SPEAKER_03 0:00

Welcome to SenseChat, the podcast where payments meet personality. From tech trends to legal twists, compliance quirks to marketplace moves. Titty's here to keep ISVs, PayPal's, and marketplaces ahead of the curve. Get ready for insights, a few laps, and the occasional compliance scare. Let's dive in and make payments make sense.

SPEAKER_04 0:23

Expanding into the U.S. sounds pretty simple when it's aligned on a strategy slide. Pick a market, hire a sales team, localize the product, connect payments, and start selling. Then reality shows up. Your customers expect different payment methods. Your reporting doesn't quite match how they run the business. Support suddenly crosses three different companies, pricing gets more complicated, and the payment setup that worked perfectly well in other countries starts feeling a lot less perfect here. That's what we're getting into today. What actually changes when an already global ISB expands into the US and why payments can force a much bigger product and partnership conversation than anyone actually expected. This is SenseChat. Chris, we talked a lot about US software companies trying to expand internationally, but the story goes the other way. Illumine was already operating across more than 50 countries before making a serious push into the US. So they weren't new to international expansion. They were new to that particular kind of payments chaos we specialize in here.

SPEAKER_01 1:24

And that's what makes this interesting. When you come into the US, the question isn't just can I accept a payment? Of course you can. The harder questions are who owns onboarding and support? What happens when a payment fails? Where does reconciliation live? What does the merchant see? And whether the partner you pick today can support the product you want to build in two years.

SPEAKER_04 1:44

Right. A payment setup can be perfectly fine when the goal is broad global coverage. But once you're trying to go deeper in one market, fine can stop being enough pretty quickly. And the US market keeps moving underneath you. Chris recently wrote about the possibility of major banks buying debit infrastructure and what kind of change could mean for routing, pricing, and the economic ISVs build-around payments. We don't need to turn today's episode into a debit network seminar, but it's a good example of the bigger point. Even when your customer sees one clean payment screen, that's a whole lot happening underneath that that can change.

SPEAKER_01 2:19

Exactly. If you're building payments into your product, you're making a long-term infrastructure decision in a market where the rules, economics, and relationships change. So partner selection isn't just procurement, it becomes part of a product and risk strategy as well as customer experience.

SPEAKER_04 2:34

And that's why we've got two people from Illumine with us today who can look at this from different sides of the business. Navneet Rostogi and the founder of Ilumines. So he can give us the founder and product perspective on why the company came to the US and what had to change. And A B is Ilumine's director of global revenue and partnerships. So he's been right in the middle of the commercial and partner decisions that come with all that expansion. You guys, welcome to SunChat.

SPEAKER_00 3:00

Thank you. Thank you, Kitty, for having us.

SPEAKER_04 3:03

Not me. Let's start with the company itself. For somebody who hasn't come across Ilumine before, what are you building? Who do you serve? And what problem were you trying to solve when you started the company?

SPEAKER_00 3:13

Thanks a lot, Kitty and Tiss for having me. I think the story goes back eight years back when my son started taking first steps at home. And I as a parent got excited seeing that, okay, my son started walking. I should share this news with everyone in the world. And next day, when I went to the childcare center and shared this news, and they said to me, it happened a few weeks back, and I think we miss telling you. And that led me to realize it might be the same story for so other parents. And that was the case when I started talking to them. It was about a lot of key milestones getting missed or getting missed when they were not part of the story of what their child's journey looks like as of now. From there, I uh like being in G coming from an engineering background, being an engineer myself, I said, I can solve this. This has been done. This problem is quite easy enough. It has been done by so many companies out there. Let's pick up this challenge and let's solve it. And I thought I'll solve this problem maybe in a couple of months and we'll make a lot of money after that. So I picked up the phone and called the CEO of that big chain back in India that was running around 70 locations. And they said, We mean like I said, as a parent, I'm not happy. They said, We are not also not happy with the solution that we have. And I said, Then I have a solution to show it to you. And from that day till now, I think the thing that I thought I'll build it in months' time, I'm still building and keep growing from there. And in eight years, we have been more than 55 plus countries, more than 3,000 childcare centers globally catering to. And US is where we entered last year and expanding really quickly. I think one of the problems that we keep discussing is how do we onboard so many clients so quickly and take them live? So those, those, that's the stage we are in.

SPEAKER_02 4:47

But if I look at the functional fit of the product, let's say which industry problems do we solve the best, I would say multi-site operations. And that's where our dominance has been, because we have been solving it from day one. So imagine today we are seeing a lot of growth happening in childcare organizations, a lot of consolidation happening. And we have been solving that issue of multi-site operations from day one. So today, if you have 10 centers and you are looking for a partner who can support you in the journey of, let's say, 10 to 100 centers, Illumine does that very well because the functionality allows you to do that organically. So that's that's where we come from. That's that's how we think we live, breathe, and execute multi-site operations. So that's that's the functionality part of it that I wanted to just put out there as a And uh since you've already expanded in the other markets.

