TIO: Beyond the Bright Orange Box
While I was at CFSI, I met a young, enthusiastic and curious Persian-blooded entrepreneur on the expo floor of an obscure ATM conference in 2005. He stood before a bright orange box that he described as a “reverse ATM,” which allowed cash-preferred customers to save money and time in paying basic bills.
His name is Hamed Shahbazi and his company was Info-Touch Technologies. A couple weeks ago, an equally enthusiastic and curious Hamed, with just a couple of gray hairs to show for the intervening years, agreed to sell what’s now known as TIO Networks to payments giant PayPal.
Despite Hamed’s charm and good looks, his story is not sexy. Instead, it’s a story of tenacity, smart pivots, and commercial and social value creation. I’ve enjoyed every minute I’ve spent with Hamed over the past decade, and I’m grateful to have been a small part of his success.
Hamed and his loyal team are incredibly tenacious. Started in 1997, TIO (then Info-Touch) started by creating kiosks for conferences. In 2002, they pivoted to accepting cash to pay bills via their kiosks. Over time, the kiosk faded from prominence in favor of “clerk assisted” bill pay — available today in over 65,000 locations.
Who knew underbanked consumers in the U.S. spend almost $1B in fees to pay about $50B in total bills each year? A service I get for free through automatic recurring payments, Western Union will do for $11 per bill (up to $20 for expedited payments)!
Several years ago, Hamed led the company into providing completely digital bill-pay APIs connecting TIO’s cash-acceptance network with mobile and web capabilities. Last week, I asked Hamed where he sees the industry going next: “I think we’re going to see profound changes in how bills are paid. Generally, my view is that as the world becomes more connected, bill pay experiences particularly outside of the bank channel will improve dramatically and likely a lot more quickly than bank powered programs.”
“One will not need to spoon-feed [bill-pay] programs with information to get on-boarded… and innovations such as bots mixed with AI/NLP powering conversational interfaces that are voice (eg. Alexa, Siri, Cortana) or non-voice powered (Facebook Messenger, WhatsApp, Twitter, etc.) will impact the overall experience,” Hamed offers.
Core invests in companies we believe create economic value as a function of providing significant social value. Seventy percent of TIO’s 14 million customers are low- and moderate income. TIO saved those underserved customers about $500 million last year alone, versus their competition. “One story that was deeply impactful for me,” Hamed recalls, “was [about] a woman who wrote to us letting us know that she felt a lot more safe paying her bill at our kiosk in a Circle K convenience store as opposed to going into a payday loan shop or a check cashing store where she dealt with a clerk behind a bullet-proof glass.”
This makes Hamed exactly the kind of misfit we love to partner with; he is neither heartless mercenary, nor helpless missionary. Not unlike PayPal’s Dan Schulman, I might add. Dan likewise has a bee in his bonnet about capitalism serving as a social change agent and wants PayPal (and before that, Amex) to improve the lives of the mass underserved. I’ve had a professional crush on Dan for years, so I couldn’t be happier about the TIO-PayPal marriage (which was announced on Valentine’s Day, no less).
I asked Hamed what he was most proud of. “I am proud of our ability to have Compaq/HP to invest in our company back in 2001 and buy 20% of our equity. Not only was the cash helpful, but having that kind of sponsorship got us in the bill pay game and helped us acquire relationships such as Cricket, AT&T, Circle K and others. It was a complete game-changer. Without this investment from a major strategic, it would have been hard to convince large billers to take a chance on a small Canadian public company.”
“I am proud of our decision to initiate a serious M&A program,” he added. “One could say this was a very risky move (as we had no prior experience) especially considering that we stretched ourselves significantly in order to perform our first acquisition. At the time, we were a $12 million market cap company. We used $3 million from Core Innovation Capital, $2 million from our treasury, $2 million from the target’s own untapped credit lines and $1 million as a vendor financed note to buy the company which more than doubled our gross margin. This transaction created a clear inflection point in the company’s value creation trajectory.”
We’re extremely proud of TIO and excited to see what they do next. And, I want to recognize Hamed has a great, un-sung team, some who have been with him literally for decades. A few of these modest rock stars are Laurent May, Chris Ericksen, Eva Fong, Richard Cheung, Jake Cunningham, Amir Javidan, and Hamed’s brother, Sam Shahbazi.
Core Innovation Capital is a fintech venture capital firm investing in companies committed to empowering small businesses and everyday Americans. Our portfolio companies deliver more efficient, well-designed solutions that save people time and money, create upward mobility, and scale broadly — driving both profit margins and consumer value.