Sue Britton, CEO of Firefly Growth and a seasoned expert in the financial sector, engages in an insightful dialogue with Hamed Arbabi, the Founder & CEO of VoPay, about money movement. Specifically, how software solutions are doing it today, their challenges, and how VoPay's payment API can help them do it better, faster, and at scale.
Sue Britton: You're listening to Fintechs, a podcast that explores the innovations and challenges in Canada's FinTech landscape. I'm Sue Britton Britton, CEO of Firefly Growth and an entrepreneur with over 30 years of experience in the financial industry. I also serve on the FinPay committee and am an advisor for Holt Exchange.
Join us as we sit down with industry leaders, trailblazers, and pioneers to discuss their journey, the evolution of FinTech, and what's next for Canada's dynamic FinTech ecosystem. Today, I'm joined by Hamed Arbabi Arbabi, CEO and founder of VoPay.
Sue Britton: Welcome, Hamed Arbabi.
Hamed Arbabi: Thanks for having me. It's a pleasure.
VoPay's Founding Story
Sue Britton: So, Hamed, it's great to meet you. I've heard a lot about your company and about you. But maybe you can tell us about VoPay. I think you founded the company in 2014. What has been your journey? Why did you start VoPay? What is the essence of what you do?
Hamed Arbabi: Yes. So, I come from a telecom background. In my previous venture, our service focused on wholesale carrier service. We contracted telcos domestically and internationally, providing what is called airtime. The biggest challenge was tracking reconciliation and the movement of money, which was a mechanical process for us. Our finance team was growing as fast as our technology team, and I was curious about how this problem could be solved for organizations like mine. We also had a retail operation with 6,000-7,000 store locations where we received paper cheques, and that was another issue on the macro side. So, we had macro problems with large transactions domestic and international, and then we had micro problems at the retail level. And this led to my next venture.
After exiting that venture, I started educating myself to understand the entire ecosystem, where the banks, central banks, and payment organizations like Payments Canada or NACHA were. I envisioned VoPay having a position where it could help organizations streamline their money movement operations.
Sue Britton: Wow. Interesting. So, it's been a journey for you over these past six years. Can you give us an example of some of your clients and the problems you solve for them?
The Payment Problems VoPay Solves
Hamed Arbabi: VoPay offers a set of APIs and resources, such as SDKs and white-label experiences, to software applications or ERPs and helps them to either bring money movement into their entire solution or enhance how money movement is currently structured. For example, in the lending industry, which covers about 30% of our customer portfolio, we partner with loan management software providers. The way we contribute to the industry is by partnering with these organizations called LMS or loan management software solutions, arrangements offers are the solutions or those verticals, software applications that service a lender so lender want to sign up, start offering loans, they use that software, they issue loans, they calculate the interest rate, they delay the approval and funding and repayments, but traditionally, when it comes to processing the actual payments of the loan or what they refer their industry as funding the loan, to take that information to their bank or a platform outside the core software, they manage your business on daily basis that process that transaction and come back and manually reconcile within that core platform.
The same thing when it comes to repayment of the loans that they have to take the information for the loans that are due on that certain day, process with a bank or service provider and then reconcile it manually in the system so there is inefficiency, the risk of human error, and it's getting more problematic as the scale that costs 1000s or 10 1000s of loans or borrow portfolios, it's it becomes hectic to manage and grow that way.
So we bring the entire solution through a partnership with these loan management software into the core. So they have one dashboard that they have, they can do they can manage your entire business operation, which means when the loan is approved, by clicking on a kind of a button within that application to say fund the loan, we will they will communicate with our platform. We manage the money movement and agree console back to the book, same thing with repayments. We tell them who has paid and who did not pay, and then they can manage that business more efficiently within one interface rather than having multiple user providers and helping them to improve their bottom lines. You know, reducing or relocating FTE hours for more to do. More to areas that contribute more to their business growth rather than tracking and processing transactions manually.
Sue Britton: Very interesting. And the manual part of it? If they didn't have you, how would this money move?
