Virtual Cards: The Future ? of SMB Payments | Daniel Kniaz

“We see ourselves as a very product-focused team. We spend a lot of time talking to our customers and that I think is one of the single most important things that we can be doing with our time“.
– Daniel Kniaz, DiviPay

Today I’m speaking with Daniel Kniaz, CEO and Founder of DiviPay

In this episode, we talk about . . .

• Daniel built a lot of entrepreneurial and start-up skills and base knowledge of FinTech while working in the Westpac Innovation Team. Left due to slight frustration of what they built never made it to market, and they felt (‘they’ being the other future co-founder of DiviPay) could move faster and learn a lot, going out on their own.
• Daniel shares the journey of DiviPay and how it works. It’s always been about virtual cards, though needed to pivot several times to solve the pain points of SMB and meet the demands of paying consumers.
• We have an interesting conversation exploring the accounting and start-up relationship and how accountants need to communicate their value to start-ups (who don’t have a lot of money).
• Daniels first taste at entrepreneurial life was an eCommerce modern man’s sock business.
• The trick to accessing US education at an Australian price point
• Daniel explains the process methodology for building in feature requests.
• And I shall also mention the two books he referenced were
  • “Humankind, A Hopeful History” by Rutger Bregman
  • “Never Split the Difference Negotiating as If Your Life Depended on It” by Chris Voss

I have a strategic partnership with the team at Divipay you can read more about it here: https//endorsementdisclosure.com/

What makes a good sock for the modern man?

Daniel:              I would say it is all-around comfort and breathability, has to be breathable. Don’t want those feet getting sweaty.

Heather:           What material are we going for?

Daniel:              I think it’s going to be cotton with a slight nylon blend.

Heather:           That’s interesting. I thought you’re going to go and say bamboo then.

Did you run a sock company in your earlier life?

Daniel:              I did, it’s a funny one. When I was a little bit younger I started getting the entrepreneur bug and wanted to start my own thing. I wanted to learn about selling and building a brand and I think fashion is often one of the easiest things to get into. So, I wanted to do that, but I wanted to do something a little different, a little more niche than T-shirts that a lot of people do. Socks were an underrated item of clothing so, was a way to sink my teeth in early on the world of business and learning how to build a brand and sell a product.

Heather:           Excellent. It is a really good way to do something like that and it does seem that the serial entrepreneur starts with one and then another and slowly grows through, there’s no better education than I’m doing it, actually doing it rather than spending a lot of time at college et cetera.

Can you share with our listeners a little bit about your background?

Daniel:              I did a double degree in both business and psychology. Once I graduated I then went into the workforce where I worked at Deloitte for about a year and a half as a consultant. After that, I moved overseas so, I moved to California, lived in the US for a couple of years, really just working odd jobs enjoying myself there. I was hanging around with a group of people who were all working on their projects, doing incredible things at a young age. So, that’s essentially what inspired me to go “I want to start my own thing.” So, when I came back to Australia before fully committing to work on my projects, I knew I needed some savings, needed to make a little bit of money first. So, I actually went and took a job at Westpac and worked there for about a year and a half and it was after the time that started DiviPay.

Heather:           Excellent.

Do a lot of people go to the US to study in Australia? Is it the US expensive to study in?

Daniel:              It is but the trick is as an Australian university student, you can go to the good grade exchange programmes. So, you can go to the US and pay your Australian tuition. So, you get access to study there but with an Australian fee. So, it’s a little hack that a lot of people are taking advantage of more and more now.

Heather:           That is the hack to know about. I know that my daughter has done exchanges to Nepal and Korea, but I’m not sure if she even knew about the US that would have been a very good one to have a go at.

As DiviPay’s CEO, can you share what brought you to this point?

Daniel:              It all probably started by working at Westpac and that’s where I met my co-founder. So, I am non-technical, my co-founder is very much on the technical side of the business and we met at Westpac working in the innovation team there. So, our remit was how do we take potentially disruptive financial technology and apply that to the bank. So, within that framework, we essentially built a lot of skills that are required when you start your own business, identifying the problem, talking to customers, doing rapid prototypes, building MVPs. So, we learnt a lot of skills there together working in that team and ultimately we left because there was a slight frustration working for a large corporation, a lot of what we did, what we built and we never really made it into the market. So, we saw the opportunity and said, if we step out and do something on our own, we can move a lot faster and we’ll learn a lot as well.

