160: Freedom v2 | Colm Lyon’s Journey through Payments and Fintech

HIGHLIGHTS:

Colm Lyon on the early days of IT in a bank in the 1980’s and 1990’s:

“There was only one mainframe in the bank when I joined, and a handful of dumb screens. There was no network, there was no email - it was a very different world and It's hard to believe what it was like back then. I even remember having to work on the business case for bringing email into the organisation.”

“Work practices dramatically changed [in the 1990’s].  The role I played was less about the technicalities of programming or designing networks, and more about the implications on the business process of implementing this new technology.”

“People say that change is accelerating. In many ways, it’s not, it’s just the same.  The change back then was really dramatic, and it was fundamental to the rate at which businesses worked. The introduction of early-stage desktop computing fundamentally changed the way organisations worked and it was completely different.”

“What I learned most from those 14 years was an appreciation of the impact that technology has on business processes and how those business processes change. As I moved into Realex I found that many of the things that I had learned about managing change and about how to be effective at managing change were really useful to me.”

On the inspiration to start Realex Payments at the turn of the millennium:

“I had worked on a project that was supporting businesses selling online. Back in the day, with businesses that were selling online, the solution that many banks were providing was sending them a card machine in the post. They would connect up the card machine and they phoned the customer, got the details over the phone and type them into the machine.”

“[Businesses] realised that this wasn't going to work or scale, and a web-based version of the [card terminal] was required. I thought that this would be a really good space to get into.”

On Colm Lyon’s ‘aha’ moment on what Realex had achieved in Year One:

“We were pitching to the investors, and [co-founder] Owen O’Byrne had prepared a screen showing transactions going through our payments gateway into the different acquiring banks for the 19 or 20 merchants that we had live at that stage [in 2000-2001].”

“I inadvertently flicked onto that screen, and I left it open on the overhead while I was presenting and talking about the business.  Someone in the room asked me what was going on as they could see transactions going through in real time.”

“I told them we had a client in the States who provided online services related to a baseball game going on at the time. The guy turned around to me and said, ‘So you're processing payments because there's a baseball game happening in the US right now?’”

“I said ‘Yeah, that’s what we do’. I had never thought about the profound nature of the fact that as an indigenous Irish business with two people, we were participating in a value chain that was happening in the US at that moment in time.”

“Then you realise, that's actually what we can do, and over the years we just built it all up.”

Colm Lyon on what Realex Payments achieved:

“We built it up over 15 years to 12,500 clients for whom we were processing €28-30 billion worth of payments per annum. It was a very large and important and piece of infrastructure that was at one stage, probably one of the biggest, if not the biggest e-commerce gateway in Europe.”

“It was all grown organically, we had no VC, no private equity involved. We had maybe 15 investors who invested €320,000 [in total] into the business [in the early days]. That was the only external capital that we raised throughout the journey.”

On the acquisition of Realex by Global Payments:

“We met up as a group of executive shareholders with four or five different options on the table. We talked about the idea of raising capital to continue as an independent firm, and we talked about joining a larger financial institution and becoming an important part of that. For me, the key was that no matter what I wanted at that stage, what everyone [together] wanted was the way that we needed to go.”

“It was a completely unanimous decision that the team would prefer to be part of a larger financial institution that could give us the distribution. An exit is only an exit if people call it an exit, and it’s an exit only for the shareholders. For everybody else, it has to be an opportunity to continue to grow and to scale.”

“You might be exiting, but you've got to make sure that what you're handing over is something that's going to continue to grow, and that's what we saw with the opportunity [with Global Payments].”

Colm Lyon on the inspiration behind taking Fire.com forward as a separate business in 2016:

“What I’m seeing in online banking is the same as what I saw on my statement 20 years ago when I worked in the bank.  It hadn’t really changed that much and yet businesses have changed enormously. What we were really interested in doing is making a digital account [for businesses], or an account that was digital by design and ‘API-first’ with the connectivity and accessibility that a regular business banking account wouldn’t have.”

Colm Lyon on what he’s excited about with the near-term future of payments:

“Technology has advanced to the point now where we all have multiple accounts on our phone, and we can access those accounts through our devices. We’re seeing the early versions of what I call account-to-account-based payments, which is where people are paying from their accounts, particularly in Ireland and the UK.  This was previously a very dominant form of payment in Continental Europe, where people have been paying from their accounts, but those solutions tended to be quite nationalised.”

“You can tap your card today on an NFC tag and do a contactless payment. In the future, there's no reason why you won’t tap your phone and the money will just go directly from your account straight to the account of the retailer in real time. The payment will be instant, and the cost of processing will be a fraction of what it costs today – this is where the world is headed.”

“I also see the core clearing systems changing. What we’ve been doing for many years in fintech and payments is working on the outside of the onion, and we haven't really been changing the core. The core clearing systems are going to bring in a capability in the next three to five years, right across the world, that will enable real time, safe, and secure account-to-account-based payments between people, between businesses and between businesses and people. That's going to be a huge shift in the industry and it's going to really change the way people pay.”

On what gets him out of bed in the morning with Fire.com:

“As a 30-person business, winning the contracts to provide some of the world's biggest financial institutions with key pieces of infrastructure that enables them to go to market with really innovative services and solutions for their customers – I just love that. It’s worth getting up in the morning for and I’ve really enjoyed it. I’m not saying it’s easy though!”

On what Colm Lyon looks for in startup founders with his own investments:

“When people overuse words like unicorn and rockstar, I don’t think that does the industry any benefit.  We’re looking for business people: women and men who are maybe frustrated with what they've got, who want to work hard, and they're looking for an opportunity.”

“The investments that we made were simply just to help those people, and that's all we try to do. Sometimes help is just talking and engaging and supporting and connecting, and yes, providing financing.  We're fortunate that we're in that position where we can provide that help.”

LINKS:

Episode title inspired by 'Freedom' by The Gloaming and 'Freedom' by The Game.

Check out the Fire.com website to learn more about Fire.com and Colm Lyon.

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