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Digital payments in agriculture is a game-changer for agribusinesses
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In this episode of the Feed & Grain Podcast, host Steven Kilger welcomes Tony Morosini, chief digital payments officer at Bushel, and Jake Joraanstad, co-founder and CEO of Bushel, to discuss the transformative potential of digital payments in the agriculture sector. With Tony's extensive background in digital payments and product development, the conversation delves into the challenges faced by agribusinesses in managing financial transactions, including the prevalence of paper checks and the need for more efficient payment solutions.
Jake and Tony share insights from their recently released report on digital payments in agriculture, highlighting the industry's slow adoption of technology and the innovative strategies Bushel is implementing to streamline payment processes. As they explore the future of payments in agriculture, the episode emphasizes the importance of leveraging technology to enhance cash flow, reduce friction in transactions, and ultimately benefit both farmers and agribusinesses alike. Join us as we uncover how digital payment solutions are set to revolutionize the way money moves in the agricultural landscape.
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Transcript
Introduction and Sponsorship
00:00:00
Speaker
Hello, my name is Stephen Kilgurn. I'm the managing editor of Feeding Grain magazine and the host of the Feeding Grain podcast. Thank you so much for joining me today as we dive deep into the issues affecting the feed manufacturing, grain handling, and allied industries. Today's episode is brought to you by the Ben Witt from New Mat Systems.
00:00:18
Speaker
The powerful dual impact binwhip removes the toughest buildup in blockages and industrial storage silos without hazardous silo entry. Learn more today at binwhip.com.
Guests Introduction
00:00:29
Speaker
Today's podcast has two guests, Jake Jornstead, co-founder and CEO at Bushell and Tony Morcini, Bushell's new chief digital payments officer.
Why Digital Payments?
00:00:38
Speaker
We're talking about the advantages of implementing a digital payment system at your facility, how it addresses the security and other issues surrounding paper checks, and the uptick in digital payments in the industry. I hope you enjoy the interview. If you want to help out with the podcast and are listening to this in a podcasting app, please rate us and subscribe. If you're listening online, sign up for the Feeding Grain newsletter Industry Watch to see what new podcasts drop and stay up to date all the news from around the industry. Now,
00:01:07
Speaker
onto the show. Hi, Jake. Hi, Tony. Thank you guys so much for joining me today. I really appreciate it. Thanks for having us, Steven. Oh, you're here because Tony, you were hired at Bushel not too long ago. Would you mind telling us a little bit about your background in ah digital payments and what kind of drew you to the agriculture section?
00:01:26
Speaker
Yeah, sure. Steven. So my name is Tony Morsini. I'm chief digital payments officer at Bushroll. I've been here and I think August 5th was my first day at work. So I'm like two and a half months in I've spent about 20 years in payments. I used to own a consulting company and I ended up getting visa as a client and I.
00:01:44
Speaker
went there and i loved it and i became an employee and i ended up at visa for 10 years in product i was always in product there working on a different visa product types like a dispute products and commercial car issue processing and kind of got the startup bitch and i had a friend who had just started a company called sofi and i was the original head of product and i stayed there for five years and i launched a pretty successful program there called SoFi Money, which is a ah large, ah basically was a large challenger bank product. I think today it has like 2 million customers on it. And so that was great because I then had network experience from Visa. And then I had issuer experience being a real issuer, a card issuer at SoFi. And then I went to figure with a bunch of the ex SoFi people, I stayed there a few years. I created ah an issuer processing platform built on blockchain that I would stay there about four years and we sold that business.
00:02:34
Speaker
And then before I worked at Bushel, I was a really cool merchant gateway provider for the oil and gas industry. This is where a lot of my ideas for Bushel kind of came from. It was a pretty focused business out of Houston that provided merchant acquiring for mobile transactions for the oil and in gas industry. When I was working there, I met Jake and he and I talked about this for months and it got me pretty excited about it. So I joined Bushel.
