Sameer Gulati, COO of Plastiq — Addressing the Working Capital Gap for Businesses
Gabriela Ariana Campoverde sits down with Sameer Gulati, Chief Operating Officer of Plastiq, a fintech company which allows business owners and savvy consumers to use their credit cards to pay for virtually anything, even their rent, which would normally require a check.
Founded in 2012, Plastiq has processed billions of dollars. For small businesses, Plastiq solves day-to-day payments problems for them and helps them get better access to cash flow. Today this fintech is advancing innovative payment solutions to more than 150 countries around the world.
In this episode we discuss:
How Plastiq addresses the working capital gap businesses often face: “Plastiq focuses on making the lives of small business owners easier, and we think of ourselves as solving the payments problems of all small businesses, which on the surface seems like, ‘Yeah, sure. People write checks and do bank transfers and use credit cards. Why is this such a big deal?’ But fundamentally SMB payments are broken and not just in the United States or North America — pretty much universally. That is the problem. Meanwhile, at the same time, small businesses, again, universally are the backbone of every economy, right? There’s 30 million small businesses in the US alone, but it is a dramatically underserved segment of the population from a financial services and payments perspective. So that is the problem we are solving for folks. Our mission is to make all payables and receivables for small businesses easier while at the same time solving a very critical problem, which is cash flow. The number of businesses that struggle with getting access to cash flow in time is staggering.
More than half of businesses in the US today have less than 30 days of cash on hand as an example. It’s worth just pausing and thinking about that because in our individual circumstances, if I said to you, ‘Hey, you’re going to run out of money in 30 days, Gabriela,’ that’s a really scary situation. These are business owners who are not just fending for themselves. There are people relying on them. So you take all of that, a massive population critical to the economy, deeply underserved by financial services — we’re solving day-to-day payments problems for them and helping them get better access to cash flow.”
The importance of credit for Plastiq users: “Credit is a very important driver of growth, particularly in the US both from how the economy is structured and processes are structured, but also the mindset of people is one where accessing credit to fuel your growth is seen as almost a right.
People are very fixated on managing their FICO score or the business credit so that they can always have access to credit and grow faster and grow bigger. When you look at the primary payment instrument, that is a credit card in the United States — there’s $3 trillion of credit lines sitting on cards in the US across business credit cards, commercial cards, consumer cards, but the fundamental problem in accessing that is the two segments that need it the most have the least access to it. Those two segments are subprime consumers and SMBs. If you look at the last year, or if you look at the 2008 crisis, every time there’s trouble in the economy, credit gets pulled back by the banks first for these two segments. So credit lines are reduced for subprime consumers and for SMBs and access to new credit also reduces for these two segments very, very quickly, which is ironic in that they’re the ones who need it the most when it is crunch time.
But you know, the risk manager at a bank will tell you that’s exactly why you have to pull the credit back because they’re the riskiest segments. So the approach we have taken is rather than try and get SMBs to go apply for more credit and increase their debt load, we should unlock the credit that is already sitting pre-approved on their cards. That’s how our proposition works — which allows them to use that to grow faster, more confidently, and very importantly, because it’s already approved and sitting on their cards, one of the core themes that we hear from our customers is they need the confidence that when they need access to this credit, they can actually use it. Because this is pre-approved [credit], that works really well for them.”
Insights which led to the company’s focus on small businesses: “We were initially focused on consumers. The original promise was for consumers to, or individuals to, use any of their cards to pay anybody.
So the initial use cases were tuition, rent, taxes, utilities. In fact, we still do a lot of tuition payments today to universities in the US and Canada because a lot of universities still don’t accept cards. From there on what we found was based on consumer behavior, we actually found there was a segment of consumers who were actually making payments, which were quite atypical of a consumer, and we realized that these were small business owners using our platform as individuals. So they would actually make their rent payment and then go, ‘Hmm, actually, I could use this for my business, which is actually really impactful for me.’ So then they started using it for business, and so the company realized that and shifted its focus to businesses. So that was one important moment in the company’s history, and now today we are focused on B2B payments.
The second one I’d call out is it’s very important to leverage existing behaviors versus trying to fundamentally try and change somebody’s behavior. It’s much harder to do the latter. One of the core issues in B2B payments is that how the payer wants to make the payment tends to be different than how the recipient wants to receive the payment. As an example, let’s say an e-commerce merchant is paying a wholesaler. That e-commerce merchant wants to use a card. The wholesaler does not accept cards, right? Or the e-commerce merchant says, ‘Look, I want to just sign in through my bank account and send you money through a bank account,’ and the wholesaler says, ‘Actually send me a check.’ This is a problem that is pervasive in B2B payments.
