In the Vault

In the Vault: Placing Multiple Bets on a ‘Mosaic of Solutions’ With Former Global Payments CEO Jeff Sloan

Angela Strange

Posted April 30, 2024
ABOUT IN THE VAULT “In the Vault” is a new audio podcast series by the a16z Fintech team, where we sit down with the most influential figures in financial services to explore key trends impacting the industry and the pressing innovations that will shape our future. Follow this show on our podcast feed so you don't miss an episode. In this conversation, a16z General Partner Angela Strange talks with Jeff Sloan, former CEO of Global Payments, about how he was early to spot significant industry trends, how to make bets that move an organization, and the sea change that AI represents for the financial services industry.

Episode Transcript

This transcript has been condensed and edited for readability and clarity.

Angela Strange: Jeff, we are thrilled to have you here.

Jeff Sloan: Thanks for having me, Angela.

Angela: You’ve had 3 corporate careers and Global Payments was really your first operating role. Talk through the journey before you started Global Payments, and then why did you specifically join when you did?

Jeff: Well, thanks again, Angela, for having me. It’s terrific to be with you today. So, I’ve really had 3 careers. I started out as a lawyer, corporate finance lawyer, for about two and a half years. Then I went into banking, specifically investment banking in the early ’90s. And then my third and most recent career was as an operating executive, as you say, over at Global Payments.

That may sound like three wildly different things when you think about it, but the thing that I really found in common among all three was I really like change, dealing with change. And specifically, I like feeling uncomfortable. And I think the commonality of switching careers a couple of times is I don’t like to get set in my ways. Once I feel like I’ve got kind of a firm footing, I really like to shake things up, feel stressed, feel comfortable being uncomfortable, is how I would phrase it. And I think it’s worked pretty well over the last kind of third of a century that I’ve been working.

Angela: Why Global Payments? Why at that time? What did you see that made you want to join that company and feel uncomfortable at that company versus somewhere else?

Jeff: Global Payments really exists at the intersection of two of my favorite things, technology and financial services. And the thing I thought most about was what we could do with the platform to modernize the technology, to grow the distribution footprint. A lot of the things that we ultimately did when I was running Global Payments from 2013 to 2023, a lot of things that we ultimately did were not even like a glint in my eye back in 2009, 2010 when I was just thinking about coming over. But I was very confident in my knowledge of the people in the business, very confident in the quality of the platform. And I thought really it was the right platform on which to build a foundation of growth. And that’s what I was really most focused on doing.

Angela: One of the interesting things we notice about CEOs that are able to scale really quickly is that they often sit at the intersection of a few different worlds and are able to bring these trends together. What were the business lines that you were in?

Jeff: Yeah. So, I would say back then it was primarily a business that was kind of legacy technology, think IBM before Red Hat or something like that, where it was a business that was a data center kind of driven legacy code, it existed. And this is also embarrassing to do it myself. Global Payments and I are like exactly the same age. I think I was born one week later, 56-plus years ago, almost 57, and Global Payments and I kind of share more or less the same birthday and actually within a week or so.

But when you think about it that way, it was really kind of a legacy technology business on the technology side, coupled with good distribution or sales of their products and services outside the United States, but really sub-scale and kind of immature in terms of diversity of distribution inside the United States. And I would say some of that, I kind of recognized, Angela, externally, kind of having known the company for a really long time, and then some of it also, I kind of really came to the point of view about where we needed to invest and how aggressively when I came to the company in 2010 as the president and COO, and then three and a half years later became the CEO.

So, during that period, I really started thinking about, “Okay. What areas in both technology investing as well as distribution or sales do we really need a bolster to really take the company to the next level?” Happily, that really happened at the same time that there were seismic changes going on in the software and technology world. Think about the ascendancy of the cloud in terms of technology environments. Think about during the middle of the last decade. Think also about the nature of how you procure digital kinds of payments and services, e-com being an obvious one. So, there were a lot of seismic shifts going on both as a technology matter and also in terms of the digitization of payments that really influenced where we thought once I got there, where we felt we needed to make the investments.

Angela: You talk about the evolution of financial services into fintech. And I think the fintech term became very popular around actually when you became CEO. So, you touched on trend one, which I think is really obvious now. But 10 years ago, that was a lot less obvious. How did you bring those things together?