00:02:57
Speaker
Well, number one, welcome to agriculture. We're happy to have you. Jake, well, you've been on before and we've talked before, but can you give us a little background? Yeah. Hey guys, Jake Jordanstead, co-founder and CEO here at Bushell. My co-founder Ryan Raguse and I have been building software specifically in agriculture since 2017 with our offering. I'm a technology guy with that background, but family on both sides of my world are in agriculture, both in cattle and in in row crops up here. I grew up in Northern North Dakota, about 10 miles from the Manitoba border. Man, if Tony's background doesn't tell you that we're pretty serious about solving these payments problems in Ag, I don't know what is. And if you think we're crazy on titles, Chief Digital Payments Officer, it really just, if you say it's CDPO, it just sounds like C3PO. So that's why we want with that. So that's the whole reason for that title. But Tony knows what he's doing in this space. And frankly, the opportunity is absolutely massive to change how we think about money movement in agriculture.
00:03:54
Speaker
And it's starting to change, but there is a heck of a lot of work left.
Transition from Paper Checks
00:03:58
Speaker
You guys just released your report on kind of digital payments in agriculture. What did you guys find out? 70% of grain settlements are still being paid by paper check? At least. As a millennial in a digital age, that's still kind of crazy. We're so far behind. Can you talk a little bit about what you guys are thinking are the solutions to that, whether it's ECH payments or digital wallets?
00:04:21
Speaker
So first off, I want to dispel some myths because, and I hope everyone that's listening kind of hears this. First off, for some reason, we still hear people think that we are somehow building some sort of crypto blockchain payments tool for Ag. That is not the case. We're working with traditional bank tools, but moving agriculture into the 21st century of banking, which includes ACH and you know moving away from wires, moving away from drafts and paper checks.
00:04:50
Speaker
And the other myth is that this is all about real-time payments. And our customer, the agribusiness, whether they're a co-op, a grain elevator, or a retailer, they're worried about float. That makes sense. It's not great to hear as a farmer, but the truth is that paper checks take seven days or more to get deposited. And in that time, somebody might be earning interest on that money while you as a farmer take too long to get it deposited.
00:05:13
Speaker
and so We aren't trying to necessarily break all these sort of models, but at the same time, the idea that a farmer would be inconvenienced every single week and month, especially during harvest, to have to go to town and deposit a paper check at the bank.
00:05:29
Speaker
And on top of the fact that they may have a lien, which adds another complication to the problem is absolutely ridiculous. And we went this fall and launched, basically we call it direct deposit for our customers. So this is a grain elevator that's paying farmers or a processor, an ethanol plant or mill that owes farmers and their businesses money for their grain can enable this where the farmer just clicks the dropdown and gets set up with direct deposit all on the tool, on the mobile app or on the web.
00:05:56
Speaker
Whereas traditionally, as you know, you've probably seen this before, you fill out a paper form, put a voided check in the mail, and you send all of your account information in the mail to somebody. That's how you get set up today, prior to Bushel's work in direct deposit. But the last time that I got a paper check for my payroll was like never.
00:06:14
Speaker
so There's a lot of work to be done. We're making it super easy for our customers to do that. But in the process, Steven, we have companies that we work with that don't even have an ACH processing ability, have never offered ACH payments before. And that's only one part of the equation. That's to pay the farmer, but also to get paid electronically is also a challenge as a retailer for fertilizer, seed, chemical, and whatever else. So tons of problems. I think we're making progress and it's not some dark art, black magic we're working on here.
00:06:43
Speaker
Steven, one of the things that's really interesting, I've worked with a ton of banks in like a partnership capacity over over these past 20 years in payments. And you know you watch advertisements for commercial bank accounts and things, right? there always There's always the communication in the marketing that, hey, we know your business.
Banking Challenges in Agriculture
00:07:01
Speaker
And that's how they pitch these commercial products is we know your business, we're here for you. And I think at the banker level, that's totally true. like I think the the banker you meet in any kind of commercial account set up, like for a farmer,
00:07:13
Speaker
They do know your business, but does that really then manifest itself in the products? And if you look at really the products that are offered while they have that knowledge on the people side, when you look at the products, the products are just these more or less relatively generic, like core banking and payment services that they buy from just a couple of big companies that are largely all the same. And so when I, you asked me in the first part, like what really excited me about, I think one of the things that really excited me was like, I couldn't believe no one had done this already. But my experience working with banks a lot is you have to get to a pretty chunky sized bank before they really have software engineers on staff. Like most banks, they're just buying these off the shelf products from a few companies. And they don't really have software engineers until you get
00:08:02
Speaker
I've worked with some like up around 5 billion in assets but before you start to see that there's someone there who can actually deliver something that isn't just generic functionality. So I think that's one of the opportunities I saw here was like, here's a huge industry that gets really no love from banking tech and banking tech hasn't delivered anything to the banks that really solve this verticals problems.
