Why this payment tech business has soared during the COVID pandemic

Alan Murray (0:07): Leadership Next is powered by the folks at Deloitte, who, like me, are super focused on how CEOs can lead in the context of disruption and evolving societal expectations.

Welcome to Leadership Next, the podcast about the changing rules of business leadership. 

Murray (00:20): I’m Alan Murray, and I’m here, as always, with my extra-special, stupendous, over-the-top Ellen McGirt. Ellen, how are you?

Ellen McGirt (00:29) I am good. I am good. I’m happy to be here. We’ve got a very special guest. We’re going to be talking about one of everybody’s favorite subjects, unless it’s super divisive. We’re going to be talking about money today, aren’t we Alan?

Murray (00:42): Money, yeah, and payments, and how money moves. It’s Jeff Sloan. He’s the CEO of Global Payments, which makes some of the technology plumbing that underscores commerce, so we know he’s had a really interesting two years here. And in fact, Jeff, last time I saw you was right before the pandemic began. Thanks for joining us.

Jeff Sloan (01:02): Thanks for having me. I think that was the last meeting, Alan, that I had right before the world shutdown in March of ’20. So I’m happy to say it’s nice to see you and Ellen, and under better circumstances.

McGirt (01:12): I was just going to say that in those two years, you’ve also joined the Coins2Day 500. So we should mention that right up the top.

Sloan (01:17): We’re very proud of that. Thank you for mentioning that.

Murray (01:19): It’s a great thing. We love companies in the Coins2Day 500. But Jeff, why don’t we start off, because even though you’re in the Coins2Day 500, you’re not as well known to our listeners as some of the more consumer-facing payment companies like a PayPal or a Square. So why don’t we start off by you telling us what Global Payments does and how you compare to those companies.

Sloan (01:41): We’re one of the largest payment technology providers in the world. What we do is we build technologies that enable all sorts of businesses, merchants, banks, software companies, technology companies to accept payments. A really good example, Alan, is we have over 150,000 quick-service restaurants in North America using our technology. So if you order for Burger King on your cell phone, for example, that’s a customer of ours, get your hamburger, pay with your face or your thumb, get your hamburger delivered via DoorDash or UberEATS, all that technology really is ours, you know, at the end of the day. So we really facilitate acceptance of digital payments. Of course the pandemic had quite an impact on our business.

The pandemic really accelerated the digitization of payments by probably three to five years. And one of the important things to know about Global Payments, Ellen is that we sit in between the merchants, the software companies, the financial institutions, Visa, MasterCard, and we make sure that our customers—merchants, corporates—get paid digitally for things that they’re they’re rendering. So needless to say, an environment where people want to touch fewer things—like you want to pay your rent online, you want to valet your car using your phone, you want to change your thermostat with your face—environments like that, where people are less prone to touch things physically. We benefit from all those kinds of trends.

Murray (03:01): So many things, as you say, in that world have been accelerated by the pandemic. Lots of stuff here we want to dig into. But let’s start with the integration of the virtual world and the real world. And we see examples of that all over that’s obviously got to be an issue for you when you’re dealing with companies like a Burger King that are selling hamburgers online and in person. How does that work?

Sloan (03:26): What the pandemic really did, Alan, is it really accelerated the blurring of the lines between the virtual and the physical worlds. Now people think about their laptops, their iPads or cell phones, the same way they think about physically going into a store and they want complete flexibility, regardless of where they go one needs to be interoperable for the other. So now there is no really more distinction between e-commerce and what we call omni-channel or acceptance in the virtual world as well as the physical world. We did $1.45 billion of revenue in the omni-channel world, and I just described that, blending last year—that blending of the virtual and physical environment.

So for example, we just announced Adidas, Skechers, [third brand hard to understand], all those kind of shoe companies, we provide all those technologies to allow those types of corporate customers to sell their goods online as well as offline seamlessly. So now, Ellen can walk into a shoe store, buy something online, decide it’s the wrong color or the wrong size, return it in a physical environment or just send it back and do it online—all that underlying technology like a Shopify or a PayPal or someone else would have, that’s really what we do at the end of the day. And as painful as the pandemic has been for so many obvious reasons, as it relates to the way that consumers shop, we believe that that environment has permanently changed and that business for us, Alan, today is growing 30 to 40% faster—that ecom omni-channel business than it did pre pandemic and at size at [hard to hear].

Murray (04:55): Wow, well I’m glad you talked about Ellen’s shoes and not mine because I’m wearing slippers right now. [Laughter] See, I still have my bedroom slippers, so I’m not a good shoe consumer but Ellen may be.

