So.
Hey, everyone, my name is deep.
And in this video we're going to talk about finance as a service business model.
Now almost a decade back, one of the most famous venture capitalists in Silicon Valley, that's Marc
Andreessen.
He said that software is eating the world, and I wasn't sure about this treatment back then, But now
I personally believe that software is eating the world because today if you look at a normal company,
you will realize that they are using a software to solve every single problem related to money.
And that's why in this video, we're going to talk about the different types of finance as a service
business model.
And that's why I have divided these business model based on the kind of problem that they are solving.
So in this video, let's talk about fast vertical category.
Now, the first category we have is payment.
And if you look at softwares like stripe or square or pay Pal, these are all payment gateway provider.
And if you are a business owner or let's say you run a small startup, in that case you need a payment
gateway so that you can accept payment from all of your customer.
Now all of these payment gateway provider will normally take around 1 to 2% cut on every single transaction
and that's your payment.
Then we have spend management and obviously as a business, you also need to manage how much you are
spending in all of these processes and that's why you need to spend management software like Bill.com.
Article.
RT And these software can help you understand how much spend is there across different sector and processes.
Then we have payroll and benefit.
So if you are a startup founder or a business owner, in that case you may have some employees and those
employees may have their bank account with different bank or let's say they might be present in a different
country.
In that case, you need a software so that that software can automatically manage your payroll and the
kind of benefits you are providing to all of your employees, like health insurance.
In that case, you need payroll and benefit kind of software.
So softwares like Zenefits rippling and Workday can help you manage your payroll and benefit.
Then you have your equity and financing.
And if you are a chief product officer or a chief financial officer, in that case, you need a platform
that can help you manage.
ESOPs or your future investment or your cap table.
In that case, you need softwares like Carta, AngelList and Kabbage.
Now, right now I'm giving you a high level overview, will go deep into all of these vertical category
in the few minute.
Next, we have accounting and reporting, and I'm sure if you are into finance, then you have a lot
of these platforms like QuickBooks and Net Suite, where you can do the audit process or you can look
at all of the transaction with these different vendors or supplier.
In the end, you have your financial analysis and planning.
And for that, you don't really need these fancy software.
I mean, you can do your financial analysis using Microsoft Excel and you can present that with the
help of PowerPoint, but you can still use these fancy tools like air table, smart sheet and Burn chart.
But I think Microsoft Excel and PowerPoint can do the job.
You don't really need other software.
Now let's go deep into all of these vertical category and then we will understand how all of these software
are solving one single problem.
Let's start with payment.
As a business owner, your main role is to accept payment from your customer.
But if you look at our startup, I think it's more than just accepting payment.
You also have to send money to a different vendor or to a customer.
In that case, you might be having so many employees who need a credit card or something so that they
can send the payment to the vendor directly using their laptop and they don't really have to communicate
back and forth with the finance department.
In that case, you can issue corporate credit card using brex or ramp, and that's how you can easily
send money to all of your different vendors.
Or let's say if your employees are doing small transaction.
While they are traveling to a different city for some business meeting and all of that.
Then you also need a bank that can help you in ACH or a wire transfer.
And I guess different countries have different banks.
But if I talk about United States, then you have your Silicon Valley bank and couple of other banks
like Mercury, and you can use these platforms to send money to a different person.
In the end, you also need a payment gateway.
And with the help of that, you can accept money from your customer.
So let's say if you have a software product or if you are selling some service, in that case, your
customer can directly pay you with the help of Stripe Square or PayPal.
So you have all of these payment gateway provider.
So if I summarize a video in the payment vertical, you need to solve the problem of sending and receiving
money.
If you want to give more flexibility to your employees, you can simply issue these credit card and
you can simply track all of their payment.
You can easily do reconciliation and you can do a fast settlement in order to save some time of your
finance department.
And that's how you send money that the second part is receiving money.
And you can use all of these payment gateway like Stripe, PayPal and Square to accept payment from
the customer.
And these payment gateway can also help you in fraud analytics or maybe in financing like Stripe capital.
And that's the payment vertical.
Now, in case if you are still confused with how exactly does this payment processing or these payment
gateway work, let me give you a high level overview of this payment gateway business model.
So let's say as a company, you can't really accept payment from these customer and that's why you use
these payment gateway provider like Stripe, PayPal, Razorpay or pay you.
And these customer will send the money to these payment gateway provider and they have integration for
any kind of debit card or credit card you have in any country.
And then your customer can simply send the money to these payment gateway provider and they will take
a small cut of around 2% and then they will send the rest of money to your bank account.
And that's the high level overview of payment gateway business model.
I don't really want to go deep into this, but that's how you can look at a payment gateway.
The next vertical you need to understand is span management.
Once you got the payment in your bank account, then you also need to track how exactly you are spending
money.
So let's say in a company, majority of spend goes into the salary of your employee, then you are also
paying a small amount to all of these different vendors or suppliers you have.
So you need a platform so that you can manage things like.
