Paysafe Calls Digital Wallets the New Hub for Payments and Commerce

Narrator 0:04

This is What's Next in Payments, a PYMNTS podcast. Forward looking insights from industry leaders on the trends and technologies reshaping payments in fintech. In this episode, Bob Legters, CPO at Paysafe, says the increasing use of digital wallets can streamline back office processes and reduce costs.

Austin Prey 0:24

I'm Austin Prey, senior reporter here at PYMNTS. Joining me today is Bob Legters, the chief product officer at Paysafe. Bob, thanks for joining us today.

Bob Legters 0:34

Oh, it's my pleasure. Thanks for having me, Austin.

Austin Prey 0:35

Yeah, it's an exciting conversation. You know, we're here for the February edition of the What's Next in Payment series. Uh, you know, for this series, you know, we're asking senior execs across banking, you know, FinTech, and the payment service uh industry broadly to kind of name their word of the year for 2026, uh, excluding, you know, AI and crypto. Uh and so, you know, kind of diving right into this topic, you know, from your perspective, from Paysafe's perspective, kind of, you know, what's your word of the year?

Bob Legters 1:02

Uh yeah, it's a it's a perfect question because uh, you know, we as we're as we're create creating our plan for the year in the roadmap, you know, the common themes come up and you start running across. We're gonna do these nine or ten things, but at the end of the day, one thing, one theme always emerges. Our our word, it's wallets. Uh wallets is the word of the year. Um we we we specialize in both the merchant and the consumer side. And the one thing that seems universal across both those markets is the wallet. So that's that's our word for the year.

Austin Prey 1:33

Awesome. Uh, and not to kind of quickly veer into you know the other side of the coin there, but what might be kind of a constraint on wallets? Uh, you know, kind of what are you guys preparing for uh as some challenges as kind of you know the word of the year you know proves its metal uh over the next 12 months?

Bob Legters 1:49

Well, you know, in in the payments space, what typically happens is all the innovation happens in the engagement model between the consumers and the representation, and and wallets appear to be a very digital version of banking that allows you to move money without the constraints of the banking system and and all of that, but it's actually not true, right? The um all funding that's moving is really moving under the constraint of the existing ecosystem for uh bank authorizations and the normal risk and fraud and AML and all the regulatory rules. And so the real constraint to the rocket ship that that wallet is on is the existing system is still a requirement of moving any transaction. So it can feel really cool, and then all of a sudden you get hung up by a step that feels like, oh, this is a terrible experience. But the truth is, it's the same experience you have with banking and these other things, and until we can streamline the entire ecosystem, we can't make the wallet feel that much different than a banking transaction.

Austin Prey 2:52

Totally. Uh, and uh yeah, that that's really well said. Uh, and kind of when it comes to you know creating and scaling this kind of invisible, uh, you know, it just intuitive wallet experience, um, where do you see you know end users noticing change first? Uh and kind of what's on you know companies like Paysafe to you know maintain to kind of improve, kind of you know, how do you see that breaking uh out across the user experience and kind of the you know stakeholder kind of prerogative?

Bob Legters 3:21

Yeah, I think it's a great question. Uh one of the things that consumers notice first is because of the nature of how a wallet works, right? When you fund into your wallet, we have that traceability of the origination of the funds and it it's much closer to the transaction. So moving it out of the traditional rails and into the wallet allows it to be closer to the transaction. So the consumers notice more instantaneous money movement, more instant responses. And so they they feel much more connected to the transaction. And in in many cases, what merchants would realize in a wallet transaction is they feel the same thing on the back end, the settlement, right? Because now it's moving with greater speed, they also get the benefit of optimizing the back end of the processing engagement and they get that real-time settlement, which is critical. You know, we want we want a merchant to be able to provide a service, get paid, and then on the way back to their shop, replenish supplies and be able to, you know, kind of make that working capital actually come right out of the transaction that took place. So the speed is the first thing and instant access to fund, the first thing that everybody notices.