SPEAKER_01 5:34

What did you assume would translate pretty cleanly here in the US? And what surprised you once you actually got into the US market?

SPEAKER_00 5:41

So a lot of countries we expanded, Chris, and uh we thought it'll be the same journey in the US. I think initially it looked like the same to us, but then soon we realized I think payment is one piece there. Subpayment and subsidy are the two very, very big pieces in US that surprised us. Coming back here when we entered into the US market, we thought everything will work the same. One of the biggest learning first came is every state is like another country. It's not like the whole US, you can solve it in one piece out there. Whether you take about the payments, whether you take about even the subsidy out there. There is a federal subsidy, there is a state subsidy, there are ELCs, there are different grants out there. How do you manage them? And when it comes to the payment, it's completely different than any other countries. The most of the billing was running in an auto-pay manner. They want people to just put on their details and run in auto-mayers. There were a family who needs to be split the billing, there were the tax statement that needs to be generated on a specific format on a specific day. There are subsidies, there are copies, there are grants, and there are different discounting strategies. So there were so many combinations we had. And then the reporting itself. Reporting was most of the solutions, like out-of-the-box reporting that was available out there, was only helpful for a few cases, like just for the money movement. But the way the reporting needs to look at it, like for example, I order offer three programs. What is my revenue looks like, what my projection looks like, where I'm paying what fee, uh, what is the average settlement looks like, all of those reports were out of the system, or we have to manually build it. Like this is not easily accessible. So that took us a lot of learning even to understand how to go about building them. Like ACH as a payment system was quite a learning for us that it assumed to be success unless until you hear a failure on a webhook out there in the next five days.

SPEAKER_02 7:22

Another element to it was we also learned why it is an auto pay because the payroll was running on a weekly or bi-weekly basis. So it's a it's a faster cash inflow and outflow business that they have in childcare. So you need to understand the settlement cycle, you need to understand how the payroll works, why why there is a need for autopay. So a lot of uh nuances to it, I would say.

SPEAKER_00 8:07

And they always wanted a single point customer experience. Like, if anything happens, they should be able to reach out to us, not figuring it out, to go to the Stripes general chat and then ask those questions out there, or any other products, like just for giving as a reference. And like one of the use cases were like which also led to think of a partner who can enable those use cases, like considering this is a large operational and a regional team's out there, there will be a case valid where the refund needs to be there. When the refund needs come in, they wanted to make sure there is an approval out there, and that approval needs to be at the regional level or even the HQ level, if in case of a certain amount. So Illumine has a workflow system which allows you to configure this, but a lot of time the limitation was coming, these capabilities of the refund was not exposed from the platform to even put it in our system, or having the refund pool amount, which they can put it so that the staff can issue refunds from there. So they have to go separately, create uh create a sweep from the banks to bring that balance and do it, which will take a lot of time and then delay from a customer experience point of view. So those things have been built, like similarly, able to look at the settlement from a perspective of what has been built versus what is collected out there, really. So those are the pieces. Similarly, when it comes to chargeback or the disputes out there, able to easily defend them because the platform has a lot of information, like child is attending your program, their attendance information, their communication information, easier to fight those versus going on a separate platform, taking screenshots, putting a report versus just one click taking a report and submitting a dispute proof or uh like that.

SPEAKER_01 9:38

I think there's a responsibility question hiding in there too, isn't there? It's the you as the ISV, you kind of want to be the single point of contact. The customer themselves don't really care. Which company underneath has the responsibility on the chargeback or on the uh on the process flow, but you want to own it and you want to make sure that that happens. So, how do you think about the line between what a lumine should own and what the payments partner should own?

SPEAKER_00 10:06

So I think it's quite uh simple when it comes to saying we want to own the customer relationship. Anything coming from customer should directly be in a lumine wheel handling it. Anything in terms of technical aspect of anything related to, let's say, fraud or any capability that you need in the product, like let's say, as simple as enabling a new payment method out there. That's the kind of relation that you should be handling as a company between you and the payment processor or the payment gateway out there.

SPEAKER_04 10:33

Yeah, that's the part customers are so consistent about. They don't say, I completely understand the failure occurred three vendors downstream. They say, I clicked your button and now my money is weird. So whether you claim to own the experience or not, the customer may have already made that decision for you. And up next, A B, once you knew you wanted to go deeper, what did a serious US payments partner actually need to look like? What moved from nice to have to non-negotiable for you guys?