Daniel:              That was the Genesis of why we left corporate and moved into FinTech and it just because we had a base of knowledge on FinTech. In terms of then the story of DiviPay. It’s been a journey with lots of ups and downs. The idea came from listening to our customers. I think what a lot of people probably don’t know is DiviPay is actually on its third iteration. So, when we started the business a few years back, we began with a consumer-facing product. So, B2C product and over time we pivoted from what was originally a shared payments app or think of it like a bill splitting application. We pivoted from that to another B2C app, which was centred all-around protecting a consumer’s privacy and security while shopping online. So, we would essentially issue a virtual card for each online payment, like a proxy to your regular bank card.

Daniel:              So, we’ve always worked with virtual cards and payments, but ultimately what happened through that journey is whilst we scale that product relatively well, we found it very, very difficult to monetise. You could say we found out the hard way that consumers want everything for free, particularly when it comes to financial services. So, that was the second pivotal persevere moment where we had to look at our business and look at what was the viability of this business. And by talking to customers, we essentially learned that they loved our product, they can see how it could apply to their small businesses and that’s where we started to dive in and really understand the pain points that small businesses have and then how we can pivot the technology that we’ve built to help the SMB instead.

Heather:           That’s interesting. I think Rod Drury said something similar to you in that the first layer of the mass market that will buy is a small business because consumers don’t expect to pay for a lot of things.

Can you explain to our listeners what DiviPay currently is and what it does?

Daniel:              DiviPay is essentially an all in one spend management tool that helps SMEs instantly issue virtual corporate cards, pay bills, control spending and automate their expense reporting. And if I go back to those early conversations around what the problem space is that we heard from customers is very difficult for SMEs to get access to a traditional corporate card from a bank and instead they would have one of two different workarounds available to them. Workaround one would be requiring team members or staff to use their cards and then submit an expense report and then the second workaround that is common would be a single card, a director’s card, the founder’s card that would get shared around an office and both of these come with some inefficiencies, whether it’s fraud and wasteful spending from sharing a card around.

Daniel:              And we’ve heard examples where teams have photocopied cards, they’ve got them saved on shared drives, everyone has access, no one knows who’s spending on what. And then the other major pain when you require staff to spend their own money is talking to customers. It’s really interesting, you never actually know any individual’s financial situation. So, we would hear countless stories of team members having to put thousands of dollars of company spending on their own personal cards and in some instances actually incur interest on behalf of the business before they got paid back. So, there’s a number of pain points there and the DiviPay product essentially helps solve all those issues.

Heather:           Absolutely and it is interesting if you read forums et cetera, people do find a lot of pain having to purchase on behalf of the business even $50 for some people can be quite a stretch for them and their personal financial situation is of course their business. It is a really big onus to put that requirement on them, to expect them to actually make that payment so, DiviPay does take that off them and I’ve used it myself and I really liked the actual ability to create cards separately for different people, issue it, it all happens quite instantaneously which is nice that it happened that fast and then sent out to those particular people. And I noticed from your LinkedIn profile you actually put up a post saying that at Christmas that would have been Christmas 2020, Xero issued 800 DiviPay cards to their staff all around Australia, as they’d stopped celebrations it just gave them an opportunity to here, go and spend money at a small business.

Heather:           And that’s just a really simple way to actually issue that for that many staff and especially in this remote work that we’re having to do due to COVID. So, it is quite an interesting concept.

Daniel:              I think that’s where the virtual card really comes into its own. The fact that it is an instant thing. So, with Xero, I think there was a great campaign COVID meaning we could no longer celebrate it, no longer have a Christmas party, how can I instantly give my team members access to money to then go and spend a small business? And the virtual card means I can instantly set a card up, create a budget and then within a few seconds that team member has a notification on their phone, here are a hundred dollars to go and spend. I think it’s really powerful because of that instant nature with the virtual cards.

Heather:           It is and for those listening in it does physically look, when it gets on your phone, it looks like all of your other cards, it looks exactly like your other cards so it’s just interesting.

Where did the name DiviPay come from?

Daniel:              It goes back to the Genesis of the one DiviPay which was all around splitting payments or dividing payments hence DiviPay. And the name has stuck because A, there’s a lot of admin to change everything that goes with the name. So, we were trying to fit it in with the new business, but I think what works well is what business owners often talk about, I need a Divi App cash for my team members to go and spend. So, fortunately enough it’s actually continued to work for us over these multiple iterations.