McGirt (05:10): That’s good for holidays, I can use my face to buy you some new slippers, Alan. Jeff based on everything that you’ve been seeing and learning and just the blender that you’ve been in, can you talk to us a little bit about the future of shopping and buying? We’ve got crypto. We’ve got the metaverse coming. How strange is this world going to get? And how can consumers and businesses keep up?

Sloan (05:33): Well, the first thing I’d say Elon is no, we’re not going to go backwards. So even as the pandemic becomes endemic, I don’t think you’re going to see consumers kind of raise their hand, Ellen, and say now I want to wait in line again. Thank goodness that’s behind me. So I don’t really think there’s any kind of motivation or push to going backwards. A great example of that Ellen is our advanced-MD medical business. So we did something like two and a half million teledoc visits last year in ’21, Ellen. Pre-pandemic we did like 25,000 in 2019. So even if and as the pandemic becomes more like the flu and more endemic, I don’t see a change where people go back to the old way of doing business. I think that’s kind of point  number one.

The second thing I’d say, Ellen, is things like buy-now-pay-later or what we call BNPL, the proliferation of alternative payment means some of which are through your banks, and some of which are through newer players like an Affirm or a Klarna which actually are non banks. I don’t see that changing either. In fact, in last year, 2021 Global Payments did over 2 billion by-now-pay-later transactions, and I’d say, Ellen, that’s probably got 50%. So the idea that consumers can kind of pay the way they want, pay over the number of payments that they want, generally not get charged for paying in installments, we’re one of the biggest providers of that type of functionality. And that’s something obviously the pandemic accelerated.

Murray (06:56): This is a fascinating topic. But you say generally don’t get charged. I’ve heard of examples where in fact they can particularly, if they miss a payment, be charged interest rates as high as 30%.

Sloan (07:08): Sure. So there’s a couple ways those models work out. Let me just be clear about Global Payments upfront—we’re actually not a bank, and we don’t extend credit to consumers. So it’s our technology that the merchants are using, just to be clear, so we don’t take any underwriting…

Murray (07:21): So you don’t set the terms of the loan?

Sloan (07:24): That’s exactly right. So we’re not taking any credit or balance sheet or underwriting risk on it. I was really referring to Alan, is in some of those models, particularly given where they started, they’re generally charging a mix of the merchant, as well as the consumer. So slightly different than your using your Bank of America card or your Capital One card. Now that may evolve over time back to what you said.

McGirt (07:43): So a lot of these innovations that you’re talking about seems geared towards people who already have money, which it seems funny to say it that way. But this is really a question about financial inclusion, which I know has been a big topic of conversation in the fintech world and just in the corporate world in general. Do you see any trends or opportunities for financial services, given your viewpoint on all of this, for people who have been unbanked, for example, or who have not enjoyed the kind of financial inclusion in the past?

Sloan (08:18): Absolutely. It’s a terrific question. So one of the businesses that we own today is a business called Netspend, which is actually focused on unbanked and underbanked individuals primarily in the United States, but also in Europe. One of the things, Ellen, that we’re most proud of is during the pandemic, we’ve facilitated the disbursement of over $5 billion of aid from the federal government directly to consumers who don’t have traditional bank accounts. Instead, as you would imagine with us, Ellen, they have digital bank accounts, you know, with us.

We’ve been very proud that our team members have been involved in broadening financial access and being more inclusive in facilitating that aid in many cases, Ellen, days in advance of what more traditional kind of fee-charging financial institutions and others would do. So I do think for the pandemic, you have seen an expansion of the pool, mainly through many of the programs that we’ve helped facilitate.

The other thing I’d say if you go back to Alan’s question about buy-now-pay-later, almost by definition, a lot of the work that we do there is with non bank card or outside the more traditional financial institution spectrum. Given the typical size of those transactions, which are smaller. They’re 30 to $40, on average, instead of 50 to $80. They’re done more on a repeat basis. A lot of those are done by younger consumers. I think that has a very nice part that speaks to inclusivity and expanding the footprint of people who are able to shop online, which as you know, is not traditionally a cash business kind of buying something online. So I do think innovations have expanded the pool of opportunity, as difficult as the pandemic has been you know as a human.