00:08:26
Speaker
Yeah, that's a really good point that I really didn't think about it because even if your local Farm Bureau bank person knows you really well and they know the industry, who they work for, that's a giant concomer. It probably has really other pressing concerns and it's usually not agriculture.
00:08:42
Speaker
And to introduce more problems, I mean, go try to digitally figure out where you stand on all of your loans in agriculture. All of us are used to seeing our credit card balances and our loan balances from our mortgages from our banks. But to understand that in one place as a farmer,
00:08:59
Speaker
as well as being able to somehow see your operating line from farm credit and maybe your loan from farmer Mac for your land. It's just not even possible right now. It takes you forever to understand. And most of it's just a paper invoice. Here's your latest mortgages due and here's your balance. And so that too has not been solved. And there's a ton of opportunity to work with the farm credit system and everyone else involved to kind of make this whole thing easier for everyone.
00:09:23
Speaker
Yeah. And there's, I mean, finances are a struggle even at the best of times. So making it as easy as possible to get your information and know what's happening with all your loans and accounts seems really important as a normal person who doesn't have a small business. Like I need that.
00:09:38
Speaker
There's kind of the question about security. You hear about digital fraud and stuff because
Security and Cost of Paper Checks
00:09:42
Speaker
that's what everyone's doing. But there's actually a lot of security concerns with mail payments. And how can digital payments hopefully help ease some of those problems? Because sending checks to the mail is never the most secure way of doing things.
00:09:54
Speaker
Checks are pretty unsecure in general. At the bottom of the check is that routing number and account number, which is like a private key printed on a piece of paper is really what that is, right? It's not secure. They do those polls for your gym membership. What that is, is that's the manager at the gym uploading a spreadsheet in their bank portal of routing number and account numbers. And they say, pull 50 bucks this month from.
00:10:17
Speaker
Stevens account pull 45 from Tony's account and they upload that into their commercial banking application. But that data is you know probably in a spreadsheet. In these situations, you have someone learns of a bunch of routing numbers and account numbers. They can pretty much add whatever they want to that and the polls will go through and they could take the money before Anyone knows about it. And this kind of thing's happened. That kind of fraud happens. There's people with bad intentions everywhere. And so the check is inherently like insecure, honestly, because of it's exposing a private key to the world, basically. Stephen, another problem, the egg retailer. If you're a green elevator and an egg retailer as well.
00:10:53
Speaker
The idea of being able to take payment for a fertilizer purchase of $20,000 and it's on a credit card negates the entire point of selling the product because you're paying three three and a half percent on the transaction. It's not a feasible path forward in Ag. And so there needs to be another alternative method of payment besides the paper check and the credit card to make that happen.
00:11:14
Speaker
That's a really good point because a lot of this, you could look at it as kind of an advantage towards the farmer, right? Like good digitizing payments, getting them their money faster, but it's also a big benefit to grain elevators, fertilizer plants, these businesses that having a check writing system isn't, I'm guessing isn't cheap. It's also.
00:11:33
Speaker
hard to keep track of. And also, like you said, if you do it through credit card, then you're open to fees. It just seems like there's a lot of problems for people at every level of this that digital payments could help solve. If you assume that you have no fraud on an annual basis for paper checks, a paper check transaction costs between $10 and $25 every time. That's before any other problems. So clearly there's a better way.
00:11:59
Speaker
Yeah, and agriculture gets a lot of slack for being behind on technology, and admittedly they are kind of slow to end the uptake with some things, but this seems like we're really, really far behind. Agriculture is also kind of like this weird amalgamation of personal and business relationships all being intertwined, and the guy that you know your banker and you've known him for 25 years and you've always gone through him, you know your local grain elevator that even if they're one down the street,
00:12:25
Speaker
As flashy new stuff you tend to stick with the one you know how can digital payments enhance and simplify these business interactions if you're from Silicon Valley you think that you could just jump into the space disrupt everything and none of those things matter but the reality is we have physical product.