Jeff: I’m not just saying this because I’m on the a16z podcast, but I agree with Marc Andreessen. I mean, my view all along, once you’ve come to the point of view that your core skill set and asset is as a technology company, that really software is eating the world and is the mode of differentiation. It is how we win at the end of the day.

Now, you don’t have to own all that software. You can be a great partner with people who are very good at software, which we do. But by the time I left and retired last summer in 2023, we were actually a top-quartile software company by revenue in terms of cloud SaaS if we had been listed just in the public markets in the U.S. for cloud SaaS software at Global Payments. I think we were doing something like $3 billion of revenue a year in software sales. So, clearly, I thought that was a huge mode of differentiation for what we were doing.

I did take a lot of grief for that thesis because it was pretty controversial in the industry, particularly, in the sell side and the buy side 10 years ago. But my perspective and one of the things I thought we did very well at Global Payments, my perspective is you have to be very close to your customers. We have to know what customers want. We have to get kind of instant feedback. And if we’re doing the right thing, we need to scale it quickly. If we’re doing the wrong thing, we need to fail fast. And that’s one of the things I thought we were very good at at Global Payments and that’s what gave me the confidence that going down the path of software-based investment was really the right thing to do.

Today, it’s kind of table stakes and dogma in our business, but I could tell you, I spent years telling people why well before Toast came public, well before Stripe, Square, etc., we were really on the scene in public investors’ minds. I spent a lot of time proselytizing as to why this was the right thing to do. And I’m really happy that in hindsight it worked out.

Angela: One of the things we often think about is there are no bad ideas, there are only early ideas. And to your point, you were early and you took a lot of grief. Any advice on how you either kept your confidence through that time or recalibrated?

Jeff: Well, I think one of the most important characteristics for a new CEO, but especially a technology company CEO, is putting a lot of bets on the table. In technology land, you generally don’t know instantly that the technology you’re investing in is going to be successful until you kind of see what the demand is. I’ll just give you one real-world example, which fills me with a lot of pride because it’s actually kind of counter… It’s like the exception that proves the rule. It’s kind of counter to what I just said, which is in the sports and entertainment business, which changed substantially with COVID, but I think was changing anyway, we built really kick-ass software that we got to the point where I would walk into a meeting with large professional sports teams and 15 minutes in there, they would just say, “Sold,” which very rare to happen at the end of the day. I felt it was a great tribute to the quality of the software products and services we built.

The same thing was true, one of the last deals I signed before I left was McDonald’s. They just announced in their recent rollout of their new environment, which is the next generation on McDonald’s. I was in that pitch too, kind of a year and a half ago when I was leaving. Same thing. Fifteen, 20 minutes in, done, right? Sold. So, I say that’s the exception that proves the rule because it’s very rare to be sitting in a meeting with professional sports teams and McDonald’s and have them tell you, “Hey, we’re sold.” But I would say, in a certain sense, what you’re looking for is feedback from your customers of where their pain points are and what problems they’re trying to solve at the end of the day.

I think it’s our job as CEOs, and I think Global Payments historically had gotten into trouble here before I took over in 2013. I think it’s our job as CEOs to put a lot of different bets on the table. Global Payments have really been rifle shot in terms of distribution before I came on board as CEO. And that worked for a fair time and then it kind of stopped working. And I think if you lose momentum in technology, if you lose momentum in sales, it’s very hard, I think, to get that back.

So, part of my thesis really was putting bets in a bunch of areas. And in tech land, it’s gonna take 18, 24 months for you to figure out, “Well, was that the right kind of bet? How does this go?” And the obvious ultimate example is what I said before both in the sports area as well as in quick service restaurants. That’s the exception rather than rule. But having said it, I do think at the end of the day being close to your customers, getting that kind of feedback as to what problem they want solved, having them reaffirm that you’re on the right path I think is really invaluable to running any of these businesses.

Angela: If you think of investing or company success is having a product advantage and a distribution advantage, right? Talk through where you were when you started and what you’re ultimately trying to get to on the distribution side.

