Fintech off the shelf: Making an all-in-one approach pay off

More and more digital businesses want to be viewed as a fintech provider. Arik Shtilman created a thriving start-up by offering companies a simple way to make that leap.

In this episode of the McKinsey on Start-ups podcast, McKinsey executive editor Daniel Eisenberg speaks with Arik Shtilman, co-founder and CEO of fintech platform provider Rapyd. An edited transcript of their conversation follows.

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Fintech off the shelf: Making an all-in-one approach pay off

Daniel Eisenberg: Hello and welcome to McKinsey on Start-ups, I’m Daniel Eisenberg.

When it comes to start-up fundraising these days, new records seem to be broken every quarter. But few digital sectors are booming as much as the business of money known as fintech. Globally, fintech raised more than $90 billion in the first three quarters of this year, almost double the pace in 2020, with 42 new fintech unicorns minted in the third quarter alone. Helping fuel this massive growth is the widespread belief that nearly every company, whether technically a financial-services provider or not, wants to be a fintech player in their own right. That is because, as Arik Shtilman, the co-founder and CEO of Israeli fintech unicorn Rapyd, says, all sorts of companies “understand that the way to monetize the relationships that they have with their customers is through payments.” Shtilman, a serial entrepreneur, founded the global fintech-as-a-service platform provider to make it relatively easy and simple for any digital business to embed a wide array of financial services into their offerings. Prior to Rapyd, Shtilman founded ITNAVIGATOR, a cloudbased contact center and unified communications platform, which was acquired by Avaya in 2013.

Thanks so much for joining us today, Arik. Tell us about Rapyd. What does the company do and what is the problem you’re trying to solve?

Arik Shtilman: So, Rapyd is a fintech-as-a-service platform, which is completely different from traditional payments companies. People keep asking me if we do payments. Yes, there is a payment service inside Rapyd, but we’re not a payments company. We basically provide the white label infrastructure for fintech companies to build on top of us any type of solution that they might want to sell to businesses or consumers. One of the services that exists in the platform is payment collection. But there are additional capabilities like disbursement, custodian accounts, FX, compliance capabilities, card issuing, et cetera. You can think about us as a type of Amazon AWS for the fintech space; a white label infrastructure that enables other companies to build seamless financial applications on top of us.

Daniel Eisenberg: I’ve heard you talk about every company wanting to be a fintech company. So, it’s really for anybody with a digital presence who’s going to do any kind of commerce. Is that right?

Arik Shtilman: Yes. In today’s world, almost every single company wants to become a fintech because companies understand that the way to monetize the relationships that they have with their customers is through payments. And basically, our infrastructure enables these companies to start providing fintech or paymentsrelated solutions.

Daniel Eisenberg: Looking ahead, are there any new markets that you think will have the most opportunity and/or possibly be the most challenging to move into?

Arik Shtilman: We operate globally today. We have an operation in Asia Pacific, in Latin America, in the US, in Europe. We’re super excited, mainly for markets like Brazil, Mexico, Indonesia, and Thailand, where you see a lot of adoption and growth of innovative fintech solutions and a lot of adoption of wallet-style applications that are basically changing the way people are using financial services.

Daniel Eisenberg: The varied ways that people pay is much broader outside the US, whether it’s wallets or other types of payments. Can you just talk briefly about how that’s evolving outside the US?

Arik Shtilman: The US is very card-centric market. Almost every single person has a debit card, and some people have credit cards. When you look at other markets—Brazil, Indonesia, Malaysia, Thailand, Philippines, Mexico and others—there is basically a leap. People skipped the cards stage altogether. Then newer technologies came in, mostly mobile-payment-based, a lot of wallet platforms.

And what you see, especially in Asia-Pacific, is the fact that the big brands are becoming payment methods. So, Alibaba and Tencent were the first ones to do it with Alipay and WeChat. But the reality is that Grab did it with GrabPay in Singapore, Gojek did it in Indonesia. Basically, every single company that has a substantial number of consumers decided to start monetizing these consumers by providing payment applications that replace the need to use debit or credit cards. We see massive adoptions of these wallet-style-based solutions in Asia-Pacific, and now the wave is coming into Latin America, which is the market that is up for grabs because it has been a very cash-oriented market that due to COVID has suddenly adopted digital payments quite rapidly. And we will see the same type of approach as in Asia Pacific.

