Value vs Margin- The Payments Migration of Dustin Sparman

As the co-founder and CEO of multiple successful payment processing companies , Dustin Sparman has had a front row seat to the evolution of payment processing. In the past decade Dustin Sparman has seen the industry quickly transition from traditional client procurement models, mostly based on independent sales strategies, long term contracts and leases, and the dependency on independent sales programs, to a Fintech model enabling banking and financial services through unique technology platforms. Examples of FinTech strategies are Digital Lending and Credit Facilities, Mobile Banking and Payments, CryptoCurrency and BlockChain technology and Integrated Software Providers.

“The consolidation and price compression in the Payments industry has led to a rapid change in strategy for merchant acquisition and retention” notes Dustin Sparman. The card brand regulations have made contractual obligations in merchant agreements a thing of the past which has led acute businesses to build value for their clients through technology offerings, acting more as a business partner than a vendor. This has created an unprecedented opportunity for Enterprise software companies to overlay a payments strategy into their existing platform and drastically increase revenue while solving a major challenge for clients in payments reconciliation. In fact, the #1 eCommerce platform for business, Shopify, reported merchant revenue in 2020, which is primarily of payment processing revenue, grew 116% annually to $2.02BB while their core model of subscription services grew only 41% to $908.8MM. Their solution is simple, it is the lead offering for all of their subscribers and it is easy to get approved, says Dustin Sparman. While they do allow the use of other payments solutions on their platform they charge their subscribers to access them. Payment processing is a commodity and merchants by and large do not care who processes the payments, only that it is cost effective, easy to reconcile, and offers quick access to their cash.

For decades, the payments strategy was the same, acquiring smaller Independent Sales Organizations (ISO’s) while building a retail Payments ISO on one of two platforms, TSYS or First Data. However, Dustin Sparman has noticed that over the past 5 years the strategy has changed drastically, mostly because it lacks innovation and true value for businesses. ISO’s have been fighting for the same transactions as their competitors without providing any real value to their clients, hoping they will continue to rely on the shiny object syndrome to make a decision on their credit card processing with special promos and incentives, free point of sale software, and other tactics. This model is no longer viable, the payment processing industry has consolidated considerably through acquisitions and true technology companies such as Stripe and Adyen have entered the market making the antiquated processes of traditional merchant acquiring a thing of the past. Trading long underwriting approval processes for instant onboarding and expensive integrations for one click plug-ins, businesses now prefer an expedited processing model known as payment facilitation (PayFac) to the traditional merchant account options. The technology offerings are superior, the pricing is more competitive, and the payments solution is often a service that is offered in an existing software platform the businesses rely on.

As a systematic problem solver, Dustin Sparman has shifted his focus to offering consulting services to build solutions that truly benefit clients while creating value for the companies he engages with by increasing the lifetime value of their customers through payments integrations into technology platforms. Entire industries now rely on single source platforms to operate nearly every aspect of their business, from accounting to invoicing, sales and marketing, project management, proposals and bidding, the dependency is seemingly endless. Industries such as medical, construction, ecommerce, finance, insurance and real estate are now realizing that the revenue they can generate by investing in a payment product through a PayFac solution will further solidify their relationship with their customers while significantly increasing the valuation of the business. Oftentimes the payment processing revenue surpasses the core business revenue as is the case with Shopify. It’s been a very defined strategy for private equity to quickly increase revenue and move their investments into a FinTech multiple which is trading at as much as 80X revenue. While building out a small and efficient team Dustin Sparman has consulted for some industry leading platforms installing payments into their offering and strategically working with these clients to deploy an execution strategy to ensure client adoption. As a 6 time Inc 500/5000 honoree Dustin Sparman has built a reputation as an industry leader in payment processing through implementing systematic processes, innovating sales and marketing strategies, managing bank acquiring relationships and incentivizing teams to perform at their highest levels all while keeping an eye on the revenue and growth strategies of his businesses and forecasting industry trends to stay ahead of the curve. These skillsets have proven to be invaluable to the right organization looking to fast track payments strategies.

As the payment processing industry continues to evolve and new payment methods eclipse traditional acquiring, the payments landscape will certainly become more convenient and cost effective. For companies with a dependency on payments it’s imperative to make sure you have a strategy to have a leading-edge payments solution.