Expenses and traveling procurement fees that you are paying to these vendor and your upcoming account
receivable and payable.
And that's why you need to spend management software.
Now the first part of spend management is account payable and receivable.
So let's say you have sold some product to a distributor or to a supplier and you are expecting a payment
from them in like ten or 15 days.
Or let's say you have to pay to someone in the coming one week.
In that case, you need a software where you can exactly see your account receivable and account payable
so that you can put a couple of team members into that process and they can manage all of that process.
Then we have procurement and you need the software that have the centralized procurement dashboard where
you can negotiate with these different supplier and you can sign all of these contract.
And that is also a part of spin management where you negotiate the contract.
And you also manage it apart from just looking at the account receivable and payable third parties expenses.
So if you have issued some credit card to all of your employer, then you need a dashboard where you
can look at all of these expenses in real time and you can also control the spending limit of all of
these employees based on the kind of position they hold.
And if they have spent any amount of money from their own personal pocket, then you can also reimburse
the amount.
And that's your expense management.
Let's talk about the third part that is payroll and benefit.
Now, the largest expense a company can incur is payroll and benefit.
And this will include things like onboarding a new employee, looking at their productivity with time
tracking, managing their retirement fund, and making sure that the employee and their family is having
an insurance, at least a health insurance.
And for that, you can use payroll and benefit software.
And there are multiple categories to that.
You have enterprise resource planning, a human resource information system and a human resource management
system.
So products like SAP, workday rippling, all of these products are the really good example of payroll
and benefit.
So you have other products like Zenefits, Gusto, workday rippling bamboo, air, cha.
So you need a product that can manage all of your human resource function end to end.
So from onboarding to time tracking to payroll and benefit.
Now, these companies have tied up with all of these other finance platforms so that they can manage
the process end to end.
Now, if you look at a company like Rippling, they have the tie up with these payment gateway provider
and these banks as well so that they can transfer your monthly salary or payment to all of the individual
employees account.
And they also have tie ups with couple of insurance providers so that they can provide insurance.
And they also have a time tracking software.
So if I go deep into just one single process, let's talk about insurance.
So in case if you don't understand about this domain and insurance, normally a bank is insuring you
or a financial institution is insuring you.
So they will give you personal insurance, asset insurance or educational insurance.
Let's say for an employer, it's the health insurance.
And the way they give this health insurance is by reselling that health insurance product to all of
these different companies who will further resell the product to a tech company like Replanning or Workday.
So these individual company have the partnership and they do a lot of marketing for this specific bank
or financial institution so that they can sell this insurance to all of these companies or employ.
And the fourth vertical is equity and financing.
And I have divided equity and financing into three important part.
At first we have Treasury, then we have equity and then we have credit.
So in Treasury you can use platforms like Betterment so that you can automatically invest your capital
and you can manage the return on cash.
Then you need equity platforms like GATA or AngelList.
So let's say if you are a startup founder and you are planning to raise capital from a group of Angel,
in that case, you can use Angel list.
And once you have raised some capital from all of these angel investor or let's say a group of angel
investor, in that case, you need a platform where you can manage your cap table and you can also issue
some employee stock options to all of your employees and you can easily structure your company.
In that case, you can use platforms like Carta.
And that's how you can manage the equity or let's say, stocks in your company or in your startup.
Third one is credit.
Now, in order to successfully run a business, you need to take some credit and then you need to manage
that money with the help of all these different platforms.
Now, if I give you a simple example, Kabbage is a company that will provide you credit for your business
by looking at your past transaction.
So they will look at all of the transaction in your QuickBooks or in a payment gateway provider like
Stripe or Shopify.
And then they will give you a small loan or some credit so that you can expand your business.
In the end, we have accounting and reporting, and the main idea here is that you need to maintain
visibility into accurate financial and for accounting.
You can use product like QuickBooks Net Sweet or Fresh book.
And the main idea here is that with the help of the software, you can do auditing in your company or
you can look at all of your account receivable account payable, your total turnover, or how much payment
are you doing with all of these different vendor.
So accounting software like QuickBooks and Fresh Book can help you in looking at all of these transactions.
Then we have reporting.
And with the help of these software, you maintain a real time visibility and you can use these analytics
software like Tableau or Power BI that will connect with your data warehouse and you can simply pull
the data and slice the data.
Based on your need, and for that you can use power bi, x, l w, and then you can share this report
with a senior executive.
And you can use PowerPoint as well if you want.
So if I quickly summarize the video, these are all the five different vertical category in finance,
and all these category are helping you in solving one single problem in your business from accepting
and sending payment to all of these different vendor to managing these spend, to providing payroll
and benefits to all of your employees, to managing your cap table equity and ESOPs with the help of
Carta or maybe raising capital with the help of Angel list.
Then we have accounting and reporting with the help of QuickBooks or NetSuite from Oracle, and in the
end we have financial planning and analysis.
So I hope you will be able to understand all the different types of business model that exist in finance.
And if I missed out on something, please let me know in the Q&A section and I will love to reply.