Payments Innovation

How Thinking Smaller Helps FinTechs Scale

FinTech Innovation YapStone

Though the “think small, grow big” mentality might not be the first approach that comes to mind for FinTechs, it may be because there’s a misconception about what thinking small really entails. David Weiss, president of YapStone, explains why market specialization or focusing on specific verticals can be the best path to growth and scale for companies in the FinTech space.

There’s more to thinking small than one might think. The key is this: don’t think “small,” think “focused.”

In fact, when it comes to FinTech companies, thinking “small” by focusing and serving a relatively small number of huge markets may provide the best opportunity to drive more impactful revenue with sustainable and profitable growth.

David Weiss, president of YapStone, shared with PYMNTS some big misconceptions about market specialization.

The belief that focusing on particular market segments may not be a great way to scale a company just isn’t true, he explained.

“From that perspective, even though YapStone is focused on a small number of verticals, the opportunity in each is quite significant, as each vertical is hundreds of billions and, in some cases, trillions of dollars in size,” Weiss said.

He noted that while other companies in the payments space have a product offering that is an inch deep and a mile wide, YapStone’s approach for the most part is about being several miles deep and several feet wide in any given vertical market. This allows the company to offer integrated, end-to-end payments solutions for specific markets.

“The other misconception is that focusing on vertical markets may seem easier, but it’s really not. Payments are very complicated, whether you’re a large global company or a smaller startup company,” he stated. “It’s very easy to underestimate the complexity of what’s required to scale a payments company, regardless of your go-to market strategy.”

Weiss went on to say that “very few payments companies have the people, the expertise, the technology and the infrastructure to sufficiently address these complexities that span across onboarding (auto-decisioning different types of merchants globally), risk management, pay-in methods, pay-outs, security/data protection, customer service, regulatory, licensing and compliance requirements. Most payments companies that focus on authorization, settlement, simple APIs, pay-outs, etc., eventually become commoditized.”

Navigating the FinTech Waters

For new FinTech entrants, Weiss’s advice is to ensure that their company has a unique offering, supported by a strong value proposition.

When YapStone made the decision to focus on the apartment rental market back in 1999, Weiss said the company was fixated on differentiating their payment solution from other companies in the space. Back then, even though PayPal was just beginning to gain traction and online banking was quite prevalent, the apartment rental market was still dominated by paper checks, Weiss explained. Property managers also used an incredibly archaic system that made it difficult to deal with rent, security deposits and payment collections.

This is exactly where YapStone identified the opportunity to solve a real problem for property management companies and build long-term relationships. Weiss explained that YapStone offered integrations with major property management software companies, making it easier for property managers to accept online payments and eliminating the hassle of processing paper checks.

YapStone applied that same discipline when it entered the vacation rental vertical in 2006, eventually building an end-to-end payments solution serving that particular market.

Weiss also noted the importance of thinking differently and fostering partnerships across the industry.

“Because of the integrations and interconnections between all the various constituencies from the card networks, to the issuers, to all the other financial institutions, to the marketplaces and other business development partners, it’s almost impossible to do this alone,” he explained. “FinTech companies must partner with this ecosystem to really accelerate growth and conquer some of the unique obstacles along the way.”

The decision to avoid the one-size-fits-all model and instead focus on specific, large vertical markets can enable FinTechs to deliver faster, more sustainable and more profitable growth, Weiss said.

“What we’ve tried to do is solve complex payments problems and build real integrations with our partners in our markets, and that strategy has served us extremely well,” he added.

Over the years, YapStone has expanded into new verticals, including self-storage and homeowners’ associations, but Weiss said within all of those markets, the company follows the same strategy of solving specific problems for these large verticals by building specific functionality for their partners.

Preparing for a FinTech Future

When it comes to what’s next for the FinTech landscape, Weiss said he expects that there will continue to be a bifurcation between the strong and the weak, the haves and the have-nots, because the cost of doing business and the stakes are so high.

Due to the segmentation between some of the larger public companies, earlier-stage players and those that fall somewhere between, there will likely be FinTech consolidation and failures in the coming years.

“A lot of companies just aren’t going to make it for one reason or another, and those companies in the middle are going to differentiate and segment themselves in one direction or another,” he said. “You’re going to see a widening of the gap between the more successful, high-growth, high-margin, highly integrated players in the payments space, and those earlier-stage companies and those companies who have not invested in the requisite infrastructure.”



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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