‘Solving corporate payments is about context, not about who pays’: Mesh Payments’ Oded Zehavi
- Mesh Payments uses a foothold in SaaS payments to help corporates with their spend.
- CEO Oded Zehavi joins the Tearsheet Podcast to discuss the genesis of the firm and why the market for corporate payments is so interesting.
As an early PayPal employee, Oded Zehavi jumpstarted the firm’s Middle East and Africa business. From there, he joined Payoneer to help with a turnaround by optimizing sales, product, and marketing. Now, Oded is the CEO and co-founder of Mesh Payments, a corporate payments firms that uses a speciality in helping firms manage their subscription spend and eventually handle their total spend.
We talk about the changes Oded has seen in the payments industry over the past 15 years, and where he thinks it’s headed in the future. We drill down into opportunities for payments firms in the SaaS economy, and how Mesh uses its experience managing SaaS payments to expand into its clients' total spend -- it grew 600 percent over the past year.
The Mesh genesis story
Well, we founded Mesh Payments looking for huge pains, and the B2B payment space is still a huge pain. It's amazing that when we found a niche, we raised the seed round based on a deck that doesn't have any linkage to what we do today, which is common to many other successful companies. But over time, with a lot driven by COVID, it's became all about solving big things, helping customers, bringing value, and making them happy.
We help our clients solve a really huge pain, which is managing and orchestrating the tens and hundreds of SaaS recurring subscriptions that they have. That's usually how we start our conversation with our clients. And over time, we really take over the entire corporate spend and help them get to the next level of visibility and control, which is really the essence of what financial teams are looking for.
Many of our early adopters are technology companies, but we are seeing more and more non-pure tech companies. The lines are blurring between what’s a tech company and what’s not. We have many media companies and cloud service providers. I'm amazed to see how many service providers in the US are now looking to automate payments -- there is a trend of wanting to get organized and give better visibility and value to their clients..
The pain point
So historically, our clients faced two fundamental challenges. One is how they enable their employees to pay. And when COVID came, this pain became enormous because before, they might have had a lot of physical processes, or could ask employees to come to their desk and resolve their payments. Now everybody is working remotely across the country -- across the world -- and there are bigger needs for payments. So many companies orchestrated payments by sending their dedicated finance team’s card numbers across the world on an email, Slack, or a piece of paper. They’re really losing control. With recurring payments, like subscriptions, it’s also a big problem. Nobody really thought about what happens when a company uses a dedicated card for all these payments. If there’s an issue and we have to cancel that card, the outcome is very painful in the SaaS economy as these services may stop and people get annoyed when they shut down these services. It’s really a big pain, and drove a lot of the growth we've been facing in the last few months.
Mesh Payments’ solution
We believe that every payment should have a context, meaning it's not about who pays -- it's about what you pay for. That's different to some of the approaches traditional banking cards or even next generation corporate cards take. In our mind, we orchestrate the process from when an employee decides that he needs to purchase something and up to the stage that the finance team needs to approve that payment. And in our world, everything should be approved by the finance team, which are the gatekeepers of the organization. So, everything should be synced with the accounting team and the accounting system with a single source of truth to anything that happens in the organization when it comes to payments. We orchestrate all these processes. All of this resides on top of very sophisticated infrastructure that enables us to issue cards, either virtual or physical, based on the use case and based on the need. And that's really what provides value to our clients.
Competition and new players in the market
The market opportunity is infinite. If you add all the vendors in our space together, they don’t cover more than one to two percent of the addressable market. Most companies still use a very traditional corporate card issued by a bank that doesn't have any sophistication and is totally passive. The biggest challenges for finance teams are complacency and inertia. They do what they’ve done for so many years, and they think that's the only way it can be done. Nobody ever told them there is a better or a more sophisticated way of handling payments.
You probably notice there are some very noisy companies that have come to our space within the last two years. Following the shift in the mindset of finance teams during COVID, and the shift in the way companies operate remotely and in a distributed way, some of these vendors have been really successful in getting on the front page. Some of our clients have used these new vendors, and we have done a lot of work making sure they understand our value and why we think we are the future of their corporate payments.
First of all, I am always honored that I'm being compared to some of these amazing companies, like Brex. They've done great in creating a lot of awareness of our space, raising a lot of money, and really creating value for clients. I think it's very different between the different vendors. And usually people don't understand the distinction between them; some offer just another corporate card with some sophistication and more focus on the banking side, and they try to become a startup bank, which is great for some small cap companies that have challenges with getting their own bank account. But when it comes to sophisticated companies, and I'm seeing more and more, the lines are blurring between SMBs and mid market companies. Some of these firms are really behaving like mid market companies when it comes to corporate finance. And when the company is sophisticated enough, they need things with better capabilities, that Brex will usually not offer them.
We’ve grown more than 600 percent in the last eight months, which is measured by volume. To me, [the most important metric] is how much money we’re processing for our clients, not by number of cards or number of clients -- it's the volume.
In the old world , you try to generate as many cards as you can. In our model, in the next generation, we’re trying to capture as much corporate spend as possible, regardless of whether it's done by a very sophisticated single card, or being divided into thousands of tiny payment instruments running on the Cisa network.
So a lot of our conversation, by the way, is with the SaaS vendors themselves and how we can benefit them -- how we can help them to shift payments into full automation. It's also one of the latest things to come into center stage: how you automate the collection of the receipts after transactions. Many of our clients will reach 70 to 90 percent of fully automated receipt collection that will be matched automatically to their accounting system. That's a very important KPI and many finance teams have been getting into this mindset. The new world, and the post COVID world, is all about automation and all about minimizing manual efforts. And that's really exciting.
One goal is continuing to provide more value to more clients, or to our existing clients. A lot of the team here are veterans of the payment space. A lot of my teammates came from these amazing companies, like PayPal, where we are really focusing on leveraging our payment infrastructure to enable value for our clients.
The second thing is about distribution -- we are going to announce a lot of partnerships with companies that are sitting side by side to us. I'm a huge believer in the synergy between payroll and non-payroll payments. We will announce some of these partnerships with some of the biggest payroll companies, enabling clients one stop shopping for all their payments.
The third thing I’ll mention is that a lot of what we do are integrations into systems and services that will enable us to provide insights to our clients that converge the things we've seen in the payment transaction itself and things we are seeing beyond the payment transaction. It's all about giving finance teams better control, better visibility, and of course saving them money. A lot of our clients’ feedback is that after following using our system they've saved so much money by eliminating duplicate subscriptions, and they finally understand where they are spending, so they can reduce costs where it matters.