Jeff: My perspective all along, Angela, was I don’t know what’s gonna win. I think it’s important to have diversity of that distribution. What I really liked about the software stuff is we’re selling a technology-based solution. We want our customers to be delighted with what we are selling. What better way than to sell it through mission-critical vertical SaaS which they’re using to run the businesses, and we kind of run in the background, much like an Uber. The payments is kind of behind an Uber Eats. The payments is kind of behind the wall and is in the background, and you just know it works. And that’s kind of the vision I had of that part of the business.

And obviously, that’s evolved over time, but I think having the perspective of diversity of distribution, having a lot of different ways to sell is super important because it’s very rarely the case that one mode of doing something, whether it’s on the technology side or it’s on the sales side. It’s very rarely the case that there’s one solution you happen upon it and that works for all time. That’s really just not the nature of how things are bought and sold.

And I would say at the end of the day to highlight the point about diversity of distribution. So, by the time I left Global Payments last summer when I retired, we were selling stuff, consumer self-service kind of online to small doctors’ offices through our AdvancedMD healthcare practice. We were selling with high physical touching into advanced quick service restaurant environments like a Burger King or a McDonald’s, which are highly customized IT kind of installs, we were selling through physical sales reps, which is kind of Heartland physical kind of feet-on-the-street, and we were selling through some of the largest most sophisticated software partners as well as our own software into the most complicated as well as simple environments on the planet.

So, it wasn’t that we pivoted to something that just worked by itself like ISVs, and kind of stopped. Instead, it was all part of the thesis of, “Hey, it’s a mosaic of solutions.” I don’t really know what is gonna be predominant not just today but five years from today. So it’s important to have a lot of different bets in a lot of different areas. And if those are successful, which is what the feedback we’re getting from the market, scale those quickly. So, put more and more and more resources. And we were very much focused on measuring every month detailed ARR being generated by those software sales into those environments and throwing more resources at those things that we thought were more successful.

Angela: When you talk about multiple bets, is there a bet you made that didn’t work that you can talk about?

Jeff: I would say less that didn’t work more like got derailed. So, I think if you think, obviously about COVID and some of the changes that came with COVID look we, everybody else in the world really, of course didn’t see that coming. So, when that hit, I would say we had to substantially reposition the business.

And a great example of that is in the quick service restaurant space, we had on their drawing board, so we were not early but probably on time in a pre-COVID environment but late as COVID. So, this is obviously a miss, but we clearly caught up. When COVID hit, small and mid-sized restaurants like a pizza chain or whatever very quickly said, “Hey, I need the ability for customers to order this stuff kind of online, order on your phone, order from your iPad, whatever it is, have it integrated into DoorDash Uber Eats, etc., and have it all be seamless.”

Well, we had that in the context of a Burger King, in the context of very large customers and we call that service, that software Omni, is the name of it. So, we had that in the context of very big guys, but clearly we didn’t know that was coming. And the ability to pour resources and scale on that is something we really had to play catch up on. So, it was like on the drawing board it was working but the ability to take that from a very small portion of the business into being a primary means of distribution, we don’t play a lot of catch up.

Same thing was true in the medical software field. We had a Teladoc piece that we were using at AdvancedMD in terms of software sales and those sales were really done remotely through kind of Google web pages where docs would click on that and consummate that sale via call centers, that kind of thing and sell software that way. That’s very different from setting up all these doctors on Teladoc. So we had a Teladoc package but it was tiny, not scalable all the stuff you would envision if you weren’t in a crisis environment. So, very quickly we had to scale that too.

So, I would say Angela, less of a miss and more of caught by surprise kind of having things that were on the drawing board as a product matter for investment and all of a sudden having to drop everything, redirect the resource because the world had changed. And as I say, I mean, I think one of the things we were very good at was scaling quickly and kind of failing quickly. So if things didn’t work we just kind of junked it and started something else. But ultimately those two things, the remote delivery and the Teladoc are key parts of our business today and are generating billions of dollars of volume years post-COVID.

Angela: What’s the best-in-class deal integration that you think about at Global Payments?

