Umang Sota (MBA ’21) shares the innovation journey of Checkout.com, an online payments platform.
In my previous article, “Retail Apocalypse: Is This It?” (Harbus, February 2020), I wrote about how the global e-commerce players are bringing us the joy of shopping for stuff from all around the world while sitting on our comfy couch. The global e-commerce industry has been growing at approximately 20% year-on-year for the last few years and is expected to reach $5 trillion by 2021, according to eMarketer’s 2019 Global E-commerce Report.
In this piece, I want to dive into the payment industry which is instrumental in driving the phenomenal growth in e-commerce. While it may be just a click of a button for us to buy something online, for a long time accepting online payments has been the most arduous challenge for e-commerce players. The value chain from the buyer to the retailer has various intermediaries such as banks and card networks, and each layer has individual standards, regulations, and costs associated with it. In addition, given that it’s all virtual, retailers have to add checks to verify the buyer and assume any risk of fraud. The requirements become even more complicated when transactions are cross-border.
All this essentially means that any online business needs to have extensive expertise like that of financial services firms including user verification, credit risk management, and compliance.
These challenges and the rise of online commerce have given way to startling innovation in the online payments space. We all know about the emerging companies in the US but one of the billion-dollar superstars we, at HBS, may not have heard about is “Checkout.com”. Checkout.com is based out of London, UK and is leading the innovation in the online payment space.
On a Zoom call with me, Guillaume Pousaz, CEO of Checkout.com, explains, “Think of Checkout.com as the person behind the curtain making the show between the e-commerce merchant and the buyer work. We provide a unified technology solution to make the process of accepting payments easy, reliable, and efficient for online merchants.”
What this means is that Checkout.com as a technology payments processor manages the innumerable layers on behalf of online merchants for a fee (usually a percentage of total transaction costs).
This model is typically referred to as Unified Payment Processing. It allows companies like Checkout.com to provide a single platform to merchants, offering payment gateway, processing and acquiring services via a single integration. This simplifies the process for global e-commerce brands that operate in a number of different jurisdictions as they do not have to maintain relationships with card networks or banks or worry about any regulatory compliance requirements. The Unified Payment Processing model has become widely popular since 2010 and is leveraged by various companies including PayPal and Stripe.
Checkout.com has taken this model and built a comprehensive service platform for its online merchants. Pousaz explains, “We started with taking financial aspects and risks away from our customers—giving them the time to focus on building their business. But now we are helping our customers with data-driven insights to drive more revenue and higher conversion.”
And what about competition? Pousaz emphasizes his company’s unique strength is “a single platform across more than 50 markets while even the largest banks and payment processors still have country- or region-wise platforms which add friction to aspects like currency conversion, driving insights for merchants from these global transactions.”
Checkout.com’s go-to-market strategy is another source of its competitive strength. Checkout.com has focused on deployment ease and speed to ensure that developers, as its primary customers, love its product. It has designed its organization with a technology focus. Today, Checkout.com has over 700 employees globally, and two-thirds of these employees are in tech-focused product and engineering teams.
It achieved the unicorn status in its first funding round in May 2019, where it raised a Series A of $230 million. Unlike many of its peers within the space, the business had scaled to the status completely organically, growing at 30% annually with almost no churn. Pousaz claims in a LinkedIn post, “We spent our first few years laying the foundation for our product and reinvesting every single dollar back into the business.” He refers to this process as ‘bootstrapping.’ “Bootstrapping a business means being lean—making tough decisions, hiring one employee at a time, making every resource count, and where mistakes are costly.”
But you will be surprised (or maybe not) to know that it all started with surfing in Los Angeles. During his early life, Pousaz moved from Switzerland to LA in search of wonderful surfing waves and joined a small payment company there. It was during this time that he got interested in the payment industry. After that, he kept looking for the right opportunity, and he found one in 2009 when he came across a small start-up that had built a payment gateway. He convinced them to work with him and move to the UK to work on what we know now as Checkout.com.
The UK has always been known as a finance hub, but Pousaz’s decision to invest in the UK even after Brexit is certainly an encouraging trend for the country. Over the last few years, the British government has invested in various initiatives like TechNation, a national network of tech entrepreneurs, investors, and talent to attract tech innovation. In Pousaz’s view, “The UK has offered us great talent and open regulation, and we see a commitment from the UK towards innovation. The Shoreditch tech scene has developed dramatically over the last few years. Even the UK financial regulators are pushing for disruption.”
Checkout.com has already opened 10 international offices but continues to grow its team in the UK as its headquarters. Pousaz is very bullish about the growth prospects of Checkout.com not only in the UK but worldwide. He shares, “We see two growth pillars: one is focused on geographical expansion and another on product line extension.” Checkout.com already has acquiring licenses in the UK and France and seeks to expand the licenses and its suite of services in all core markets.
In terms of the product line, Checkout.com has ambitions to be a much bigger financial services solution provider. In Pousaz’s words, “We may not become a full bank, but we want to have a majority of the GMV [gross merchandise value] of our customers flowing through us including treasurer solution, payout/disbursement, risk management, and other value-added services.”
As Checkout.com takes a larger share of its customer’s wallet while also increasing its customer base from new and existing markets, expanding its customer ecosystem is only going to propel the organization forward into much bigger market opportunities. What’s exciting for us at HBS is that with this growth, Checkout.com presents great career opportunities for brilliant MBA students looking to be part of the disruption in the FinTech space.
Umang Sota (MBA ’21) is originally from India and has worked in product and business development roles in the B2B technology space across Asia and Europe. Prior to joining HBS, Umang was the Global Head of Product for Tata Communications’ Cloud & Data Center Services based out of London. In addition to technology, she is passionate about early education and has taken on active leadership roles in projects around education for the last 10+ years across India, Singapore, and the United Kingdom.