Daniel Eisenberg: I know you’ve been moving a fair amount into, like you said, compliance, AML (Anti-Money Laundering), KYC (Know Your Customer), that sort of stuff. Is that the next major area for Rapyd to expand into? Or are there other sub-sectors within fintech that you see yourself moving into more in the next few years?

Arik Shtilman: These days, everybody is looking into solutions that offer an all-in-one service that includes built-in transaction monitoring, KYC, AML, KYB (Know Your Business), because the need to go and integrate multiple companies to really be compliant and make sure that your system can work is becoming huge overhead that companies cannot afford themselves.

We decided to go into this business and build our own Rapyd trust product, which is our own compliance-as-a-service platform that is bundled into our own Rapyd product. So, when somebody is using Rapyd, they also get all the compliance capabilities included.

It’s increasingly becoming a requirement in today’s world because the majority of the business models are marketplace-style business models. And when you work in a marketplace-style business model, there is a lot of complexity around money movement, KYB, account opening that didn’t exist in the past because the regulators didn’t really get the concept of marketplaces. But I think today the regulators globally are getting it faster and faster. And companies have a need to have compliance integrated into their payments stack.

Daniel Eisenberg: How big an issue is regulation in this space for a player like yourself? How much does that factor into strategy near-term and longer-term?

Arik Shtilman: It’s big. As soon as you start moving a lot of money and you’re operating in multiple jurisdictions, the regulators are always looking at you. And when the regulators are looking at you, you need to make sure you’re compliant and every single client that you have is working in a compliant way.

Now, there are two ways to do it: Either by hoping that your clients are compliant, or by having a very good tech stack that will make sure they’re compliant. And we use option number two. We basically put our trust in our technology because, otherwise, the smallest client can come onto the platform, create some type of technical foul from a compliance perspective, and the regulator can shut you down even if you have a $1 billion business, because $100,000 of a transaction that shouldn’t have gone through went through. You can basically risk your entire business.

We put a massive amount of effort into compliance and productizing compliance. We have dedicated product and engineering teams, the only thing they do is compliance-related tasks and automating them. And we’re less believers in having a huge compliance team constantly going through spreadsheets and paperwork than automating stuff and making sure that our technology stays up to date with the requirements of every single regulator that we work with on planet Earth.

Daniel Eisenberg: Speaking of regulation, you talk about the company being the world’s largest local payments network. Can you expand on that as a differentiator, being both global and local, whether it’s the way payments work or regulation in each market, and how much of a challenge that is to navigate?

Arik Shtilman: Oh, that’s a huge challenge. Every single country has its own way of defining the rules and regulations. Every single country has its own payment regs these days and its own requirements. And basically, an e-commerce transaction in the US versus one in Singapore or Indonesia or Brazil will look completely different from a compliance perspective. The varied payment methods that people use also add complexity: If you pay with a card, it’s one set of rules and regulations; if you pay in cash, it’s another; if you’re paying with a wallet, it’s also different. So, the matrix that you must run behind the scenes in your platform is so complicated these days that the capability to run a global platform like Rapyd is becoming Mission: Impossible on a daily basis unless your tech is really top class.

Daniel Eisenberg: Obviously, the fintech space is growing these days and there does seem to be an ever-expanding number of competitors as players expand across value chains. What do you think is the clear differentiator for Rapyd versus some of the other fintech-as-a-service players who have similar broad ambitions?

Arik Shtilman: It really depends, at the end of the day, what the clients want to buy, right? I will give you an example that, again, is not coming from payments. And then I will give you the payments or the fintech example.

Let’s start with an example from cloud computing. If somebody needs to host a server somewhere, then he has a zillion companies on planet Earth that can offer you hosting, right? You have an endless number of providers. On the other hand, if you really are trying to build a product that is sustainable with high availability that can work in multiple jurisdictions, you need a lot of computer power. You need database services. You need network load balancing. And so, you need to go either to Amazon AWS, to Google Cloud, or to Azure by Microsoft, and that’s pretty much that.

It’s the same thing in in fintech or fintech-as-a-service. If you only want to collect a payment from a consumer with a debit or a credit card, there are a million companies on planet Earth that can give you this capability. But if you’re trying to build something that is a little bit more sophisticated, if you’re building a marketplace, if you’re building a wallet application, if you’re building a sophisticated pay-out platform for payrolls, you need a platform.