Hamed Arbabi: It's what we see in our everyday banking so it's no different that as a person, when you want to send a transaction to an individual from your bank account, imagine a transfer or a paper cheque that is what I always try to help businesses to understand that there is your business has no difference without technology on how you manage your personal payments with a difference that you have to do this at scale. You have to register these in another system, which is your accounting software; otherwise, you will not have any visibilities on your business financial activities.
Automation is the key to growth and accuracy for financial data because, at the end of the day, any business that we track is a component of money movement. And the better you manage to have the finances it improves your cash flow. It improves your operation efficiencies.
Sue Britton: Very interesting. I'm a small business, so not likely, you know, not likely a potential customer for you, but it sure would be nice if one of my providers enabled me to move money in it in a more efficient way because at the moment, I have two different business accounts and a personal account and I have no way of moving you know more than $3,000 between those business and personal accounts. It's very frustrating.
Hamed Arbabi: We are getting there. We have started working with major accounting software brands. I can't share the names, but our aim is to make money movement more efficient for businesses across Canada and the US and make this available to as many businesses as possible.
VoPay's Mission and Value Proposition
Hamed Arbabi: Exactly. I want to quickly touch on kind of our three goals as part of our mission statement. What is digital transformation and that means empowering businesses to transition to digital services, which finance is one of the key pillars in digital transformation.
Financial Inclusion which is I think we look at financial inclusion from different points of view, how financial services are not accessible the way they are supposed to be in Africa, but we don't consider SMBs that are not included in other financial services. That's also a lack of financial inclusion. We see that even across regions and individuals in Canada, so our goal is to enable as many platforms and software applications to be able to reach the last mile. Individuals in remote areas or businesses that can operate better and faster with access to more services. And finally, sustainable financing, which we want to eliminate paperwork, cheques, and anything that can have a negative impact on the climate. So, we are really focused on marrying that digital transformation into sustainable financing to eliminate those inefficiencies.
Sue Britton: That's very clear and impressive. And you know, it's not often you have a FinTech who has such a clear, mission and value proposition. So beyond lending, which you said is about 30% of your business, what do other market segments look like?
Who Is Using VoPay: Industry Use Cases
Hamed Arbabi: So there are various industries that come to us, but in terms of for pay, we, other than lending, we are fairly invested in Prop tech, which is around Property Management software that that the rent payments across Mom and Pop landlord or commercial landlords and how to also pay their bills.
We are also, I think, pretty strong in Human Resource Management software there are various use cases, such as payroll management or management software, that leverage our platform, get your worker platforms that use our services to to streamline the money movement, and there are lots of complexities across each one of these subcategories of human resource management.
We are expanding into two other verticals in 2024, which are insurance and healthcare. And in insurance, we work so we have the same approach to every industry we go because we want to be able to have an impact in every vertical way to insurance companies one by one, it's probably not going to help them to address the problem that they have for inefficiencies. So it's just we are bringing additional service, but we want to live within the core software application that they use to manage your business on a regular basis. So, we are working with insurance software providers to help them automate claim payments, premium payments, and payments to brokers from carriers carriers to agents. So there are those complexities that involve multiple entities in every transaction, and the same thing in the healthcare space. How we can improve payments across you know, hospitals and doctors and patients and doctors and and all the entities that are involved in that industry.
Upcoming Regulatory Changes in Canada
Sue Britton: Wow, it sounds like you have a giant market opportunity based on what you've described was nice. Okay, so, I know we're not going to talk too much about like they are at all really about the regulatory changes, but it strikes me when I listened to you that when the real-time rail is up and running, that you might be one of those, you know, as the Bank of Canada likes to say, payment service providers that might enjoy direct access and to be an RTR participant. So move your own money directly within the payments rails. Is that a fair statement?
