Episode 1: The Problem Beneath the Problem | Payments Cannot Fail ft. Mike Walters

Hello and welcome to Payments Cannot Fail hosted by myself, Mark Fieldhouse. I'm the chief revenue officer at Form 3. Delighted to be here as well, Mark. Mike Walters, the CEO and co-founder of Form 3. Is this first one of the series actually is really just exploring why Form 3 exists, why did the company get created in the first place? So I'd like to start really as one of the co-founders. Why did you discover a problem? And I'm calling it sort of the problem beneath a problem. Can you talk to some of the reasons why you discovered the problem existed, what would happen if we weren't here? You know, just sort of talk to us generally about the company and the genesis of things. Yeah, sure. And it's come a long way, the organisation in the last, in the last sort of nine and a half years. But I think back to the problem statement that we were trying to solve for, I think it's still as valid today as it was when we first started. Payments is a network effect business and it's the desire to move and transfer value between organisations and individuals. And at the heart of that are the financial institutions that enable and make those money movements happen. And a lot of the infrastructure that makes that work is very invisible to most consumers, smaller businesses and even large businesses. But the challenge that a lot of those financial institutions face, whether they are big or small is similar. And that is that when we first started, really your choices were to build that infrastructure yourself or to source pieces of software from sort of classical software vendor providers. Right. And, you know, sort of build that together as a way of connecting to the different pieces of payment infrastructure in countries. And specifically we're talking about account or account payments now. But that's just really hard. And so when we looked at the amount of regulatory change that was being pushed into the payment ecosystem and we looked at the readiness of and the progression of cloud technology from other industries, we sort of said, well, there's got to be a different way of doing this. You know, if we take that proven scaled cloud-based technology from streaming enterprise scaled e-commerce, and we use that technology to create a platform that financial institutions could consume and use, then we could radically simplify the different technology choices that those banks and financial institutions would need to make. You know, we can make it faster. We can make it more easily scalable. We can make it more consistent. And all of those things matter to the end users of payments because their experience is slicker, more reliable, but more rich in data, more consistent, more performant. You know, and all those things in day to day really matter. So that's really why we started the business. It was, you know, can we take that modern technology and apply it to this problem and solve in a different way? You know, I think the journey that I think financial services are taking, of course, on that global landscape is maturing and accelerating at a huge pace, of course. So if you look at the transformation in other software or SaaS businesses, that transformation happened, you know, years ago, decades in some cases. I think the modernization and that theory around the payment just cannot fail because so much more is dependent on it. It's sort of the building systems from symptoms, which is what I want to touch on now. So talk a little bit about the scale of the resilience and why customers look to form three for being a partner in that ecosystem because it is really crucial for what they're doing, right? Yeah, it is. And I think it, again, it goes back to approaching this problem, not a customer at a time, but approaching this problem really, really wanting to understand how products operate on a platform. And you're absolutely right. That is the the specification of, you know, many industries all over the world, where that is sort of heightened, I guess, from a payments perspective is that the nature of operational resilience has to be different. So, you know, the world will tolerate a 10 or 20 second buffering in a video download or a file that you have to go and retrieve a second time or a message that you can resend or you happen to have got twice. When you're moving money, none of those things can happen. So not only does it always have to be on, but it has to be 100% accurate and it has to be continuously like that for all customers in the same way. And so I guess we've had the opportunity to invest significantly on behalf of all of our customers as a group. And to be able to do that at a level that no individual bank, regardless of size, will have been able to do. So making the industry better for everyone. That's exactly right. And I think learning from our customers is one of the things that we've been really keen on doing since we started is, is, you know, there are lots of insights in our clients because they've been running this payment estate for four decades. And when they ask us a question about how can we make something better from a security perspective or a performance perspective or a functional perspective? The beauty of running a platform with products on it is when we make that change, it is shared and immediate for all customers. And that's a global problem. Because it's not just a colloquial UK issue that payments can't fail. It's a US issue, it's your opinion, it's shared by all. It is. And, you know, I think we're, you know, we're really focused in the, in the accounts of account landscape. And that's been very deliberate because I think a number of organizations have taken on that challenge in the card space over the last, you know, 10, 15 years. But even in the card space, it went through a digital revolution in order to support e-commerce. Account to account didn't have to to support e-commerce. And so it's sort of lagged a little bit behind. And that's led to, I guess, this opportunity now