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Leaders In Payments
Leaders In Payments
Jeff Shea, Co-Founder & CEO of Under | Episode 392
Meet Jeff Shea, the co-founder and CEO of Under who's revolutionizing how payments companies onboard merchants. Drawing from over two decades in payments and fintech, Jeff has created a digital account opening platform that's solving one of the industry's most persistent challenges.
Under helps payments companies streamline merchant onboarding through integrated identity verification, automated risk assessments, and simplified application collection. Serving over 100 payments organizations across the United States, the company primarily works with wholesale ISOs, payment facilitators, payment processors, and software companies that monetize payments. Jeff explains that their platform bridges the gap between disjointed point solutions that many companies currently cobble together, creating a seamless experience from lead generation through merchant approval.
The conversation takes a fascinating turn when Jeff discusses the future of payments and underwriting. He predicts continued growth in embedded and verticalized payments as more software platforms own their payment stacks. Looking further ahead, he believes payments will become increasingly commoditized, with differentiation coming from how platforms manage identity, trust, decisioning, and merchant experience. Most compellingly, Jeff references a McKinsey report predicting that traditional underwriting will disappear within a decade, replaced by artificial intelligence, deep learning, and machine learning. These technologies promise faster approvals for legitimate merchants while more effectively identifying problematic applicants.
Ready to transform your merchant onboarding process? Discover how Under can help you approve the right merchants faster while reducing risk at under.io.
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:Hello everyone and welcome to the Leaders in Payments podcast. I'm your host, greg Myers, and on today's show we have a very special guest, jeff Shea from Under. So, jeff, welcome to the show. Yeah, nice to meet you.
Speaker 3:Thanks for having me on Absolutely.
Speaker 2:So, if you don't mind, start out by telling the 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.
Speaker 3:Yeah, absolutely so. I live in Charlotte, North Carolina. I grew up and lived in Chicago for most of my career, had a chance to move a little bit out to the East Coast and we've been loving it here.
Speaker 2:I went to school at the University of Illinois when I lived out in that area. Well, obviously, as the co-founder and CEO, you are very well aware of all the goings on at Under, so tell our audience what Under does.
Speaker 3:Yeah, so Under is a digital account opening platform. We help payments companies onboard merchants faster, make smarter and better underwriting decisions. We do that by streamlining identity verification, automating risk assessments and simplifying really the whole process around application and agreement collection and data fulfillment. Our goal is to reduce friction, streamline the process for how accounts are onboarded and help companies to make better decisions.
Speaker 2:Okay, and who would your typical customer be?
Speaker 3:The most ideal customer would be someone that's in the payment processing space, so this could either be a payments professional or a software company that monetizes payments. We work with a broad spectrum of customers, but we work best with those who take on liability, so they have some type of an underwriting component into what they do, or they're really focused on top of the funnel. So that might be a wholesale ISO, might be a payment facilitator, could be a payment processor.
Speaker 2:Okay, and how big is the company?
Speaker 3:We have just over 100 payments companies that we're working with across the United States. We also do solutions for companies across some other countries. Primary offices located here in Charlotte, where I'm at, and our engineers are in Austin, Texas.
Speaker 2:And you said you have customers across the world, so obviously it's a potentially a global solution.
Speaker 3:Yes, yeah, we specialize in primarily only advertised in the United States and in Canada, but we have had a lot of interest across different countries, more so as you get into the software and payment facilitation side of trying to streamline these types of solutions.
Speaker 2:And who would be your sort of ideal customer within these payments companies? Who are you typically talking to?
Speaker 3:So just chatted about that a second ago. Do you mean the individual at the company or the actual.
Speaker 2:Yeah, like the role or the individual who do you usually engage with there.
