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Leaders In Payments
Leaders In Payments
Sunil Madhu, Founder & CEO of Instnt | Episode 295
Discover the cutting-edge intersection of technology and security as we welcome Sunil Madhu, the visionary founder and CEO of Instnt, to unveil the transformative power of fraud insurance technology in the payments industry. By providing real-time insurance coverage during the pivotal moment of customer onboarding, Sunil's company is reshaping how businesses defend against fraud-related financial losses. In this episode, you'll hear how Instnt's sophisticated tech—laden with biometrics and behavioral analytics—melds with existing systems to insure transactions in the blink of an eye. Sunil's insights extend beyond the tech, as he recounts his global journey from Scotland to New York, and the leaps from Fortune 500 boardrooms to the thrilling unpredictability of startup life.
To further understand the implications of Instnt's innovation, the podcast discusses how the company's fraud insurance technology integrates with various financial institutions, including fintech companies, credit unions, and banks. By mitigating fraud losses and ensuring compliance, Instnt not only fosters trust in digital transactions but also enables these institutions to focus on their core operations without the overhanging concern of fraud.
Welcome to the Leaders in Payments podcast, where we talk to C-level leaders from across the payments landscape. We'll be discussing the products and services that impact the payment space today, as well as trends and predictions for the future of payments. We will also hear stories from our guests about their journeys to the top.
Speaker 2:We are the first business in the world to be able to price the loss risk of a particular institution and to offer insurance as a mechanism of offsetting those losses, so that when a business uses instant they don't have to worry about having fraud losses anymore, because that problem will be solved by insurance. When fraud happens, say simply file claims Instant automatically validates and finds insurance cover to every customer that that business on board and decides to accept.
Speaker 3:That was Sunil Madhu, founder and CEO of Instant. He is my special guest on this episode, episode 295 of the Leaders in Payments podcast, and I'm your host, greg Myers. Businesses of all sizes use Instant to increase the number of good customer signups and new accounts that remain compliant and fraud-free with, instance, cutting edge technology and $100 million in fraud loss protection. Sunil and I talked about the fraud space and what makes Instant truly unique in the market. We also discussed Sunil's professional journey and his views on working at Fortune 500 companies versus startups. We've got a great episode ahead, so let's get started. Hi, sunil, thank you for being here and welcome to the Leaders in Payments podcast. Thanks for having me. Absolutely, let's dive right in. If you don't mind, tell our audience a little bit about yourself, maybe where you grew up, where you went to school, where you currently live, a few things like that. Sure, I'm a Sunil entrepreneur.
Speaker 2:I'm originally from Scotland. I've lived in about 17 countries so far landed in the United States. Get a land of the 1990s actually.
Speaker 3:Okay, and you're currently in New York. Yeah, currently live in New York. About 20 years. Oh, wow, okay, great. Well, let's talk about the company. So tell the audience what Instant does Instance the?
Speaker 2:first, fraud insurance technology. We basically help businesses avoid fraud losses which they normally have to hold on their own balance sheet, by using insurance stuff, set the losses and technology to stop a lot of fraud that would cause the claims.
Speaker 3:And who's your typical customer?
Speaker 2:Well, we sell primarily into the financial services market, and our typical customers are Fintechs, credit unions, banks and other types of businesses that onboard a bunch of retail consumers.
Speaker 3:So maybe tell us a little bit about the insurance side. I think that might be a little bit of a unique position you have there, so maybe explain that to the audience.
Speaker 2:Traditionally, businesses build their own toolboxes with a dozen or more different vendor tools to help them combat fraud and to accept new customers who are signing up on their websites and mobile applications.
Speaker 2:They typically write business rules using a combination of these vendor tools in their toolbox to stop the bad guys and to let more good customers in.
Speaker 2:But regardless of how good the vendor tools are and how many of those tools they use in their toolbox, the businesses are left holding fraud losses and typically most medium to large enterprises hold tens of millions of dollars, with their top third of the banks holding an excess of $100 million in fraud losses, and often with the larger institutions, they also have capital reserves and treasury set aside in case they realize any of the risks that they have in their lending and other types of businesses.