Jeff: I found what’s most effective is really setting the tone at the top. So, what I think tends to work in these things is setting up what we used to call an ESC or Executive Steering Committee which usually meant it involved me and a bunch of the other senior operating executives at the company. And even if it was a small deal, the size they’d build really didn’t matter, but at the end of the day, you might have 50 work streams from finance accounting, sales, HR, legal, tech, of course, etc., on any given deal. So, what you really needed was accountability and governance around structuring how the performance was moving ahead probably for 12 and in some cases 18 to 24 months for bigger deals, but at least the first 12 months after close where are we really kind of regardless of the deal.

So, we would meet as an executive team with people who are running the integrations, generally one person on the global side and one person on the counterparty side. We would meet monthly to get executive reports on what was going on. It didn’t really matter what the report said. I think the main thing was the practice and effort of making sure that everybody on the deal teams knew that we were focused on it, we were gonna kind of stick to our knitting and make sure that what we committed to was going to get done. And years later we would do post mortems like how did it really go kind of compared to what we did.

But a lot of people when they announce a deal take a sigh of relief and say, “Hey, as an operating matter, hey, that was a lot of work. Hey, we’re super busy. Time to move on.” My view is the work only starts then. It’s easy to write a check. It’s not so easy to operate a business with hundreds and thousands of people in it when you’re trying to take the best of both companies, which was really generally our approach.

So, I think that was super important. By the way, that’s super important for acquisitions, but also super important for divestitures. We sold businesses too. And it’s the same thing. I think there’s no substitute for that kind of planning, integration, thinking ahead. And then even after the disposition is consummated, the same thing. I think for months thereafter, it’s super important that we have line of sight, know who’s accountable, have governance, have control over how those businesses are reporting. We had a lot of data in our business and I think using that data to your advantage in things like this is super important to success.

Angela: So, a few years ago, there were some mega-mergers, right, like Fiserv bought First Data, FIS with Worldpay, and then Global Payments and TSYS. Obviously, you believe in the scale advantage. Why did you choose that strategy?

Jeff: I think technology is a scale-investing business at least in digitization of payments. And what do I mean by that? So, I think the amount of investing within technology, so directionally that what I’ll tell you is correct. So, when I got to Global Payments maybe we spent a couple $300 million a year OpEx and CapEx in tech. When I left last year in 2023 that number was north of $2 billion. So, obviously, there was a lot more revenue, there were a lot more people, there were a lot more customers, or a lot more partners. But it’s a lot better for us to invest $2 billion a year in tech than it is for us to invest $300 million a year in tech.

So, I think at the end of the day there are enormous scale economies. We had signed marquee and really distinctive deals with both AWS and Google in the last few years I was at the company. And I can tell you from having dealt with them, having dealt with other partners of ours, scale matters in that business. So, I think the company last year did something like $75 billion transactions and probably processed something like $3 trillion-plus or minus of volume.

Every transaction incrementally needs to come in at a higher margin than the last transaction and we need to continue to grow and do more to get our margins up to be able to afford to make the investments we need to make to maintain and accelerate our pace of cutting-edge technologies to remain competitive and get ahead of the competition. So, I think at the end of the day it’s important to have that flexibility, that capability to make the investments organic and inorganic in our environments that we need to make. And it’s very hard to do that without that scale.

Angela: B2B payments are still more than 25% cash in check. There’s a lot of room. How do you think about that market?

Jeff: My perspective is that investing in B2B technology today has the same growth opportunities if not more so than investing in e-commerce did kind of at the end of the last century is kind of my view. The size of the market, I think MasterCard’s PEG did it $125 trillion annually which is 4 times the size of the consumer-driven B2B2C market where Global Payments historically had competed.

And you’re right in what you said. Roughly half that business today is still kind of cash in check, right? The other half is ACH or some kind of other variant. So, listen, half of $125 trillion is a big number, right, at the end of the day. And of course, there is the ACH piece too, which I think that business is changing as well. So, my perspective is that there is a fantastic growth opportunity. No one really has a meaningful leg up on anybody else. It’s wildly diffused, massively under-penetrated a gigantic market as it relates to target-addressable size.

Angela: We’re right now in the middle of one of the largest technology platform shifts with generative AI. How did you think about it at Global Payments? Where do you see this potentially impacting your business?

