How Sureswipe Is Achieving Year-On-Year Double Digit Growth In 2008, Sureswipe entered a highly commoditised and competitive market because Paul Kent knew he could deliver three critical things: A product and service to an overlooked and untapped market, an innovative business model that focused on service, and a cost-to-market below any of his competitors.

PLAYER: Paul Kent

COMPANY: Sureswipe

WHAT THEY DO: Sureswipe is one of South Africa's first card Payment Service Providers (PSPs), established to make card payment acceptance easy and accessible to all independent retailers and service providers.

EST: 2008

TURNOVER: R251 million

VISIT: sureswipe.co.za

Four years ago, Paul Kent received a Request for Proposal (RFP) from a tier one retailer. He ran around the office high-fiving everyone. Sureswipe had made it. They were officially on the map.

Two days later, Paul and his COO, Richard Flack, turned the RFP down, choosing not to pitch for the business, even though it would have been a huge deal if they'd secured it. It took two brutal days to make the decision, but ultimately, Paul and Richard understood that sometimes you have to say no to business, particularly if it doesn't align with your vision.

"I was so excited, but Richard immediately said, "let's think carefully about this before making any decisions,' and so we did. We went back to our vision to make card acceptance easy and accessible for all independent retailers.

"The more we thought about the RFP, the more we realised that we're not geared to service tier one retailers. Our team has a deep connection with independents. That's who we want to support and where our expertise lies.

"Our business model is geared to support that market sector. Extending our focus to tier one retailers would require a change in our business and a new division to service them. It wasn't the right move for us."

Paul learnt what many successful entrepreneurs before him have discovered: In business, what you say no to is as important as what you take on. The more focused you are and the better you understand your core customers, the more successfully you will service them.

That's the foundation of a sustainable, high-growth company. It took Paul and his team five years to get 3 000 Sureswipe card payment machines into the market.

They were growing rapidly by the time they received the RFP. Today they have 10 000 devices in the market, and expect to hit 30 000 within three years. The business has grown 30% in the last year alone.

Here are the lessons Paul has learnt since launching Sureswipe in 2008, from the leanest way to start (and run) a business, to minimising customer churn and maximising market loyalty.

1. Launch a solution, not just a company

The idea for Sureswipe was born inside Healthbridge, a company that processed claims between doctors and medical insurers. It was the mid-2000s and medical aids were changing.

Where previously doctors submitted directly to medical aids, co-payments and limited annual benefits compelled medical practices to start accepting cash and card payments. Sureswipe was launched as a division that supplied card payment machines to support this shift.

Paul, who was heading up the business development key account team at Healthbridge, realised that there was a much bigger market that needed a value-for-money, high service level card payment solution, and that was independent retailers.

"Growing up in the UK, I spent a lot of time in my grandfather's fruit and florist store and in high school I worked weekends at a local clothing retailer. As a result I understood the challenges of retail, particularly the time-bound administrative burdens," he says.

Paul researched the market and developed a value proposition based on two key factors. First, although paying for payments is a grudge purchase, particularly for small, independent retailers, cash-based businesses that adopt card payments typically experience a 50% increase in monthly turnover.

Second, independent retailers with point of sale (POS) machines were paying a 5% transaction fee, while those that hadn't adopted POS systems weren't the core focus of banks. Paul found a frustrated customer base eager for an alternative service provider.

"Most retailers either thought that card payments were too expensive, or that they could only access POS machines through their banks. They'd often wait up to 30 days for a machine, and if it broke, it would be another week before a technician came to fix it. At that time, the large banks weren't geared to service that market."

With a clear value proposition in mind, Paul convinced Healthbridge to ring-fence Sureswipe and launch it as a separate business.

In October 2008, Sureswipe opened its doors with Heathbridge as the majority shareholder. The business model had two core focuses: Converting cash-based businesses and switching independent retailers who already had POS systems but were dissatisfied with their current service providers.

"We were strategic in picking the right market, but luck also played a part," says Paul. "When we entered this space, a similar company was launched to focus on tier one and two retailers.

"But, the banks were highly competitive in that market segment and new entrants found it difficult to compete. We targeted a market that was largely ignored and today, 70% of our business is from single-store owners."

While they were fine-tuning their offering, Paul and his team found that their customers were so grateful for an alternative solution that they tended to forgive start-up wobbles as Sureswipe found its groove.

STRESS-TESTING YOUR BUSINESS

In the early days, the Sureswipe team leveraged its relationship with Capitec Bank to secure meetings and make sales. "We're not a bank, so we need a banking sponsor to help us meet regulations and operate within this market," explains Paul.

