The Executive Interview Series provides readers with exclusive insights from movers and shakers in the payments industry. The Payments Industry is under continuous transformation, as such this series provides diverse perspectives on everything from strategy to payments technology and to the future of the industry.
In this interview, TSG’s Market Intelligence team-member Alex Ferguson and Jared Drieling spoke with FinMkt Vice President of Strategic Partnerships Todd Aronoff to learn more about his thoughts around current trends in the consumer and commercial lending ecosystem and what its future entails.
BACKGROUND: Todd has deep and broad e-Commerce, digital payments and lending experience. He is currently VP of Strategic Partnerships for FinMkt, a venture backed Lending as a Service (LaaS) technology platform. Prior to FinMkt, he served as Director, Global Credit at PayPal responsible for the Large Enterprise merchant segment. Prior to PayPal, Todd held leadership roles in product management, marketing and partnerships functions at China UnionPay and Citi.
Q: Alex FergusonHow did you get into the payments industry?
A: Todd AronoffOut of college, as with many, I was not sure what I wanted to do. I was always fascinated by technology, innovation, and industries that were constantly evolving. My first job was with a strategy consulting firm. I worked on a couple of different projects for banks that were primarily payments related. I’m dating myself a little bit, but one project involved advising a large bank on whether to join a pilot for a new technology allowing consumers to store cash on a smartcard. At the time, cash accounted for 80% of payment volume and now that’s essentially flipped 25 years later. At the core of commerce, payments are how value is exchanged and the industry is constantly striving to find more efficient and secure payment methods. The payments business is super dynamic and constantly changing and that’s what has kept me in the space.
Q: Alex FergusonWith that said, what do you think some of your major contributions to the industry have been either personal or a part of an organization?
A: Todd AronoffOver my career I have been fortunate to work throughout the payments ecosystem including banks, networks, merchants and across geographies to advance the utility and value of digital payment products. When I was at Citi, I primarily spent time managing credit card portfolios and launching new credit cards and loyalty programs. At China UnionPay, I had the opportunity to help build one of the largest global payment networks across the Americas. I moved into the eCommerce space at PayPal, where I worked with the largest merchants to expand their point-of-sale (POS) consumer financing capabilities. And now at FinMkt, I am fortunate to be helping build a best-in-class technology POS financing platform that connects lenders, merchants and consumers. In my career I’ve strived to bring new ideas around paying and getting paid to make the process simpler, faster, and more rewarding.
Q: Jared DrielingNone of us have a crystal ball but I think with the different perspectives you have on the ecosystem, it would be interesting to hear your take on what you believe will be the biggest payments opportunity over the next five to ten years.
A: Todd AronoffThere’s so much going on right now, so many different pieces of the payment ecosystem that are evolving on a daily basis. That being said, I’d say removing friction out of the payment transaction to the point where the exchange of funds isn’t front and center. I think there’s a huge opportunity to drive consumer and commercial commerce. Today, you can preorder your coffee and pick it up without waiting to pay a cashier. There’s no in-person exchange of payment when you do that, you just order ahead and grab and go. Or you could order a pallet of materials from ten thousand miles away for your commercial establishment without having to enter any payment information as a part of the transaction because everything has already been prescheduled including escrow in a seamless fashion. I think that’s a massive enabler to drive efficiency. Removing the payment friction out of a taxi ride gives valuable time back to a rider who may be running to a meeting and gives the driver a chance to squeeze in another ride before going off duty. It’s a win-win.
Q: Jared DrielingLooking specifically into the financing and consumer lending space over the next five years, do you see a lot of the same similarities?
A: Todd AronoffI would say yes and more. In addition to improving speed, security, and customer experience, leveraging data is also a big opportunity on both the business and consumer lending side. Lenders will continue to make more informed underwriting decisions by pairing data with AI and machine learning and then delivering funds in a matter of seconds. Funding transactions instantly will become more ubiquitous and building customized offers for individuals and businesses will become more one-to-one. Financing terms that are at the individualized level help borrowers and lenders build better, more balanced relationships. That balance hasn’t been there in certain cases, so if you can find a situation where there’s an exchange that benefits both sides, and both sides are feeling good about it, then you can create more lasting relationships and that win-win experience.
Q: Alex FergusonWhat would you consider the major pros and cons of other business lending solutions out on the market? Things such as traditional bank loans, merchant cash advances, and other lending marketplaces?
A: Todd AronoffOn the business side, lending has advanced quite a bit with respect to the pace of underwriting and funding. I look at some of the pros being a more streamlined user experience from the time of application to servicing, along with more favorable and customized product and loan terms whether it be credit lines, term loans or factoring. On the flip side, there are a lot of people that are competing for business lending volume. Some of the lenders haven’t been around that long. During these times of financial uncertainty, there may be some concerns around the longevity of those lenders and you obviously want to borrow from someone who will be around through economic cycles. So businesses must balance who they’re borrowing from and if they’re going to be around over the long term.