Heather:           Now it does make sense and it’s a good lesson for people out there because I’m not sure if you’re aware of it, but the turmoil that people went through when Receipt Bank became Dext, then people’s minds just exploded and I still have people contacting me saying, where is the online mobile can’t find it, what is the new name? So, I recently heard you did a talk with Meryl Johnson of Bean Ninjas, we all love Meryl Johnson here. And in it, you said that as a startup you didn’t see the value in engaging an accountant initially, which was brutally honest and I completely hear you on that.

How can the accountants make it work for you in a new startup? Is it equity in return for services? Is it fees spread out over a period? Is there something else that they can do?

Daniel:              It’s a really good question because whilst that’s what we did at the time, I definitely regret not working with an accountant sooner.

Heather:           The accountants are now cheering.

Daniel:              Definitely one of the big lessons and I think going back to my frame of mind at the time. The reason is you’ve got a very small finite amount of money and there are opportunity costs to absolutely everything when at this point in time, you’re just fighting for survival and you’re trying to find product-market fit. So, any dollar that I spend over here, you’re always doing this cost-benefit analysis of what if I put it over here to further the business? In hindsight, we paid for that a little bit later on when the systems weren’t set up properly from day one. When I think about again why I viewed it in that way at that time, well, one was obviously inexperienced, but the other one was no one really sat me down and told me what the consequence of that would be.

Daniel:              So, I think if I was a little bit more educated on this is what’s coming, this is why this is so important for you to do today I probably would have sold me. I then think about this really interesting concept around how do you engage startups who don’t have a lot of money from day one. And I look at other service providers who’ve done this really, really well and I draw parallels to a business like AWS. So, Amazon Web Services, what they’ll do is for a startup will provide 5,000 or $10,000 worth of free credits for the first year. As founders will look at that and go, great this is a great value-adding service, I’m going to start building my entire tech stack using these $5,000 free credits. In the same way that your architecture, your tech stack is really sticky I think your accountant and your bookkeeper is also a very, very sticky service.

Daniel:              So, once I’ve signed up and once I’ve started consuming that service, it’s very unlikely that I’m going to move down the track because from the engineering perspective, everything is built on AWS. It would take a lot of work to migrate that from the accounting service, I know my accountant really well now, they understand our business would take a lot of effort to move. So, I really think from the accountants perspective is knowing that startups probably don’t have a lot of money from day one, but if they do want to engage, knowing that in the long term they can be really profitable clients, what is that hope that you can get them in early knowing that they’re probably not going to leave for a long time if you can’t get them on your books?

Heather:           Absolutely thank you for that and it’s maybe that they have to put a streamlined package in that they can just roll out to which are very specific to the needs of startups and also potentially working with the startup hubs, the innovation centres to access startups and work with them that way because when it happens, it happens huge and it’s going out there and getting that experience and that knowledge.

Daniel:              I think with the startup hubs from my experience as a founder, you’re trying to make a lot of decisions really quickly and often you don’t know what you don’t know. So, you ask for referrals a lot. So, it’s not uncommon to go to another startup founder and ask “Who’s your accountant, would you refer them?” So, I feel like once you can get a few that’ll exponentially grow over time as that referral network kicks in.

Heather:           Absolutely and some people do love working in that space.

Who do you perceive the ideal client is for your solution?

Daniel:              So, I think the great thing about the product is our customer base is very disparate. We work with everyone from the micro-business who’s just looking to pull apart personal spending and business spending and just have two different systems so they’re not putting it all through the one card. We work with tradespersons with two to three employees to medium-size digital agencies with 50 staff all the way up to some rather large companies like Michael Hill Juul or Canva that have a few hundred people all using DiviPay. And I think what’s really interesting is there is businesses in the expense management payments world, they all have an identical problem or set up problems. They’re just magnified once you’ve got 50, 100, 150 people.

Daniel:              So, the product works really well whether you’re five people or 500 people. I would say though, our sweet spot is any business in that five to 50 range and really if you’re a team or business that has team members that have to spend money to get their job done. So, whether that you’ve got a sales team who’s out on the road or have to travel or marketing teams who are doing spend on social media platforms and whatever it may be, they’re the businesses that I think are probably the best fit for us.

Heather:           Absolutely. Thank you for sharing that.

How do you go about building feature requests into DiviPay?

