Announcer: Welcome to Cents Chat, the podcast where payments meet personality. From tech trends to legal twists, compliance quirks to marketplace moves, Kitty is here to keep ISVs, PayFacs, and marketplaces ahead of the curve. Get ready for insights, a few laughs, and the occasional compliance scare. Let's dive in and make payments make sense.

Kitty: Expanding into the U.S. sounds pretty simple when it's aligned on a strategy slide. Pick a market, hire a sales team, localize the product, connect payments, and start selling.

Then reality shows up.

Your customers expect different payment methods. Your reporting doesn't quite match how they run the business. Support suddenly crosses three different companies. Pricing gets more complicated. And the payment setup that worked perfectly well in other countries starts feeling a lot less perfect here.

That's what we're getting into today: what actually changes when an already global ISV expands into the U.S., and why payments can force a much bigger product and partnership conversation than anyone actually expected.

This is Cents Chat.

Chris, we talk a lot about U.S. software companies trying to expand internationally, but the story goes the other way too. Illumine was already operating across more than 50 countries before making a serious push into the U.S. So they weren't new to international expansion. They were new to that particular kind of payments chaos we specialize in here.

Chris: And that's what makes this interesting. When you come into the U.S., the question isn't just, can I accept a payment? Of course you can.

The harder questions are: who owns onboarding and support? What happens when a payment fails? Where does reconciliation live? What does the merchant see? And can the partner you pick today support the product you want to build in two years?

Kitty: Right. A payment setup can be perfectly fine when the goal is broad global coverage. But once you're trying to go deeper in one market, fine can stop being enough pretty quickly.

And the U.S. market keeps moving underneath you. Chris recently wrote about the possibility of major banks buying debit infrastructure and what that kind of change could mean for routing, pricing, and the economics ISVs build around payments.

We don't need to turn today's episode into a debit network seminar, but it's a good example of the bigger point. Even when your customer sees one clean payment screen, there's a whole lot happening underneath that can change.

Chris: Exactly. If you're building payments into your product, you're making a long-term infrastructure decision in a market where the rules, economics, and relationships change.

So partner selection isn't just procurement. It becomes part of product strategy, risk strategy, and customer experience.

Kitty: And that's why we've got two people from Illumine with us today who can look at this from different sides of the business.

Navneet Rastogi is the Founder of Illumine, so he can give us the founder and product perspective on why the company came to the U.S. and what had to change.

And AB is Illumine's Director of Global Revenue and Partnership, so he's been right in the middle of the commercial and partner decisions that come with all of that expansion.

You guys, welcome to Cents Chat.

Navneet Rastogi: Thank you. Thank you, Kitty, for having us.

Kitty: Navneet, let's start with the company itself. For somebody who hasn't come across Illumine before, what are you building, who do you serve, and what problem were you trying to solve when you started the company?

Navneet Rastogi: Thanks a lot, Kitty and Chris, for having me.

I think the story goes back eight years, when my son started taking his first steps at home. As a parent, I got excited seeing that and wanted to share the news with everyone in the world.

The next day, when I went to the childcare center and shared the news, they said to me, “It happened a few weeks back, and I think we missed telling you.”

That led me to realize it might be the same story for other parents. And that was the case when I started talking to them. A lot of key milestones were getting missed, or parents were not part of the story of what their child's journey looked like.

Coming from an engineering background, being an engineer myself, I said, “I can solve this. This has been done. This problem is quite easy enough. It has been done by so many companies out there. Let's pick up this challenge and solve it.”

I thought I would solve this problem in a couple of months and make a lot of money after that.

So I picked up the phone and called the CEO of a big chain back in India that was running around 70 locations. I said, as a parent, I'm not happy. They said, “We are also not happy with the solution that we have.” And I said, “Then I have a solution to show you.”

From that day until now, the thing I thought I would build in a month, I'm still building and growing from there.

In eight years, we have been in more than 55 countries, serving more than 3,000 childcare centers globally. The U.S. is where we entered last year, and we're expanding really quickly. One of the problems we keep discussing is how to onboard so many clients so quickly and take them live. That's the stage we are in.

AB: If I look at the functional fit of the product and which industry problems we solve best, I would say multi-site operations.

