The Tech Behind MoviePass and Government Payouts – Louis Hoch

Episode Overview

Louis Hoch is the CEO of Usio, a top company in custom and embedded payment solutions. Usio serves fintechs, governments, and large firms. Louis brings strong experience in payments and fintech. He drives Usio’s push to add smooth payment tools to many business types.

He has helped Usio build services for both old and new payment needs. These include check printing, FedNow real-time payments, and AI-based biometric systems. Usio’s flexible tools and focus on users help all types of firms handle payments better, serve clients well, and boost results.

Louis supports using AI and biometrics to make payments safer and smoother. He believes these tools will shape the future of payments. At Usio, he works to make payments a way to build brand trust and stronger customer ties.

His strong grasp of tech and rules has helped Usio grow in a complex market. He built a work culture focused on change and client needs. This approach keeps Usio ahead in today’s fast-moving payment space.

Episode Transcript

Louis Hoch: Their future payments is all about biometrics merging with AI. And you know, you’re going to be able to take a token that’s generated from your unique retina and attach that token to some type of payment wallet, and in between that will be AI that can make the best decisions for you as a consumer when you’re making purchases. And again, it just shows the power of diversity of payment channels.

Kevin Rosenquist: Hey there and welcome to PayPod, where we bring you conversations with the trailblazers shaping the future of payments and fintech. My name is Kevin Rosenquist. Thanks for being here. In a world where convenience is currency, payments are no longer a separate step. They’re built directly into the experience. My guest today is Louis Hoch, CEO of Usio, a company at the forefront of embedded and custom payment Solutions from powering everything from fintech startups to city governments. Using tech quietly moves money in the background while brands stay front and center. In this episode, we unpack how embedded payments are reshaping the way we buy, pay and get paid. Plus, why B2B payments are still stuck in the past. How rednow and real time rails are shaking things up, and what the future holds when biometrics and AI collide in the payment space. So please welcome Louis Hoch. So embedded payments obviously talked about a lot these days. For anyone who might be new, can you explain in simple terms what embedded payments are and why they’re becoming such a critical piece of modern commerce?

Louis Hoch: First thing is, embedded payments is a big buzzword in our industry.

Kevin Rosenquist: Absolutely.

Louis Hoch: And a lot of people use it. What I think are incorrect. And I’ll explain to you what I mean by incorrectly, but embedded payments are all about integration and it’s seamless integration. It’s invisible. It’s promoting the brand, the software it’s embedded in, and it has to adapt to custom workflows that the software’s customers need.  Every type of software has a different workflow. It’s not just as simple as installing, you know, an old days internet gateway and hoping that everybody you know can pay one way.  So workflows are very important. Being invisible are very important. The tech stack has to be flexible, and it has to deliver all the payment channels that that end consumer would need. And so that the software is able to take a payment. However the consumer wishes to pay but again promoting the software’s brand and their workflow is the most important part of embedded payments.

Kevin Rosenquist:  So Usio touches multiple parts of a payment stack. How would you describe the areas where Usio provides the most impact for businesses?

Louis Hoch: We do impact in a lot of ways for integrated software vendors. And you know, our customers include a lot of cities and counties and states and a lot of fintech companies. Our strategy of being diverse in the payment channels that we offer, we have all the payment channels from traditional check printing, which we printed, you know, 8 million checks last year all the way to the latest, you know, fed now.  So everything in between. And, you know, having that diversity for payment channels is very important not only for embedded payments but for fintech companies. A lot of fintech companies that we work with, they don’t exist without us. A good example would be MoviePass. So MoviePass is an amazing fintech company. They needed a system that would work with all movie theaters throughout the United States. And the way you access a MoviePass subscription is to swipe your MoviePass Mastercard. And that’s important, right? Because Mastercard bridges all the diverse POS systems that you would encounter through all these different theater brands. So MoviePass doesn’t have to negotiate with all these different theater owners and hope that they want to play with them. And a lot of them, right, because they have their own type of discount program. So when you swipe your card at an AMC theater to access your MoviePass subscription that you paid $20 a month for.

Louis Hoch: That got you so many credits that you can use in the MoviePass network. You know, those credits are worth more in a Monday night to a Non-Feature film than they are on a Saturday night.  For a feature film, when you swipe that, a message comes to us and says, hey, Kevin’s at the AMC theater, and he wants to watch Spider-Man on a Saturday night. New release. Well, the cards in our network maintain a zero balance. We don’t know if the transaction is good or not, but AMC wants their $16. So through unique technology that we have and just one other player in the industry has,  remote authorization, we send that transaction to MoviePass. And within a second they respond back saying, yeah, go ahead and pay the $16. Kevin has enough credits to watch that movie. And of course, we check to make sure MoviePass has enough money on file with us to pay the $16, and then we pay the AMC. But without that card program and the unique technology that we offer them. Moviepass can’t exist in the way that they want to operate their business model. So we’re a true solutions provider. A lot of times we’re the engine that actually builds a fintechs offering.  We also have a lot of cities and counties and government entities that do a lot of disbursements, and our diverse payment channel offering is key to them.