00:12:44
Speaker
in physical location that matters more than almost any other industry. You cannot deliver grain two states away in any practical sense outside of a railroad, right? And so like the idea that there's some sort of untapped market here or whatever, these guys know their relationships. But on the flip side, in our State of the Farm report, it's proven this, these farmers are using digital wallets in their everyday life and the only place they're not using sort of digital payment methods or sort of transactions online is an agriculture. That is clearly the pattern that's happened. And you guys, you've done that. You have noticed most of your interactions with, it tends to be bringing businesses in, right? Bringing co-ops, bringing other software companies in on your system and that therefore being able to kind of branch out that way rather than targeting individual producers.
00:13:33
Speaker
That's how we've come to market for the last five years. That continues to be our focus in terms of the customer, right? The agribusiness is our core customer. We're here to make their business more efficient and more effective. If in the end it benefits the farmer as well, that's a double win for us. In 25, you're going to see some more capabilities. We're really on both sides, the agribusiness, but also you're going to see some things from us on the farmer.
00:13:55
Speaker
that will make it make more sense for the farmer to encourage their agribusinesses to use these tools because their benefits are going to continue to go up. And in the end, if you can make more interest on your cash sitting in your account today rather than a week from now or maybe never, a lot of farmers, for example, don't get paid more than maybe half a point of interest on money sitting in their checking account. We're going to change that in 25. I think that's going to matter a lot for these guys. Small margins right now are all we have to work with. and so If we can help them all make more money in the process, I think it's going to change the way people think about this. Well, you mentioned earlier, a week for a check to be deposited is a week you're not getting interest. and Yeah, that probably doesn't sound like a lot to a lot of people, but when you're getting getting hundreds of thousands of dollars in payments. A week's 2% of a year, right? and so You have a lot of those 2% a year all adds up, right?
00:14:43
Speaker
But it is getting better. Your state of the farm report showed that 12% in paper check payments. Do you see
Rise in Digital Payment Adoption
00:14:49
Speaker
that as a trend? Do you think it's going to snowball is I think a big question because ah to me it seems like a perfect opportunity for in five years for us to be almost at 100%.
00:14:59
Speaker
Well, our job is to make it snowball. That's what our top priority is right at Bushel. And then you know what else is crazy is our the volume, even our own system, we're seeing basically a 300% increase this year and money moved on the platform over last. And so we're starting to really see that is starting to snowball. and What's interesting about the information is when somebody starts to do it this way, they don't really go back. It's not like Oh, it was an inconvenience and then they just went back to paper checks. It was just easier. That is not what's happening. And so once somebody's there, I don't think they're going back to that old method and a paper check or whatever it might be. And so I think no ball effects coming. It's going to be rolling downhill and it's going to be rolling fast.
00:15:37
Speaker
I think Stephen, like you mentioned, this has been a long time coming. It's kind of, I think, like it goes back to our original conversation. I don't think anyone's made the product for the industry. No one's focused on this. When you start delivering product that solves problems within a vertical industry in payments, like for example, like When you make a payment method can either be your cash balance or your line of credit and it's one click difference. And you can make spending that money super easy as opposed to having a checkbook in the mail for that line of credit. And you have to go find it in your desk drawer and all that and when it's really all integrated in. So the farm credit system, lenders line of credit looks just like another bucket of money that you can pull from in in one button or when you have a bill pay system, but it's a bill pay system that is pre-populated with.
00:16:25
Speaker
Common ag industry payees all these little features just incrementally make it more and more powerful every one of them. solves another problem and reduces friction. And so that's what we're going to roll out is that, right? And I think it will snowball. I mean, that's what we're betting on and people will see the value. So people have got to see the value in your product, right? It's got to solve their problems. It's got to have better economics. It's got to overcome the friction of changing. And so to do that, it has to be a lot better than what they have today. That's what we're going to do.
00:16:57
Speaker
Yeah, definitely. And I mean, as more co-ops and companies also adopt your system, it is a selling point. We talked a little bit about people have loyalty, but loyalty only goes so far. And if a co-op can demonstrate that it is making this easier for the producer compared to its neighbor, then yeah, it probably will attract some customers over.
00:17:18
Speaker
We know it does, Stephen. The customers are saying, I work with this company because they pay me online and they pay me on time. And that's why I've switched to doing business with them. Because if they're in the same market, there's not necessarily a difference in price unless there may be a processor or something like that, that we're seeing that already. I would imagine because it is, I mean, at the end of the day, this is business and the easier you can make it for your customer, then the better.
00:17:44
Speaker
It's not complicated. yeah Here's one thing that's interesting in Ag.
