Vijay Sondhi: I love that perspective. Recently I was on a business trip from San Francisco to Salt Lake City. It was about a year and a bit ago. The travel muscle, memory muscle hadn’t come back from the COVID lockdown days. I got out of my Uber at San Francisco airport and I went oh crap, I left my wallet at home. So, I thought what do I do now? Do I miss my flight? Go home and get my wallet. And I said wait a minute, I use Clear, which has biometric authentication to get through security and TSA. I can get to the airline because I got my boarding pass with a QR code on the phone. And so, I proceeded to go through my trip. I got to the airport, Hertz wouldn’t let me take the car out because I needed a driver’s license. So I hopped into another Uber, checked into the Hilton with a key card on my phone and did an entire business trip without having my wallet. So, what I learned was, if the house is burning and I get to choose one thing keys, wallet or phone you know which one I’m going to take.
Greg Myers: It’s central to all these sub themes that we’ve had during this series. I mean, when you think about, obviously, text-to-pay and wallets and unattended retail and basically omnichannel commerce, I mean that’s a little more because you’ve got online and in-store but you obviously have to have the phone and then QR code payment, so all of them have that phone as a central part of it. But when you think about this concept of anytime, anywhere payments, and then you think of the segments of the industry that NMI serves so the ISVs, the ISOs, payfacs, banks so what would your advice be to them, or what do you think about from their perspective about this topic?
Vijay Sondhi: I think there’s some commonality across those groups and then there’s some differentiation, and so let me try to unpack it. The commonality part all of these groups ISVs, ISOs, payfacs, and banks – they are all trying to solve the same problem which is make it easy to take a payment and to make a payment while keeping everyone safe and secure. And so, I think we need to just ground ourselves that the whole point of this complex credentialing system in the way we make payments today is about safety, security and reliability. People can’t steal my money, fraudulent consumers can’t take my goods and an unknown consumer to an unknown merchant can make a payment and be guaranteed settlement. So that’s what we’re all trying to do, and they’re just trying to do it from different angles.
Now, if we break down those four groups, let’s go through the ISVs – independent software vendors or software-led payments. They’re mainly solving for a UI/UX in their vertical. Maybe it’s a yoga studio software company or medical or dental. They’re trying to make it really easy for the doctors or dental office to take a payment, but they’re really solving for everything else inside the dental and doctor’s office from pulling up the records, scheduling, reminders, and so it’s a second order goal for an ISV to have payments at the forefront. The first order goal is the best software experience for their vertical. Now the ISOs are really trying to enable their merchants to get up and running as instantly as possible and often they’re fighting the battle of the ISVs taking over their market. So, their goal has always been to make money off of payments. So, I would say their first order goal is really around monetizing the payment flow and their secondary goal is the UI/UX, or the user experience. That’s changing. The ISVs and the ISOs are kind of colliding and becoming more like each other. And then, just briefly, the last two payfacs, are enablers, so they themselves are focused on monetization, but they’re trying to help the software companies get up and running quicker and maybe share some of the spoils and banks, frankly, boy, they’re just trying to capture their value and keep in the game because they’re regulated and they’re concerned about disintermediation from software platforms.
Greg Myers: That’s interesting. I’m glad you kind of went through each one and sort of described it, so I appreciate that. So, the next topic is what’s really driving this trend? I mean, I recently saw some stats that said and this is no surprise, I think, to anyone 98% of Gen Z have a smartphone and 91% of those have had one since they were younger than 16 years old. So, they are really driving like you talked about earlier just being able to do everything on your phone. Is that sort of what you’re seeing that consumers are really driving this and merchants and these groups that we just talked about are kind of catching up, or do you feel like merchants are helping to drive this trend as well?
Vijay Sondhi: I think it’s a pretty clear one-way answer. The Gen Zers are the ones that are leading the trend and effectively we older consumers than Gen Zs and merchants we are following their lead and I think that when we look at what their lead is, well, their phone is actually an extension of their body, practically. When I look at my kids, who are approaching 20 and 18, not really kids, young adults but they can’t imagine their life without the phone. That’s one thing and the other one is they had the attention span of a goldfish and unfortunately that’s because they’ve grown up with the Instagrams and the TikToks and the Snapchats. So, if they can’t take a payment in an instance in a nanosecond, the merchant has lost the sale. So, speed and convenience are critical to that group and security and reliability are taken as a given, whereas older consumers maybe, like myself, we were just amazed that it was secure and safe and it worked quickly. But these folks, they just want to get on and move on or they’re going to another vendor.
Greg Myers: How do you think COVID affected that? I mean, when you think about the changes that happened there, right? I mean, I think most people say it was an accelerator to all these things. Do you agree with that?