Murray (09:54): Yeah, you know, it’s so interesting. I hear you talk about buy-now-pay-later is this kind of new thing that’s going on in the retail world. It’s a function of my age, I guess, my mind immediately goes back to Wellington Wimpy on Popeye who said “I will gladly pay you Tuesday for a hamburger today.” But let’s leave Wimpy aside. Cryptocurrency. Right? I talk to people who fervently believe that 10 years down the road 20 years down the road, the whole payments, ecosystem that you are a part of will be gone and everything will be done on the blockchain because it’s more efficient and simpler and easier and less expensive for people to do that. Where do you think we’re headed with cryptocurrency and blockchain and decentralization of finance?

Sloan (10:41): At the end of the day, I think the first thing is your question, Alan, about kind of where we sit and the proliferation of new payment types is that last mile of connectivity has taken us half a century to build up and it’s very hard to get to. So as long as they’re using something other than cash and check—and cash and check is the enemy and the pandemic  has accelerated the decline of cash and checks—as long as you as a consumer are paying for something other than in cash and checks, we ultimately are going to get paid and stay in the middle of the process.

Murray (11:07): That’s interesting. So then crypto should be your friend. So you’re in a position to give us an objective reading on where it’s really going.

Sloan (11:15): Exactly and I would parse what you asked, Alan, into two pieces: first on the crypto side and second on the blockchain side. So let’s, because crypto is an example but it’s not the only thing in blockchain. So as relates first to crypto. Sitting here today, crypto is mostly a person to person kind of trading business as a consumer matter. Now, why do I say that? Because a typical grocery store, for example, has 1% operating margins. Bitcoin today is swinging four to 500 basis points a day. No grocer is going to take that even if it’s you know, same day or overnight or next night risk. It just doesn’t make any sense as a risk manner.

Sloan (11:47): Now I do think a derivative of that, Alan, is stable coin and the Federal Reserve has come out with a bunch of papers over the last six months. I do think there’s a role for a digital fiat currency in the United States and globally. The UK has said the same thing. So has China. So I certainly foresee a time in the next 12 to 18 months where you see stable coins as an example of cryptocurrency which really isn’t all that different now than what we do today, which is electronic transactions, which is our primary business. So as it relates to person-to-person trading, we announced the deal with PayPal, where their digital wallet training if you’re a consumer and you want to buy cryptocurrency in your PayPal digital wallet, the technology behind that is ours, if it’s done cross-border kind of overseas and the like, if you’re using a bank card, Visa, MasterCard, whatever Discover Amex to go buy that. If you go into Coinbase, for example, and their digital wallet and you’re buying cryptocurrency using PayPal, that’s us too.

Sloan (12:42): So I think we’ve got a good position out as it relates to that derivative part of what the consumer is doing by powering the loading of the digital wallets. But as I said before in the context of the grocery, if it’s not a stable coin, and it’s something that fluctuates pretty dramatically intra-period intra-day, it’s hard for a merchant to accept that today. Where you will see acceptance, and this speaks to our b2b business, is cross-border for corporates. So there’s no reason for a corporate with crypto to pay a VIG or a fee on FX. You could do that stuff in cryptocurrency and you could probably hedge or take some more risk if that’s what you want to do on the variability in Bitcoin or theory and pricing.

So we are looking at use cases, Alan, cross-border to replace FX and there I think you will see in the immediate term a real role for Bitcoin and cryptocurrencies  as it relates to blockchain. The idea of distributed ledger technology, of which crypto is just one example, I think does hold a lot of promise. But I would say that that’s more along the lines of what the Fed is described in terms of Fed now, which is rea-time payments and real-time access to your funds and not having to wait for a check to clear or for you to get paid at work, and that’s something we already facilitate hundreds of millions of times overseas every day and that’s nothing but good news for our business.

[Music]

Murray (14:05): I’m here with Joe Ucuzoglu, the CEO of Deloitte US, and the sponsor of this podcast for all three of its seasons. Thank you for that.

Joe Ucuzoglu (14:12):Thanks, Alan. Pleasure to be here.

Murray (14:14): So Joe, one of the surprises we saw in 2020, in the midst of a lot of bad news was some good news. An acceleration in the adoption of digital technology. Do you think that’s going to continue?

Ucuzoglu (14:26): I do, Alan, and I would say that the cause for optimism is warranted. There are going to be some pretty significant dividends that come from the massive acceleration in all things digital. We’re going to see significant benefits to the economy from the big digital transformation investments that companies are making. I think we’re going to see big benefits to people in terms of quality of life, as we see new models for working that allow greater flexibility, productivity.

Murray (14:57):So people were forced to innovate in 2020, because an extreme change of circumstances was forced upon them. Can they keep up that pace of innovation?