That's where our dominance has been because we have been solving it from day one. Today, we're seeing a lot of growth happening in childcare organizations and a lot of consolidation happening.

We have been solving the issue of multi-site operations from day one. If you have 10 centers and you're looking for a partner who can support you on the journey from 10 to 100 centers, Illumine does that very well because the functionality allows you to do that organically.

That's where we come from. That's how we think. We live, breathe, and execute multi-site operations.

Chris: Since you've already expanded in other markets, what did you assume would translate pretty cleanly here in the U.S.? And what surprised you once you actually got into the U.S. market?

Navneet Rastogi: We expanded into a lot of countries, Chris, and we thought it would be the same journey in the U.S.

Initially, it looked the same to us. But then we soon realized payment is one piece there. Subsidy and payment are two very, very big pieces in the U.S. that surprised us.

When we entered the U.S. market, we thought everything would work the same. One of the biggest learnings was that every state is like another country. It's not like you can solve the whole U.S. in one piece.

Whether you talk about payments or subsidy, there is federal subsidy, state subsidy, ELCs, different grants. How do you manage them?

And when it comes to payment, it's completely different than other countries. Most of the billing was running in an autopay manner. They want people to put in their details and run automatically.

There are families who need split billing. There are tax statements that need to be generated in a specific format on a specific day. There are subsidies, co-pays, grants, and different discounting strategies. So there were so many combinations we had.

Then there was reporting. Most of the out-of-the-box reporting available was only helpful for a few cases, like money movement. But the way the reporting needed to look, for example, if I offer three programs, what does my revenue look like? What do my projections look like? Where am I paying what fee? What does the average settlement look like?

All of those reports were out of the system, or we had to manually build them. They were not easily accessible. That took us a lot of learning even to understand how to build them.

ACH as a payment system was quite a learning for us. It is assumed to be successful unless you hear a failure on a webhook in the next five days.

AB: Another element to it was we also learned why it's autopay. Payroll was running on a weekly or bi-weekly basis, so it's a faster cash inflow and outflow business that they have in childcare.

You need to understand the settlement cycle. You need to understand how payroll works and why there is a need for autopay. There are a lot of nuances to it.

Navneet Rastogi: They always wanted a single point customer experience. If anything happens, they should be able to reach out to us, not figure out how to go to Stripe's general chat and ask those questions there, or any other product, just as a reference.

One of the use cases that also led us to think of a partner who can enable those use cases was refunds. Considering this is a large operational and regional team environment, there will be a case where a refund is needed. When the refund request comes in, they want to make sure there is an approval, and that approval needs to be at the regional level or even the HQ level if it is over a certain amount.

Illumine has a workflow system that allows you to configure this, but a lot of the time the limitation was that those refund capabilities were not exposed from the platform so we could put them into our system. Or they needed a refund pool amount so staff could issue refunds from there.

Otherwise, they had to go separately, create a sweep from the bank to bring that balance and do it, which takes a lot of time and creates delay from a customer experience point of view.

Similarly, they want to look at settlement from the perspective of what has been billed versus what is collected.

When it comes to chargebacks or disputes, they want to easily defend them because the platform has a lot of information. The child is attending the program. There is attendance information and communication information. It's easier to fight those disputes versus going to a separate platform, taking screenshots, putting together a report, and submitting dispute proof. It should be one click to take a report and submit it as dispute proof.

Chris: I think there's a responsibility question hiding in there too. As the ISV, you want to be the single point of contact. The customer doesn't really care which company underneath has the responsibility on the chargeback or on the process flow, but you want to own it and make sure that happens.

So how do you think about the line between what Illumine should own and what the payments partner should own?

Navneet Rastogi: I think it's quite simple when it comes to saying we want to own the customer relationship. Anything coming from the customer should directly be in Illumine's wheelhouse.

Anything in terms of the technical aspect, or anything related to fraud or any capability that you need in the product, like enabling a new payment method, that's the kind of relationship you should be handling as a company between you and the payment processor or payment gateway.

Kitty: Yeah, that's the part customers are so consistent about. They don't say, “I completely understand the failure occurred three vendors downstream.” They say, “I clicked your button and now my money is weird.”