Vijay Sondhi: I do. I think there were two elements to it. I think the first accelerator was many of us remember we had the order online pick up at the store and nobody wanted to touch anything. So, a couple of things happened. One was contactless went through the roof because you know you didn’t touch anything and if she doesn’t require a physical tap even though people think it does there’s a few inches away. And then other forms of eliminating the touch, like the QR code or even the e-commerce payment online and then just show an authentication to pick up the food or the goods. That was one accelerant.
The other accelerant was that people just got more comfortable with new forms of paying with the phone and not with the point of sale, and I think the example of that one was things like the Starbucks app and the equivalents. They went through the roof and, of course, we’re all now really used to sitting down at a restaurant scanning a QR code, making the order, paying for the meal, and the food just appears. So that’s now changed behavior. We used to think of the card present world as being the center of the solar system. It flipped it now card-not-present is the center of the solar system, that meaning something not at a physical terminal, and then the card present is kind of the planet circling. So biggest accelerant, completely paradigm shifted.
Greg Myers: Well, when you think about this concept of anytime, anywhere payments, where do you think it’s headed in the next, say, three to five years?
Vijay Sondhi: I think that the biggest step change is going to be the elimination of what I called superfluous hardware. Talking to superfluous hardware. So, if you think about I’m a consumer. I’ve got a super computer in my pocket, always on internet connected device. It has my biometric credentials. It’s a much better form of authentication than a password or a pin. It’s either my face ID or my fingerprint and the merchant has all kinds of computing infrastructure, including they probably have a phone in their pocket.
Why am I taking out a metaphorical version? And if you see the card art in the Apple wallet or the Google wallet, pretending like it’s a piece of plastic and touching it to one of these EMV readers, it’s absolutely ridiculous. We should just have the cloud. Talking to the cloud. So, I think what you’re going to see is we’re going to solve the problem of keeping credentials safer and more secure using the phone. That’s going to be cost savings because we’re going to get rid of hardware, better UI/UX and I think the only spoiler alert here is I think it might take longer than three to five years. These cards and these readers are just going to be around for a lot longer than we think because ubiquitous acceptance and the network effect of these interoperable messages Visa, Mastercard, Amex, you name it. It’s going to take a little longer than three to five years, but the downward trend, it’s there.
Greg Myers: So, when we think about this anytime, anywhere payments trend, how are the products and services that NMI offers? How are you positioning those?
Vijay Sondhi: I love that question because with disruption, we often think of winners or losers, because the so-called Luddites that don’t get on the innovation train are going to lose out. And that really is our business to make sure that our partners don’t lose out. We take care of offering all the building blocks to enable the best payment experience for this new world as it emerges. So, we have everything from tokenized payment credentials; we support the connectivity of 200 processors; tap the phone technology that is turning a phone not only into a wallet but into a payment acceptance device, and we offer the ability to get to your instant onboarding type of merchant issuance by being able to choose your processor and acquiring bank. All of this happens by calling our APIs and SDKs, and so what we are in the business of is making sure that you can monetize payments, provide a superior experience, but, most importantly, we want to future-proof the payment stack you get from us, because our job is to constantly be at the innovation edge, that, as these new technologies emerge, you are up to date and you are also able to rely on the older technology as a fallback. So really, we love the disruption. Bring it on, and then we go to our partners and say you probably should focus on your merchant servicing and let us take care of the technology payment enablement infrastructure.
Greg Myers: Obviously, we’ve covered a lot of ground about NMI, a little about your background and a lot about the anytime anywhere payments. Is there anything else that you’d like to add before we wrap up the show?
Vijay Sondhi: If there’s one thing that you take away from the discussion today. We talked about a lot of things. I would say. If there’s one thing, it is a call to action to all your listeners. Strive to deliver the best payment experience, which is the one that never happened, whether you do that for yourself, with NMI’s help, with any other provider. We all want to help empower the consumer economy and the merchants that help the economy thrive. I think that’s what drives the passion that I personally have, and we have at NMI and the industry participants on your podcast, Greg, is we want to make the money flow, because money is what makes the world go round, and so just meet the consumer where they are, and everything else will follow.
Greg Myers: I think that’s some great advice. Vijay, thank you so much for being on the show today. I know your time is very valuable, so again, thank you so much for being on the show today,
Vijay Sondhi: Thanks for having me, Greg
02:34 – About Vijay Sondhi
03:21 – About NMI
04:30 – Anytime Anywhere Payments Explained
05:19 – Evolution of the Smartphone
09:28 – How ISVs, ISOs, Payfacs and Bank Think About Payments
11:53 – Consumer Driven Smartphone Payments
15:00 – The Future of Anytime Anywhere Payments
16:23 – NMI and Anytime Anywhere Payments
17:51 – The One Thing