Ucuzoglu (15:06): Well, that’s a challenge for all of us as leaders. I saw a great quote in one of your interviews, Alan, that in this period of time change was free because the alternative to change was even worse. We all have to look back on the way in which we moved so quickly. We broke some glass. We didn’t let corporate bureaucracy get in the way and it actually benefited all of us significantly. And leverage that mindset going forward to act more quickly to be less inhibited by risk, and to see the true benefit of embedding digital transformation and an agile mindset within the way that our organizations operate on a go forward basis.

Murray (15:43): Joe, thank you.

Ucuzoglu (15:45): Alan, pleasure to be here.

[Music]

McGirt (15:46): I want to switch gears a little bit and have you put on your CEO leader-of-people hat and not just mover of money and technology. This has been a really challenging couple of years as we’ve already mentioned, including some coming to the fore of some really pressing social issues, including the environment and race and justice and all that other stuff. Could you talk to us a little bit about how you handled those issues and how you pulse your employees about what’s important to them, around inclusion around activism around the environment and how you sorted that out?

Sloan (16:29): I think one of the most important traits generally and certainly in the pandemic is empathy. I think at the end of the day, you know, regardless of the fact that this is a technology company, it’s run by human beings, right? So no matter how much technology they’re selling at the end of the day, when something goes down for the night, you’re going to pick up the phone or pick up the chat or whatever, and generally speak ultimately to a to human being. So we always say at the company that our people come first and we’ve made a lot of investments into a lot of things to make sure that we live up to the promise that I just mentioned.

Sloan (16:58): The first thing we did, starting probably five years ago, Ellen, is really start reporting to our board on our diversity, equity and inclusion initiatives, and establish public targets, which we posted on our website in our corporate responsibility report last August, the first time publicly, both about where we are today as a business, Ellen, and also where we want to be in 2025. And we post that every year publicly and now we monitor what our you know what our progress is, at every level of the company. A great example of that is our succession planning. So we built diversity, equity and inclusion into our plans not just for the current generation of leadership of the company, but where the company wants to be in three years, four years and five years and those are publicly articulated goals, that not just the public can see but that our team members can see publicly and they can grade us on on how we’re doing.

Sloan (17:48): The second thing we did is we really reformed our focus groups within the company. So we have groups for veterans. We have groups for 10 years plus with with women. We have our Onyx group for African Americans. We have an LGBTQIA group, as well. And really want to make sure that we’re promoting those groups. The last thing I would say is we as a company have a long history of volunteer work, of charitable giving and everything else. You know, we dedicate and donate 10s of 1000s of hours a year back to volunteer work in our communities where we live in work. And I think that feeling of being grounded, where we live and work is hugely important. The main thing is we all do it globally together, you know, twice a year during the work where you can. I think that part really binds us together and we can see how everybody makes the community where we live and work a better place.

Murray (18:36): Jeff, let’s stick with the leadership theme for a little bit because one of the things that has changed the nature of leadership is just the extraordinarily rapid pace of change. And your industry your area, you see some of the fastest technological changes, as you say, things like buy now pay later, changes in payment systems. It’s all changing very, very fast. That makes it hard for somebody in your position to formulate a long-term plan or a five-year strategy because things change overnight. How do you as a leader deal with the extraordinary pace of technological change?

Sloan (19:11): Listen, I think we do a few things really well. First, we’re a technology company. So I think to a certain extent, we’re used to rapid change in our business. We’re very happy to partner with some of the largest technology companies like Amazon and Google on the planet, to get the very best of technology and cut into cutting edge solutions. The second thing I’d say, at the end of the day, is that we’re very close to the customer. One of the things I’m most proud of is our ear is always to the ground. We know instantly what sells and what doesn’t. So a great example is ours when the pandemic first hit so we enabled hundreds if not 1000s of restaurants to go online almost overnight. It was probably you know within the span of a week for being physical only to being virtual as well as physical. That was an underlying trend in our business for a long time. As I say the pandemic probably accelerated that by at least five years. The way we got there is by being flexible in our technology approach but but having our ears to the ground and listening to the customer, and that served us very well.

McGirt (19:14): I just want to build on Alan’s question for a second because executive focus, it’s something that we talk a lot about and just how much time do you have or can you carve out or what is your strategy for thinking about the future? Because you have to think about it on so many different levels. You have to think about the well being of your employees. You have to think about trends that are coming. You have to think about what signals to pay attention. Ear to the ground is one thing but how do you manage the thinking part of your job?