Addressing Lien Positions
00:17:48
Speaker
Our customer at Bushel has explained to us so many times that part of their challenge is this lien position that a lender may have with the farmer. And they're liable to some extent to paying the farmer correctly, especially if there's a lien. They may have to have two names on the paper check, one the lender and one the farmer. And their job is to check the state registries and everywhere else to make sure that farmer doesn't have loans they're not aware of. That's a problem.
00:18:14
Speaker
We've been working on this for a while. We've realized now about somewhere between 30 and 50% of the industry payments would have a lien on them at any given time. So that means there hasn't been an electronic payment solution for liens. And so we've been working hard on this. We filed our first patent this year.
00:18:32
Speaker
on electronic payments in agriculture with liens. And on top of the idea of us filing the patent, in the process, we found that nobody has filed patents in this arena. And frankly, nobody's even thought about this problem before. And so of course, to Tony's point, nobody's done this before. And that's exciting. And you guys do have some exciting stuff coming up. Can you give us a little preview on? And you're going to have to come back on once these systems launch to a broader audience.
Future Plans for Bushel
00:18:59
Speaker
The first major change for us in 25, talk about this more in January, but our customers are going to start earning interest in all their money in our accounts with our bank partner. They're not bushel, right? It's not a bushel account. It's a FDIC insured bank account. They'll be able to have significantly higher FDIC insurance limits and they'll be paid really competitive rates on their interest on a liquid check-in account. It's not a money market. It's not a CD, tying your money up for six months.
00:19:25
Speaker
It is liquid. And so that's a big change. And then you'll see in Q2 next year, a lot of updates coming in for the farmer to make their reasons to to use a tool like this significantly higher. and' Tony, you want to share any more? We really looked at, make the farmer switch from from a paper check-based world. What do we have to have? So we we put together a roadmap of features that'll be coming out next year. And like Jake said, the first thing will be higher limits, higher interest rates than we think they're going to get anywhere else.
00:19:55
Speaker
We're going to do things like we've heard that the problem with mobile check deposits has been the limit like their local bank. If they do have it, then they've got some tiny limit of $10,000 or something. And that doesn't work in this space where they were getting big checks of a hundred thousand dollars. So we're going to address that.
00:20:12
Speaker
We're going to have debit card on the product. They'll be able to either spend their cash balance with us or they'll be able to hit a third party line of credit. And we're building that as well. And so a bunch of features, like I mentioned earlier, a bill pay that's kind of ag centric. We think this is going to be pretty compelling product financially that was really built for the American farmer, honestly. Well, yeah, it sounds like it's going to be an exciting 2025.
00:20:38
Speaker
Tony, is there anything that's kind of surprised you about just working in Ag in the payments landscape? Honestly, no. Jake and I talked for a couple of months before I joined. And so I did my research. The lack of thing very compelling from a product standpoint, the lack of any one major bank really dominating in this space. Those were all things I kind of figured out on my own. And it just sort of reinforced You know, my belief that there was a huge opportunity here. There's a couple of businesses that have sort of done this, that have focused payments on a vertical and have done extremely well. Like one of them is, you know, Wex and Fleetcore, those two, which focused on truck drivers.
00:21:21
Speaker
over-the-road truckers, 18-wheeler drivers, and developed payment networks at those fuel stations that those big gas stations the truckers go to. They focused on a payment network for that and then expanded into other services for that industry like factoring.
00:21:37
Speaker
and currency exchange for truckers that drive across borders a lot like in south america and europe and and so and so as i look at this i was like this is really reminds me of those other businesses yet this one no one has touched this yet really at all that was pretty exciting and and like i said steve i came into this with my eyes pretty wide open so That doesn't surprise me. You're in finance, not in English. With me, I'd be, take the job, no research done. It's fine. I'll figure it out. You probably did all your research. Thank you guys so much for joining me today. I really appreciate it. I hope you come back soon. And I hope that you have a great rest of your year. I hope everybody that's working hard to finish out harvest this year, whether you're buying grain or farmer yourself, good luck finishing harvest in 2024.
00:22:23
Speaker
2025 is going to be hopefully an exciting year and hopefully we can see some better prices next year. Let's hope for it. Yeah. And hopefully next year you're getting those checks digitally. You're darn right. By next fall, that better be happening. All right. Thank you guys. And to everyone out there listening, stay safe.