Speaker 3:Yeah, good question. It varies. Sometimes it's going to be the head of product. We get a lot of companies we work with that have already started to try to solve this problem. They're either learning right now how to build this internally within their organization or they're reaching out to try to find some point solutions to get what they need done. So sometimes we'll work through the product team, Other times it'll be through the risk team, as everyone right now is really focused on reducing risk loss, making better decisions, trying to streamline those processes. That would probably be our top two individuals that we connect with.
Speaker 2:And how do you go to market? Do you have a direct sales team through partner channels? How do you get these customers?
Speaker 3:We do primarily outbound. So we're pretty active in the space and we attend the quarterly ETA events. We also go to the annual show. Sometimes we have a presence there so we'll connect with our customers or potential customers in person. We do a lot of outbound reach outs and strategic partnerships that help get us in touch, partnered with some of the processors which have also kind of connected us through the individuals that are there. Of the processors which have also kind of connected us through the individuals that are there. We do have a web presence. We get a little bit of direct resource from online but it's not as heavy of a search term for people looking to solve these problems, so it's really more of when they're in that focus we try to be available.
Speaker 2:So it's kind of interesting. So maybe we can peel back the onion a little bit on that, because I find it interesting. There you mentioned a lot of them are trying to build this themselves, like what problems are they running into, and then why do they turn to you?
Speaker 3:Yeah, I mean honestly, some of our favorite customers to work with are the ones that have already started development on trying to solve this. You know, I've been in payments for a really long time for a really long time and I think most people that have have all learned the struggles of onboarding accounts, whether it's from kind of the early manual processes of collecting different applications and working through that, or maybe it's a little further down the funnel where they're looking at making decisions. But this is not a new problem. It's been around for a long time and I think most of the larger groups and payments are familiar with this and interested in solving that problem. One of the paths that we find is they'll bring on some development resources and they'll try to work internally to build an internal system. Sometimes it's a little bit more complicated than it seems.
Speaker 3:Most payments companies I'm familiar with have pretty distributed teams. They have a network of independent agents. They'll have a ISV or partnership channel, they might have an inbound channel, they might have a web or a W2, like beat on the street channel and each one of those operates a little bit differently, has a small to large connection and understanding of their customer large connection and understanding of their customer, and that adds a lot of uniquenesses, particularly when it comes to agents and independent contractors and ISOs, who really operate on their own, have their own pricing structures. The more of these variables that are put into place makes creating a holistic solution for this a little bit more difficult. Where we found companies have been the most successful is if they focus on one specific vertical, so that might be a certain MCC with a certain channel, as opposed to doing something a bit more broad.
Speaker 2:Well, how do you differentiate yourself against your competitors out there?
Speaker 3:So when we think about competition, it falls into a couple of buckets the two most common scenarios. One is the one we were just talking about. People try to build this themselves and they're really looking at trying to use engineers to develop and create their own internal solution, and I think the big difference between us and that scenario is this is all that we do. So we've been able to invest a pretty significant amount of capital that we've raised from our investors to build out this platform, and we'll continue to invest and improve this product at a level that's more realistic than what I think an individual payments company would think of as the appropriate amount of investment for this type of a solution. So we feel that long term, because of the time we've been in market and the continual improvements of the platform, that we have something that's really special there.
Speaker 3:The other scenario we run into is where companies put together a series of point solutions. So they may grab a form builder like a job form or a PandaDocs and then pair that with an electronic signature tool like a DocuSign, and then that's probably integrated or semi-integrated into their CRM Maybe they're using Salesforce or HubSpot or something like that and then generally they'll have a few point. Solutions for identity LexisNexis is very popular, gaiax is very popular, and now you have three or four different systems that don't exactly communicate well together, but they solve individual pieces of the pie. And then you have a human on the other side that's trying to kind of take bits and pieces of that data and make You're just focused really on the front end, the onboarding.
Speaker 2:You're not doing any kind of risk analysis or anything.