Speaker 2:We are the first business in the world to be able to price the loss risk of a particular institution and to offer insurance as a mechanism of offsetting those losses, so that when a business uses instant, they don't have to worry about having a fraud losses anymore, because that problem will be solved by insurance. When fraud happens to simply file claims, instant automatically validates and binds insurance cover to every customer that that business on boards and decides to accept. We use our own technology layer, which is a line of code that lives in the websites and mobile applications user interfaces, to determine whether the customer is risky or not and then to determine whether we can bind insurance or not. We do that on the fly as the customer is signing up. We make a decision within about a second as to whether we can find insurance cover and then we tell the business through APIs that they can go ahead and let that new customer in and not worry about any fraud losses because they're indemnified.
Speaker 3:A traditional way in the fraud space was sort of a scoring engine. Do you use something similar to that?
Speaker 2:Well, yeah, in traditional systems everybody manages and owns their own fraud and fraud loss.
Speaker 2:So there are lots of tools out there that provide scores and these course can then feed into other machine learning models at the business, when that'll help the business figure out how much risk there is on the individual instant does something slightly different, because we're not actually trying to get Whether the business should let someone in or not, that's entirely up to that business and their existing technologies and processes.
Speaker 2:We can sit as an overlay layer, if you will. We just dynamically add insurance into the mix. So we provide an accept our deny decision, which is says we're willing to take the risk on the individual and buy insurance cover or we're not. Along with that information, we supply a variety of data about the types of checks we've conducted on that individual In that second, in order to ascertain the risks and figure out if they're worth finding insurance against. And all that data, which is a very rich data set, includes biometrics and behavioral cognitive information and Device intelligence, velocity checks, personal information verification, k y c checks and a variety of other types of All of that rich data, along with the decision to buy insurance cover, is pass seamlessly back to the application, where the API application can then consume that information, feed that into the downstream models that determine whether they want to accept a customer or what restrictions they want to apply on an account, etc and how long is instant been around?
Speaker 3:we're just turning four, okay, and how?
Speaker 2:big is the company? We have just about 20 people and we've raised about Eighteen million dollars so far, okay, well, congratulations for that.
Speaker 3:We've talked about a lot. I think that answers this question. But beyond the insurance side of thing, what else differentiate you from your competitors out there?
Speaker 2:Well, we covered the entire customer life cycle.
Speaker 2:So when a business signs up with us, I don't really get that insurance protection which is very unique with the only solution provider offering that for customers opening up your account we protect that business for the lifetime of that account.
Speaker 2:So when that customer comes back and performs a transaction, like a payment or whatever, we make sure that it's the authorizer on the account that's doing that and not someone who's Broken in or stolen that person's password and impersonated them.
Speaker 2:So we stop the account, take over risk during transactions and then we have a unique offering which we launched last year, which allows a customer who's been previously verified and accepted by instant to obtain a pass, because multi pass with a multi pass is authenticated, secure To can I use identity, which contains in it all the information about the individual sign up or login in terms of how the information is verified, what level of risk the person was accepted for and whether they're kac, information is current or not.
Speaker 2:All that's bound in the tokenize pass. So with that pass seamlessly pushed to the end user in their mobile device, the user can come along and try to access other products, services that business Maybe upselling to them and where traditionally they would have to sign up and go through all those fraud and kac checks over again, with instant. By presenting that pass, the business can accept the customer. One click and all the friction involved in having to resign up and rekyc and re Verifying their identity, all of that just disappears. The customer is able to get to the product service that's being up sold to them by that business with a single click.
Speaker 3:Well, that's pretty amazing. So is it also a B2B play? Can businesses that are signing up for products? Would that be almost considered the same as a consumer?