The reality is that Rapyd is pretty much the only platform that exists today unless you want to go into an integration project with five different companies. And that’s pretty much the competitive differentiation that we have. Our sales teams are not going after these typical checkout experiences; clients that only need debit or credit card payment collection. But we are going after more sophisticated use cases that typically are in more than one country where the merchant has a need to transact in multiple jurisdictions. This is where our bread and butter exist.

Daniel Eisenberg: So, in your mind, there’s nothing comparable being offered in terms of such a comprehensive platform in this space?

Arik Shtilman: No, listen, if you want to compete with Rapyd, you will need to go and combine five different companies in a single solution. And even then you will probably be able to do business only in one country or region. If you want to do it, for example, in the US, Europe and in Singapore, nobody can do it except for us. If you want to do Brazil and Mexico and the US, nobody can do it except for us. The combination of the countries plus the number of services that we offer creates quite a unique competitive differentiator.

Daniel Eisenberg: Speaking of acquisitions, you guys have been doing a fair amount of M&A lately. I think Valitor might be the most recent. You also have Rapyd Ventures, your own venture arm. More companies seem to be taking this approach of investing in addition to fully buying companies within the wider ecosystem. What is your ambition for Rapyd’s venture arm? And how do you weigh investing versus outright buying companies such as you’ve recently done?

Arik Shtilman: Rapyd Ventures is really a small venture arm. It’s like a $45 million venture fund, which is quite small. And the main intent behind Rapyd Ventures is to invest in businesses that are using Rapyd and gaining traction, where we can help them to accelerate their own business while building up our own platform.

In the past, before Rapyd Ventures started, we saw quite a lot of small businesses starting to build stuff on top of Rapyd. And suddenly, they became quite successful, big companies. On the other hand, we also saw businesses that had unique business models, but didn’t have enough funding to scale, even though (from our perspective) they could have become a very meaningful client. Rapyd Ventures is here to do both things: One, gain profit, from the fact that we see our best clients and we can potentially invest in them and make sure we also profit when they scale; and the second thing is, we help the smaller clients build proof of concepts, launch products on top of us.

Then later, when they continue and scale their business and they raise capital from bigger VCs, we continue to provide them our capabilities and we benefit from it as a platform.

M&A’s a different story. In that case, typically we’re buying much more mature companies. We’re not buying technology. We believe that our technology is superior to any technology that exists out there. So, we will never buy technology. But on the other hand, we will buy one out of two things. Either old payment platforms that have existing clients that we can digest into our platform and basically migrate into Rapyd, buying them at a lower multiple and then get them traded at a Rapyd multiple; or, on the other hand, we can buy ourselves into a market from a regulatory perspective. It’s complex.

For example, we wanted to be in the Hong Kong market with regulatory licenses, so we recently bought a company that already had them.

Daniel Eisenberg: Interesting. Where does the Valitor acquisition fall on that spectrum?

Arik Shtilman: Valitor is based in Iceland. It’s a big company with around 200 employees and a massive portfolio of clients but old technology, a very old-school payments platform. Our goal there post-closing is to migrate all the clients to the Rapyd platform. And basically, we bought them at a low multiple and, later, they will be traded at a Rapyd multiple.

Daniel Eisenberg: You also have something called Rapyd Accelerate, which sounds like an incubator of sorts. How do you view that arm?

Arik Shtilman: So, the incubator is something else, and available only in Israel (in Tel Aviv). This is our vehicle for helping very early-stage entrepreneurs to get started building the business case and creating a prototype, leveraging the Rapyd platform. Later, these businesses can turn into a Rapyd Ventures investment, or we can help connect them to the VCs that we know extremely well. And the goal, again, is to help very early-stage companies build products on top of our platform so Rapyd can monetize that from a revenue and volume perspective.

Daniel Eisenberg: Let’s talk briefly about your background and what led you to founding Rapyd. You have already founded and sold a cloud company. The common thread between your previous company and Rapyd isn’t clear. I’m wondering how you ended up in this space?

Arik Shtilman: By mistake. We came from a cloud computing company that was in the unified communications space. We had no clue about fintech, payments, financial services at all. It was back in the hype days of Uber at the end of 2015. Everybody wanted to be the Uber of something. We decided to go into consumer payments with no clue about what we’re doing, and we stumbled into every single problem that exists on planet Earth, from the fact that you need to get regulated, that you need to connect to somebody to do issuing, somebody to hold funds in custody, somebody else to do FX.

