Exclusive Q&A with Kelly Kay, President and Chief Operating Officer at YapStone

YapStone, founded in 1999, is an online payment processor aiming to kill the paper check. They target different verticals in the rental industry, including housing, vacation rentals, and more.

We spoke with Kelly Kay, President and Chief Operating Officer at YapStone about some of the challenges in vertical payments and changing long-standing consumer habits.

Kevin Xu: Can you give me a brief history on YapStone and what you’re doing in the payments business?

Kelly Kay: YapStone was founded in 1999 by Tom Villante, and in 2001, he joined forces with RentPayment and its founder Matt Golis. Through the vision of the two founders, they created a payment-processing product focused on the multi-family housing industry. With the launch of RentPayment, property managers were able to accept credit cards and e-Checks for rent payments and move-in expenses for the first time ever. Over the past 10 years, the company has grown through strategic acquisitions and has also partnered with one of the largest online marketplaces in the world, HomeAway/VRBO. Eventually, YapStone expanded their payment platform to address additional industries and verticals with products like DuesPayment (HOA assessments), InnPayment (bed and breakfast properties) and ParishPay (faith-based), which powers payments for more than 1,000 Catholic churches across the country

We read a lot about the “death of the paper check,” but is it really going to go away anytime soon?

At YapStone, we’re focused on changing the way people pay. The number of checks that people are writing drops every year as people turn towards electronic payments for the ease and convenience. In fact, in 2009, U.S. consumers and businesses wrote 28 billion checks and that figure has been dropping by about 1.8 billion a year.

For us, we’re especially focused on industries with big-ticket, reoccurring expenses, like rent for example. The last check that people usually write is for their monthly rent. Many people now pay just about everything electronically, but still keep that checkbook for their rent check. There is no reason for this – we want them to understand that they have the option of paying their rent a number of different ways with our services – whether that’s by credit card, e-check or debit card.

YapStone has been around for almost fifteen years, what are some of the keys to your staying power and what are you doing right?

We’re more than just a payment processor – we have a unique product and value proposition for our customers. We facilitate interactions between renter and landlord, parishioner and church, and renter and vacation homeowner. We’re not a “one-size fits-all” payments company – we’re focused on providing the best and most integrated overall solutions for each of these verticals. It’s not just about the payment; it’s about the customer service around making the payments. For example, this includes the integration of the software tools that a property management company would use, or providing customizable solutions for a vacation market site. We differentiate ourselves from companies like PayPal or Stripe because we are focused on understanding the needs of the verticals that we serve.

Many payment processors and payment companies say that it’s not enough to just process payments – you actually have to engage with people and help them manage their businesses.

Yes, I believe that’s true. I came from PayPal, and when I was there, we were basically trying to be ubiquitous. We were trying to find a way to create a product to allow everyone to make e-payments. That sort of model doesn’t really work in the industries that YapStone serves. In particular, we’re talking about larger dollar transactions, which have very unique needs. Many payment companies are dealing with an average payment size of only $25- $50. Our typical transaction size is anywhere from $800 to a $1000, so we need to have a special back-end to address those needs. Our customers, and us, also have more risk exposure with the larger dollar transactions. So, we really need to know every bit about the their businesses and the industries that we’re making payments for so we can offer them the best and most secure payment solution for their company.

Are there any profitable verticals that you guys target in addition to the rental market?

Yes, we have taken our payment platform, which initially focused on the multi-family housing industry, and expanded it to address other verticals with products such as VacationRentPayment and ParishPay. VacationRentPayment is for rent by owner as well as the larger vacation rental companies, like a property management company (PMC). With only 24% of vacation rentals currently being booked online, there is a huge opportunity for growth in this market. ParishPay helps Catholic churches take donations and automate those donations. Checks are rapidly being replaced by credit cards as the preferred method of payment for parishioners and currently, more than 1,000 Catholic Churches use ParishPay directly with another 5,000 via a partnership with Cathedral, totaling a third of U.S. Catholic churches accepting donations electronically.

And your branding kind of represents that, instead of saying YapStone, you actually have separate sites for your different verticals, which is interesting.

YapStone is our corporate brand, and then underneath that we have the different brands identifying what we do in particular, such as RentPayment, VacationRentPayment and ParishPay. We try to make it easy for our customers to understand which verticals we serve.

When you walk into a potential customer, what’s your proposal? How do you explain to them that you will make things easier to them or save them money when, most of these people in these businesses are kind of rooted in the paper check?

