2022 is here and I’m beginning to meet and talk to a growing number of embedded finance platforms that may be new brands but have deeper, longer roots in the space. Tern is one of those companies.
Brion Bonkowski is the founder and CEO of Tern. Tern’s a low code/no code embedded finance platform that provides onboarding, issuing, and payouts solutions. Tern was created to acquire another firm – US Unlocked – which issues virtual cards for people living overseas to buy stuff in the US, and works with firms like PTOGenius to embed payments and money movement either as an API or used as a white label solution.
Brion discusses the growing no-code/low code trend and where he’s seeing growth in that space. We talk about how Tern competes and differentiates itself in a growing field and what Brion and Co have in store for 2022.
Brion Bonkowski is my guest today on the Tearsheet Podcast.
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The following excerpts were edited for clarity.
First of all, thank you so much for having me. I’ve been excited to participate. Big fan of Tearsheet. I graduated college in ’99, ended up working in a management consulting role for about eight months as a subcontractor to Accenture and hated it. I moved to San Francisco during the time to follow the the .com boom. I had a successful exit pretty quickly there and then had a couple of not so successful entrepreneurial activities after that with 2001, etc.
The double edged sword of an early exit
It was an interesting time, because I was really young, and I was able to start my career by hiring a bunch of people and firing a bunch of people, which taught me a bunch of lessons. If you sell a company, make sure you hold on to some of that money. Don’t throw it all into the next company.
Around 2010, a very good friend of mine, Zachary Smith, took an institutional round for his cloud hosting business. He had another ISO called Merchant Plus that he was also a founder of, so he essentially hired me to be the managing director of that business, to build it out while he took care of his other business. And that started my career in payments.
Running on the ISO side, on the acquiring side, I learned a lot about the payment space. And I realized that a lot of the innovation was actually happening on the issuing side of the business. So we set out to find an interesting use case to issue cards. It’s a lot more fun battling over 150 basis points than than 10 basis points.
Finding a use case
We found cross border e-commerce to be a really interesting way to issue cards. These are non US citizens looking to buy US goods and to issue them virtual prepaid cards. We found that to be an interesting niche. So we decided to delve into it and found a company called US Unlocked which was doing that. And we ended up acquiring it. We actually started Tern to acquire US Unlocked in 2015, to establish a foundational business logic layer and intellectual property for us to launch what we call our Tern Fintech as a Service suite.
If you think about cross border ecommerce, it’s a very complicated and regulated industry. We’re onboarding and offboarding people from around the world, handling funds transfer, cross border FX, multi currency, multi language — so a very complicated use case. We all thought that it was a good strategic springboard for us to build a platform upon.
Growing the team
We’ve been able to hire some some fantastic people, we have an awesome staff on board. In 2017, I was introduced to my co founder, Corey Glaze, who I ended up bringing on as co founder in 2018. And since then, we’ve been pretty successful in building out this platform to help other companies launch fintech products.
No code/low code
We’ve been in the space since 2015 launching fintech products. What’s missing in the industry is the flexibility to offer different ways to deploy fintech solutions. So most of the Banking as a Service providers today offer an API. We do that too, of course. But we also have what we call low code and no code offerings. Low code are essentially embeddable widgets that do core fintech services like onboarding of customers and businesses, issuing of cards and accounts, and payouts, and we offer all those services in this low code, no code, you code type of a framework.
The low code widgets can be embedded into an existing app with very little technical expertise. And then on the far right, you look at our no code options, which are essentially white label, full front office, back office solutions to satisfy a specific use case like remittance, or cross border e-commerce, or payouts, or corporate incentive programs.
A lot of what we have been doing to date has been no code, and just launching fintech applications for people as a SaaS offering. So we host everything, we manage all the contracts, we manage all the relationships of the backend providers, in a multi bank, multi processor, multi KYC provider capacity.
For low code, I’ll give a great example. There’s a company called PTOGenius in Miami. It’s a venture-backed company helping employers facilitate the payout of their employees’ PTO. They came to us and said, ‘Hey, we need a very easy way to pay these people out. Can we potentially issue cards or do ACH or what have you?’ So we consulted for them and essentially said, ‘We think you should probably use this push to card transaction processing to do this.’
We basically branded a widget for them to do that. They can embed this widget into their existing application, which is a beautiful application. The widget looks exactly like everything else in their app, but they don’t have to worry about PCI, they don’t have to worry about SOC 2, they don’t have to worry about the compliance, the regulatory aspects of launching a fintech product within their app. And if you look at the company, they are essentially a fintech company. But they do all the the marketing, onboarding, sales, and support of their platform, but they essentially outsource the one fintech component to us, and we deploy that as a brandable widget.