"When Capitec secured its licence to do merchant acquiring, they had no customers and were developing their product in-house. They were also looking for a distribution partner.

"We aligned Sureswipe with Capitec as our sponsor and provided them with a distribution partner and a solid footprint in the medical market — it was a perfect solution."

When you're dealing with people's money, you need a strong level of trust, so the relationship with Capitec was essential while Sureswipe built its own brand. "It wasn't always easy," says Paul. "We had six people who went from retailer to retailer explaining who we were and what we did. At one restaurant, two off-duty cops heard one of our reps and decided it was a con. They arrested him and he called me from the back of the police van. I had to convince them that we were a legitimate business before they'd let him go."

After five years, Sureswipe and Capitec found that they were competing with each other. When the contract came to an end, both parties decided not to renew it.

But Sureswipe had 3 000 devices in the market, all of which were on Capitec's technology platform. By not renewing the agreement with Capitec, Sureswipe needed to recontract all 3 000 of their customers. It was a massive project.

"It was also a huge lesson for us, and I'm glad it happened when we only had 3 000 machines in the market. We realised the risk in working with one bank, particularly because the technology that processed our customers' payments wasn't our own. We needed to licence our own technology and develop a dual sponsor system to mitigate this risk."

The entire project took more than six months to complete. "People in the industry were sceptical — a project of this scope had never been done before," says Paul. "We started with a small, ring-fenced team. By the end of the six months every employee was working on the migration of customers onto the new platform."

The lesson: There will always be challenges, particularly during growth phases. Stress-test your business as much as possible. The earlier you spot a potential risk or problem, the sooner you can address it and implement a solution, even if it means adjusting your business model.

To stress-test your business, ask yourself these four questions regularly: What happens if everything goes right (ie, we grow too fast)? If I remove one piece that's central to the functionality of my business (this is what Sureswipe faced), what happens? Is my business valued (ie, do you know if your buyers love you and why)? What's the worst that could happen?

2. Variable cost models keep businesses lean

One of Sureswipe's success factors is that its product isn't cutting edge — what the business does is not unique, and the technology is available to be licensed. Nothing had to be built from scratch.

This allowed Paul and his team to launch the business with a variable cost model, outsourcing sales, the call centre and even their technology. "The biggest outlay was the initial investment into the product, funded by Healthbridge, but within a year we were cashflow positive," says Paul.

"We've been funding ourselves organically ever since." At the time, launching the business wasn't a big risk because it didn't involve a huge upfront investment. Healthbridge was happy to see where it went.

Paul and his team of eight kept costs down and slowly built up the business to the point where it became bigger than its initial shareholder. "It was the ideal business model to start with. Don't try to build the biggest — do the minimum required and don't use a lot of capital.

"If you use a lot of capital upfront shareholders will put you under immense pressure. We were under no pressure. We weren't drawing anything; we were just a little side thing that may or may not work.

"We were the first mover in this space in South Africa, but everything we do has been done somewhere else. The machines are sourced from a few companies in the world that manufacture them.

"The mPOS machine is licensed from a company in Iceland. Software is licensed. Everything Sureswipe needs exists — it's just a case of sourcing it and building a solid service-delivery business around the tech."

Without the burden of heavy research and development and other start-up costs, Sureswipe channels all internally-generated cash into finding ways to do things better and faster for their customers.

"Today fintech is a buzzword. Disruption within the financial services sector is expected. Ten years ago, fintech wasn't even a word. Everyone thought you could only deal with banks.

"What we had going for us when we launched was our card machines. People understood them so we didn't need to educate our market on what we did.

"We just needed to make them aware that there was an alternative to banks, and because we focused on an untapped market, there weren't really competitors in the space. We weren't trying to bring in new technology like mobile payments. The market wasn't ready for that in 2008."

Sureswipe launched with traditional stand-alone card machines, followed by Integrated payments for larger retail franchise stores, mobile MOVE card readers for businesses on the go, and Sureswipe POS LITE, an app-based point-of-sale software for start-ups and smaller retailers.

"When it came to mPOS, we were happy to be followers. We had a product ready to launch, but we made the decision to wait for the banks to launch their offerings and educate the market first.

"We were then in a perfect position to be fast followers — without needing to educate the market ourselves. It was a strategic play and it worked for us.

"We've also had good growth in our MOVE product and we're doing the same with QR code payments. There have been trailblazers in the market who have done phenomenally well, but they operate on separate platforms. We can now offer a QR code that accepts almost any QR Wallet.

