NMI’s Payment Playbook Podcast – Episode 17: Sarah Hoisington, VP of Strategy & Marketing at Matera

Greg Myers: Hi, Sarah, and welcome to this episode of the Leaders in Payments Podcast where we’re going be talking about anytime, anywhere payments and of course, QR code payments is a big part of that. So, thank you so, so much for being here today and welcome to the show.

Sarah Hoisington: Hi, Greg, thanks so much for having me on.

Greg Myers: Absolutely. So, tell our audience a little bit about yourself maybe a little personal and professional background information.

Sarah Hoisington: Sure. So, starting with the personal I live in Bellevue, Washington, it’s about a 15 minute drive east of Seattle, been married over 27 years to my husband, John, we have two boys or I should say young adults, Zach and AJ, both software engineers one in LA, the other is in New York. We’re all entertained by our eight-year-old French bulldog named Bossman. Professionally, I’ve specialized in financial services and payments for over 20 years. I always find myself working on the new things. So back in the 90s, I was with BCG, helping clients with things like online banking. When all that was possible at that time were online portals so consumers could see account balances or maybe transfer money. In the early mid-2000s. I was with HSBC and their cards business, pushing them into mobile payments. That was back in the day when we put a credit card on a Nokia flip phone and enabled consumers to pay at point of sale using NFC technology. And back then we could only use it at a few places to pay like McDonald’s or Duane Reade, which is a pharmacy in New York, among a few other places. So, when former colleague recruited me to work with Matera, a company that’s arguably a global leader in instant payments and related technology. I couldn’t say no.

Greg Myers: Great, great. Well, first I have to comment on the dog’s name that is an incredible maybe the best dog name I’ve ever heard.

Sarah Hoisington: Well, I have to tell you how it goes so my husband and I have different last names and his last name is Rossman. So, we joke that it was named after him. So, when we go to the vet and our dog gets called back they say Bossman Rossman. So anyway, yes, it works.

Greg Myers: That’s great. Well tell us a little more about Matera. What does Matera do?

Sarah Hoisington: So, Matera is a tech company. It’s been around over 30 years actually. And headquartered in Brazil. We have 1000 employees, over 250 clients, and not just any clients, but two of the top three global banks, three of the top 10 U.S. banks and a third of all banks in Brazil use our solutions. So, we really grew up as a core banking provider, so we’re kind of like a jack Henry and FIS or a Fiserv in Brazil. When the Central Bank of Brazil announced they were developing an instant payment solution called Pix. Our co-founder and CEO Carlos Netto became really involved in that effort because getting Pix launched was a real public private effort led by the central bank so when it launched in November of 2020, Matera had a Pix solution ready for the market. And so, as your listeners probably all know, Pix instant payments has been crazy successful. It was adopted faster than any other instant payment scheme in the world. There are now in just three years after launch more Pix instant payment transactions than credit and debit combined. In Brazil. I think in September there were 3.9 billion Pix instant payment transactions and as for Matera, we are the largest third-party provider of Pix instant payment solutions. Our software alone powers over 350 million instant payments a month. That’s like 20 times the volume of RTP transactions in the U.S. by The Clearing House and about 20% of Matera’s Pix transactions are initiated by QR codes. And we are now bringing our tech to the U.S. to help drive adoption of instant payments here as well.

Greg Myers: Okay, okay, well, what makes Matera unique in the marketplace?

Sarah Hoisington: Yes, I’d have to say a lot of people tell us it’s our modern tech and ability to scale that makes us unique. So, in Brazil, we’ve replaced a lot of Pix providers, because their solution couldn’t scale to handle the volumes demanded by the market. And from a U.S. perspective, we also have unique insight on instant payments. So, Brazil is three to five years or more ahead of the U.S. in terms of instant payment adoption. So, we’ve seen what works, what doesn’t, the use case that makes sense to invest in, the innovation happening on top of the instant payment rails that’s opening up new revenue opportunities for the ecosystem. So, a lot of companies who play especially in the credit card space come to Matera for advice on how to stay relevant in the age of instant payments.

Greg Myers: Yeah, I think we could do a whole episode just on Pix and kind of the history and the evolution and the success. But you mentioned QR code payments, which is really what we’re going to dive deep into now. So, if you can, would you give us a little history about QR codes? And maybe, you know how they’ve been associated with payments over the years?

Sarah Hoisington: Yeah, so the QR code itself has been around for over 25 years. It’s really only in the last 10 years that they’ve been used for payments. And if you think about even how they came about, it was a Japanese company back in the 90s called DENSO Wave that wanted to improve barcodes. So, they came up with the QR code really for tracking production, it was just about speed for them. So, this two dimensional design of a QR code could be read 10 times faster than a barcode. And it really when it comes to payments, it wasn’t until about 10 years ago or so that AliPay and WeChat Pay in China were the first to use QR codes as a contactless payment method.