for banks of financial institutions around the world to start to really read the benefits of having, having spent time looking at this now. But there's a lot more use cases coming up now, isn't there for account to account? So I saw in the press some one of the airlines now saying, hey, you can pay for your flight by direct account to account payment and sort of skipping out one or two of those steps. I think what a family interest in talking both to internal employees and to customers is, I just didn't realize that if a payment fails, what that knock on impact could be. So for example, if someone is expecting a salary that they don't receive, can you just talk about just so that the viewers can also understand the impact of that? Because I think some people just expect it to work and they get paid on the first of a month or the 15th. But what happens if it doesn't happen? Oh, it's tough, isn't it? It's tough. And I think one of the things that is relatively unique about account to account, although, you know, I think this is different in some in some card landscapes, but generally speaking, the account to account world is focused on salaries, rent collections, mortgages, loan payments, the ability to send money to trade people to to each other to, you know, split bills at the end of the night, you know, all of those, all of those sorts of things. And they are immediate life requirements. If you, if you, it doesn't matter whether your card is still working, if your salary didn't hit your account, you know, it doesn't matter if you have been approved for a loan to buy something that is, you know, necessary or to fund a big repair on a car or whatever it is, if the money doesn't arrive. And so, you know, I think I've always been very intrigued by the fact that nobody wakes up to do a payment, you know, there is always a real world motivation and outcome from the movement of money in account to account. And almost, almost more so than did your, you know, Black Friday delivery order get confirmed or not. You know, some of this stuff is, you know, is really difficult for all of the reasons we talked about. It's important. Yeah, and I know you and I've spoken a lot that as I go and meet our customers, you know, it's a very privileged role to go and talk to them around the world. And what really surprised me is how incredibly exciting and happy they were about working with Form Three. And I guess that really is testament to the problem that was solving for them. And I think to quote one or two, it's that we remove this incredible headache that used to exist so that they focus on their customer. I mean, is that, you must have heard that a lot over the last decade. Yeah, absolutely. Absolutely. And I mean, you're right. It is an absolute privilege to be leading a group of people in an organization where we have just the best technologists and payment experts that you can find in a really practical way. You know, payments is a really practical business. There are ways of writing down rules of how things should work, but they also actually just have to and so, you know, taking that level of expertise and that headache away from clients is absolutely what we're there to do. And we've been really successful with that. So, you know, we process more than five billion transactions a year for our customers, and that's growing really rapidly. And I think that's just testament to, you know, what starts to happen when you get that expertise, you get that reputation for excellence in technology, you continue to invest in it, and you start to do that in different geographic markets as well. So, you know, one of the complexities of these banks and financial institutions, I think continue to be fined, is. It's not only does a patchwork exist in an individual market, but if you have multiple markets or you're trying to enter a market quickly, the problem is exponentially bigger, much more quickly, and the overhead of managing and running that also exponentially increases in complexity. So we take on that complexity, but I guess the other thing to just reflect on is that really this is the same whether you're a large bank or an agile fintech. You still want to make the money move and you want to do that in the best way that you can. So moving away from customer software and moving towards this platform view, sort of consumable readily. Yeah, exactly right. And we'll touch on. Thanks Mike. We'll touch on the resilience, the security and scale in a few minutes. I mean, I wish a difficult question because obviously you come from the industry before form three, and when I say industry, that's financial services and banking. What would happen if form three didn't exist? Well we wouldn't be having this conversation, but I think really what would have happened over the course of the last eight, nine years is sort of a refresh of maybe how things were being done before. So I think what we've really brought to the industry is proving that you really can do something as critical as payments in a public cloud environment at real scale and to do that in a safe and an industrialized way. So I think the the contrast to that is organizations continuing to invest huge amounts of money in local customized pieces of software and infrastructure, probably at sub scale, at more cost with probably more issues and probably bigger challenges in service provision as well. So I think I'm really proud of the organization and the customers that we work with and the changes that we've been able to make with them. And I think we're starting to shine a bit more of a light on on really the maturity of that particularly cloud native environment for doing something like this. I think if the if one of the viewers actually did a tally of how many payments in and out occur just as an individual and then as a family and then as a group or a company, it's hundreds and thousands a second, right? Do as a platform, is it worth just touching on the this year scale that we deal with and how many transactions we're working with? Yeah, for sure. And you