Speaker 2:know they're different. The processes for business being on board it is different from a consumer being on board it. Our core business is the help businesses on board consumers the retail side of their business. We partner with other vendors. No, to support the use case of businesses on boarding other businesses okay.
Speaker 3:and how do you go to market? Do you have a direct sales team, or do you have partnerships, or both?
Speaker 2:We do both so we have a direct sales team that basically you know sort of Go through targeted account lists and so on. And then we have channels, both resellers as well as white label or internal partners that typically on platforms like banking as a service platform or a loan origination platforms, were embedded in those platforms so that the users of those platform services automatically get the value of instant okay, and you mentioned, you know, banks and credit unions and fintechs.
Speaker 3:Do they have to be a certain size or just anyone who is onboarding consumers?
Speaker 2:yeah, it's really anybody's onboarding consumers and worries about the risks of fraud, losses and compliance issues. Any business that fits that bill can use us where do you see the industry heading?
Speaker 3:you can sort of answer that from the fraud lens or the broader payments industry lens, whichever you choose fraud never goes away.
Speaker 2:It constantly evolves. So the front prevention market steadily growing at about, I believe, 24% compounded annual growth rate. That's projected to hit about $33 billion in the United States alone by 2030. Globally, fraud causes about 5% gross domestic product loss across the board. It's a huge problem generally and the payments industry obviously is a multi-trivial dollar market and payments are always evolving and fraud is very ripe in that space as well. Merchants and consumers are both affected by it.
Speaker 3:So these are all growth markets for our business okay, and it's hard to have a fraud discussion these days without mentioning AI, so how do you see that playing in the space?
Speaker 2:yeah, so our platform, the entire platform, is managed by an AI. We've replaced the human in the loop that normally has to define business rules and select vendors and integrate different vendors and, you know, constantly manage the fraud prevention, identity verification system for every single product that the business ends up launching, which is kind of a repetitive process. We take all of that OPEX cost and paying away. In our system you can set a configuration detail and the AI will pick it from there and, you know, make sure all the necessary checks and conventor calls and other types of processing the heavy lifting in the back end is completely taken care of by autonomous agents and then, after the data is processed and returned back to the application, the AI goes back to sleep. It's designed to be very simple for the end users to integrate us into their applications and their infrastructure, with AI doing most of the work silently in the background well, let's switch gears a little bit and talk about you.
Speaker 3:You mentioned earlier serial entrepreneur. Maybe you walk us through your professional journey and how you got to where you are today.
Speaker 2:So I was primarily working in Fortune 500 companies around the world. Ibm was my alma mater and I worked at Siemens, nick Sturff and Texaco, chevron and a few other companies, and in the late 90s, when I moved to the US, I got my first whiff of what a startup was like because I joined the kind of early founding team of a company that was pivoting, called NetEgrity. I stayed with that company in its journey to go public in 2001 and we established the Identity and Access Management marketplace with the first company that created standards for something called single sign-on. So consumers were employees of companies basically logging into their workspace in the mornings. Traditionally they'd have to remember a dozen passwords for all of the different internal tools within the enterprise, and the integrity solved that problem by enabling people to remember just one ID and password to access all of these different systems in a seamless way, and the growth working with the founders of that company kind of gave me a lot of insight into how startups work.
Speaker 2:I fell in love with the whole notion of startup culture and I never looked back, and since, after that company went public a couple years later, it was acquired by computer associates, I worked there for a wee bit and then I started the next startup called Securant, which was a continuation of the work we were doing at the integrity and single sign-on and authentication.
Speaker 2:We tried to solve the problem around authorization, management or enterprise policies which allow or disallow people to use enterprise resources in specific ways, and kind of solving the mishmash of policies that exist within the enterprise across applications, networks and devices. I sold that to Cisco in 2007 and then started another startup on the back of that called Hopscotch, which I sold to WPP companies shortly after about three and a half years. Then, on the back of that, started Secur. Secur is growing into a $5 billion business now an identity verification. I was the CEO of that company for about nine years, left that company in 2019, handing it off to my colleague to scale it out and take it public and started instant on the back of that company. So it's been an interesting and fun journey so far.