Greg Myers: Okay, great. So, similar to several of the topics that we’ve covered in this series, COVID was an accelerator for the use of a lot of things, right, and especially QR codes. So, can you speak to that point a little bit?

Sarah Hoisington: Yeah, for sure. So, I mean, one of the technological things that happened was when Apple in 2017, introduced iOS 12, that enabled QR code scanning from a camera app. So having that available, and then fast forward to 2020 when no one wanted to touch anything, because of COVID, the use of QR codes took off. So, I saw a recent stat that said 50% of restaurant menus converted to QR codes in the U.S. when COVID happened. So practically overnight, we were all scanning QR codes to get product information, redeem coupons, fill out surveys, join a Wi Fi network, you name it. So, it really did accelerate COVID, really did accelerate the adoption of using QR codes and consumers in the U.S. got used to what that QR code could give them and how to scan it. So, it kind of gave us that familiarity that we didn’t have prior to COVID

Greg Myers: Yeah, and it’s interesting, because I see them everywhere now. Right? I mean, even TV commercials Hold on, you’ve got five seconds to get your phone out. And scan that QR code on it, but it’s working. And they’re doing it. And in fact, I’m sitting in this podcast studio, and there’s a big screen, and it says if you need help connecting, here’s a barcode, I mean, here’s a QR code. So, the use cases of them, you know, are have proliferated in the last few years.

Sarah Hoisington: Yeah, we were watching Thursday night football last night on Amazon Prime and half of the commercials had a QR code in the bottom left hand of the screen that you could scan for a coupon, scan to sign up for something, scan for more product information. So, it’s, it’s become just integral to our day to day lives?

Greg Myers: Well, I want to make sure as we’re talking about QR codes and payments and how they’ve come together, there was a time where you pointed your camera at the QR code, it opened up a web form, you put your credentials in there, where that’s a little different than kind of what I’ll call our modern day or newer, you use of QR codes for payments. So, can you kind of unpack the differences and kind of, you know, the older way versus the newer way, or maybe the older way versus the better way? Can you unpack all that for us?

Sarah Hoisington: Sure, of course. So, I mean, a lot of those QR code use cases that did explode during COVID for what we call kind of the simple URL redirect. So, by that, I mean, I have a mobile phone, I see a QR code, I open my camera app, I scan the QR code, and it redirects me to a landing page. So, I can see that product information, get that coupon, fill out that survey or whatever. So, the QR code was kind of used as a tool to connect people from offline activities and move them online. And some QR code payment applications work as a URL direct also so like if you take Toast right the technology used for ordering and for payments at restaurants. So, a restaurant that uses Toast typically, customers get their bill at the end of the meal, printed at the bottom is a QR code the consumer gets out their mobile phone opens their camera app scans the QR code and they get redirected to a landing page where they enter their credit card information. So, name, card number, everything else. I mean we’ve all done the drill. The challenge with this approach is the potential for fraud, right? So, what if a consumer gets redirected to a nefarious website, pays a criminal or provides their payment information to a fraudster? So, there’s nothing to prevent that from happening. So, a lot of times when we talk to people about QR codes, they go, oh, there’s just so much fraud that happens with them. But there’s actually a much more secure approach. There is technology that’s a lot more secure for generating and facilitating QR code payments. So, it is an API based technology that can generate a unique QR code for a specific transaction. And from a consumer’s perspective, that QR code looks just like the one that does a URL redirect, it has the familiar square, filled with a series of those boxes. But from a back-office perspective, that QR codes represented as a string of alphanumeric characters. So, each position in the string provides information about the payment transaction, including things like the amount, the currency, the biller information and that kind of QR code that’s based on or generated by API based technology. That QR code isn’t scanned from a camera app. It’s scanned from an authenticated mobile app, or a mobile app that a user had to log into, like a bank or a retailer mobile app. So, when a consumer scans the QR code from within an authenticated mobile app, an API call is made to the solution that generated the QR code. So, the QR code can be validated. Has it been spoofed? Has it been tampered with? Has it already been paid? Once it’s been validated, an API response is sent back to the consumers mobile app with the transaction details, so they can look at it and review the transaction and authorize payment.