Speaker 3:So currently we live from when a lead is a we call it like a lead or a warm lead all the way until a merchant account is approved and we do all of those steps in that process, from lead generation document and electronic signature and application creation, top of the funnel, management, identity verification, underwriting, approval, etc. That's where we stop today. We don't yet then manage post-approval risk management, transaction monitoring, those types of things. A lot of that is on our roadmap for where we're looking to go as a company, but we've been primarily focused on the front end, as you mentioned.
Speaker 2:So where do you see sort of the payments industry and you can definitely answer this based on your area of focus, but where do you see it headed in the next, say, three to five years?
Speaker 3:Yeah, so I think some of this has obviously been happening more recently. I think in the next maybe two to three years we're going to continue to see a big shift towards embedded payments and verticalized payments, and this has been happening, as I mentioned, for a bit of time. Right now, More software platforms owning their own payment stack. With that is going to come the need to have better tools to manage risk, compliance, underwriting, kind of understanding how the payments ecosystem works, and that's really more of a continuation of what's been happening over the last four to five years here. Longer term, I do think payments does become commoditized and in many ways the real differentiator is going to be how platforms can manage identity, trust, decisioning and the experience of really that a merchant has while they're working through that process. So I think it's just a little bit more of an acceleration of what we've seen in the early stages here.
Speaker 2:And where does AI play into all this? I have to ask because that's a topic that comes up in almost every conversation.
Speaker 3:Yeah, absolutely. I mean AI is, I think, going to continue to be a big piece of this. Mckinsey released a report that underwriting as we know it will cease to exist in the next 10 years and it will be replaced by artificial intelligence, deep learning and machine learning. And you know kind of some realistic scenarios of what that looks like is, if you think about how underwriting and identity verification works today. It's really a series of different data points that, as I mentioned before, are probably coming from these disparate vendors. So you'll run a kyc with alexis nexus, you'll do a little bit of your own digging on google, you'll do a bank verification through some method or another. That'll be cross reference to your you know word document, 12 page underwriting guideline of the then statements and you're really just trying to like piece these things together to see where somebody fits in a puzzle and ultimately approve the right merchants.
Speaker 3:I think at scale, you see that these processors have gotten to a point where they have a level of comfort with their underwriting. Their one to two basis points of loss has been consistent over a really long period of time, but it's been difficult for that to ever get better and it's been difficult for that to get faster. Often what's happening is it's getting slower because there's more and more fraudulent scenarios, so there's more use cases now that you have to test for and it's become this really additive system. So I go through all that to really show that artificial intelligence can be incredibly valuable. When you think about how it works on data, you know AI is essentially an algorithm working on an incredibly large data set which is creating feedback and predictions and then editing and adjusting from there. So if you think of underwriting, you have an exorbitant amount of data.
Speaker 3:You now can start to make better decisions based on that data, not relying on people to make those decisions, or at least recommendations coming from an AI agent that can dig into the data and look at it a little bit more holistically and then, secondarily, you can follow that data over time to see what happens to these merchants if they end up betraying, if they end up creating risk loss, and then use that to constantly learn and you'll consistently get better and we should see risk loss actually start to go down over time with the amount of data that we have.
Speaker 3:So I think it's really around this kind of human in the loop style process that you hear a lot about with AI. You've got computers now that are going to do a better job analyzing data and making recommendations, which is going to allow a human to then come in and dig into those manual cases or those pens and then have an automatic process for the remainder, and then a system that's going to continually get better. So that's a lot of what we leverage AI for today within our company and where we're really excited about seeing it make a big difference and ultimately, helping customers approve the right merchants faster and, equally important, not approve the ones that are going to be problematic.
Speaker 2:You mentioned something about the embedded payments into software companies. I want to double click on that. Do you find that a different selling into that market versus your kind of ISOs and pure payments companies? Is it all the same to you or is it a little bit different in the nuances of the two?
