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Suneera Madhani’s Market Disruption

Today it is part of Silicon Valley lore. Steve Wozniak, who would later become larger than life as the co-founder of Apple Computer, went to his employer Hewlett Packard with one of the most revolutionary inventions of the twentieth century, the personal computer. His supervisors at the company did not consider the product to have any market potential. They, in fact, rejected his pitch five times.

Surprisingly, this isn’t an isolated experience among successful entrepreneurs. They try to bring an innovative idea to the company they are working with, only to be met with disinterest or dismissiveness. Yet, for these intrepid individuals, that is often the catalyst for a profitable business endeavor. That is certainly the case with Suneera Madhani, the founder of Fattmerchant, who is revolutionizing the way the credit card processing industry has worked, up till now.

This is where I, for the first time, felt I had roots; that’s why I’m passionate about Orlando, about growing the community. This is the first place I genuinely called home and felt like I belonged.

Madhani had been working for a merchant services company, basically the middleman in most credit card transactions, who are often accused of adding hidden fees, and arbitrarily raising their rates or holding their client’s hostage to contracts that can cost them substantial fines if they try to escape. She told Fast Company, after two years when she began noticing a high volume of complaints. “I wrote down every time a customer had a complaint,” she said. “It was always about transparency and simplicity, and even just consistency in what they were being charged.” This would become the Fattmerchant opportunity.

Life Lessons

Initially Madhani didn’t aspire to the entrepreneurial life. She in fact felt a little transient growing up, attending 10 different schools in 12 years. Her father, whom she described as a ‘serial entrepreneur,’ kept the family on the move until they came to Orlando. “This is where I, for the first time, felt I had roots; that’s why I’m passionate about Orlando, about growing the community. This is the first place I genuinely called home and felt like I belonged.”

However, the benefits of those formative experiences aren’t lost on her. “I learned to be charming,” she said. Madhani and her brother Sal, who is the co-founder of Fattmerchant, developed a knack for making friends and being comfortable in changing environments, “We learned to tackle the new school together,” she said. They are skills that have come in handy, as she raised money and developed her pitch with investors. Let’s face it, anyone who did cold calling at 15 while working at one of their father’s call centers would have a unique set of talents and experiences.

A scholarship took her to the University of Florida, with a major in business finance and a minor in leadership. She even studied abroad one semester in Rome. “I did internships every summer, but most of them were in sales and marketing, rather than finance or accounting. Then when I graduated, though I had a great academic and experiential resume, the market had crashed and there were no opportunities in finance,” she recalled.

Corporate Blues

It was the tobacco giant Philip Morris that offered her a position, “I sold my soul to the devil,” she said laughing, “However, I really learned a lot and there were aspects that I really enjoyed,” but Madhani was heading towards an epiphany. “I didn’t think I wanted to be an entrepreneur, but rather to rise through the ranks of the corporate world. But I found there were some things that bothered me about working for a major corporation. I was essentially a serial number on the back of a laptop. Plus, I hated what I was selling, so there was no alignment or passion. Regardless of how much money I was making, I knew I wasn’t where I belonged.”

She left when an opportunity presented itself with a merchant services company, which she thought might be a great fit for her skill sets. “Six months in I hated it,” she confessed. “I asked myself, ‘Is there something wrong with me?’ or ‘Is there something wrong with this industry?’ and I realized it was the industry.” Madhani recognized the financial institutions were basically taking advantage of the small business owners. “We would promise things, but we didn’t deliver and the small business owner has no options,” she explained.

Then came the Wozniak moment. Madhani went to her bosses at the merchant services company and proposed an innovative new approach. Charge a flat subscription rate for processing cards and eliminate the labyrinth of fees. Madhani’s proposal was greeted with a similar lack of enthusiasm that innovators throughout history have faced, basically they responded, “Who is this 25-year-old upstart?”

The Why?

Large retailers or restaurant chains can negotiate these prices, but small businesses didn’t have that kind of leverage. The attitude, according to Madhani was, “This is how the industry works, so it is just accepted and a handful of companies completely control the market.”

The direct costs are posted by the card brands, but the processing companies or merchant services charge fees on top of that, usually a percentage, along with a host of other fees: gateway fees, ancillary fees, compliance fees and the list goes on. In the end, it can be 5 to 6 percent, and the more a business processes the more they lose. Today, on Fattmerchant’s website there is actually a counter that continually tabulates how much their customers have saved to date.

“My generation loves transparency and we said, instead of charging all these variable costs, why don’t we just charge a at monthly membership fee?” she asked matter-of-factly. It was her brother, Sal Rehmetullah, who was working in San Francisco for Deloitte in operational efficiency at the time, that confirmed her idea had merit – “this in genius” – and that they should start a company of their own. “We not only wanted to simplify the process, but also to provide these owners with the technology that would help them grow their business.” Adding with emphasis, “No and I mean no businessperson says, ‘I love my merchant services provider,’ because the user experience is so negative. Once the customer is on-boarded they are locked in and usually frustrated.”

The Launch

Fast is the operative word to describe the growth and development of the company they launched in 2014. Madhani quit her job and Rehmetullah planned to follow her in six months. The name “Fattmerchant” was intended to be memorable, along with being an acronym for Fast, Affordable, Transaction, Technology.

They focused their business model on four verticals: retail, restaurants, healthcare and professional services, with the latter being their fastest growing sector. They found they could save clients 40 percent on merchant services and have built unique platforms for the professional services sector.

“Our system works with our clients’ existing tools and technologies or we can provide hardware and software, if you need to take Apple Pay or new chip cards, mobile payment processing, ecommerce or shopping carts. We are businesses’ one stop shop, for the company doing between $10,000 to $250,000 in transactions a month. We’re like Costco; you pay one price and you get everything we offer at wholesale prices. In the first year, we did $5 million in transactions, the second year $110 million or 2,000 percent and this year we should do $700 million and will continue to grow,” she said, as one could feel her enthusiasm growing like an evangelist in a tent meeting.