SPEAKER_02 11:02

Second was we became much more, I would say, curious about the technical capabilities that a payment partner has to offer because it's something which we wanted to really tie up with the product and we are very fast with our development. And uh with respect to the customer experience, there are new things that are coming, not just in childcare, but in other consumer-friendly applications out there. So the customers are already acquainted with newer payment methods, faster, I mean, better experiences with a lot of other payments solutions out there. So we wanted to make sure that in childcare we offer the similar or at par or better experience. So we wanted to also evaluate that A, technical capabilities are there so that we can build that experience, B, whether the partner also looks at the payment side of business as evolving as the consumers are evolving. So those became non-negotiable. I think we kind of evaluated partner more on the non-negotiable side uh while we were looking for US market.

SPEAKER_00 11:57

I would add just one thing there. Uh like I we have never gone for a partner in looking at just the name or the revenue of the company because that's another angle. Like the in payment space, I've seen there are so many companies so big with the revenue, but their tech maturity or the tech offering is not that strong as the company that we try to kind of offer to our experience, like our customers, like, and that's where a lot of times this is a struggle. Like you want to offer something, but then the platform limits you because the other capable capabilities are not there. And because they're so big, the revenue like the revenue size is so big, and maybe initially when you're starting with the partnership, you're a very small client for them. So a lot of times you'll not have a say in the roadmap or not, they will not prioritize it. So that kind of becomes a struggle. Like you want to give a best experience, but you have made a partner who's not even listening to you because you are too small for him at the stage. So that's another angle we always try to see that we the partnership needs to have a save from both the sides, yeah.

SPEAKER_01 12:56

On the technical side, it can become a business problem fast because you can't grow as quickly as you want to and integrate with who you want to. You might have weak APIs that delay launch days, you might have bad documentation that becomes an engineering cost, all these different problems associated with. When you were looking at these different payment partners, you were looking at their tech, how did you get it? How are you able to kind of dig into were they mature enough in order to support what you needed?

SPEAKER_02 13:28

One part of evaluation, I think that that will be relevant to this question. We always ask them for a testing environment for us. So while we are aware that they have documentation in place or all the necessary resources that they might have listed on their website, we wanted to also test the ongoing support with respect to technical implementation. And how open are they during that process and answering queries? Because that also acts as a in a way, because you have to ultimately you are facing customer, but you have to rely on partner to answer those queries, let's say technical or whatever solution handling that you're doing at the back end. So that process of testing the entire integration process, uh, running certain test transactions, making sure that we are always talking in terms of this solution is existing today. Can we do this better? And would your technical team can look into it? And the responses speak for itself. So that becomes a crucial, I would say, and multiple times. And we have seen our questions evolving also with respect to every partnership that we do. And this became one of the hygiene things for us.

SPEAKER_01 14:33

And we should touch on economics here as well, because economics matter, right? But a bigger revenue share doesn't help much if the partner slows your roadmap or forces you to rebuild the experience later. How did you balance commercial upside with product fit and customer pricing?

SPEAKER_00 14:50

I'll just add one perspective on that. Like uh whenever the payment partners should be looked at it. Short term, you're looking at product experience out there, and the long term you're looking into the revenue economics also out there, or the economics of the payment business out there. Because it cannot be the other way around. While you need to have an eye on both, it's not like you can you can trade off one and then later you can e magically figure out the other.

SPEAKER_01 15:14

But the first one is very important the product experience out there, and uh that payment should strengthen the core product and not become a distraction, right? So it is a flower uh with your service.

SPEAKER_00 15:27

And there are a lot of costs around it, like the your internal cost as well as the external cost. Like it's not easy to build those payment pieces also out there. And it it depends on like you have an easy route where you can just plug in and play and use it, but then you get stuck down the line in six months saying that I cannot now extend it further down the way, the experience I want for them. So you have to invest to in have a good right partner for the payment to be integrated in the platform so that in long term you have to start seeing return there.

SPEAKER_01 15:52

Yeah, and some changes in the uh payment platform eventually affect pricing or margin at the ISV level as well. So you can't predict every change, but you can avoid choosing a partner or business model that only works if every assumption stays the same, right?

SPEAKER_04 16:08

Let's bring this back to the customer. Your users are center owners and directors, they're trying to run a childcare business, not reverse engineer payment infrastructure. What have you learned about the US customers actually expect from the payment experience and from Illumine when something goes wrong?

SPEAKER_00 16:24

Three things very consistently from a customer experience or what US customers expect from us. Like one is the clarity over speed, like uh they want to know where exactly what is collected, what is settled, and if uh failed. Speed may be a little bit delayed, but that report needs to be accurate and very clear out there. Second is it needs to have a single person or the single number to call if any issue happens. Like that's very consistent that I'm seeing across there. I think the third is more around like uh the way the US operates their books, like in these businesses, how they sync to the QuickBooks and all of that should not mess up. Like when you start doing the billing, your ledger should not mess up. I think these are the three things that I've started seeing as the important thing in US.

