Digging Deeper with Digital River World Payments: Building the Future of Global Payments

June 23, 2014         By: Andrew Barnes

Andrew Barnes’ series, “Digging Deeper” is based in Silicon Valley and focuses on key startups and innovators, and how they are disrupting digital payments and commerce. 

It’s fair to say that Digital River World Payments is one of the payment processors on the list of virtually any merchant of any stripe (not that Stripe) who wants global payment services.  Global Payments, Chase Paymentech, First Data on one hand, and WorldPay, Global Collect, and Adyen on the other are some of their direct and overlapping competitors.

In 2013, Digital River processed more than $30 billion in online transactions, connecting digital goods and brands with buyers across multiple devices and channels worldwide.  Founded 20 years ago, Digital River has 1,400 employees worldwide, revenue of $389MM, and trades on the NASDAQ as DRIV – clearly no spring chicken in the payments world.

”I think the payments industry has been commoditized. If all you are doing is offering a low priced basic gateway or mono-line service I think your days are numbered.”

So what’s the dealio?  Andrew gets scared straight about the future of payments with Craig Thomson, Digital River World Payment’s VP of Strategy and Channel Development. They talk turkey about the saturation of payments providers, Craig’s lessons from being a super successful payment’s entrepreneur, and why startups and partners are the lifeblood of Digital River’s growth strategy.


Andrew Barnes: Craig, great to talk with you again.  Thanks for your time. Let’s jump into it.  I’m located in Silicon Valley and we of course spend a lot of time ruminating on disruption and innovation in the payments space. You guys are quite aggressive in the marketplace. What business model, and whose business model, are you disrupting if any?

Craig Thomson: Andrew, great to talk with you again as well.  Yes, let’s jump in.  At Digital River World Payments we’ve created a single connection to a basket of global card alternative payment solutions. That’s what we’re disrupting in the payments business. We’ve done that across a variety of different acceptance channels so not just card not present but mobile as well.

We’ve also taken what has traditionally been a multiple channel payments model and put a single transparent layer in front of that, in front of those legacy systems, so that merchants and businesses now have an opportunity to get to market on a global basis faster, with fewer service providers, while addressing all of the kind of regional, local, compliance, and regulatory concerns in different markets.


If I’m a payment and commerce professional or payments professional, why should I care about what you’re doing in the marketplace?

I attended a Visa conference a few months ago and there’s something like 2200 different payment providers globally. What we’ve done which is different is that we’ve taken more of a holistic approach to merchant acquiring and card acceptance than most other companies. Most of our competitors focus on single market verticals or segments, but we’ve developed solutions that appeal across a much broader spectrum.

Take a SaaS provider as an example. Someone who’s offering web or mobile based point of sale software and they’re looking to integrate payments into their solution. We can provide a single interface that supports PSPs, ISOs, and directly acquired merchants across again multiple acceptance channels in multiple regions which different from majority of other providers. That makes it a lot easier for the service provider because they don’t have to worry about maintaining separate connections to a Paymentech or a Global Payments or a Barclays. They can consolidate all of that through us and they don’t have to worry about whether merchants have existing relationships, or about the size of those merchants because we have bank connections and relationships with all different providers in different parts of the world.  In all likelihood we’ve already got that interfacing relationship established for them.


In terms of payment processing winners and losers. Who do you think is going to get the traction where the others, longer term, may not?  

I tell our sales teams that across the spectrum of any product or service, 80 percent of a consumer segment purchases a good or service based on the perceived value, 20 percent are only focusing on price. I think the payments industry has been commoditized. If all you are doing is offering a low priced basic gateway or mono-line service I think your days are numbered. I think that we’re seeing enough consolidation in the industry, enough commoditization occurring that it’s going to be very difficult for those models to succeed in the long run. I think that any payment business needs to be positioned to add value to the relationship with the merchant. You can do that in a lot of different ways.

The winners are going to be those organizations that demonstrate to merchants that there’s offering more than just a commoditized payment offering and offering perceived value.


The term emerging payments. What does that mean to you?

Emerging payments means different things to different people. To me, emerging payments is really referring to emerging acceptance channels and payment offerings which are completely new and innovative. A lot of what developers are producing these days aren’t really payment innovations, they are really just variations on existing card or ACH acceptance methods. Square’s come up with a device that allows you to accept payments from mobile phones and Bitcoin has developed a model for accepting electronic currency. To me those are really creative examples of emerging payments at the point of sale.


At Digital River what emphasis do you put on new ways of accepting payments at the point of sale? How is that part of your strategy?

Certainly mobile is an area. Mobile for us, in the merchant space, is largely built around chip and pin or EMV technology. In markets outside of the US, mag-stripe has been supplanted by chip and pin and having retail or mid-market solutions that don’t incorporate chip and pin aren’t really viable at the point of sale. For us, mobile, emerging payments, include chip and pin solutions and enables merchant to accept payments in new locations and new ways. Whether it is at the physical store, trade show, fair, or the customer’s place of business. Whether they’re on the road or in-between taking an order, we foresee acceptance channels opening up so that merchants have the ability to collect payments anywhere at any time.


When you think of mobile, what is your strategy, and what does that mean for you? 

Our strategy has been to partner with other organizations to deliver mobile payment solutions. Currently Digital River World Payments has a nexus of about 500 software providers that have integrated their solutions to our payment services, and we see an extension of that in mobile. Our solution is to provide the APIs and SDKs for the various mobile operating systems which allows our partners to accept chip and pin transactions, EMV contactless, NFC transactions, and wallet based solutions like V.me and MasterPass. It is also to provide a tool kit for software providers to leverage our 85 plus bank connections so that they can provide solutions globally.