Austin Prey 4:29

Awesome. Yeah, I love the way you frame that, just kind of getting closer to the transaction because I'm I'm thinking back to my personal life, you know, and it is, it does feel reassuring when you kind of you know it's there, uh, it's visible, and it's also kind of, you know, it's that easy. Um, and and you know, not to make it a pattern of one positive, one negative, but to veer into kind of the risks, you know, what's keeping you up at night uh around what around wallets and kind of what do you see as some necessary risks?

Bob Legters 4:56

Yeah, there's uh that's a it's a great question. And and the reality is it is a two-sided coin, right? With every benefit that you get, you're pressing the industry and the ecosystem a little further than it's gone, right? The more real time you go, the more risk that if there's a crack in the system, if the you know, the I always say the the fraudsters out there have a much better incentive plan than most of your payments employees, and a much worse non-performance plan, right? So you get to keep what you steal or you go to jail, is uh a lot different than the employment model that we work in. And so I I think the the opposite side of that is is that where the SDD and FTD and all the kind of risk-based limits and the tolerances are such that in a real-time world, fraud can ramp ten times as fast. And so where normally you can see a fraud trend emerge over hours or days or even weeks, in some cases these things emerge over minutes. And so the consequence to that is the need for kind of instant interaction and re-verification of transactions. Now, the good news is like bringing that closer. I remember I came up, you know, in checks before the knucklebusters and uh the credit cards and all the payment systems. So we've taught the whole world what's that three-digit code on the back of your card, what to do with this. Now we're teaching the whole world, hey, when you make a transaction, expect that that SMS text right afterwards to verify the transaction. Sometimes expect the one that says, is this really you and check it. And those are the types of things that I think um by using a wallet, you get that kind of real-time app notification that's not delayed by the ecosystem. So, so the the big risk on the side of all that speed is the fraud risk and the security risk. And it's always a balance because it doesn't matter how safe you're making somebody, when they feel the bars of safety, it still feels like a prison.

Austin Prey 6:50

No, that that's yeah, that's really well said. Uh, you know, Carl, what are some capabilities uh that you know you see kind of becoming table stakes in 2026 uh you know as wallets scale?

Bob Legters 7:03

Well, well, certainly um interchanging money, uh, when you talk about things like crypto and you talk about moving money into different wallets, you know, the average consumer used to participate in maybe one to 1.5, and now it's in in certain markets is going up to six or seven wallets. Um what's happening is the consumer's holding their money across multiple locations now instead of using a single device to access pooled funds. And so the ability to interchange those dollars, right? Converting your rewards points, using your crypto, moving your debit and credit, all of those type of things. So those capabilities have to be give me access to my assets wherever they are in the wallet, and I'll use your wallet all the time. And that's that's one of the big um development and roadmap hurdles to do it. The other would be a lot of cross-border, way more international activity going on with wallets. A lot of consumers that are that are more international depend on wallets rather than banks because of the regional nature of banks. So they use the wallets and then they're jumping across multiple currencies, might be jumping across, you know, a lot of FX. And so um seamless, transparent FX, and and of course, you know, kind of that that uh uh global payout capability is critical.

Austin Prey 8:19

Yeah, I mean, uh conceptually they're not so different, kind of being able to, you know, right your money how you want, but technically they're they're they're they're they're very different. Uh you know, can you talk maybe a little bit kind of about how the you know emergence of wallets is just kind of changing you know the payment stack for for for businesses and and individuals?

Bob Legters 8:38

Well, one thing's for sure, um the the businesses are more, the merchants and the retailers are trying to get the consumers to engage in wallets more because it's a way better experience to be able to move money back, whether that's cashback rewards or incentives or rebates or refunds, moving money back to a consumer through a wallet is a way to instantly uh engage with them and not depend on the external system, so to speak, and you know the external ecosystem. So I think that's that's probably one of the things we're seeing is more and more and more of the businesses are counting on the wallet as a part of their ecosystem. Not to mention, if you have deposited funds into a retail but retailer-based wallet, the retailer's got some understanding of the type of spend that's available by consumer, and it changes the way they market and interact. So when we talk about when we went from general marketing to targeted marketing to engagement marketing to loyalty marketing, and now we're getting into wallet marketing, there's no better consumer to have than one that you have a registered consumer with financials. Uh it's the it's kind of the best of both worlds without having to get into the banking world, right? Very few retailers want to be anywhere near banking regulation and money laundering and all of those things. They want to they want to leave that to the experts, which is where organizations like Paysafe come in and we step in and you know and provide those services for them. But without a doubt, um getting that engagement and transparency is paying off in droves for a lot of the retailers.