Sloan (20:35) I have other people do thinking for me and with me.

McGirt (20:37): That’s a good way to do it.

Sloan (20:40): I don’t have a monopoly on all the ideas myself.  So look, we have a few elements in our business that speak to that. The first thing I’d say is every other month, I get deeper views on how our businesses are performing as an operating matter, which is really more than anything else a strategy question in terms of how we’re doing. So they’re not focused on P&Ls, Ellen, they’re on focused on future state product development, kind of where do we want to be 6 12 18 24 months now? What are our competitors doing? What’s the market telling us? That’s kind of point number one.

Point number two, we have a corporate enterprise initiatives group that thinks about many of the things that Alan asked about. So cryptocurrencies, blockchain, buy-now-pay-later. We have a group that just thinks about that 24/7 and I meet with them every week, you know, to go through a kind of where that business is, is going. But the last thing I’d say is I think it’s important to leadership matter, Ellen, is to surround yourself with people who disagree with you. And this, I think, comes from my background. I was in banking for 16 years before I came here and Global was actually one of my clients, which is why I came here in the first places. Back in my banking days, you know, your IP was just thinking, you know, at the end of the day. So if there was an issue where we want to inent a new product, you get 10 smart people in the room and we might have 50 different opinions, but you’re going to come out with one.

I like to think that we’re the same way. I like being surrounded by people who don’t agree with wherever I am. And at the end of the day, if there is a problem, we’ll have ten smart people in a room and the most junior person or the most senior person could have the right solution, but I can guarantee you we come out of the room where you have one answer. So I think we’re much benefited by our diversity of thought or diversity of background and everything else or diversity of community. And I think the sum of the parts is is much greater than the whole is the way I think about how we lead.

Murray (22:18): Ellen you want to do our lightning round here?

McGirt (22:21): We’re going to do our lightning round. This is short answers only. We’re taking a pulse of all of our guests to see our leadership next month, three key elements of their business lives. A couple of sentences will do it. And I can already tell that your one of your answers are going to make Alan very happy. The first one is what’s top of mind for you when it comes to COVID?

Sloan (22:42): The health of our employees. There’s no doubt about it. I would say at the height of it, Ellen, and I think this might be large sentences, but I’m really passionate about health here. I want people to want to work here. I want people to thrive and be healthy here. The last thing I want is for someone not to be doing well here. So I think it’s the health and satisfaction of employees. There’s no doubt in my mind, that’s the most important.

McGirt (23:01): Second question is what’s top of mind for you when you think about the economy?

Sloan (23:06): The health of the consumer. So our business is a derivative of GDP growth. So consumer spending, the health, thr consumer. You probably saw retail sales the other day, Ellen, which were good. Our business generally tracks that kind of thing. So really, when there were mass shutdowns during the height of the pandemic, I can tell you that wasn’t good. So the health of the consumer is my primary metric.

McGirt (23:25): And the last one is what’s top of mind for you on your journey as a leader?

Sloan (23:29): Well, I you know, I ask myself all the time, what’s the next stage? You know, it’s funny, I say to my wife, hey, we hit you know, one of our goals and, Alan will appreciate this because he led off with this, one of the goals was when I took over eight and a half years ago was to become a Coins2Day. 500 companies. So we thought we would need we were like sub 2 billion in revenue eight years ago, whatever it was this year, well, our guide the other day for this year was call it eight to 9 billion, you know of revenue this year, and we thought we would need like six, seven, whatever it is to kind of make the list here in the United States. It took us kind of eight years to get there. Now we set a new goal which is to double revenue again and get into the Coins2Day 250 and then 100. I’m not saying that just because Alan is sitting here. That has been our goal.

Murray (24:10): Look out, look out Walmart, keep climbing up that list. I’ll tell you we think fortune should be part of everyone’s goals. Right, Ellen?

McGirt (24:22): That’s exactly right. That’s exactly right.

Murray (24:24): Jeff, thanks so much. We know Global Payments a little better than we did 30 minutes ago. Fascinating conversation. Very fascinating area of the economy. We appreciate you opening the window and giving us a view.

Sloan (24:38): Thanks for having me.

Murray: Leadership Next is edited by Nicole Vergalla, written by me, Alan Murray, along with my amazing colleagues, Ellen McGirt and Megan Arnold. Our theme is by Jason Snell. Executive producers are Mason Cohn and Megan Arnold. Leadership Next is a production of Coins2Day Media. Leadership Next episodes are produced by Coins2Day‘s editorial team.

The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any individuals or entities featured on the episodes.