And basically, a year into this new company, we found ourselves in a massive integration project, seven different companies, paying lawyers a lot of money to get regulated just to launch our consumer payments product in one country. We looked around and it didn’t make any sense.

It was 2017 by then, and it was clear that this is the heavy lifting that every company on planet Earth needs to do to launch something in fintech. Every single company was rebuilding the infrastructure again and again from scratch, which is equivalent to building your own data center. Nobody does that anymore, right? So, we decided to build on the idea to what we understand much better, which is a type of cloud computing platform that provides you with the infrastructure to build financial service applications.

Daniel Eisenberg: You figured out this glaring market need totally by accident. Were you surprised that no one had tried to do it yet?

Arik Shtilman: Yeah. We were surprised originally, but later, when it started to succeed, it started to be like mushrooms after the rain. Suddenly, there was banking-as-a-service, fintech-as-a-service, this or that as a service; everybody is doing the same pitch. But I remember when we were trying to raise capital in 2016 and ‘17, nobody wanted to invest because everybody thought it was a stupid idea.

Daniel Eisenberg: And did they think it was a stupid idea because they thought it existed already, or they just thought there were so many players, and they didn’t realize…

Arik Shtilman: They thought it was too complicated to build and nobody needs it because there’s so many players that you can waste your time integrating. But the market showed differently. Nobody wants to do all these massive integrations. Daniel Eisenberg: I’m wondering, from your experience in building your first company, if any lessons have proven particularly important in your journey building Rapyd. Had you, for instance, encountered that kind of skepticism?

Arik Shtilman: Oh yeah. Anybody that is an entrepreneur, unless they are super lucky, stumbles into this skepticism. Why do you think you can do it? Why is Google not doing it? Why is Facebook not doing it? Why is Amazon not doing it? There is always this thought that people have that other companies are already doing something that you’re trying to build. It’s almost automatic. And I had it in my previous company also. You know, I’m pretty much used to it. If you’re not getting asked these questions, then you’re probably stumbling into bad investments.

Daniel Eisenberg: You’ve talked about how a lot of folks don’t really know how to pitch to investors and that you, yourself, didn’t know originally how to do it and how different it was from pitching to prospective customers. Can you talk a little bit about that and what you’ve learned?

Arik Shtilman: A lot of entrepreneurs are focused on building a company and selling the product. And they think that the pitch of selling the product, like they pitch a client that potentially will pay the company money, is the same pitch that you need to give a VC to invest.

But it’s completely different. A client wants to understand the benefits to their own business. They want to understand the feature, how much it would cost versus the competition, how much money they can save, et cetera. The investors don’t care about these things. They want to understand the bigger picture. “Tell me about the industry. Tell me how big this thing can be.” You need to sell the dream of how much you can grow and why you will change the industry. If you come with this pitch to a client, they will never buy from you because they want to solve a problem. If you come with the problem-solving pitch to the investor, typically the investor will say, “It’s too small. I don’t have any profitability here. I don’t care about these features.”

Now, it took me probably two years to understand that because my first company was a bootstrapped startup. So, I never raised capital. And when I came for the first time to raise capital, I always did my sales pitch, which I thought was the best sales pitch in the world. And it was a very good sales pitch, I always sold the product. But I never raised capital.

But one time, I got an email from a VC that told me, “Listen, the product is amazing. It looks like something good. But you don’t know how to raise money from VCs, and I think because of that your company will fail.” I printed this email. I have it framed on the wall of my room. And later, this investor invested $200 million in my company, a $5 billion valuation. So, apparently, I was able to learn something, and they also had to eat their hat at the end of the process.

Daniel Eisenberg: Do you think many entrepreneurs make that same mistake? They get the product right. They’re able to sell it to customers. And then they think the rest will take care of itself in terms of fundraising?

Arik Shtilman: Yes. I think that because they have product market fit and because they have a client that is paying for the product, they assume the fundraising will follow, and it’s a mistake.

Fundraising is the most important skill set that a CEO has in the seed, A and B rounds of the company. You spend 60 to 80 percent of your time fundraising. It’s all the time, a never-ending fundraising process. Maybe today, when you have all these mega rounds, it’s only in the seed and the A rounds. But at least back in 2016, ‘17 and ‘18, 60 to 80 percent of my time was fundraising, because you always need to plan the next round. You always need more capital. You always need to jump to the next level. And CEOs that spend too much time around other things in the business are basically making a mistake because the round is not going to come on its own.