Daniel:              So, we definitely like to see ourselves as a very product-focused team. So, we spend a lot of time talking to our customers and that I think is one of the single most important things that we can be doing with our time. In terms of the feature requests, there’s a number of different ways that we handle it. First of all, any feature request that comes in could come in from the customer service channel or could come in from a sales conversation, could come in by talking to county bookkeeper partners. What we’ll do is we’ll enter all of that into our database system where we code all of those requests, give them a common tag so we can understand what are the most requested or important features that people are asking for and then we substitute that with a number of other different frameworks or methodologies. One which we run every six months, sometimes more per year is a set of customer interviews where we start by asking a very simple question which is, how disappointed would you be if DiviPay no longer existed?

Daniel:              And there are three answers, there’s not disappointed, somewhat disappointed or very disappointed. So, based on your answer there, we then look at those who said, very disappointed. We look at why? What do they love most about the product? And then we double down on those features when we do our next set of iterations and buildings. We then look at those who said somewhat disappointed that’s where these feature requests come out. So, we understand what is the gap to get this person from somewhat disappointed to a very disappointed user and we start prioritising and building those feature requests. And then we look at those who said, not disappointed and ultimately they’re the ones that to a degree we actually ignore because they’re most likely actually not our customer, we’ve got the wrong persona or the wrong customer.

Daniel:              So, there’s a very big gap to get that person to very disappointed. So, we double down on those first two groups. And then once we’ve got the feature request, we actually go back to what’s called the jobs to be done framework. So, when you talk to someone often as feedback they’ll give you the feature that they want, but what sits behind that is a job or a problem that they’re looking to solve. So, what’s really important is they may have given you a feature but you’re not sure if that feature the way they’ve described it is actually the best way to solve that problem.

Daniel:              So, you try and strip that layer back one, to using this job to be done framework where it’s are all about understanding what is the situation, what is the motivation and what is the expected outcome that person is trying to achieve and then we’ll go through a process of actually exploring all the different ways that we could solve that problem and then that goes into our development cycle where we MVP it. We go back to those group of users, ask them for feedback, ask them does this solve your problem? And continue to iterate from there.

Heather:           It sounds like a lot of your degree, which you said was psychology and business you’re using a lot of that psychology side of it in how you’re actually developing the product roadmap.

Daniel:              Absolutely. It’s really helpful in understanding why people do what they do and how they do it and then absolutely you can map that against this product framework to get the best outcome.

Heather:           It’s funny you don’t necessarily think about that when you’re dealing with a technical financial product, but of course it’s probably extremely important.

What are some apps, software or tools that you can’t live without either at work or personally?

Daniel:              So, in terms of apps I’m definitely pretty addicted to work. So, Slack and email are very high on my list, particularly as the team grows, talking to the team, responding to requests and things that they’ve got. I think there are so many great software tools out there and the way we look at software is as a small team what is the FT cost essentially of not having a tool? There’s a lot we could build in-house, but instead, there are these great SaaS platforms out there that we can use to streamline things. Xero’s obviously a great example of that, for project management we use Atlassian and that suite in Confluence and Jira. So, we’re pretty prolific users of SaaS tools within the business for a small business our size we’ve got something like 50 different software tools that we use and each of them does a slightly different job. On the personal side, I definitely love Twitter as an app. I’ve probably tweeted-

Heather:           But that’s interesting because your Twitter wasn’t very active or I picked up the wrong Twitter handle.

Daniel:              No, you’re right. I’ve probably tweeted two things in my entire life.

Heather:           One of them was on Valentine’s day in 2019.

Daniel:              I don’t want to look at my history there, but I should probably get on the tweeting front, but I love it for news, I love following interesting people and other startup founders, some around the world. I think there’s just so much rich content on Twitter, so much life advice that can actually be genuinely helpful from people who have been in our position and done what we’re trying to do and do it really well and they’re just providing this stream of consciousness and their thoughts which is almost like looking around the corner a little bit in terms of foresight and whatever may be so, I love looking at Twitter on a pretty regular basis.

Heather:           That’s so interesting. Now, I really like Twitter and you can deep dive and really learn about something or someone on Twitter and I don’t know whether you’re aware but Rod Drury approached me on Twitter to write Xero for Dummies, which I went on with. So, I’ve written about six books off the back of him approaching me on Twitter for that. So, that’s cool but I do think… and a lot of the guys who are out there are approachable, so they will respond to you.

Daniel:              I was going to say, you can get life advice and business opportunities by being on Twitter.

Heather:           But that obviously was a surprise for me, but I do think it’s that you put out there what you’re interested in and you talk about what you’re interested in and it comes back and people connect with you based on that.