Q: Alex FergusonA similar question, but perhaps a bit more focused on the consumer lending side, do you see any different major pros and cons between POS lending financing solutions centered towards consumers?
A: Todd AronoffThere is also a huge uptick in the number of solutions that are being offered in the marketplace to the point where merchants and consumers in the ecosystem are having a hard time distinguishing one from another. Merchants in almost every vertical can offer consumers more options on how and when to pay. These could be in-store, in-person, in-home or online. Having lots of different options is great for consumers to buy now and pay over time so long as the terms are fair and transparent. In terms of cons, I’d say the ease of applying and getting approved has become so simple that consumers can easily extend themselves more than they would normally want to. People need to go in with their eyes open and make sure what they’re doing is going to put themselves in a position to be able to pay off those loans and conduct and manage their finances appropriately.
Q: Jared DrielingWhen you’re trying to establish strategic relationships or partnerships, what do you think are some of the more difficult hurdles you’ve encountered or continue to encounter?
A: Todd AronoffSome of the most critical hurdles I typically encounter include finding the right sponsor within an organization who understands the business case and can influence or make the partnership decision. Those hurdles have heightened when I have pitched an offering that is fairly unique or has had an atypical partnership model. Partners have varying levels of technical knowledge so finding the team who understands what you’re offering and the unique value that it will bring to both the partner and its consumers can be tricky and challenging. For example, in my current role at FinMkt, I am introducing banks and merchants to our multi-lender financing platform which is a relatively differentiated approach for POS financing. Last but not least, integration is a key hurdle to overcome. Especially on the bank side, several lenders have unique technical guidelines and compliance standards. To be able to meet those unique needs, our team must be thorough, flexible and creative in order to ensure that the contemplated partnership can be implemented as envisioned in the contractual agreement.
Q: Jared DrielingTodd, I think I know the answer to this next question, but from your perspective what are some of the more striking differences you’ve noticed in your transition from some of the larger corporations you’ve been at compared to an emerging venture backed company like you’re at today?
A: Todd AronoffWhen making the transition from larger corporations to a venture backed company, you need to be ready and excited to wear lots of hats and roll up your sleeves and get projects moved along to maintain momentum. You also must embrace an environment that thrives on rapid decision making, evolving business strategy, and flexible product roadmaps. These themes are all critical to take advantage of the highest priority opportunities and build a viable business model. The pace is much faster and the level of collaboration is higher which can help to avoid the pitfalls found at larger organizations where teams are competing for resources. While I’m still relatively new to FinMkt, it’s been an incredible experience to be part of a company where everyone is focused around building a best-in-class financing platform that provides a win-win-win solution for lenders, merchants and consumers.
Q: Alex FergusonWe’ve talked a little about the differences between the shifts between large corporations and emerging startups. But what are some of the skill sets that you’re able to leverage from those previous roles at large corporations for a growth stage startup like FinMkt?
A: Todd AronoffAt FinMkt, my team speaks to large complex, established organizations that have been entrenched leaders in their industries. It’s critical to be able to navigate large complex organizations, how to get to the right decision makers, and build a business case to help them be your sponsor. I’d also say understanding the payments and lending ecosystem and the interplay between all the different pieces is something that I leverage every day. FinMkt has a diverse team with deep knowledge from across the fintech landscape which is very helpful to deliver best solutions for each of our partners.
Q: Alex FergusonHow is your company coping during the COVID-19 pandemic and how do you think the pandemic will impact your industry?
A: Todd AronoffFirst, I would like to express my best wishes to everyone during this unprecedented and uncertain time. Our team at FinMkt, both in the US and India, will remain intact and work remotely. Fortunately, we have a healthy runway that will allow us to continue to build solutions for our partners and emerge from this downturn stronger than ever.With respect to payments and financing, the pandemic has already accelerated the ongoing shift to digital. For in-store commerce, contactless and cashierless payments will be adopted globally at a faster rate. While online sales in the US spiked over 25% last month primarily from online groceries, I do believe more people will remain eCommerce shoppers now that many have essentially been obliged to buy online. As for point-of-sale financing, the upward trend will continue to mirror the growth of eCommerce and I also expect to see more digital, instant POS financing in offline verticals like home improvement, healthcare and auto. Banks with strong balance sheets will increasingly partner with FinTech platforms to help them participate while FinTechs with balance sheet risk may not survive a prolonged recession. The increasing consumer desire to have more control and flexible financing terms will make it even more important for merchants to offer affordable financing options for shoppers across the credit spectrum.
Q: Alex FergusonTell me about yourself. What do you like to do outside of work?
A: Todd AronoffOver the past 5 years, I have become an avid runner which is something I’d never thought I would do. I try to get a run in most mornings with a couple friends, which definitely helps me both mentally and physically. I’ve had the opportunity to run the New York Marathon for the past 4 years and I’ve set a goal to run a couple others outside of New York. I also like to travel on both a personal and professional basis and spend time with my family whenever possible.