So, with this type of QR code payment technology, there’s no need for the consumer or merchant to disclose their payment information. It’s all handled by the technology related to that kind of a QR code that was generated. And that is the way QR code payment technology works in Brazil. It’s also available in the U.S., it is early days. But it’s this reliable, scalable mechanism or really form factor that’s helped to drive Instant Payment adoption in Brazil. And the fastest growing use case of Pix is consumers paying businesses because it’s easy to do, thanks to that QR code. And if you bring it back to the U.S., and you think about how we have two Instant Payment rails now we have RTP and we have FedNow. But we don’t have a really good mechanism for consumers to initiate those instant payments, especially at a merchant or a biller without having to share their bank account information. QR codes are a really secure way to do that.

Greg Myers: Yeah, and just to take it a step further, the difference here is also and you can correct me if I’m wrong, but you won’t have to if you’re using your I’m assuming, if you’re using your banking mobile app, you wouldn’t be paying with credit card. It would be more of an account-to-account transaction.

Sarah Hoisington: Yeah, unlikely. It’s possible to configure it that way. But it’s unlikely because most of the use cases of why you want somebody to pay by QR code is to encourage them to pay by bank, right? Because it’s a way to move away from that, especially, you know, as a biller or merchant move away from that high cost of interchange.

Greg Myers: Right. Right. Okay. Well, you mentioned Brazil, but how are other regions of the world using QR codes for payments? Is it completely different than how we’re doing it here in the U.S.?

Sarah Hoisington: Yeah, I mean, so I’d say, so we just don’t have that much. So, the way I described it happening in Brazil is pretty different than the U.S. because most of the use cases are still kind of URL redirects. We’re just early days and kind of bringing that technology, the API based QR code technology to the U.S. And if you think across the globe, I mean, it’s really China, India, Brazil, those are the countries where QR codes are commonly used for payments. I mean, if you are shopping at Amazon in Brazil, and you get to checkout, you’re actually presented with a QR code at checkout@amazon.com, which a lot of people are surprised to hear because we don’t see that here in the U.S.

But one of the things that those countries where QR codes are commonly used for payments, where it’s different is that they have the existence of a QR code standard. So in each country, anyone that generates a QR code, and it’s usually financial institutions that are going to generate them, usually, they have to adhere to some sort of established standard. And the format is slightly different country to country. They’re all though kind of EMV based. So very standards-based technology. So, like in Brazil, for example, the alphanumeric string that represents a QR code is 14 fields. The fifth field, for example, is the merchant category code, we can have four characters for that code. That’s the kind of standard that exists in those other countries. And so, what it does when you have a standard is it makes it easy to have open loop QR code transactions. And by that what I mean is, if we had one in the U.S., for example, a QR code generated by Wells Fargo can be scanned and paid by a consumer with a bank account at US Bank, for example, with a standard each financial institution has systems configured to extract the data they need from the QR code that string of alphanumeric characters to process the payment. So, the more financial institutions we can get in the U.S. to adhere to the same QR code standard or format, the more this technology can help accelerate instant payment, adoption.

Greg Myers: Okay, yeah, I find all of that very fascinating. Well, what do you think is next for QR code payments? I mean, where do you see it headed in the next, say, three to five years?

Sarah Hoisington: Yeah, well, so I mean, for sure QR codes aren’t going away. As more use cases for instant payments emerge, especially for consumers paying businesses, using a QR code to initiate these payments is really, I mean, it makes complete sense. So, it’s funny whenever I talk about these types of QR code payments, the pushback I always get is, well, what about credit cards, Americans love their credit cards, their rewards, and a lot of us do, but merchants as you know, hate interchange. And many of us when offered a big enough discount or some loyalty points, we’re happy to change our payment behavior to save some money. And as merchants and billers see the economic benefits, the efficiency of instant payments, we’re going see more and more offers to switch away from paying with credit cards to directly you know, instantly and that’s where secure QR code tech is going to play a bigger and bigger role. And the whole pay by bank movement. I mean, that’s already happening. I have a great example, even from just last night, where my husband and I were paying some bills, and one of them was to renew the vehicle tags on one of our cars and the Department of Licensing for the state of Washington wanted to charge us 3% if we paid by credit card, but we could have the luxury of paying our bill for free, if we paid out of our bank account, and the bill was over 450 bucks. So, if we didn’t want to pay the nearly $15 credit card fee. But to do pay by bank, we had to log into the Department of Licensing payment portal with our vehicle license number which neither of us had memorized, we had to input our bank account routing number, which neither of us knew by heart, so we had to look it up in our bank mobile app. And only at that point after we had typed in that information, could we hit pay?