What are you currently reading apart from Twitter or what’s a book that you’d recommend to someone?

Daniel:              So, I try and read as much as I can time permitting. So, I think that always when I think about what’s a good book or what’s a book I really love? I definitely have recency bias when it comes to books just based on the last thing I’ve read. So, in terms of the last book I’ve read that I thought was quite interesting was actually a book called Human Kind and the book essentially challenges the idea that human beings as often what we’re taught in mainstream media by nature are selfish and governed by self-interest. This book presents a counterargument that humans are inherently good and the instinct to cooperate and trust each other has this real evolutionary basis, which I think it was a great book, some great science in there.

Daniel:              From a business operate a book perspective, hands down the one that does actually stick in my mind is a negotiation book called Never Split the Difference. It’s probably the most practical book I’ve ever read. You can essentially negotiate anything and everything in life. He was an ex hostage negotiator for the CIA and he gives you these tips that you can literally close the book, turn around and use in any circumstance and they work, it’s crazy to see how you can apply it just gives you that edge in negotiation.

Heather:           That’s really interesting. I’m pretty sure your tweet was about negotiation.

Daniel:              Probably negotiating where we go for dinner or something like that on valentine’s day.

Heather:           So you can go and explore it. But thank you for sharing that. That was an interesting one negotiation is one of these horrible things that yes, you probably do need to learn because it can be quite confrontational which some people can cope with and other people can’t necessarily cope with.

Trent McLaren wants me to ask you, who’s your favourite for thought leader?

Daniel:              Of course, he does. So, Trent joined the team, my favourite thought leader in it accounting or?

Heather:           I don’t think he said accounting, he just said favourite thought leader.

Daniel:              I’m trying to think as I said on Twitter I follow all these great people who talk about their business experience. There’s a company called Mixpanel, which was founded probably 10 years or so ago. Very, very successful company and the founder of that business has since exited and started another business. And he just almost daily drops these awesome insights about what it’s like to scale a business, what you should be thinking of at the different stages. And he just has some really raw insights around the challenges that a lot of people don’t often talk about. So, it’s often just one of those pieces of information where you’re going through something and you feel I’m I the only one that is experiencing this? And then you see someone who has been very, very successful talk about the exact same thing. That’s always really comforting, knows that you don’t know alone in this and this is natural.

Heather:           Absolutely. It does help to resonate with people after going through similar things and that’s one of the things that we’re missing out on and not having the conferences in that you can actually… it’s also an opportunity for you to rub shoulders with the other app partners who are actually going through similar types of journeys that you are going through.

Daniel, what is next for you?

Daniel:              So, in terms of the business we really do want to become this all in one spend management or financial control stack. So, in the same way, that every business has a technology stack or marketing stack, we want every business to have a finance stack and we want DiviPay to be that finance stack. So, what does that mean? Well, we want to provide the capability for small business owners and finance teams to run all of their money in money out transactions via DiviPay, they get one central spot where they have complete visibility over all their payments and importantly, they get great real-time data that allows them to understand from more of a forward-looking perspective, how their business is actually tracking and trending.

Daniel:              So, we’re going to bring all of these payment methods together, but we’re also going to provide great workflows on top of each one that really streamlines a lot of these administrative tasks that traditionally have gone hand in hand with expense management. So, today DiviPay does cards, most recently we’ve added accounts payable or bill payments. In the future, we’re going to be adding capabilities like reimbursements, accounts receivable, payroll access to credit, these things.

Heather:           Absolutely. I think there’s a very exciting future in that space for you, I’m sure that you will have great success doing that.

Is there anything else that you’d like to share with our listeners? How should they be getting in touch with you and with DiviPay?

Daniel:              So, I think the best way to get in touch with DiviPay is via our website, divipay.com, D I V I P A Y. We are also on all of the socials. You mentioned Trent before. If Trent hasn’t popped up in your newsfeed yet, then I’m sure he will very, very soon.

Heather:           I think every listener then knows who Trent is so, connect with trends to find out more. So, thank you so much Daniel for joining me on Cloud Stories, really appreciate your time and sharing everything with the listeners.

Daniel:              Fantastic. No, thank you so much for having me it’s great.

Daniel:              Awesome.

Heather:           Awesome. So, thank you so much. Have a great rest of the day appreciate your time.

Daniel:              Thanks Heather, I appreciate it. Take care.

Heather:           Bye.