Hard Wired

Posted by
February 11, 2022
Investor Ben Horowitz wrote the best-selling book “The Hard Thing about Hard Things.” This is not a book review, but a nod to the spirit captured by the title.

Hard things are in fact hard, and getting it right makes all the difference in the world.

In a world of cloud services, pervasive APIs, and low-code/no-code solutions, establishing a technology company isn’t the formidable endeavor it was even a few decades ago. Certainly, this haste can make, if not waste, significant problems down the road. Particularly for Fintechs in the financial services and Payments space, haste won’t fly.

There are plenty of reasons why this is true, but we’ll focus on three here:

    1. Platforms versus Point Solutions

    2. Security

    3. Carbon

Platforms:  At Zact, we realized early on that the Payments space was not only huge and important but also the very definition of connected complexity. Seemingly easy actions by a consumer or a business (swiping a credit card, initiating a payment, etc.) create a series of complex, multi-system steps on the back-end. As such, Payments and Spend Management requires a set of interoperable applications, sitting on top of a platform, which is itself connected to the core payment rails. Point solutions – like standalone expense reporting, travel booking, or fleet management apps – don’t cut it. 

Security:  Technology leader Charlie Bell calls Cybersecurity “one of the greatest challenges of our time.” When it comes to Fintech – an area intimately connected to the grail of money – security is not an afterthought. Covid has increased the card-not-present (CNP) transaction volume with a proportionate increase in fraud. Haste in this critical area of security and fraud protection can backfire. Putting the effort in to create a dynamic security framework and backing it up with not just PCI but both SOC 1 and SOC 2 compliance should be a necessary step. Business to business customers and consumers alike should demand it of their Fintech partners. Zact has done the hard work in providing the same bank-grade fraud protection that large money center banks expect.

Carbon:  Finally, there is the issue of human beings, who are both error-prone and, at times, dishonest. Fraud costs on the order of 5% of revenue, and up to 17% of that total comes from out-of-policy expense reporting. While the darker side of fraud can be thought of as “human nature, ”systems must be instated not only for early detection, but for elimination of fraud at the source. For unintentional error, the same standards apply.

With the staggering numbers involved in Payments – hundreds of trillions of dollars in motion – it’s important to pick your fintech and Payment partners judiciously. At Zact, we believe in the platform approach and the need for bank-grade security, compliance, and governance. It was very hard to build our entire integrated solution with those ideals in mind. But the great thing about hard things is that not everybody can do it.