Austin Prey 10:12

Yeah, and it's a great call out on kind of the money back uh element of this. You know, is that something you're seeing the marketplace kind of go to proactively, or is it more something that where there's a you know an education kind of gap around it's you know, well, it it is interesting because like payouts is usually something handled by the financial aspect of a retailer, but they're missing that it's still a consumer experience.

Bob Legters 10:34

Yeah, right? When the whether you're doing a warranty payment or a payout on a rebate or um or doing a refund or something like that, or even the payouts where you're sending money to a uh maybe a contingent worker in another country, those are still experiences that reflect on the brand. And that's one of the things that wallets do is they bring the transaction and the brand closer together so that the better the experience, the better the brand looks. And we're we're experiencing a lot of that as we move more money into businesses that are doing payouts, paying commission checks, just moving money, not necessarily having to be a part of the actual cause of the payment, not having to be in the warranty or the insurance system, but just saying this is the way you're gonna get your money. It's simple, it's safe, it verifies you, it verifies me, and it it makes it a lot easier to not have to track down and work through the banking system where you can't work on each other's behalf in the banking system in many cases. So we're seeing a lot of that. Um payout wallets are growing immensely with cross-border transactions and um especially with the kind of the gig economy and the remote worker status that we see, especially in the development space.

Austin Prey 11:44

Yeah, and it's uh it's uh it's kind of just a perfect fit. You know, the wallet is a perfect fit for that use case. Um and you know, kind of looking ahead, I guess, to 2027 already. I know it's just February, uh, but if you had to define success uh at the end of this year, you know, with one measurable outcome for kind of the wallet economy of let's call it, uh, you know, what what would it be?

Bob Legters 12:05

So it's interesting. Uh I would measure it on shift mix, right? The mix of of money that's spent in wallets versus money that's spent in traditional rails and things. Um, you know, it's interesting. Almost no payment methodology that's ever been invented has ever been retired, right? Uh we're still using checks. I remember, I remember in the 90s when checks were going away, and then you go to you know different payment types and different um, you know, kind of mechanisms and ecosystems. And so what we want to see is shift mix, right? We saw the same thing with alternative payments, with crypto, with these things come up, where you're saying the real success is getting a bigger and bigger share of the dollars moving through that portion of the ecosystem. So we see a double-digit move in wallet, in the dollars in the wallet, um, then we feel like we've you know we've accomplished a lot. Um, we put a lot into the wallets because it enables us to reach out to customers in a number of very unique and niche markets. And so uh that's that's what we're measuring. We're also looking at uh average deposit by consumer, right? How long do you keep your money in the wallet and and what do you want to do with it? So wallets are great for certain markets, not so great for others. Like, you know, there's there's other markets where it doesn't make sense. But if it's a recurring spend category like the experiential economy we work in, then you want to keep a balance in there and be ready for the next opportunity to spend and the next uh good deal, or et cetera. And so that's that's what we do. So we we're looking for the shift mix, right? More shift from the traditional rails into the wallet rails.

Austin Prey 13:39

Awesome. Uh and this might be a kind of a naive question, but when it comes to that shift mix, you know, from the product perspective, is uh, you know, what's kind of more I don't know what the right word is here, but kind of when it comes to backwards compatibility, you know, as you said, kind of every payment method that's that's been you know used outside of maybe the penny, rest in peace, you know, is still around. But there's also all these future ones, kind of from the wallet engineering perspective, what have you learned, you what have you and your team learned from kind of backwards compatibility with more traditional methods and then forwards compatibility with kind of more spear tip, you know, maybe digital assets, maybe kind of uh you know, uh cross-border, cross-border currency batching or things like that.