Jeff: Well, I think it’s gonna be an enormous sea change, not just for Global but really for a lot of our customers. I mean, think about traditional financial institutions, particularly for TSYS on the issuing card side. Think about how it’s gonna change customer service and how customer service and chat and those kinds of features and functionalities, how those things will be rolled out over time.

So, instead of you calling the call center or speaking to a human and all these other things, a lot of that stuff is gonna be done automatically, I think, through generative AI. A lot of the underwriting, the AML, the KYC, all those things, I think can be automated, much faster, cheaper, better margin, better responsiveness. And I think it frees up human beings to focus on additional value-added services. It makes them more important in terms of what they need to do and really ups the skill set, but there’s a certain amount of administrative side, which I think can be dealt with through generative AI.

So, I think it’s gonna pretty substantially transform the margin characteristics of what the business really is and can be, and I think can really augment, therefore, the opportunity for technology people in the business to focus on what they think is most important. Of course, the corollary to this, and you’ve seen this already, is the deep fakes and the stuff that comes out on the fraud-related side, but I think that’s also a great opportunity for Global Payments and people in the industry to come up with better AI protocols that actually stop the deep fakes and the fraud coming from generative AI. So, I actually think it’s really a seminal event in our business, in fintech, in financial services, and is another reason I’m so optimistic about the rates of growth that you’ll see in the business. And yes, margin is a big piece of that, but I think the products and services that will be developed to both address the pros and the cons of generative AI, I think are super exciting.

Angela: One hundred percent. As you think back to yourself 10 years ago or just in general, what do you wish you knew then that you’ve learned. Any advice to CEOs that aspire to have the revenue growth that Global Payments has had over the last decade?

Jeff: Look, it’s a marathon, not a sprint. And I think it’s very easy, particularly in stressful environments, to get carried away too far one way or the other. A great example for me individually and also for us as a company was Brexit. So, we had a pretty meaningful…we have a pretty meaningful, and Global Payments does business in the UK. At one point, it was probably 3% to 5%, something like that of revenue. And we were very focused and hopeful that Brexit would not be voted in favor of Brexit. And we were disappointed, obviously, when it happened. And we’re not the only people, obviously, who felt that way, but we’re obviously not there. It’s not our vote. But I would say that I kind of felt like I knee-jerked too quickly.

We had a bunch of investments we were making, technology investments as well as distribution investments in the UK, which when the Brexit vote happened and it started to get implemented pretty early on, I’m going to lose track of the years here, but probably in ’18 or ’19, we cut some of the investments that we were planning to make in the UK, not in Europe but really in the UK. And I think that was a mistake.

I probably should have gone more slowly with that and said, “You know what? This thing can change. Things can happen.” I mean, no one could really foresee the COVID situation, but things can really get mixed up. Maybe it’s not the bad economic outcome that it might be. Obviously, there was an economic cost to it, but maybe I’ve overthought that. And I think in hindsight, that was probably not the right thing to do. I probably should have been more patient and said, “Yes, this is a challenge, and, yes, this is not good and all these other things.” But it’s gonna take a period of time to play out and we don’t know what that’s gonna look like, so let’s just take it one day at a time. And I think our business would have been better positioned had we not cut those technology investments.

So, my advice kind of coming out of that war story is, look, there are gonna be things that happen you can’t control. I think we all know that. That’s just the nature, I think, of life, particularly in any kind of complicated business. But I think it’s super important, though, to take the long view and to say “Look, there’s a lot we don’t know. Let’s see what happens. We don’t have to decide today.” But you’re in an environment where you don’t have unlimited resources, so you’re trying to do the best with what you have. And it’s not like we did those things that didn’t do anything. I’m sure we reallocated those to other businesses, those investments. But I think moving too quickly like that was probably a mistake. I’ve always felt that way. And I think I should have taken a deep breath kind of at the time and said, “Well, let’s just see how this plays out.”

Angela: Jeff, thank you for joining us. Really appreciate your wisdom. And congratulations on all you’ve accomplished.

Jeff: It’s my pleasure. Thanks for having me, Angela.

In the Vault

“In the Vault” is a new audio podcast series by the a16z Fintech team, where we sit down with the most influential figures in financial services to explore key trends impacting the industry and the pressing innovations that will shape our future.

Learn More