know, you're right and it's mind boggling it and it happens really quickly. As I say, we've process it about 5 billion transactions a year. I mean, all things being equal, that's 1.2, 1.5 trillion pounds a year is running across the platform. Those are transactions from the UK, Europe and the US. And that means that the platform has been and continues to operate at thousands of TPS for our clients. TPS? Transactions per second. Okay. And so that's huge. Yeah, it is huge and I think it's, it really does, when you start to see those things aggregated, you start to see the importance of where we do make investments in security and resilience and, you know, where we've, you know, spent significant money and I guess invention in operating, not just in one public cloud, but across public clouds, to make sure that, you know, in instances where there is some instability in those providers. And we've seen that in the press. Of course, we've seen it in the press. It's very high profile, right? Yeah. Doesn't impact our customers who are processing and, and for an individual bank or customer of ours to have got to that level of investment is, is significant and again, probably could have done, but do you really want to be doing that when we can help with that as a problem or, or, or, or do you invest that effort in, in your customers directly? So, it, so just reflects on, on that resilience piece, just a, a little bit more. So, if I were, I don't know on a Friday morning, I'm sending a payment to my mother who's buying something and an individual provider has an outage, it is what you're saying that the payment just persists and it will be handled by us across one of the other three clouds, right? Yeah. That's, that's exactly right. So, the exam question we set ourselves was, look, public clouds are extraordinarily resilient and they're very complex, so it's not one thing. It's a whole cluster of systems and, you know, and pieces of technology, and they can fail in pieces, they can fail completely, they can fail in regions, they can fail in individual data center components, and the exam question we set ourselves was, if transactions are flowing continuously in real time and a public cloud provider, then we use all three of the, of the largest global providers, if one of those was to be unable to transact for us, would that same transaction in real time still work, both in and out for our customers? That was the exam question and that's what we do today and we've been running that infrastructure now for about 18 months, we've seen real world high profile examples of, of where that, you know, crippling to some organizations, and where that's not caused any impact on our processing flow at all, and it's hard, and, you know, we have to spend a lot of time making sure that we invested in that, you know, appropriately, but it's, but it's really important and I think it's a recognition of the responsibility that we hold for our customers. Yeah, and I think the, when I look back on the journey, certainly that I've seen in the last 12 months, that reliance on the resiliency that we provide and scale is just becoming more and more, now, I'm going to use a statement that's probably unfair, but, but go with me for a second, but, you know, what we do, I've heard, called boring, but critical, or it's the hidden infrastructure that no one sees and gets no credit, but we're actually quite proud of that, right? Or absolutely. Or co-founders, you certainly are, just touch on what that statement means or why it's not as bad as it first zone. Absolutely, I mean, look, if we get famous, probably, that's because something not good has happened. We should be invisible because it's our customers, customers who are actually making payments work. Yeah. And so that is absolutely our job, you know, the humility of doing a job brilliantly in service of our customers so that they can be great for their clients is foundational to the way that we think about the world. And we talk about, obviously, this cloud native and an API first, mentality, and deep to my heart, obviously, is a technical background in software engineering. So when a bank and a FinTech is engineering and you mobile help or a new feature that I don't know, it might facilitate what a new payment style or a loan or a same day loan, talk about the software engineering or delivery in a bank and why it's so crucial to have this modern API first approach from form three in, I guess, terms of speed of delivery for software, software, cadence, urgency. One of the things that we identified quite early is in order for us to be able to develop rapidly and we deploy into production five, six, seven times a day every day. And in order to have that sort of cadence, we needed to understand the behavior of the payment systems that we connected to in the markets that we connected to. So as we were going through the process of saying, there's an upgrade coming, we need to send incremental information or add a new field or something, you know, we needed to do testing and because we do test driven development and have automated all of the testing across the platform, we needed something inside our platform that looked and behaved exactly like the infrastructure that we were going to go and connect to, the payment system that we were going to connect to. And so for every payment system that we connected, we created a simulator. And we were busy using that all the time every day to allow us to move at the speed that we wanted to move. And I think it, I can't remember when we stumbled across it, but the question quite quickly became, well, why would customers not want to do the same thing to us? You know, why would they also not want to know how we would behave in any circumstance and not only how we would behave ourselves, but how that would interact with the payment schemes as well, yeah, and so what we've now surfaced to our customers is the ability to use these simulators directly and to do all of that test driven development against us in a way that means they don't have