Hamed Arbabi: Yes, we are looking forward to it. In my experience in regulated industries like telecom and finance, I see regulation as safeguarding the industry and protecting against bad actors. I think the new changes might be challenging for smaller fintechs, which will not be able to cope easily, but as an industry kind of player, we want to make sure we support the entire ecosystem and make sure that if you have the ability to build services or solutions that can help other providers that are more maybe focus on sales or sales organizations and technology organizations, they might not be well adapted to these new regulations or they cannot build the tools to stay compliant. So we would just just as in a general kind of explanation, we are building a solution that will other parties while we aren't, we want to stay on top of being compliant. We are also building tools and services for other fintechs that they can use to streamline their regulatory compliance report. It's reporting and the frameworks that they have to comply with.
Sue Britton: That's great to hear. I think that will become very important as we sort of start 2024 is you know, you probably know Ron Morrow, the executive director of supervision for the Bank of Canada, and he's very concerned that, you know, payment service providers register, but then ultimately, you know, he's sort of characterized as like, it's, you know, he says there are 2500 PSPs in Canada, but it's a long tail. So there are a lot of very small companies. and I think everybody's, you know, maybe just generally concerned that to your point that they'll be able to actually, you know, find they'll be able to register, but how do they actually, you know, put those practices in place so if you're there to help them for that with that I think that's going to be welcome news
Hamed Arbabi: I think the sad reality is that there will be some consolidations; smaller companies will either merge, or bigger ones will take over the mid-sized ones. And that's not just because of the regulation but also because of the economic challenges that we are facing right now. Sure. It's not just just mean takes it's many other industries, especially in the tech space, we see lots of challenges right now from, you know, layoffs and all the other things that businesses cannot scale. It wasn't the pace of growth everyone was expecting.
Sue Britton: Yeah. It is incredible to think of how much we have experienced over the last several years and, you know, here at home as well as, you know, globally, and it's probably too hard to actually sort of pull apart. Is it the impact of the economy? Is it the impact of the pandemic? It is hard to say exactly what it is, but there's no doubt that things. Things are much more difficult than they were, you know, in the heydays of pre pandemic time low interest rates, you know, grow, grow like crazy.
VoPay's Expansion Plans
Sue Britton: Let's talk about your global expansion plans.
Hamed Arbabi: So, from the day that I founded VoPay, my vision was to turn it into a global Fintech-as-a-Service provider that we can operate in various jurisdictions. Even the way we build our platform has those components built into the heart where we can it's agnostic, where we can easily make changes based on valued various components within each jurisdiction. And our growth strategy as we have been organically scaling into different, different territories. So we are right now in Canada and the U.S., and as we speak, we are in the process of going live in a few Latin American countries such as Brazil, Argentina, Chile, and Mexico, and also getting our shops set up in Europe to basically have these regions covered in 2024. And the way we do that, or the reason we do that, is that we have these partners that operate globally like the same software applications that I mentioned in different verticals are not just operating in Canada or the U.S.. Some of them have an operation in Latin America. So it's for us. It's a no-brainer for us to grow with an existing partner that will basically finance our operation for a certain period and help us to build, validate, and adopt the products to the local market with their support and, then scale from there, organic. And we see that across many of our partners, where some of them are headquartered in Europe, they saw it in Canada. They scale with us in the US, and now they want to leverage our technology in Europe because they enjoy the value that we bring to the table, and now they want to use VoPay as their primary choice for Fintech services.
What Do Payment Partnerships Look Like At VoPay?
Sue Britton: And what makes an attractive partner to you in terms of, you know, maybe a bit of the characteristic of a company that's looking for, you know, a payment processing provider like yourselves?
Hamed Arbabi: I think we are well suited for larger organizations if I understand the question like an ideal customer profile. So we are well suited for larger organizations that have complex money movement operations, which means there are multiple entities involved. Imagine Walmart, which has a North American operation, has wholesale, retail, and have locations, and those locations have vendors, or they have universal vendors, and then imagine how every entity will move money behind the scenes.