So whether you claim to own the experience or not, the customer may have already made that decision for you.

AB, once you knew you wanted to go deeper, what did a serious U.S. payments partner actually need to look like? What moved from nice-to-have to non-negotiable for you guys?

AB: We became much more curious about the technical capabilities that a payment partner has to offer because it's something we wanted to really tie up with the product, and we are very fast with our development.

With respect to customer experience, there are new things coming, not just in childcare but in other consumer-friendly applications. Customers are already acquainted with newer payment methods and better experiences with other payment solutions.

We wanted to make sure that in childcare we offer a similar, at-par, or better experience.

We wanted to evaluate, first, whether the technical capabilities are there so we can build that experience. Second, whether the partner looks at the payment side of the business as evolving as consumers are evolving.

Those became non-negotiable. We evaluated partners more on the non-negotiable side while we were looking for the U.S. market.

Navneet Rastogi: I would add one thing there. We have never gone for a partner just by looking at the name or the revenue of the company.

In the payment space, I have seen so many companies that are very big in revenue, but their tech maturity or tech offering is not as strong as the company we are trying to offer to our customers. That becomes a struggle.

You want to offer something, but then the platform limits you because the capabilities are not there. Because they are so big and maybe you are a very small client for them at the beginning of the partnership, a lot of times you won't have a say in the roadmap, or they will not prioritize it.

That becomes a struggle. You want to give the best experience, but you have made a partner who is not listening to you because you are too small for them at that stage.

That's another angle we always try to see: the partnership needs to have a say from both sides.

Chris: On the technical side, it can become a business problem fast because you can't grow as quickly as you want or integrate with who you want. You might have weak APIs that delay launch days. You might have bad documentation that becomes an engineering cost.

When you were looking at these payment partners and their technology, how did you dig into whether they were mature enough to support what you needed?

AB: One part of evaluation that will be relevant to this question is we always ask them for a testing environment.

While we are aware that they have documentation in place or all the necessary resources that they might have listed on their website, we also wanted to test the ongoing support with respect to technical implementation.

How open are they during that process and answering queries? That also matters because ultimately you are facing the customer, but you have to rely on the partner to answer those queries, whether technical or solution handling on the back end.

So the process of testing the entire integration, running certain test transactions, and making sure we are always talking in terms of, this solution exists today, but can we do this better, and can your technical team look into it?

The responses speak for themselves. That becomes crucial. We have seen our questions evolving with every partnership we do, and this became one of the hygiene things for us.

Chris: We should touch on economics here as well because economics matter. But a bigger revenue share doesn't help much if the partner slows your roadmap or forces you to rebuild the experience later.

How did you balance commercial upside with product fit and customer pricing?

Navneet Rastogi: I will add one perspective on that.

Whenever payment partners are looked at, short term you're looking at product experience, and long term you're looking into the revenue economics, or the economics of the payment business.

It cannot be the other way around. You need to have an eye on both. It's not like you can trade off one and then magically figure out the other later.

Chris: The first one is very important: the product experience. Payment should strengthen the core product and not become a distraction.

Navneet Rastogi: There are a lot of costs around it, internal costs as well as external costs. It's not easy to build those payment pieces.

You can take an easy route where you plug in and play and use it, but then you get stuck six months down the line saying, “I cannot extend this further in the way I want for the experience.”

So you have to invest in having the right partner for payment integrated into the platform so that in the long term you start seeing the return.

Chris: Some changes in the payment platform eventually affect pricing or margin at the ISV level as well. You can't predict every change, but you can avoid choosing a partner or business model that only works if every assumption stays the same.

Kitty: Let's bring this back to the customer. Your users are center owners and directors. They're trying to run a childcare business, not reverse engineer payment infrastructure.

What have you learned about what U.S. customers actually expect from the payment experience and from Illumine when something goes wrong?

Navneet Rastogi: Three things, very consistently, from a customer experience point of view.

One is clarity over speed. They want to know exactly what is collected, what is settled, and what failed. Speed may be a little bit delayed, but the report needs to be accurate and very clear.

Second, they need to have a single person or single number to call if any issue happens. That's very consistent across what I'm seeing.