SPEAKER_04 17:04

Yeah, let's make this useful for the international ISP listening to this and thinking the US is next. What's the thing founders and product teams are most likely to underestimate before they get here?

SPEAKER_00 17:15

The way underwriting works in US in the payment system is very different than the rest of the world that how it works out there. Similarly, state compliances, like for example, in case of childcare, certain states you're not allowed to pass on the the card fees to the parents, certain places you're allowed to pass on those fees out there. So, state to state, it varies a lot the way you can talk about the payments and kind of balance the service fee or the transactions fee out there. So those things need to understand. It's not easy to understand. And then when you look at the payment uh companies out there, at a high level, everybody will look the same and everybody will talk about basis points to sell you saying that I'm a good company out there as a payment. But then the learning is look at the payment pieces and the technology capability exists at that layer. So that's that's how I look at it. Yeah. And in USA, the payment business is also a very strong, sticky portion of the business because this is a really fast-moving and a complex piece that you need to have in the system. Like that's a backbone of your business itself. Yeah, the important piece AB said it's just not the product team when it comes to US building the payment businesses. It's a product and engineering team, it's a legal team, it's a compliance team. And then also about like uh the customer success team that needs to be trained very differently there. Yeah.

SPEAKER_01 18:25

And again, in the ISB, a short due diligence checklist. What are the questions you absolutely want answered before you come over to the US?

SPEAKER_02 18:33

One, you need to figure out the company fitment, that's number one, or a partner fitment. Uh, you you should be aligning on the way you operate as a company. How do you think? Do you think come customer first or not? So that's one alignment that you need to do. Second, I would say the part where technical due diligence or those technical maturity that Nav also spoke about, that's very crucial because the scope is wider. Third part, of course, the unit economics has to make sense. It has to be a longer-term alignment. And you will see a lot of partners. Don't make a mistake where you want to have a short, like short-term win. Wait and probably do more research on what all exists out there because you will find a partner that works for you for the stage that you are in. If you are a startup, you might end up working with someone else. While if you're a mature company which is extending, you might find someone else with a better maturity on tech or let's say scope of implementation. So it's it's a question of how you look at the partner. So that's very important along with the technical maturity. I think one crucial part that I said earlier also, it has to be well tested. Don't just believe the documentation, do the actual testing. That's that that unfolds a lot of things while you are evaluating for you as a long-term strategy. If you're thinking of payments as a long-term strategy, that's that's my checklist.

SPEAKER_00 19:53

I think one checklist on top of that, just look at the the kind of data security and the tech measures also out there, like compliance, SLAs, downtime, all of those things, how how good they are, even turnaround time, even for customer requests, if you have to reach out. Because as you continue to grow, these things are very important. Like we have seen in certain regions where the response time from a payment partner has been three days, while we have committed for a day, one-day communication timeline back to our customer. So you end up in a situation saying that okay, it doesn't align. So those are the things that are very important. And your platform, if you committed, let's say SLA 99.99 or 99.95. So you need to also make sure those things are aligned in those payment platforms. And that also gives you a sense of uh maturity of the platform.

SPEAKER_04 20:39

I think that's the big takeaway. Expanding into the US isn't just adding another geography to the sales map. It can force an ISV to decide just how much of the payments experience it really wants to own. And once you decide you want to own more of it, the standard gets higher. You need partners that can keep up, reporting that actually makes sense to customers, clear responsibility when something goes wrong, economics that can survive change, and a product experience that hides the plumbing without ignoring it. Nagni, A B, before we let you go, give us the quick pitch. Who should be looking at Illumine and where can they learn more?

SPEAKER_00 21:16

Any anyone who's running childcare centers, preschool, after school program, and trying to grow that center, trying to make their parent experience better and support their teachers should be looking at Illumine. It's a platform designed to make your life easy uh by bringing everything under one platform, whether it's your CRM needs or the enrollment needs, whether it's your paperwork, whether it's your communication needs, complex piece as we talked about, billing and payments and subsidy to may easily manage them. And then also on the attendance and the lesson planning side of things. So these are the pieces Illumine brings together.

SPEAKER_01 21:47

Nabni, Abi, thanks for joining us and talking about the work behind US expansion.

SPEAKER_04 21:53

And if you want another example of why the US payment stack keeps people on their toes, check out Chris's recent SenseChat article on what could happen if major banks end up owning more of the debit rails. Thanks for listening to SenseChat. We'll see you next time.

SPEAKER_03 22:07

Thanks for tuning in to SenseChat. Got questions? Got ideas? Got payment problems keeping you up at night? We've got you covered. Head over to our website to take our quick survey. You'd like to land a guest spot on the pod. Don't forget to subscribe, share this episode with your favorite ISP, and follow us on all social for the latest trends, tips, and debates. We promise no boring slideshows. At FenceChat, we're here to make payments make sense and make it fun while we're at it. See you next time.