to slow down. And they don't have to think about whether it is complete in its behavior, you know, these are the things that we use every day for running and testing and developing the platform that our production customers are relying on every day. Sure. And it's funny. I think when you and I first met, there was, I remember us talking excited about the future of payments and why what we do is so crucial. I think it took, to quite a few months for me actually, to really get into the, I guess your psyche of the criticalness or the criticality for sure of these account to account payments. Could we have done the same thing 12 years ago, do you think that the cloud providers and the technology that we use was mature enough? Probably not. I don't think so. I think the timing question is a really interesting one for us. So, you know, we were early trying to do a scale platform for payments. So some organisations are trying to do this using their own data centers. Some people have sort of dabbled a little bit with maybe for some non-real-time activities, there were sort of hosted options for things. I think that the point at which Form 3 started was driven by a recognition that public cloud technology was now at a scale where you could control it, secure it, manage it, and build into it for this type of critical purpose. Two, three, four years before that, I think customers would have had some questions about whether what we were doing was mature enough. That was still hard. The first couple of years, we were early with this for offering it as a service to multiple customers and particularly tier 1 banks, and particularly when those tier 1 banks were trying to do all of their payments for all of their customers. We were early in that process, so we did have a lot of conversations about and a lot of reviews and a lot of audits and a lot of security sessions and a lot of design sessions with those customers to explain how we do this maturely safely and in a responsible way. But now it's kind of the norm. I guess what we are now finding is that having had the experience of now running this and replatforming ourselves and going through cycles of technology refresh, that is in and of itself something which most organisations now just don't have, and so not only are we now giving those benefits of the technology to our customers, we're also now giving them the benefit of really knowing how to run it and to run it safely at scale. Yeah, and I think what I've noticed is when a problem arises, and I'm not talking about a problem with us, but a problem statement in a bank or a FinTech, what I find incredibly interesting is that we seem to be the first place that they come to say, "What would you do with this issue?" You know, I'm not going to pick on one individually, but and not only is that a privilege, but it's also, it gives us sort of moment to pause about where we would go naturally next, because there is a sphere or certainly a focus that we want to maintain or be true to, I guess, from the original tenets of what we engineered, but it is incredibly exciting that the customers and people that we meet at industry events think of us as that innovation partner to say, "Hey, this is really tough. You solved something even tougher. Could you look at this?" I mean, one example actually came up at an event in Vegas last year where it was quite a prominent two-one bank actually said, "Look, Mark, when a payment comes in, so if you imagine a payment flow, what they said is we need to kind of strip that payment apart before sending it somewhere. We need to check sanctions, audit. We need this agentification, operation, or many to occur before we wrap it all back up and send it to a recipient account." And that suddenly struck me. It's very akin to obviously what we're doing already with our orchestration product where a customer can do that today, but then it's sort of this light bulb moment was, "Well, hang on, shouldn't we create this extensible orchestrate?" And you know, maybe touch on that because I know you and I even spoke about that yesterday on the importance of adding, removing, and making assessments on a payment inflow, right? Not only is payment infrastructure not widely understood that the number of things that have to be true in order for a payment to be successful is not a short list. I mean, it does vary a bit by type of payment and organization and size and all those good things, but it's a many, many, many, many stage process. Almost be true. Almost be true. And almost be true because you're moving in a real-world value and you're taking it from someone and giving it to somebody else. And so it's right that those things must be true. That introduces this whole complexity of how do I find out whether each of those things is true? How fast can I do that? And how do I still honor that from Mr. Customers of it being delivered seamlessly and quickly? I think our view on this is that some of those things might be a competitive advantage per bank or per financial institution. And those organizations should invest in those things. Many things are not a competitive advantage. And those things we can help with because that's how a platform works best. So coordinating and making those checks and those flows between different systems is something that we can do and offer support to our customers or an option to use us to help with some of those flows and processes. Not all, but enough to make a real difference, I think. And I think that's an area where we will continue to invest. So not just how does the payment work, but how do we make sure that the most amount of benefit and value from that transaction working can be realized? Mike, I want to thank you for joining me today. We've gone everywhere. We could have gone into a lot more technical depth and explored all sorts of other areas. But I want to personally thank you for your time today and I'm really excited about future episodes. I really, really enjoyed it and great to be able to share where we've come from, where we're going. Thank you.