Well, imagine if that bill came with a QR code at the bottom, we pick up our mobile phone that’s in our hand all the time. Anyway, we use face ID to get into our bank’s mobile app, we scan the QR code, we’re presented with the name of who we’re paying, the amount we’re paying. And we’re done. We just hit confirm. It is a far better user experience. And if the money can move instantly, that eliminates a ton of risk on both sides of the transaction. So, I mean, even this morning, we looked at our banks mobile app, and that transaction isn’t there. It’s not even pending. We got a receipt last night from the Department of Licensing that says we paid $467 on November 2, but our banks mobile app on November 3 doesn’t show that our balances $467 less so if that bill not only had a QR code, but when that initiated an instant payment, the Department of Licensing would have gotten our money last night in their bank account. And that amount would have been deducted from our bank account last night so we would know exactly how much we have available to spend today. And because that’s a transaction that’s going by ACH which usually takes a few days. So the department of licensing has to hope that in a few days when the money’s really moved that we still have it, to pay them. And I mean, the other scenario I think about a lot is imagine we have $500 balance in our joint checking account, and I pay this $467 bill one night without telling my husband, he goes out the next day and pays a contractor $500 who’s working on a remodel, because he thinks that’s what the balance is in our account anyway. I mean, you can just see that instant payments solves for all these types of problems and QR codes can make it easy for these instant payments to happen.

Greg Myers: So, do you think that I mean, really, you’re talking about removing some of the friction in the transaction? I mean, do you feel like that’s a huge trend that we’re going to see over the next couple of years?

Sarah Hoisington: Yeah, and I just think the merchants and the billers are going to figure out what they need to do to incent people to pay that way. So, it’s going to be a combination of, okay, it’s way better for the merchant and the biller to receive an instant payment just in terms of efficiency and lower risk and they get their money instantly. We do need to change consumer behavior here because we do like to get our credit card rewards, but everyone’s kind of playing around with what’s the amount that’s going to be needed to move people to that form of payment. And that’s where the QR code comes in. Because it does really eliminate the friction there, right. Because for people to pay by bank, either ACH or instant payments, I have to provide my bank account and routing number, I don’t like to do that. I do that as you know, little as I have to, because if anybody that gets a hold of that can pull money out of my account. So anyway, that’s really where the QR comes in to, to enable that, that trend, because it makes it very simple for merchant biller and the consumer to have an instant payment transaction without having to disclose that information.

Greg Myers: Right. All right. Well, let’s circle back to Matera. So, we’ve talked about this QR codes and sort of where we are today and some of the trends. So how does that all kind of go back to what Matera is doing today and plans to do in the future?

Sarah Hoisington: Yeah, I mean, so I would say in Brazil, we’re continuing to do what we do best I mean, that is to provide core banking and instant payment solutions to the market. So, our QR code solution is embedded in our Pix instant payment solution in Brazil. In the U.S., our focus is on solutions that drive Instant Payment adoption. So, if you’re a financial institution that has invested in offering instant payments, RTP and or FedNow, we have solutions that help your customers initiate instant payment transactions. So QR code payments is one of our core solutions, we have a wallet as a service product. We also have a light ledger called digital twin for banks and credit unions that might want to offer instant payments, but they have a legacy core that can’t authorize transactions 24/7, which is required for instant payments, and just the thought of swapping out their core. I mean, that’s a pretty daunting task. So, we also have a light ledger that helps us financial institutions with that challenge.

Greg Myers: Okay, well, this has been fascinating conversation. I love when we talk about sort of newer technology, the technology is not necessarily new, but the use cases are definitely new and interesting. So, we’ve obviously covered a lot of ground on this topic. Is there anything else you’d like to add before we wrap up the show?

Sarah Hoisington: I mean, I think a lot of people say but it is a super exciting time in payments. And every markets different right? So obviously instant payments took off like crazy very quickly. In Brazil, it’s really different in the U.S., it’s slower in the U.S., we realize that. And no one knows when the inflection point is going to happen in the U.S. when instant payments will accelerate. But we saw firsthand in Brazil financial institutions that were not ready with Pix or related solutions, and they lost a lot of commercial business as a result. So, we look to the U.S. and we know that for financial institutions here being ready with solutions, especially for commercial clients related to instant payments and when instant payments becomes table stakes here financial institutions with proven solutions to enable all sorts of use cases are going to be well positioned in payments going forward.

Greg Myers: Okay well thanks for sharing that I think that’s a great summary so I appreciate that and thank you so much for being on the show I know your time is very valuable so thank you so much for being here today.

Sarah Hoisington: Yeah, appreciate it thanks so much Greg.

Greg Myers: And to all your listeners out there I thank you for your time as well and until the next story.

02:12 – About Sarah Hoisington

04:07 – About Matera

06:03 – What Makes Matera Unique

06:53 – History of QR Codes

07:54 – Impact of COVID

09:42 – QR Code Payments Unpacked

14:45 – How Other Countries Use QR Code Payments

17:00 – What's Next for QR Code Payments

22:05 – What's Next for Matera