"On the other hand, a peer-to-peer mobile wallet was developed within Healthbridge that never gained the traction needed for success. It was too early for the market and deep pockets were needed to fund the business. The business had a great team that worked on the project and Sureswipe benefited from accessing them."

Today, Sureswipe has integrated many functions that were previously outsourced. "Our variable cost-model allowed us to enter the market without huge financial backing, but where it's made financial sense, or it offers us a strong competitive advantage, we have brought services or products in-house."

3. Understand — and leverage — your competitive advantage

Since entering the market ten years ago, transaction fees have more than halved. This is good for retailers, but it makes the space more competitive for service providers who must maintain quality products and service as profit margins narrow.

Sureswipe's value proposition is captured in one sentence: They come for price, they stay for service. "Everything we do needs to adhere to that," says Paul. "We need to bring technology to market at a lower price point than incumbents are offering, and then secure customer loyalty with our superior service offering."

Within an increasingly competitive space, Sureswipe is not always the most cost-effective solution in the market, but a focus on service and convenience means that retailers are willing to pay a premium if the offering is good for their business.

"Our focus is value for money, not price. Retailers want to be able to accept any legal currency from their customers. As a service provider, we needed to figure out a way to do that in the most cost-effective way possible, without increasing our administrative burden as the business grew.

With its low margins, this business only works at scale. If our internal costs escalate with each new user, that's not a scalable business." So, what is Sureswipe's competitive edge? "We've always understood retailers," says Paul.

"Their biggest burden is time — they never have enough of it. If you have an unreliable product, or an administrative burden, you're essentially losing time and revenue." This was the business's entry into the market, but growth has been the result of continuously fine-tuning Sureswipe's offering based on its knowledge of customer needs.

"The more time we spend understanding our target market, the more we're able to recognise their pain points. Everything we do is focused on simplifying the lives of retailers and helping them to grow their businesses."

In a highly competitive space, you need to create an edge for yourself. Some businesses create a moat around the business with tech, but often there is a competitor who can do things faster and cheaper.

Successful companies find a different competitive edge, one that focuses on delivering value to the customer beyond the product.

Sureswipe has a two-pronged approach. First, convenience and simplicity are a must — if Sureswipe isn't making the lives of its clients easier (and more convenient for their customers in turn), then the business isn't living up to its core values.

The second is keeping costs as low as possible. Sureswipe needs to be able to offer its products and services to the market at highly competitive prices. This is only possible if the business has lean operations and is scalable.

So, how have Paul and his team managed to offer exceptional service while keeping costs low? "You need to sweat the details," he says.

"This landscape has become increasingly competitive. Banks have caught up to us. An independent retailer can pick up the phone and the bank will send someone the following day to chat to them."

To counter competition, Sureswipe focuses on service and cost to serve. It's one thing acquiring a customer, it's another keeping them, and this has been where Sureswipe's team focuses their passion and energy.

"We've found that complex structures hinder service levels and so we've kept our structure flat. Our internal culture is extremely important for customer service. Hiring the right people who are passionate about retail and business means we are able to service our clients better.

"We care about their businesses. 86% of calls get resolved by our call centres. If they can't solve the problem, a technician is sent to the store to fix or swap a faulty machine."

From a cost perspective, Sureswipe needs to continuously get to market cheaper than before, while simultaneously offering products that are better, more seamless and more integrated into the business.

"There is always an initial cost when introducing a new product, whether it's a device or an app. However, each new offering increases our clients' revenue, which in turn increases our revenue. Scale is critical — we're in the red until we achieve scale.

"We've had to be ruthless about achieving great service levels at low costs. We don't believe in either low cost or good service — we need to deliver both. If something is too expensive for us or our clients, we either don't do it, or we find a more cost-effective way to bring it to market."

4. Ensure you have a "stickiness' factor

One of the dangers of a highly competitive market is that it's simple for customers to switch service providers if they are only looking at price. If a retailer only has a POS machine with Sureswipe for example, it can be swopped out for another device.

With this in mind, Paul started looking at value-added services that increase brand loyalty and reduce churn. "We call it preventable churn," says Paul.

"If business owners have a POS device and take just one more product from us, the stickiness factor is exponential. This can include a cash advance product, or creating a gift and loyalty programme through our platform, or both.

"As a business owner you can still switch to another service provider, but it's more complicated and you're receiving a bundle of services that all add value to your business."

To achieve this, Sureswipe has partnered with Retail Capital to offer its customers cash advance products, while a loyalty programme allows consumers to swipe their loyalty cards and gift cards at all Sureswipe terminals, accumulating points.

