Q&A with Payfactory founder Ruston Miles
One of our favorite types of startups to invest in at Cortado are those who are building underlying technologies that enable businesses and industries to operate more effectively. Our recent investment in Payfactory is a great example of this.
Payfactory is a Tulsa-based startup which is an up-and-comer in the embedded finance space. If you’re not familiar, embedded finance (or EmFi) is the integration of financial services or products (such as, in Payfactory’s case, payments) within a nonfinancial services company’s product or customer value chain. Though the term may be new to you, you’ve probably seen examples of embedded finance in action, while getting a home loan on Zillow, or opting for a buy now pay later service like Klarna or Affirm at checkout on your favorite ecommerce store. For SaaS companies, EmFi products can be a great way to make the customer experience more frictionless, while also increasing revenue potential per customer through new revenue streams. Because of these benefits, EmFi is on the rise; EY estimates that the embedded finance market will grow $264B in 2021 to over $600B by 2025.
I had the opportunity to sit down recently with Payfactory founder, Ruston Miles, and learn more about embedded finance and how Ruston sees Payfactory building and competing in the space over the next several years.
Susan Moring: You’ve been in the payments space for quite some time. Can you talk about your experience founding Bluefin, your first fintech company?
Ruston Miles: I’ve been in the payments and telecommunications industry since 1994, and in 2002 I founded Bluefin in Tulsa, a payments processor and gateway provider that was later acquired by Capital Payments. After the acquisition in July 2012, Capital Payments adopted Bluefin’s name and I became the Chief Innovation Officer and later the Chief Strategy Officer. With the merger, Bluefin reached #6 on the Inc. 500’s “Fastest Growing Private Companies in the US.” From this position, I led the pivot of the company from a payments gateway to the leading payment security provider, developing and launching a point-to-point encryption solution (P2PE) for the protection of credit and debit card data entered at the point-of-sale. Remember when there were hundreds of credit card breaches in the news every year starting back in late 2013? Most large retailers have implemented P2PE now and this has largely stopped those types of breaches. Bluefin was the first North American-based company validated by the PCI SSC (Payment Card Industry — Security Standards Council) for a P2PE Solution in March 2014 and today serves many of the largest airline, retail, restaurant and car transportation brands as well as thousands of other major companies, municipalities and universities across North America, Europe and LAC.
SM: What did you learn with Bluefin that made you want to start Payfactory?
RM: While I was still at Bluefin, I noticed a negative merchant sentiment toward payment processing that became even more pronounced in 2020 due to the pandemic. Restrictions strained all aspects of processing, including sales onboarding and service interactions, resulting in merchant frustration with new account signup, onboarding, reporting and service experience. The trend towards “consumerization” in the software industry improved the cardholder experience greatly, but the merchants’ experience was still frustrating and high friction. What was needed was a whole new process that combined ongoing innovations in the payments industry with the reality that software providers now control most payment acceptance experiences. Enter Payment Facilitation.
Signing up and going live with payment acceptance historically has taken 5–8 days and dozens of documents (e.g. driver license, business license, financial statements, void check, bank statements, certificate of incorporation, etc.) for onboarding before a payment could even be accepted — this was simply too long for small businesses and merchants.
- I recognized the need for a new type of payment facilitation platform that worked at the speed of software and that was completely embedded in the software via APIs that control the entire payment experience for the business and their customers, including signup, onboarding, payment acceptance, reporting and service.
- I founded Payfactory because I truly believe that payment facilitation is the future of merchant processing. I wanted to create a payment platform that was plug and play for ISV (independent software vendor) and vertical SaaS software, enabling these companies to swiftly implement payment processing into their software with minimal work while benefiting from an attractive revenue sharing model, which is missing from much of the new group of payment providers.
SM: What do you see as the future of the payments space?
RM: I wrote a blog post about this recently, and would summarize the major trends as:
· Faster Payments: Businesses get behind real-time payments
· Embedded Finance: Lending options become a standard in the payment mix
· Software Takes Over: SaaS payments are the new normal
· Sustainability in Payments
Real-time, faster payments will be a big one. Faster payments (where the transaction and fund settlement occur in real-time or near real-time — regardless of using a card, a P2P service or ACH) are no longer negotiable but are a must-have, thanks in part to the pandemic which created consumer expectations for faster everything. With the Federal Reserve’s recent introduction of the FedNow Service, it’s time to get ready for faster payment acceptance and funding. I believe continuous settlement will be the norm coming out of 2025.
Consumer demand and preference will continue to drive payment trends. Integrating, embedding and changing the way we process transactions takes time to implement across the payments value chain. But the continued drive toward digital, one-touch commerce and an invisible, convenient payment experience is underway across industries, with more to come from standards including PCI DSS 4.0 and ISO 20022, all of which will make transactions more secure and seamless.
SM: How does Payfactory fit in?
RM: Embedded Payments through payment facilitation is the future of merchant payment acceptance and is in-line with industry trends for faster, more secure and seamless payments. I see Embedded Payments as the first wave of the Embedded Finance (EmFi) evolution that is underway where vertical SaaS providers will extend their offerings to manage more than just the vertical work and payment acceptance for businesses. I see these software companies helping their business customers run their entire business with a host of EmFi services such as payroll, billpay, POS lending, BNPL, treasury, rewards/loyalty programs, prepaid/debit/credit card issuance and employee expense management. Payfactory’s core platform already performs the underwriting, onboarding, risk management and money movement functions that are common across all EmFi services and we are working to build the rails for EmFi providers to extend their service to the vertical SaaS providers that are integrated to Payfactory.
SM: Why did you choose to build Payfactory in Oklahoma? What has your experience been growing a tech startup in Tulsa?
RM: I’m originally from New Orleans. I came to Tulsa for university and decided to make Tulsa my home. When I started Bluefin there was virtually no investment scene here. A friendly banker gave me a small loan to get going and I spent a good deal of time building every aspect of the business with very little outside assistance. This time around, the investment situation has vastly improved, and I saw that we could not only build another great payment company in Tulsa, but we could grow it much faster with great investors in Oklahoma like Cortado who not only invest capital to accelerate growth but also provide assistance, connections and access to resources to grow even faster.
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At Cortado Ventures, we invest in pre-seed and seed stage startups with a focus on energy & logistics, life sciences, and the future of work. If you are a Midcontinent startup or looking to invest in these startups, contact us to learn more.