Bob Legters 14:20

It's so uh it's a great question because the the reality is that all of those, even the legacy payment structures, are moving to more SDK, PI-based, um, auto, you know, kind of AI and automatic updating moves, because at the end of the day, uh there's only really two types of money in the world, right? There's money you have and money you don't. And the money you have is every asset that you own, whether that be stocks or crypto or deposit accounts, etc. The money you don't is always credit and risk. And so the when you want to access assets, the same basic information is still needed, right? Validation, verification, risk monitoring, those things. So what's happening is the entire ecosystem is improving and just kind of now knowing that, gosh, we didn't think about this and we don't know what to think about next, but something's coming. So we're building and in kind of that methodology that says build into this API structure, you can move anything. And that's really what's happened is you see that. So we don't really look forward as we look forward and say, oh, wait a minute, you know what somebody's gonna want to do? They're gonna want to take a piece of the equity in their car and they're gonna want to buy gas with it. That may not be the best financial decision in your life, but the truth is what we care about is where's the where's the asset, how do we value the asset, how do we recognize it, and then ultimately how do we bank it behind the scenes? And so um, so I think from that perspective, backwards compatibility is actually being addressed by uh the innovation in the market, and it's really exciting to see. That doesn't change that there's still core banking platforms, and you know, you're gonna you're gonna still have, like I used to say, they still move heavy steel across the United States on trains because it's not the most efficient means of travel, but it can carry heavy weight. So when you're moving trillions of dollars, sometimes you need the heavy weight behind you, and and that's really what we're seeing, though, is we're thinking about all the more efficient ways to do it and kind of building in that direction and and the kind of rising tide lifts all ships, so to speak.

Austin Prey 16:24

Awesome. Yeah, and it's just that's uh it is exciting, kind of that the plumbing is, you know, yeah, is future-proofed uh, you know, in in many ways. Um I guess we're kind of nearing the end of my questions here, but you know, if you had uh I I guess kind of are there any misconceptions about wallets that you'd like to kind of address? You know, is there anything that you might wish kind of merchants knew about the capabilities that exist today versus I think there's there's some great um on the consumer side, um, there's a misconception that uh in many cases I and I've talked to multiple consumers where they've said, yeah, no, I don't use wallets, and then when you talk to them for a few minutes, you're like, well, wait a minute, I actually do have that app and I keep money in it.

Bob Legters 17:05

Well, that's a wallet. And a lot of times they don't think of the wallet as a separate financial mechanism, it's actually embedded. So the big misconception is that wallets are separate financial tools, and the truth is they're embedded right into the application. And so um, what used to be a checkout process where you just wrote the same credit card number across 90 websites is now a wallet where you're not sharing that level of credential. And so uh the consumer's misconception that a wallet is a separate version of a financial tool is one that I think is is starting to erode. And you're that's why you're seeing four and five wallets and and consumers are starting to pocket their money, right? I keep my spending money separate from my bill money, separate from you know, maybe my play money or what have you. And and you do those things through the engagements that you have with retailers. On the retailer side, what they're really the big misconception is that is a I'm getting into banking, it's gonna cost a lot of money, it's gonna do this. The truth is, in many cases, a wallet is a cost savings. It's a streamliner for your back office, it allows you to do your financials without having to integrate into the financial system to make your financials work. And I think that's really one of the things that more and more are seeing. Plus, with the embedded nature of it, they're realizing, wait a minute, I can engage my customer in my app, on my website, etc., and the wallet can help me close the transaction. And that's the real value. So, so the the the walls are kind of coming down around the myths, and people are asking more questions because they understand what is a wallet, and it's really just an embedded financial capability uh that moves faster and and in many times, in many cases, safer.

Austin Prey 18:49

Yep, and it's also you know our 2026 uh word of the year. Indeed. That's really well said, uh, and it's a great note to end on. Um, thank you so much for your time today.

Bob Legters 18:58

Uh, thanks for the time. I really appreciate it.

Narrator 19:03

That's it for this episode of the PYMNTS Podcast. The thinking behind the doing, conversations with the leaders transforming payments, commerce, and the digital economy. Be sure to follow us on Spotify and Apple Podcasts. You can also catch every episode of pymnts.com/podcasts. Thanks for listening.