The dynamics of raising capital includes a lot of strategy. You need to understand who to talk to, how to pitch, which one of your existing investors can open the door for you and help you to raise capital at a higher valuation? And there are a lot of chess games that are going on in parallel that you need to play to get to the result that you want.

Daniel Eisenberg: Yeah, definitely, I’ve heard from investors and VCs that one of the big mistakes entrepreneurs make is not thinking hard enough about the investors that they choose to work with.

Arik Shtilman: That’s super important. Listen, if you take money from somebody that doesn’t understand your business, it’s going to end up very badly because, at the end of the day, you want people to understand the challenges you are facing and maybe give you some advice here and there. They’re not going to run the company instead of you. But at least they will sit in the board meeting, and you will not need to explain everything from scratch because they have a baseline of knowledge. And then they might say, “Oh, I’ve seen company X do that, I’ve seen company Y do that.” If you take money from somebody that doesn’t understand that, you’re basically wasting your time. You’re wasting their time. They rolled the dice and you’re going to babysit them for a long time until they’re not going to become a meaningful investor.

Daniel Eisenberg: You’ve had incredible growth in recent years. You’re on target to pass something like $20 billion in payment volume this year. And I think you have a goal of $100 billion. Throughout that process of growing so fast, especially in the last couple of years, what have been the biggest challenges of scaling that you’ve had to overcome?

Arik Shtilman: I think that recruiting people and building mid-level management is the biggest challenge that we stumbled into. When the company is up to 50 and then up to 100 people, okay, you can still manage this pyramid in a certain way. But when you cross the 100 people and you get to 200, 300, 400, everything you do or manage on a daily basis as a CEO or as a VP in the company is changing completely. If you’re not finding the right people for mid-level management, it’s going to be super complicated to scale the business because you will not be in the weeds of everything that is going on. Even if you work 24 hours a day, it’s just impossible. This is the biggest challenge that we stumbled into, together with the fact that we have a global company with offices in eight different places, remote teams, and diverse cultures, different languages. Bring this into the mix. Bring COVID into the mix with the fact that people cannot travel. With all due respect to Zoom, nothing replaces face-to-face meetings. And you basically have never-ending challenges that you need to resolve.

Daniel Eisenberg: Do you feel that you’ve figured out how to be more successful in recruiting and retaining that kind of skilled middle management?

Arik Shtilman: Not yet. It’s an ongoing challenge, mainly because when you find somebody that is particularly good for mid-level management, they want to be the VP. But you have already a VP that you don’t want to replace, right? And it is challenging to convince these people that this company is going to continue to grow and, later, they will go up in this pyramid. A lot of people that are extremely good want to have their own companies. They want to be entrepreneurs.

Daniel Eisenberg: In terms of that cultural issue and middle management, you’ve spoken about the challenge of having to shift to not trying to control everything and having to become more of a delegator, focusing more on strategic thinking versus day-to-day management. How challenging has that been?

Arik Shtilman: Oh, it’s super challenging. It sucks. I hate it. Because I’m not this type of a person. I like to be in the details. I like to sit with engineering. I like to talk to salespeople. I like to talk to clients. I like to know exactly how much money we have in every single bank account, just because I like to have the knowledge. And moving out from this and zooming out and doing other things has been extremely challenging for me.

But I learned the hard way that if I did not zoom out, then more important things would basically not happen. Bigger things like strategic M&As, fundraising in very big rounds, strategic deals with other partners. These types of things that can really take you to the next level will not happen if you will not zoom out from the day-today stuff. It took a while, but I got used to it.

Daniel Eisenberg: So, you no longer yearn for the days of being the early-stage entrepreneur?

Arik Shtilman: Oh, no, I do.

Daniel Eisenberg: You do?

Arik Shtilman: Of course. I will take the early-stage days anytime over the scale, just because of the adrenaline rush where you can see on an hourly basis how the product is moving. You see the first clients that are going onto the platform. You feel everything, right.

Daniel Eisenberg: You mentioned mega rounds earlier. You’ve recently done a series D and E in the last year. Does this stage of fundraising still take up as much time as the earlier rounds? And how critical is it to strike while the iron is hot, so to speak, to fundraise when the opportunity is there as opposed to waiting for what you might believe is the exact right moment in a company’s journey?