"We've seen a small increase in revenue since we added these offerings, but more importantly, our customers' revenues have increased. For example, if someone has a gift card, they will generally spend a bit extra in-store as well. Our merchant discount fee means we offer these products to our customers at a low cost, but our churn rate has lowered by 70%."

Everything Sureswipe introduces to the market is based on a long-term view. "We offer a commoditised product and so our success relies on scale and volume. As long as you can do that at the right cost, with the right returns, you have a sustainable business. These extra products reduce churn, solve pain points for our customers and in the long term will increase our revenue."

Paul's long-term focus is consolidation. "We've been in this space for ten years, we have a great customer base, and we believe that we can consolidate our market. Our long-term view informs any decision we make about acquisitions or mergers."

In 2016, Sureswipe acquired Concord, a company running software that integrated banks with retailers' till systems. The acquisition enabled Sureswipe to reduce costs by offering customers one point of contact for their POS system, tills and the processing between the two.

"It removes complexities from the value chain, reduces costs and reduces retailer admin." With new generation mPOS offerings encroaching on Sureswipe's standalone devices on the one side, and Integrated payments on the other, Sureswipe is effectively cannibalising its own market, but as Paul is quick to point out — that's the idea.

5. Always look to the future

Sureswipe's potential is huge. With 10 000 devices in the market, the business will facilitate R10 billion in transactions this year alone, which accounts for only 6% of its target sector, 2% overall, and 1% if you consider that the biggest competitor to electronic payments isn't other service providers or banks, but cash.

"Markets change and adapt, particularly in this space where there has been incredible innovation and growth over the past few years. We know that in the long run, if we want to sustain growth, we will need to cannibalise the stand-alone devices, which we're already doing. Ultimately though, what we really want to bring to market are products that can compete with cash."

According to Paul, everything comes down to two things: Convenience and cost. mPOS is a lower cost option; contactless payments are all about convenience. Sureswipe needs both — and to keep looking ahead to see what's next for their market.

"In the UK this year, for the first time, there were more electronic payments than cash, thanks to the convenience of contactless purchases for small ticket items. This is a big driver for us."

To stay ahead of the game, Paul focuses on the business's capabilities, and his own. "I need to pay attention to what's happening internationally and how we can adapt our product offerings based on international innovations, but I also need to continuously focus on personal growth.

"One of my biggest fears is that the business will outgrow me. It's a common founder's fear, and for good reason. Many founders are great at launching businesses, but they don't possess the skills the business needs to grow."

To avoid this pitfall, Paul has consciously developed his business acumen over the past 15 years, beginning with Wits Business School's Management Advancement Programme in 2003, and completing his MBA in 2015 through IE Business School in Madrid.

"I think it's essential for all entrepreneurs and business owners to keep the pencil sharp and learn as much as possible. If I reached a stage where I didn't think I was the right person for this position, I'd step back.

"We've built a team to complement each other; I'm not a details guy, but someone who is can fill that role. Part of my journey has been working my way out of a job by bringing in someone who can do what I'm doing, and often they do it better than me."

LESSONS LEARNT

Become an expert in a niche. Our focus on the independent retailer space has given us a deep understanding of our customers and their needs. We've had international companies that are interested in acquiring us state that companies in other markets don't have our level of understanding for each element of the business.

Look at problems with fresh eyes. We were naive about banking and financial businesses; we're more retailers than bankers. This meant we didn't have legacy systems when we launched, which allowed us to look at the independent retail sector without preconceived ideas and ask: What does this market need and how can we service it?

Always seek to remove pain points from your customers, no matter how small. In our sector, as businesses grow, their owners go back to the bank each year to renegotiate their fees. We removed this administrative burden by signing them up on a sliding scale, and as they grow, they automatically move into new segments and their fees drop — both new entrants and incumbent banks have copied this pricing model.

Understand where you're innovating and why. We knew we didn't need to innovate on the tech side. Everything we needed existed, and it was far more cost-effective to licence products than build from scratch. Instead, we innovated around our business model and service offering.

Everything starts with your people. Our employees are friendly and helpful, even though we now have a staff complement of 139 people. We foster a passion for learning, promote from within, where possible, and champion a can-do attitude. We're a service-based organisation, which means everyone's visions need to align with our service goal.

Pay attention locally and internationally. Read a lot, find out what's trending, be well networked and have associations overseas. For example, Mastercard and Visa let us know what's happening in other markets. We're not at the forefront of technology, but we need to know what's happening with technology to be able to follow it.