To pay it's not just the payments are not just credit card processing that we tap at the location when we purchase something that money needs to move multiple hands to continue the cycle in the supply chain. They need to do payroll, they need to do taxes, they need to pay agents, brokers, and transportation. There are so many components involved. And our platform has the capability to mirror their existing ERP systems. So the ERP system, if they want to automate the payment or get rid of, you know, manual processing of cheques and wires, they can easily replicate that process with our fully customizable APIs to reflect all the entities and how every organization transacts with the other one.
Sue Britton:
Okay. And so is there in that then is there like when I think about insurance, there's, you know, many, many, many brokers who, you know, obviously, we'll be looking at their back office providers to help them with some of this, but likely there are some technology challenges there to be able to move money the way you do.
And so is there a, you know, a sort of segment of the market that's too small or maybe that's served through other partners?
Hamed Arbabi:
I don't think so. The way we look at it is how we reach the smaller players where, okay, the broker that has 1000 policies, and they have to do claim payments or various use cases. And for us, if we directly sell to them, we are not going to be able to serve them well because we want to make sure, as part of our vision and mission, we add value. It's not just a transactional aspect. My point earlier is that if you're adding another provider, which means you're still doing things manually, but if we can go through the insurance management software that services that broker or their everyday operation, Now that broker can benefit from automated money movements, and payments and transaction management, within that core platform without dealing with a chequebook or another interface that they have to move data back and forth. To get to manage funds and and transactions.
Sue Britton: So financial institutions certainly have this challenge as well, right? As some of them don't have the ability to access or provide payment services to their clients. And, I guess that would be a potential like credit unions who work through the credit union central's and, therefore, are either limited by or supported properly, regardless, by those central's you could potentially work with a credit union central to help them expand their payment capabilities.
Hamed Arbabi: Exactly. We are working with a lot of financial institutions because we always collaborated from day one and, and it's to your point, we see that challenge in the treasury and cash management vertical of those institutions if it's tier one FI (Financial institutions), that has an interest in implementing the API, they collaborate with our team, and then we help them to build that faster.
On the credit union side, we take the same approach as we do to vertical software applications.
Our goal is to collaborate with those organizations so it gives them the ability to enhance the money movement or general cash management across all the credit unions.
Open Banking, Consumer Directed Banking And Industry Innovation
Sue Britton: Okay. I have a really clear picture now. I can almost see your sales and marketing plan in front of me. So, how, let's talk briefly about open banking. And I think we're supposed to call it consumer-directed banking, but anyway, so what impact do you think that's gonna have on your business?
Hamed Arbabi: Yes, I think the key advantage is the transparency and accuracy of data. Right now, we have all of these partners that are doing a great job, even though, you know, they are kind of probably going through various processes to capture the information.
I think open banking is becoming more mainstream; day by day, there are more people who are learning about the values of open banking, and I think a standard framework and ownership of data and the regulation around it will help the service providers to offer higher quality of service. It helps banks to monetize the data that is leaving in their kind of servers or platforms and consumers to have access to services that they need to provide their financial data faster and in a more effective way. And I don't see that right now happening in the absence of a fully implemented open-baking framework in Canada.
Sue Britton: Yeah, yeah. I worked in financial technology before I became an entrepreneur for 25 years, and we used to say that as a technology solution provider, regulation was the mother of innovation. Most people would not probably agree with that. But, you know, when you see the impact, I mean, regulation is the one thing that you have to, you know, you have to adopt changes, and that requires you and as I think, you know, in both cases for payments and for open banking, I think it's it's going to be a really interesting couple of years ahead of us. Because, you know, some will adopt, you know, approaches or strategies that will be about defending their position. And some will take, you know, opportunities to grow. And I think the growth is going to create all sorts of new innovation, lots of need for what you do.
Hamed Arbabi: They always say innovation comes before regulation but now I think that's not the case anymore. Innovation comes before regulation.