Differentiating in a growing field
I think the the the low code and no code offerings are definitely a differentiator. We have been successful in launching fintech programs for the last six years for a multitude of types of businesses — from startups to unicorns to processors. We actually do deploy hosted SaaS-based fintech solutions for some of the biggest processors here in the US, as well. So I think we’re kind of like a one stop shop for fintech, which makes us a little bit different.
The team and culture
Frankly, our team is just fantastic. We’ve been able to attract some incredible talent. We have a family-like culture, which makes it a pleasure to wake up in the morning and work with my team, which is funny because I hired about half of them during COVID. So like a lot of people in the world right now, I haven’t met a lot of my team, but I still consider them family.
It’s interesting — all of our customers are referenceable and I think the reason they are is because our team takes very good care of our platform, our tech, our documentation, as well as our customers. So, we consider ourselves almost like a part of our customers’ team. We’re driven by the success of our clients. So if our clients are successful, they have more transaction processing, then they make more money and we make more money — everything we do is in a revenue share capacity. We make money in interchange, in crypto onboarding and offboarding, in FX, and then we make some money in SaaS fees, as well. But typically, our customers are a part of that revenue share. It puts us in on the same side of the table as them.
Working with customers
We’re pretty hands on. We’ll typically do most tier two support for for customers. Our customers will handle a lot of the tier one support. That being said, we’re rolling out a handful of programs in Q1 2022, where we’re actually going to be the first line of support from an IVR and a customer support perspective. We’re outsourcing that — we’re not doing that internally. But, we’ll do that almost like a branded experience, so customers can have a branded IVR and a branded customer service center supplied by us, where they don’t actually have to do it themselves.
The product set
We’re seeing a lot of low code demand. I think the the idea of of embedding a widget is certainly not new — using an iFrame to embed a component isn’t new. But you know, attaching that to fintech services is something that I don’t think a lot of people are actually doing. We found that even seasoned engineers will want to use our low code widgets instead of an API, because they don’t have to worry about the compliance or the regulatory landscape.
A lot of our customers are traditional businesses looking to launch fintech products. They have a market or they have a customer base, and they they want to leverage that market or customer base by offering additional services or solutions. So we enable that through this low code, no code, you code. But we are seeing a trend up in the low code options, for sure.
We found a number of customers will start with no code, where they will basically outsource the program to us with prebuilt, white labeled components, almost to prove a model or to prove a thesis, or to raise money. A lot of our initial interactions will be a no code type of an opportunity. And then, as they progress, they will progress to low code where they’ll have more control over their user experience, and then eventually go to a you code scenario, leveraging our APIs.
We’re actually going to market in Q2 with an automated onboarding of our fintech services that will be low code and no code. So our widgets and API will be available to essentially anybody with an EIN, we’ll KYB them, we’ll onboard them onto the platform and give them access to live fintech services. I don’t know of anybody else who’s actually doing that — enabling people to tinker with live financial applications. And I say, tinker, but there’s a lot of deeply rooted business logic around compliance and regulatory mandates, onboarding and KYC, etc. and going into that widget framework that we’re able to launch very, very quickly. We claim that we can launch new apps within hours of people enrolling.
I think 2022 will be a good foundational year for us to streamline the onboarding process and probably to add additional processing partners. I think a lot of the banking as a service providers, almost all of them, are using Marqeta as a processor. It’s a fantastic processor. But I feel like that’s a lot of eggs in that basket. There’s a number of other processors out there, like large multi billion dollar processors, that are competing against Marqeta. Those processors need tools to compete, and they have a bunch of bank partners that also want to launch fintech solutions for their customers. We’re kind of uniquely positioned as a multi processor, multi bank kind of agnostic platform to help fintechs and the overall market go to market within a compliant framework.
The future of low code
I think low code is where things are going. There’s another company out there called Productfy, which I would imagine is probably a competitor to us, and they have launched some some low code options as well. And the fact that some of the executive leadership of Productfy are former heads of product from Marqeta kind of gives us an inkling that we’re on the right track.
New year resolutions
I would hate to say revenue as a goal, but we certainly have some way to measure it. Overall, as a company, we want to have an automated way to onboard fintechs, where they really don’t have to talk to a salesperson or sign 25 contracts for a processor and KYC provider and bank in that whole framework. That’s one of our primary goals for the year.
We’re also in the process of integrating crypto onboarding and offboarding of funds into our accounts. We’re doing some interesting stuff around cross border capacity. So 2022 is really the year for us to nail down the US, and to have a go to market product strategy that can apply to almost any fintech in the US. Once that’s successful, then we’ll go international: more likely starting in Europe and then Asia Pac, LatAm and then Africa.
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