My Story - How I Built A Digital Payment Network

In my previous company, we had a network of over 400 resellers, distributors, agents, and vendors with monthly payments. To spell it out, I experienced many, if not all, pain-points one may encounter in b2b payments. 

After selling my company, I was looking into solving some of the transaction/payment pains I experienced. 

After interviewing hundreds of bookkeeping professionals, CFOs, comptrollers, business owners, and entrepreneurs, I got no new insight at all. Their responses pointed back to the obvious pain-point: processes are manual-intensive and error-prone, demanding meticulous data entry and tedious mapping and reconciliation.

Duh!! Tell me something I don’t know yet!!

Aren’t there many AR/AP and payment automation companies using the latest tech to streamline, automate, and eliminate data entry? YES!!. 

If so, how come 99% of people interviewed (including many AR/AP automation users) still expressed their hate/pain towards bookkeeping and payments?

The only option left was to go back to First Principles using the Five Whys.

Naturally, at first, I got stuck at why in the world is any company still using paper checks? 

Why isn’t there a way to connect accounting applications with banks and eliminate the manual data entry required to initiate ACH, Zelle, and Wire transactions? 

Similarly, If all accounting applications are digital, why are invoices converted into flat PDF files and manually re-entered into the customers’ digital accounting, ERP, or POS system?

Suddenly, it became apparent that transactions and the payments associated with those transactions, at its core, are a known network. The parties involved have some relation with one another: i.e., Vendor-Customer, Originating-Receiving Bank, etc. The only question was, why is there no digital network that interconnects and shares the necessary data securely among this network? 

After discussing the idea with many of my colleagues, with whom I had experience developing complex systems before, they weren’t ready to join me on this journey, seeing it too risky and too complex to execute, especially when we had no banking or payments background. 

One colleague told me that it is nearly impossible to efficiently sanitize, contextualize and categorize the raw data to map and sync it correctly. On top of his burning question of how it will connect with legacy accounting and ERP systems with no integration? Another couldn’t make peace with the fact that we’ll have to integrate with every bank to reach ubiquity. Another one made me a list of over 8,000 POS and ERP systems we’ll need to integrate with, pointing out the many with no official integration path. 

Getting these responses from such brilliant people made it crystal clear why no one else had done it. 

Going back to the bookkeepers I interviewed in the months prior. Trying to get feedback and implications on this conceptual network-driven solution, surprisingly, the only feedback I got was, “where can I sign up?”

Attending one of the office hours from the Techstars Accelerator, there is one moment that really stood out when the interviewer bluntly told me, “I don't think this will ever succeed,” saying that without interest from the banks, this will never succeed, which turned out to be the impossible part. On the other hand, it turned up the drive and ambition to figure out how to do it without the banks’ participation. 

Having read Li Jin’s Twitter thread illustrating that although the concept of a network is to facilitate and not become the provider, sometimes one has to fake one side of a network to solve the chicken-and-egg problem. In our case, since connecting directly with every bank is out of the question, becoming a Third Party Payment Processor, Card issuer, and Card Processor is the only other option to provide complete synchronization with every US bank. 

Yet, this requires adding a whole slew of additional security features, protocols, and compliance. And we still need to find one bank that is willing to partner and work with us, and it turns out that in most banks, to get any partnership going takes no less than eight months. One financial institution told us to try back in forty-eight months and to get that answer took us over six weeks.

Not getting anywhere for months, on the brink of giving up, one-day while browsing Linkedin, I bumped into a press release from a bank announcing their collaboration with a specific Fintech. As a final effort, I decided to reach out to the bank COO. Interestingly enough, we had a phone call that same week, and we discussed our vision, plan, and issues. He suggested a solution that will provide us with everything we need to get the network going, and it can be operational within nine weeks.

We finally solved the chicken-and-egg problem, and we were off to the races, launching the first digital payment network SHTAR.com.

At the same time, we established a vibrant and growing online community of around 250 bookkeepers and accountants. I continue to use it to get insights on pain-points and industry practices and product feedback to address subtle and nuanced details. At the same time, they are the primary source for our early customers.

Fast forward 18 months. We have an established professional relationship with that particular bank, supplying access to underlying payment rails, card networks, bill payment networks to process ACH, RTP, RPPS transactions, and the ability to issue and process credit cards.

In May 2020, we publicly launched the vChecks? plugin, automatically converting any (check, ACH, or wire) transaction in QuickBooks into a digital payment instantly, reducing the time spent by 96% and improving accuracy by 600%. 

Our plugin is now published on the QuickBooks App store for QuickBooks Online and Desktop; we have API integrations and secure CSV download/upload to interconnect with legacy systems. Our target is to integrate with at least 25 accounting applications ERP/POS systems before the end of 2021.

In May of this year, we are scheduled to release vCard? to automate card transaction data entry and reconciliation. And vBill?, a complete invoice/bill automation component, it’s expected to be released this coming September.

We’ve processed over $20 million in payments to date and have experienced over 25% MoM net growth. While everything is subject to risk, we’re projecting to reach ~$300,000 gross MRR before the end of 2021.

While we continue to figure out the hard stuff, we are making leaps and bounds daily. 

To name a few, we’ve integrated with FIS (ACH), GIACT, MasterCard RPPS, MasterCard Card Network, i2c inc, FIS/Worldpay, and interconnected with many accounting applications. We are attaining PCI Level 1 Compliance and passing SSAE18 - SOC2 Audit. 

And above all, we successfully developed multiple patentable systems and algorithms to deliver a truly automated experience without introducing any new complicated systems, processes, or changing any product name or GL account.

In short, here's how SHTAR works: 

The vendor creates an Invoice within their regular accounting application; the SHTAR plugin (that runs in the background) picks it up and sends it to the customer. The customer gets an email with all the invoice/bill details. 

The customer reviews the bill within their regular email if acceptable, then clicks on the Accept link. All the invoice details are magically injected (under the correct item and GL account) into the customer’s accounting application. And if the customer has a separate ERP or POS, all details (items, quantity, and pricing) are intuitively updated into that as well. 

The customer at their convenience enters a payment for this bill within their regular accounting application and chooses from which bank account to pay; the SHTAR plugin withdraws the money from his desired bank account and deposits it into the vendor’s bank account. If the customer chooses to pay from a specific credit card, the vendor’s processing system is notified and charges it. 

In both cases, the plugin marks the original invoice as paid, makes sure the payment arrived in the bank account, and reconciles the transaction — all without any manual data entry. 

To sum it up: it is a simple plugin that magically interconnects every accounting application with all its customers, vendors, and banking systems, intuitively eliminating manual processes. 

A True Digital Network Revolution

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