Sue Britton: Yeah, yeah. I learned something in Ottawa last week when I had some meetings with the Bank of Canada and Finance Canada, and, you know, I continue to be humbled, and maybe a bit, you know, sort of feel like I'm continuously naive about the fact that you think that things are, you know, that there's armies of people and things are so you know, sort of choreographed and, you know, like, there's 1000s of pages of work that's been done for a lot of this. These things like open banking and all the payment stuff.
And the reality is it comes down to a small group of people who, when you talk to them, are very open to, you know, sort of industry involvement and engagement in their plans for implementation. I think that would go for both Ron Morrow and his team and Finance Canada. So it's like, it's good. Yeah. It's like when I think about when, you know, when you think about going to the hospital, you expect that you'll get the care you need, right? They'll save your life. And I think that is true because we have doctors, and we have, you know, systems that that do provide that. I think the government's a little bit different. I don't think the government is necessarily as knowing, and they don't necessarily have all the answers; they need industry to help them. So anyway, I'm getting off my soapbox now.
Hamed Arbabi: And they don't have the expertise across every industry. Every industry has so many sub-verticals. I think that the challenge is sometimes there is a lack of understanding of what we are trying to do.
In the same way, we talk about educating the consumer about the risks and benefits of Open Banking and everything else. I think it's the responsibility of innovators, entrepreneurs or businesses to invest time and resources to educate people who are within the government entities that are making those decisions. Because if you do not know what you're addressing or what problem you're trying to solve, you're always taking slower steps, an approach where you want to make sure you don't make something you don't approve of something or you don't regulate the wrong framework.
So I think that's the biggest challenge where there needs to be constant messaging and education across various government entities that are involved in various subjects you have to make them subject matter experts to do things that will benefit you at the end of the day.
Sue Britton: Well, that is so well said. Those are very insightful comments, and probably why you're part of fintech Canada, which is right because, ultimately, it's doing a great job sharing some of these thoughts with the right people.
VoPay's Company Culture
So maybe, maybe we can end with a question that's a little bit more about, you know, sort of you and your philosophy and how you are shaping your culture at VoPay? I'm sure you've learned many, many things along the way. But how does all of that shape how you're growing the company?
Hamed Arbabi: It's a great question. When it comes to culture, there are different assumptions. It's always a tricky question, but we don't have the typical startup culture of bean bags and a fancy kitchen with all the perks. I always use the metaphor of teaching someone to fish versus giving them a fish.
So we always try to help our team members elevate; we have, I would say, a very precise process for onboarding new team members. It's not about that what we look at is their character, and we look at their skill sets after. Because if their heart is in the right place, then they can be a player in the area of their activities or involvement in the organization. And it's a culture of collaboration. Everyone supports each other everyone wants to make sure their colleagues are gonna grow with them. And we have a simple philosophy of hiring from within that. If we want to open a new opportunity at the director level, the manager level the VP level. We give that priority to someone within the organization to prepare themselves to educate themselves and really move and grow within the organization.
Sue Britton: Wow, if you're hiring, it sounds like a great place to be. Thanks for sharing that. Those are really important aspects that drive employee engagement and happiness. Very cool.
How VoPay's Payment API Is Helping Businesses Across North America
Sue Britton: Let's wrap up. I want to give you a chance to restate your value proposition and position in the market before we end. For those who are considering partnering with VoPay, tell us again why they should reach out.
Hamed Arbabi: As I mentioned, part of our mission is to empower digital transformation. We see the trend of many vertical software applications adding value-added services, with money movement being a key component in many industries. Today many software companies want to integrate fintech into their solution.
We provide that toolbox, so they don't need to build everything from scratch. Partnering with VoPay, we operate as an extended arm of specialized ERPs, in helping to integrate money movement and payments into their core value proposition 10x faster. We continuously innovate, so our partners don't need to worry about staying on top of payment technologies.
Sue Britton: Thank you very much, Hamed Arbabi. Thanks for joining Fintechs, eh? I really appreciate it and am so glad to meet you. Hamed Arbabi Arbabi, CEO and founder of VoPay, I think you have a very bright future and I wish you all the best.