As you probably know, chip and pin integrations and certifications with acquirers are substantially more complex than mag-stripe. The reality is that even if a developer has a 100 different merchants using their point of sale software, they are not going to get the bandwidth or the attention of an acquirer for an EMV certification. We view this as a significant opportunity for us to provide those tools to developers to expand their reach. Our strategy is not to build those UIs or interfaces or applications ourselves. I think that as you move into retail, the market gets very verticalized. It’s essentially impossible to produce a single piece of point of sale software that’s going to reach across broad sectors of the merchant base.


Let me ask a question about being a startup and an entrepreneur in payments. From personal perspective, as a successful payments entrepreneur, any advice you would have for a budding startup to get it right in the current payments environment?

I’ve been there, and I don’t want to sound like a hypocrite because some of the things that I would advise entrepreneurs to do today are a lot different than things I’ve done in the past, but the world is different now. When I started in the payments industry there weren’t a lot of alternatives. At that time there were three or four well-known payment companies and then everyone else was a startup themselves. That necessitated doing a lot of things that I would advise against today.

If you focus on what you do really well and rely on others to do the ancillary products and services for you then you can become the expert in your area. I see a lot of technology entrepreneurs stretching themselves to thin. They feel as though they have to own everything or they have to build everything themselves. I think with today’s shortened development cycles the lean startup mentality where you get your product out quickly and then very quickly innovate or iterate is the right way to go.  That lends itself to just really focusing or hyper-focusing on specific niche areas.


Can you give me an example of a startup that followed that strategy and was successful?

I’ll give you Uber for example. They didn’t spend all their money building out a payment gateway and payout network. They focused on what they’re very good at which is a dispatch system for people to find transport. They then partnered to plug in the other pieces. Now, if you’re successful within your niche and you can grow to scale then sure you can go back and revisit what at that point may be some other core services that you’re using third parties for. It may make sense to bring them in house but I think as a startup you have to focus on the niche.

Another thing I’ve learned over the years is that it’s all about gaining a relationship with a customer and then trying to building on that successful relationship over time. Square is trying to do that now. They established themselves as a really inexpensive way of accepting payments for small business and once they build that relationship they expand on it to grab more share from that customer. The point is, they stated off on a wedge and then expanded over time rather than trying to do everything up front.


What are the best ways for a startup to get Digital River’s attention and gain access to your resources as a prospective partner?  

I think one of the benefits of Digital River is that we have grown through acquisition over the years. Essentially we are a consolidation of a whole bunch of startups. We’ve grown to scale over that period of time but I’d like to think that the leaders and executives within the organization haven’t forgotten that fact. I have a bunch of startups that we’re working with on various projects that are helping us build out some of the solutions that we have in development for our clients. The easiest way to reach out to us is to contact me in my role in channel development. We can’t build everything ourselves. We focus on our core competencies. For areas that are adjacent to that and where we see value then we’re more than happy to work with other companies to fulfill that need for our market.


Who have you worked with that you can reference? 

I can give you three names right now that I am working with. One is Digital Retail App’s SelfPay, which has a really innovative way of consumers checking themselves out of stores without having to wait in line. Whole Punk’s Zocalo, has some interesting loyalty and offer applications. And the third one is Kiind who provides post paid gift card solutions. They’re all startups. They’re all organizations that I think are interesting and we are supporting each other with development.


If I gave a call to these guys what do you think they’d say about working with Digital River and do you think they’d say it’s been profitable for them?

Well, these are all startups and we’re early on in these relationships so I don’t know if they’d say it’s been profitable. I think they would say that we’re a fantastic company to work with. We have the benefit of some really super smart people that have been in electronic payments for an awfully long time. In area like the voice of the customer, UI/UX expertise, and marketing as it relates to web and e-commerce we have people with experience and backgrounds that the average startup has no access to. As a partner we can bring them to our own partner relationships that can help them to be successful. We can provide advice and insights from experts that would cost them a lot of money if they were to contract for those services themselves. It’s probably something that’s out of reach for most small organizations.

About Digital River World Payments

Backed by 20 years of e-commerce experience, Digital River is recognized as a leading global provider of Commerce-as-a-Service solutions. Companies of all sizes rely on Digital River’s multi-tenant, SaaS commerce, payments and marketing services to manage and grow their online businesses. In 2013, Digital River processed more than $30 billion in online transactions, connecting B2B and B2C digital products and cloud service companies as well as branded manufacturers with buyers across multiple devices and channels, and nearly every country in the world.

About Craig Thomson, Vice President of Strategy and Channel Development

Craig Thomson is the Vice President of strategy and channel development at Digital River World Payments and is the founder and General Manager of Beanstream. Craig is a forward-thinking leader who has more than 20 years of leadership and entrepreneurial experience running high-technology companies. He is a member of the Board of Advisors to the Faculty of Business at the University of Victoria and has mentored and advised dozens of startups in the digital services and technology industries.

barnesAndrew Barnes, Managing Director, Emerging Payments

Barnes is a self-confessed payments “geek” and recognized entrepreneur working in Silicon Valley. He leverages his business development track record and network in startups, retail, and FI’s to solve tough revenue problems in payments and mobile commerce. Barnes has held executive positions internationally with Sprint, Global One, and 2Roam Mobile. He founded the National NNN Investment Group, and is an Advisor to the Electronic Transactions Association (ETA). Barnes has an MBA from WASEDA in Tokyo 早稲田大学大学院 and a BA from Penn State.  He created the widely sourced Digging Deeper series and can be reached at @AndrewinSV and Linkedin.