Speaker 3:Yeah. So do you think that working at those big Fortune 500s was that the reason that you wanted to find the entrepreneurial side, or did you see that as a positive aspect of your career?
Speaker 2:I learned from everything I've done so far and I learned the good and the bad that comes with large corporate structures. I always find myself not fitting inside them because I was very vocal and opinionated and often that's either frowned upon or it's greeted as something that's really great in these enterprises. I found that it was good what I was doing and the enterprises were always bent all the rules to help keep me happy. I learned how companies scale and what happens in companies, cultures when they scale and stuff. Then, comparing that to startups, I realized startups are much more challenging and, at the same time, much more fun, with a family-like environment where you feel more connected to what you're doing. I took some of the stuff I learned from being in the large companies in terms of processes and scale and applied them to startups. I also learned the good and the bad that comes with startups as well. So overall, you know I keep learning. I say that with every new company I make new mistakes because everything's different every single time.
Speaker 3:Right, Well, what are some things you're passionate about? Maybe one work-related passion and one personal passion.
Speaker 2:I'm passionate about solving hard problems. I'm quite analytical and I spend a lot of time reading and thinking about stuff, so I find that there are lots of challenges in the world to be solved. I'm overcoming those challenges is really why I spend my time in startups. In terms of personal Growth, I would say that managing stress and learning how to connect with people and managing people generally which is a pain in the ass, to be honest and companies, I've learned a lot personally from being in startups, interacting with a variety of people. I'm trying to steer the team towards success in the face of all sorts of odds. So I find that being in a startup has influence my personal life as much as it has my professional one and what would your advice be?
Speaker 3:say, someone's coming to your company whether it's your existing company or prior companies and they want to get into this broader let's call it payments or fintech space and maybe they want to go to work for you or you know similar company. What would you tell them they need to do to be successful in this industry? Technology?
Speaker 2:is very quickly, so it's very important to be abreast of the trends, consumers desires and behaviors and change demographics. So being aware of the market, where the markets trending Is quite important. And obviously the pace of change means that you got to put a bit of effort to constantly relearn things. That's me challenging. I would say I do a lot of reading, understand the market really well before you make any kind of decisions as to when you gonna apply yourself. With.
Speaker 2:A start up or larger enterprise start always more challenging than working in larger companies because at the end of the day you can go into the office, leave at five pm and you'll still get your paycheck and start up. You don't know necessarily what's going to be alive next week or not, and it's always a very stressful environment. I have to wear multiple hats often. It takes a lot of you and many people have romantic notions of startups which will quickly disappear once. I would say you know, don't have rose tinted glasses. Speak to the community of startup people there's in new york we're fortunate to have a bustling ecosystem of startups, just like san francisco in california. So there's a lot of support and you can speak to people and get kind of a good inside view of the company you're going to join. I think you're joining so you can use those resources to your benefit.
Speaker 3:Well, so no, we've covered a lot of ground about you and about the industry and the company instant. Is there anything else you'd like to add before we wrap up the show?
Speaker 2:no, I would encourage people to go into creating startups, especially because I is eating the world and jobs are gonna be done by robots in the future and we're all gonna be left to doing creative things. So I encourage people to take the risk and try building businesses just one last question.
Speaker 3:what would be the easiest way for people to learn more about you and about the company? Well, they can come to our website ww dot.
Speaker 2:Instant. That's I n s t n t. Without a instant dot or g. You can learn about the team of the company there. You can also look us up on linkedin. My name is the new me do. That's s? U n, I l m a d h? U and you can search for me with the company name. You learn more there as well. Awesome well.
Speaker 3:Thank you so much for being on the show today. I know your times are valuable, so I really appreciate you being here. Thank you so much for having me absolutely into all your listeners out there. I thank you for your time as well, and until the next story thank you for joining us this week on the leaders in payments podcast.
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