Third is around the way the U.S. operates its books in these businesses and how they sync to QuickBooks. That should not mess up. When you start doing billing, your ledger should not mess up.

These are the three things I've started seeing as important in the U.S.

Kitty: Let's make this useful for the international ISV listening to this and thinking the U.S. is next. What's the thing founders and product teams are most likely to underestimate before they get here?

Navneet Rastogi: The way underwriting works in the U.S. payment system is very different than the rest of the world.

Similarly, state compliances. For example, in childcare, in certain states you're not allowed to pass card fees to the parents. In certain places you're allowed to pass on those fees. So state to state, it varies a lot in how you can talk about payments and balance the service fee or transaction fee.

Those things need to be understood. It's not easy to understand.

And when you look at payment companies, at a high level everybody will look the same and talk about basis points to sell you on why they're a good payment company. But the learning is: look at the payment pieces and the technology capability that exists at that layer.

In the U.S., the payment business is also a very strong, sticky portion of the business because this is a really fast-moving and complex piece that you need to have in the system. It's a backbone of your business.

The important thing AB said is that it's not just the product team when it comes to building payment businesses in the U.S. It's the product and engineering team, the legal team, the compliance team, and the customer success team that need to be trained very differently.

Chris: Give an international ISV a short due diligence checklist. What are the questions you absolutely want answered before you come over to the U.S.?

AB: One, you need to figure out the company fitment or partner fitment. That's number one. You should be aligned on the way you operate as a company. How do you think? Do you think customer-first or not? That alignment is important.

Second is technical due diligence, or the technical maturity that Navneet also spoke about. That's very crucial because the scope is wider.

Third, of course, the unit economics have to make sense. It has to be a longer-term alignment.

You will see a lot of partners. Don't make the mistake of wanting a short-term win. Wait and probably do more research on what exists out there because you will find a partner that works for the stage you are in.

If you're a startup, you might end up working with someone else. If you're a mature company that is extending, you might find someone else with better maturity on technology or scope of implementation.

So it's a question of how you look at the partner. That's very important, along with technical maturity.

One crucial part I said earlier is that it has to be well tested. Don't just believe the documentation. Do the actual testing. That unfolds a lot of things while you are evaluating for a long-term strategy. If you're thinking of payments as a long-term strategy, that's my checklist.

Navneet Rastogi: One checklist on top of that is to look at the kind of data security and tech measures they have, like compliance, SLAs, downtime, and turnaround time, even for customer requests.

As you continue to grow, these things are very important. We have seen in certain regions where the response time from a payment partner has been three days, while we have committed to a one-day communication timeline back to our customer.

So you end up in a situation where it doesn't align.

Those things are very important. And if your platform has committed to, let's say, a 99.99 or 99.95 SLA, you need to make sure those things are aligned in the payment platforms. That also gives you a sense of the maturity of the platform.

Kitty: I think that's the big takeaway. Expanding into the U.S. isn't just adding another geography to the sales map. It can force an ISV to decide just how much of the payments experience it really wants to own.

And once you decide you want to own more of it, the standard gets higher.

You need partners that can keep up, reporting that actually makes sense to customers, clear responsibility when something goes wrong, economics that can survive change, and a product experience that hides the plumbing without ignoring it.

Navneet, AB, before we let you go, give us the quick pitch. Who should be looking at Illumine and where can they learn more?

Navneet Rastogi: Anyone who is running childcare centers, preschool, after-school programs, and trying to grow that center, trying to make their parent experience better and support their teachers should be looking at Illumine.

It's a platform designed to make your life easy by bringing everything under one platform, whether it's your CRM needs or enrollment needs, paperwork, communication needs, or the complex pieces we talked about like billing, payments, and subsidy management, and then also attendance and lesson planning.

These are the pieces Illumine brings together.

Chris: Navneet, AB, thanks for joining us and talking about the work behind U.S. expansion.

Kitty: And if you want another example of why the U.S. payment stack keeps people on their toes, check out Chris's recent Cents Chat article on what could happen if major banks end up owning more of the debit rails.

Thanks for listening to Cents Chat. We'll see you next time.

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