Today’s market is super-hot, especially for payments. It’s not complicated to raise money. It’s not easy but it’s not complicated. If the company’s good, there will be interest because every single VC on planet Earth wants to be in online payments, one way or another. The number of good companies in online payment space is limited. There’s so much capital out there and so many VCs want to be in and they’re not in Rapyd or they’re not in Stripe et cetera. As a result, they will often invest in something because they need to be there. It’s interesting because I remember I was trying to raise $2 million, and nobody wanted to give it to me. And eventually, I raised a $300 million round over a What’s App group. So, it’s definitely a different type of dynamic.

Daniel Eisenberg: Right because I’ve heard you talk about needing to raise when the opportunity’s there.

Arik Shtilman: You need to take the money as soon as you can. Do not wait because you never know when it will come back again. Nobody knows what will happen. Nobody has a crystal ball. The market can change. The valuation can shrink. There’ll be no money. If somebody offers you a mega round, at a decent valuation, take the money.

And the reason for it is that when you have a mega round, having a successful company is much easier. You can have enough money to plan long-term, can implement a lot of things, and basically, it’s a much more stable organization, right? And some people will think, “Oh, you have nothing to do with this $200 million or $300 million.” But it’s not true. You plan long-term. You know that you don’t need to raise for the next five years. And suddenly, everything on your whiteboard changes. The entire dynamic changes and the company’s much healthier.

Daniel Eisenberg: Is the notion of raising “too much too fast” exaggerated as a potential pitfall?

Arik Shtilman: There is an enormous difference between a dog walking app that raises $300 million and a payments company that raises $300 million, right?

In fintech, you need money. I’m raising money not because I want to raise money and I want to get diluted and I like talking to investors. In fintech, the reality is that you need money. I genuinely believe that in fintech, the mega rounds are mandatory in order to build a long-term, sustainable business.

On the other hand, if you’re building something like a dog walking app, yeah, it’s a mistake. You probably don’t need the money at that stage because you’re going to gamble it by trying to acquire consumers. So, it depends on your business.

Daniel Eisenberg: You were speaking earlier about the challenges of finding and keeping strong middle management people. I’m wondering how you balance the importance of technology as a driver of your journey versus people and culture.

Arik Shtilman: Listen, at the end of the day, people are everything that the company has. Tech companies don’t have lines of code. They have people that write the lines of code. The marketing strategy wasn’t invented on its own. They have good marketing people that know how to execute the marketing strategy. So, I think that building a very good team and keeping the team long-term, at least an average of three years per person, is a critical thing. And we’re trying to basically keep our people happy, make sure they have an amazing experience within the company, in order to build an amazing experience for all our clients.

Daniel Eisenberg: You talked about how you run Rapyd out of a sprawling geographic base. How challenging has that been?

Arik Shtilman: So, Tel Aviv is the headquarters. It’s an Israeli company. But we have operations in San Francisco, London, Amsterdam, Iceland, Singapore, Mexico City, Sao Paolo, Taiwan, and Thailand. It’s a very diversified culture, a lot of time zones, a lot of different challenges. But the reality is that if you truly want to build a global product and a global platform and you don’t want to become a company that only serves the European Union or that only serves the US, you must have offices in every single place because you want to be as local as you can but provide access to global clients. Without these local operations and without these local offices, you will never be able to be as local as you want. You will become an expat or a tourist in the business. And that’s one of the key elements to everything that we do. Think global but act like a local.

Daniel Eisenberg: And you really need to have an actual physical local presence? Because obviously, there’s been so much discussion about moving to a fully remote world, especially in tech, questioning how much office space companies need.

Arik Shtilman: We’re big believers in remote offices. We are not big believers, by the way, in distributed engineering and working-from-home engineering and stuff like that. On the contrary, our engineering is super concentrated in one place: actually, two places now. But salespeople, support people, operations people, should be distributed and as close as possible to the client.

Daniel Eisenberg: Right. Your engineering is mostly in Israel and then another location.

Arik Shtilman: Yes, around 80 percent of it is in Israel. And the second location is Iceland, because of an acquisition that we did.

Daniel Eisenberg: So, in terms of the folks doing the engineering, writing the code, you’re a big believer in concentration and collaboration?