Louis Hoch: Recently we did a big distribution for a state, and they were handing out $100 payments, and they knew where some of the people were, but they didn’t know where all of them were.  and so they had us mail physical letters saying, hey, Kevin, you’ve got $100 coming to you. Go here to claim it. So they gave us text,  mobile phones that we texted the message to some of them. We had email addresses that they emailed a notice to, but we all drive them back to a branded site that the consumer got to choose how they wanted to get paid their $100 and they could receive a branded Mastercard, a physical one, which a lot of people choose because maybe they want to give it to their grandchild, or a virtual card that we load real time into their Google or Apple or Samsung Wallet, or append this real time payment directly to their debit card, which is very popular option, or even a physical check. And sometimes we get asked to send it even to third party providers like PayPal or Venmo.  but the strategy there is letting the consumer choose, and us having all the payment channels is very important to companies and entities that we work with.

Kevin Rosenquist: There’s a lot of, you know, financial apps out there that, you know, seem to do everything, but are you seeing a rise in companies wanting more specialized focus payment platforms?

Louis Hoch: You know, drive specialized payment offerings. And that’s a key to what we do. When people talk about custom workflows and, you know, a lot of payment companies,  fintech payment processors like us, they shy away from that. And that’s where we excel. And our tech stack is so nimble.  and our company is so well positioned when it comes to support, you know, during implementation and post implementation. We did a lot of that business that other companies can’t achieve.

Kevin Rosenquist:  A lot of times consumer payments get a lot more attention you know. But you know B2B payments sometimes can seem just as if not more broken. What’s one opportunity you see right now in fixing B2B transactions that most people might not be talking about.

Louis Hoch: You know, believe it or not, we print a lot of checks still today for B2B payments. Really? Yeah. And, you know, and it’s going back to the simple cash management aspect where people want to keep the money. You know, companies want to hold on to that balance for, you know, a day or two extra. But we work with quite a bit of insurance companies that are now doing payments for claims on cards. Now for us to win that business, we still got to have the old channels so that the consumer can choose, hey, do I want ACH or do I want a check or do I want a real time virtual card? Say to them.  that virtual card may have some restrictions on it as well where they can spend the money. So we’re definitely on both sides of the spectrum when it comes to B2B payments.  We have AP platforms that use us to do disbursements and do cards, but they always still want checks and ACH because of that flexibility, right. The competitive advantage to them and having all these different channels is a key. Consumer behaviors change and they change over time, but they also change during times of, you know, major macro events. So like during Covid when Covid first broke out, I mean, world was in a chaos and we all lived through it. But consumer payment channels selections changed dramatically during that time frame.

Louis Hoch:  for example, consumers realized, hey, they don’t want to touch a payment terminal. They understood that payment terminal was full of bacteria. So contactless became very important during that time frame.  Well you know we were ready for that. And so we saw a shift to contactless. We also saw a shift to the need for virtual cards versus plastic cards. In fact, in 2020, we issued more virtual cards than we did plastic cards. Having all those different payment channels and our commitment to being diverse in the industries we serve, our company actually grew revenues year over year 2020 over 2019. But a lot of our competitors actually had declining gross revenues because they were focused on niches, or they only had limited payment channels.  Diversity in payment channels helps shield you from macro events. But from the consumer side it’s all about letting the consumer choose. And you know we look towards the future of payments. You know the future of payments is all about biometrics merging with AI. And you know you’re going to be able to take a token that’s generated from your unique retina and attach that token to some type of payment wallet.  and in between that will be AI that can make the best decisions for you as a consumer when you’re making purchases.  And again it just shows the power of diversity of payment channels.

Kevin Rosenquist: Do you feel like there are any specific obstacles that slow down progress in payments that you think businesses need to understand more?

Louis Hoch: Well the obvious obstacle is, is the fed the banking systems and regulatory right. Banks move slow. Banks are very risk adverse. And the fed system, as good as it works and is dependable, it is. It could be doing things better. And you know fed now is you know I’m sure you’ve had a lot of questions on your show about fed now. Fed now is exciting. It’s not there yet. You know, for widespread adoption, it’s great for sending money out today. It’s great for us to do settlements, you know, faster, you know, and charge our merchants more for having their money quicker. But until they introduce debits and until the big hindrance is the banks, core systems providers, you know, making the feednow accessible to those banking institutions at a reasonable rate.  we’re not going to see widespread adoption on Fednow. But now it is very exciting the clearinghouses to buy their idea for debits are not there yet either. So both of them are really just channels for credits. So your question is, you know, the big hindrances and in growth is just regulatory and banking really.

Kevin Rosenquist: Yeah. It’s funny. That’s not that’s not an unusual comment on this show, especially with the bank side of things. You know, it’s just the legacy systems, the risk averse, the, the trying to get them to, to want to have a motivation to update their systems. What has to change to get these larger financial institutions to move a little faster with this stuff?