It is an easy and a hard sell all at the same time because a lot of our potential customers are very traditional businesses. We need to go in and convince them to do things differently than they’ve done historically. With rent, the renters drive a lot of it because they don’t want to continue having to write paper checks – they are asking for the ability to pay electronically. We also offer additional services to payment processing. For example, we offer services that help property management companies with their accounting and management of their records. We also integrate with their software service providers and we can provide reporting capabilities. When you put all this together, it’s not just payments that we’re processing for them, but we’re actually making them more efficient as a business.

Do you have any mobile initiatives? Are you working on anything specifically to smartphones and mobile devices?

Mobile is one of the keys to success for any payments company and will be a big focus for us in the year ahead. We have a rent application that’s out right now that allows people to pay their rent online, and we’re working on an app that will allow any renter to pay their landlord. We know that consumers want the ability to make a payment on their mobile device, whether it’s for rent or vacation, so we’re very focused on that now.

How did you end up at YapStone after being at a place like the Wikimedia foundation?

I have a long history in payments - I’ve been working in the global payments industry for over 15 years with a focus on legal and compliance, which is a natural fit with YapStone. Payments is a special industry. It’s not easy – if it was, anyone would do it. To do it right and do it safely, you have to be thinking about the necessary controls and infrastructure to protect the business and the customers.

YapStone is a fast-growing company that faces similar challenges to what I faced in my other roles at PayPal and MasterCard. It has also given me a great opportunity to build a team of driven, hardworking people all working towards the same goal. My previous experiences have allowed me to help YapStone get to the next level and scale the business in a safe and secure way.

From a legal and regulatory standpoint, are there any specific hurdles that YapStone has to go through, dealing with these businesses?

We face the same hurdles as every payments company faces. But, because we do larger-dollar transaction payments, our fraud and risk modeling is different from that of a smaller payments company. However, the legal challenges are pretty much the same. My experience at PayPal has come in very handy, as has my experience elsewhere doing things like dealing with regulatory issues and figuring out how to take old-fashioned paper-based products and turning them into something modern. A lot of what we do is taking these existing rules and infrastructure and figuring out how to do it differently, and try to make it something that people want to be using in this day and age.

Can you talk a bit about your fraud and risk modeling, and how you are onboarding customers in different industries?

We’re moving into an online marketplaces type of model, which allows us to onboard our customers through electronic means as opposed to a paper-based approach. Because we’re focused on very specific industries, and have been for so long, we’re actually able to customize our risk modeling and onboarding processes to address the specific risks of each of our transactions. So again, this goes back to the ‘we’re not a one size fits all model’. We’re actually diving into the specific risks associated with each of the customers that come to our door. So when we say onboarding, I’m actually thinking about how to get customers as quickly as we can into the system, and control potential fraud or credit exposure at the same time. This is key for us, as well as our property owners, because they don’t want to have any charge-backs or losses associated with their properties.

Is this a competitive advantage for YapStone?

Yes, because many payment companies don’t want to touch these types of transactions due to the large dollar amounts. We are able to have fraud and risk models built around the size of our transactions, and we can look for anomalies based upon that. Our underwriting and onboarding tools address very specific risks, so that we can create a safe ecosystem for people who are making vacation payments for the first time to somebody they don’t know. We are continually improving and evaluating our fraud and risk modeling tools to allow for the best solutions for this market in particular. This is also customizable so we can reach out into adjacent verticals over time and expand our business.

Kelly Kay, President/Chief Operating Officer
Kelly Kay serves as President and Chief Operating Officer for YapStone, where she is responsible for overseeing the operational aspects of the company. Previously, she served as General Counsel, Head of Risk and Compliance, and Secretary of the Board of Directors for YapStone, where she oversaw the legal, risk, and compliance team. With over 15 years of global payment and regulatory experience, Kelly brings vast international experience to the YapStone team. Before joining YapStone, Kelly played key legal and government relations roles at PayPal, MasterCard, eBay, Banc One, and the Wikimedia Foundation. Her career-long payments expertise helped to drive PayPal’s expansion throughout Asia Pacific including Singapore, Hong Kong, Australia, Taiwan, Philippines, India, and Malaysia. Overall, Kelly spent ten years at PayPal and eBay in both the US and international roles. She has also advised several payment start-ups in the US, Asia, and Europe seeking to navigate the complicated regulations applicable to payments companies. In 2014, Kelly was selected by the San Francisco Business Times as one of the “Most Influential Women in Bay Area Business.”