Arik Shtilman: I believe that a conversation that doesn’t include the white board doesn’t exist. Our entire office, by the way, is built around white boards. Like, everywhere you walk, you see white boards because the conversation must be around the white board, or otherwise, nothing will happen. I can tell you that what people can achieve in a face-to-face meeting in product, in engineering, in an hour is something that would take them five days over Zoom, just because they don’t get to focus on each other. They’re distracted. They don’t have a whiteboard. And in the end, that’s the difference. It’s an hour versus five days.

Daniel Eisenberg: Right. The virtual white board doesn’t cut it?

Arik Shtilman: No, no, no.

Daniel Eisenberg: Your fintech-as-a-service approach feels a little like a self-service model where companies can choose off the shelf the payment solution that they’re looking for. Was that always the vision for the business?

Arik Shtilman: Yes. That was the concept from day one. We wanted to allow our clients to consume different types of products on top of our platform in every single country that they want to operate without dependencies. And in the beginning, as I said, people thought it was a bad model and impossible to run. But the reality is that the world is shifting to this model and we’re super successful and a lot of other companies have since replicated it.

Daniel Eisenberg: I just want to ask you briefly about decentralized finance, things such as blockchain, and how you think about that in terms of payments and fintech? Could that kind of technology be game-changing for the industry down the line?

Arik Shtilman: I think the reality is that, with all due respect to decentralized finance, we still have a big problem in that the only way to move money is with a bank. And with all due respect to cryptocurrency, every single country on planet Earth still has a central bank. The central bank defines the policy, and the only entities that can move money are banks. If you really want to get to a decentralized financing world, there is a need to make sure that fiat currency—not crypto, but fiat currency—will move in real time, like (for example) in India with the UPI network, and some other countries that have also invented real-time payments.

Daniel Eisenberg: You’ve talked about the focus on the $100 billion payment volume as a three-year goal.

Arik Shtilman: It’s two-and-a-half years left.

Daniel Eisenberg: That just seemed like the right number to pick as your goal?

Arik Shtilman: At the end of the day, the $100 billion figure represents about $1 billion in revenue. As a goal for the company, it’s an ambitious target. But we decided to go as high as possible.

Daniel Eisenberg: You’ve spoken before about using a three-prong approach towards reaching that goal, based on organic growth, M&A, and then channel growth, with channel being a lot of your focus going forward.

Arik Shtilman: We’re big believers in embedded financing. So, basically, companies that are not fintech companies will embed financial capabilities within their own products in order to monetize their consumer relationships. And we call this model channel partnerships. We think that 30 percent of the volume and the revenue will come from that.

Daniel Eisenberg: When you think of innovation in the fintech space, are there particular things you foresee that you think are going to be have a major impact for either the industry as a whole or Rapyd, specifically?

Arik Shtilman: I think two important things are happening. One is seamless payments and the fact that everybody is trying to make payments look almost invisible, like when you use Uber or other app services and you hardly know that you even paid. Doesn’t matter if it is a physical supermarket or an online store or whatever, everybody wants to offer seamless payments. And I think there are going to be quite a lot of changes there from a technological perspective, especially related to security, tokenization, and leveraging your mobile and desktop devices.

On the other hand, I think that a lot of things that are related to identity are also going to play a big part, because of different regulations like GDPR and others, to avoid fraud and in order to make sure that payments are similar.

Daniel Eisenberg: And lastly, you’re now scaling your second company. Is there one or two critical pieces of advice you would give to a first-time founder?

Arik Shtilman: The first thing that I’m telling people is what we talked about originally about the fact that 80 percent of your time you need to fundraise in the beginning and the fact that the pitch of fundraising is completely different than selling the product. This is the mistake that I see repeatedly from first-time entrepreneurs. They just don’t understand the concept of fundraising. And therefore, a lot of times, they get bad valuations and bad deals in the first round. Not because the company was too early or whatever; just because they didn’t know how to play this game.

Daniel Eisenberg: Arik, I want to thank you for joining us. I really appreciate it.

Arik Shtilman: Cool, thanks very much, appreciate your time.

Daniel Eisenberg: Well, that’s it for the pod. Thanks again to our guest, Arik Shtilman, co-founder and CEO of Rapyd.

As always, I also want to thank our amazing McKinsey on Start-ups production team— Molly Karlan, Polly Noah, Sid Ramtri, Myron Shurgan, and Katie Znameroski.

And of course, thank you for listening. We hope you’ll return for future episodes of McKinsey on Start-ups.

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