Louis Hoch: Well, I think what has to change is that the companies like ours are going to have to have some type of direct access to the Fed,  some type of fintech banking charter. I know that it’s been looked at and, you know, and there may be some limited options today, but you’re not going to get a traditional banker to move the way the industry needs to move at the speed it needs to move. It’s just not going to happen. And even the banks that are kind of progressive, that are going after, you know, fee type of income, right? They want fee income with zero risk. And it just doesn’t happen that way, right. You know, I mean, companies like ours and other players in industry, we live and die by risk management. And we do a great job at it, you know. So selling that to the bank is sometimes a hard task.

Kevin Rosenquist:  I can imagine, I can imagine. Do you think you mentioned rednows and initiatives like that? Do you see real time payments reshaping the way businesses and consumers move money, and if so, do you have a sense of how long that would take?

Louis Hoch: Well, you know,  feed now,  like every payment channel and the clearinghouse, like every payment channel will have its use cases.  You know, some things are never going to go away. Ach is the cheapest way to move money today, you know, and there’s no need to do a real time payment to pay somebody’s payroll. There’s no need to do government payments in real time. You know, you can schedule that stuff and you can have it hit their bank on whatever day you want it to hit. That’s cheap and it’s batch. And by the way, what’s very important is there’s a dispute mechanism which doesn’t exist in, you know, real time payments like Fednow. Yeah, sure. So, you know, consumers are starting to understand that some of the real time channels, you know, don’t come with guarantees. So now there’s tons of use cases for feed snow and in the clearinghouse,  it is definitely a way to send real time funds, like a wire to a trusted source. And, you know, it’s going to take away from wire transfers in a big way. Fednow is a great application for settlement of transactions. Actions. So where we’re working every day to clear card based transactions instead of ACH ING the funds to our merchants.

Louis Hoch: Well, we can send it to them real time, you know. And since we’ve already got good funds to send them, and there’s a lot of value in that, right? Merchants, they want the money as quickly as possible.  and they’re willing to pay a premium for it. So the fed. Now, what’s exciting about the fed now is that every bank, every credit union has access to the Federal Reserve one way or another. Direct access, or they’re getting it through, you know, their core provider or third party.  but they all have their own routing numbers and, and,  have the connectivity. The challenge there is the core providers extending that access in a way that the banks can extend it to their customer base. Space. And right now the hurdles are expensive and time consuming. And, you know, banks, like all businesses, have more projects than they have time. So consumers will make this happen by demanding it. But it’s still got some time. And it’s not going to see any widespread adoption until they roll out debits.

Kevin Rosenquist:  Do you know innovation in fintech? It moves fast. Obviously it’s a not exactly a hot take there. But uh is there any area in payments or fintech that you think could be moving too fast for its own good?

Louis Hoch: It’s a great question. I don’t know if I’ve really thought about that, and I never think about going too fast.

Kevin Rosenquist: Most fintech companies don’t.

Louis Hoch: You know, it’s usually the opposite. We’re not going fast enough. And you know, as CEO you worry about missing opportunities. You worry about somebody building a market and beating you to the punch of something that you should have done that you were well positioned for. I think where a lot of value can be mined again, is biometrics and the convergence of AI for payments. And, and I think we’ll see a lot there in the near future.

Kevin Rosenquist: Yeah. No doubt for any companies that might want to rethink their payment infrastructure. Is there any one thing that you feel they should prioritize at the top if they really want to make larger changes. Where do they start?

Louis Hoch: Yeah. Well first thing is knowing who they are, right. And knowing who their customer is. Payment channels, embedded payments. They have to promote the brand of that software. They have to enhance the relationship of that customer with the software provider and make it stickier. Payment should be an enabler for that software company to again promote their brand, not to restrict any workflows that create value for their customer base. So flexibility and, you know, making sure that your payment platform can grow with you. You know, having all the payment channels and having a great tech stack that is flexible for the future.

Kevin Rosenquist: Do you feel like innovation right now, currently is sort of the pinnacle of innovation in payments in fintech? Is there one thing else that’s happened in the past that you think was sort of the game changer that really kind of revolutionized the industry? Or you think we’re in the middle of that now?

Louis Hoch: You know, innovation is a living thing, right? It happens every day. And there’s great ideas that go forward and great ideas that, you know, don’t have the capital to go forward. Payments will continue to evolve. And I think your question earlier is the obstacles will hinder that growth. So it’s definitely an exciting time in payments. Exciting time in technology. And we’re going to see some great things.

Kevin Rosenquist: Yeah I agree I think we’re going to see some great things too. Is there anything that scares you a little bit about where this technology is going?

Louis Hoch: You know, maybe it’s going too fast I don’t know. Obviously I want it to go fast, but we’ll see. Time will tell.

Kevin Rosenquist: Yeah. Yeah, I suppose you’re right. Suppose you’re right. Well, Louis Hoch, the company’s CEO. Thanks so much for your time. I really appreciate you being here.

Louis Hoch: Thank you so much for having me.