This was one of the things we did [differently from] a lot of other B2B payment companies. Rather than trying to get the recipient to accept cards or telling them, ‘Hey, stop accepting checks because you should use digital payments instead’, [we decided to] sit in the middle and let the payer pay how they want and let the recipient pay how they want. So we decoupled the payer instrument and the recipient instrument. So now the payer, the e-commerce merchant, can pay however they want — card, check, ACH — and the recipient sees no change at their end. They still receive a check if they want a check, or they receive a bank account transfer if that’s what they want. Now, we can actually do this internationally. So you can use a US credit card, and we can send an international wire in British Pounds to your supplier in the UK all through the same experience which is literally as simple as using your card to buy a pair of shoes online. The insight there is to develop your proposition to suit the needs and the behaviors that exist today versus trying to force something down people’s throat, because you think that’s a better idea.”
Sameer’s career from software engineering to consultant to COO: “I’d love to tell you that I always knew I wanted to follow this career path. I didn’t. I was trained as an engineer. I was educated as an engineer when I was growing up in India, and so the first phase of my career was as a software engineer in Europe, which was a terrific time. This is the Dot Com Boom and then The Bust that I saw. But in doing that work, while I realized I enjoyed that, I found I was doing a lot of implementation work versus being closer to the decision making, and that prompted me to come to the US for my MBA. Frankly that was the first time I actually got introduced to financial services and this entire world of big banks and insurance companies and private equity. And, I was just fascinated.
So coming out of business school, I joined McKinsey in the financial services practice. I was there, as you said, for just over a decade in New York and then in London. In my early part at McKinsey, I made it a point to experience every single aspect of financial services. So I did work in insurance, private equity, retail banking, consumer banking, SMB, lending, capital markets, trading. You name it — I made it a point to actually experience that. And 10 years in, I was a partner at the firm in London. The FinTech Wave had become very, very real. What I found was while a lot of the McKinsey clients at the time, like a Citi or a Goldman or an AmEx were doing interesting work, the more interesting work had started happening at fintechs, which were starting to scale. That prompted my move from McKinsey to an operating role as the COO at Lending Club, and it also brought me back to the US.
Lending Club was a fascinating experience. I moved from being a consultant to being an operator, which required a whole host of new muscles. Three years at Lending Club were a terrific time. The reason I left and moved to Plastiq, which at the time was a Series C company, was that Lending Club was already public. I wanted to go to a place where I was truly building a company as opposed to on an existing platform, adding more products and features and helping grow that. So I came to Plastiq where the team was the same as my earlier transitions — which is where there’s more interesting work happening. I felt like at an earlier stage company the opportunity was higher.”
The company’s culture and G.O.A.T. values: “We’ve tried to capture our culture or values in four items, and we call them the G.O.A.T. values — which is obviously a sporting term, like the ‘greatest of all time,’ but also it’s the animal. The ‘G’ stands for ‘get it done,’ which is a very execution oriented mindset. ‘O’ stands for ‘own the outcome.’ Everyone behaves like an owner at Plastiq and takes accountability. ‘A’ is ‘adapt with conviction.’ This is so central to being successful at a startup. All of your plans need to be flexible because the world is changing so quickly around you, and T is ‘trust the team.’ This is not a hero culture. We believe in the power of the team and collective goals, but individual accountability. So the G.O.A.T. values is something that we try to live up to and hold each other accountable to. It’s been really inspiring and humbling to be part of shaping these and infusing that in every part of Plastiq — very importantly, in our recruiting processes and how we think about our reviews and career progression.”
And much more!
Full interview → Spotify | Soundcloud | Apple
Sameet Gulati
Sameet Gulati is the Chief Operating Officer of Plastiq.
Prior to joining Plastiq, Sameer served as Chief Operating Officer of Lending Club, a fintech company that provides a range of financial products and services through a technology-driven platform in the United States. It was the first peer-to-peer lender to register its offerings as securities with the Securities and Exchange Commission and the first to offer loan trading on a secondary market.
Before joining the fintech world, Sameer was a partner at McKinsey & Company, where he became a leader in banking, payment and lending. Sameer started his career as a software engineer. He is a graduate of Booth School of Business at The University of Chicago, where he earned his Masters in Business Administration and Indian Institute of Technology, Delhi, where he studied Chemical Engineering and Computer Science.
Sameer has global experience in fintech companies. To follow him on Twitter @thesameergulati.
About Plastiq
Plastiq allows business owners and savvy consumers to use their credit cards to pay for virtually anything, even their rent which would normally require a check. Billions of dollars have been processed through Plastiq since its start in 2012.
For additional information on Plastiq, please visit plastiq.com | Twitter: twitter.com/payplastiq
About the Author
Gabriela Ariana Campoverde is Co-Host of the Wharton FinTech Podcast and an MBA candidate at The Wharton School and Masters candidate at Penn Engineering. She is passionate about building products for work-class, immigrant communities across the US.
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