Speaker 3:Yeah, it's quite different, to be honest, even though it's a similar product and similar solution fit. I think you just have two companies that operate in a little bit of a different perspective. The payments companies know a lot more about payments and they've been in this space for a long time. They understand the dynamics, how things have gone in the past, all the different distribution channels, and I think there's a big advantage to that. At the same time, that creates a bit of a bias for how things have always been done and how they should be done.
Speaker 3:Now you have a lot of software companies entering in the space that don't really know anything about payments and their background is let's streamline this, let's make it faster, let's leverage technology. So there's some pretty big advantages there and the fact that they are more open to embracing change, new technology, leveraging that to make these decisions. At the same time, they're a little more naive, not knowing the potential pitfalls of what can happen with these merchant accounts. So I think because of that you get different buyers, different ways that they're looking at solving problems, and there's both pros and cons. I think to that as we've continued to dig in, but we are excited about it because we, you know as a company. However the payments industry evolves, we're going to be in a good position you know, whoever the kind of leaders are of driving merchant accounts, by helping them have the right tools to make that process work better.
Speaker 2:A great explanation and I think you're spot on. From my experience in both sides Definitely makes sense. So let's switch gears a little bit and talk about you, maybe walk us through your career journey, how you got there, how you started the company, a few things like that, if you don't mind.
Speaker 3:Absolutely so. I've been in payments and financial technology for 20 some years now. Previously I had founded a payments company called Payline, which scaled significantly before we exited. We were a payment facilitator and a wholesale ISO focusing on vertical SaaS. We started kind of before the rise of PayFact, before that was even a word. I think it was aggregation at the time when we built our platform and we were competing in the early days with WePay and early Braintree, before Stripe even had gotten started. And I think in that experience I saw firsthand just how broken and manual the onboarding process was and how many different steps and people we had to use to both bring customers on, underwrite those merchants etc. That really led us to build a lot of maybe you can consider it the first generation of under within our own company in those early days and then use that knowledge to design a platform that's going to help moving forward.
Speaker 3:I feel like I lucked into the payment space. I didn't know a lot about it 20 some years ago when I joined in and I'm very purposely still here today. I really love the industry, have built a lot of great friendships and contacts still here today. You know, really love the industry, have built a lot of great friendships and contacts and I know without a doubt that payments is continuing to lead the charge of where you know where the market is going. There's a lot of opportunities for anyone, from whether they're an agent or whether they're a processor or a software company, so it's a really great place to be. So we're excited to stay a part of it and, you know, continue to build and hopefully solve some big problems.
Speaker 2:Well, what are some things you're passionate about? So, maybe one work-related passion and one personal passion.
Speaker 3:So, on a work-related passion, as you probably wouldn't be surprised, it's about efficiency, so I'm passionate about building tools that make complex systems more accessible, giving access particularly to maybe the less technical or smaller payments professionals to be able to compete with the people that are really driving some of the innovation on the fintech side, and I think tools like ours and others out there really make that possible, so that we can continue to empower those individuals to have what they need to be successful and grow. On the personal level, I'm really passionate about my health fitness I've done a good job, I feel, of staying up to date with that and also travel. I love to spend as much time as I can with my wife and my son. I've got a six-year-old boy who's really starting to get active in sports and he's been a blast, so being outside as often as I can and challenging myself where possible doing that.
Speaker 2:So you've been in payments for a while, sounds like. And you know, if someone came to you and they said, hey, I'm interested in joining payments or FinTech as a career choice, maybe they're right out of college, maybe they're in a different industry and they want to move into payments or FinTech, what advice would you give them to be successful?
Speaker 3:What advice would you give them to be successful. So today I would say to specialize. When I started in payments, it couldn't have been the polar opposite. I think everyone was a generalist. It's kind of a new market, the gold rush of sorts in payments, and you would sell anything to anyone and everyone had a relatively equivalent solution. Today it's wildly different.
Speaker 3:You need to be the best at something and I really think specialization can come in a couple of ways. You can focus on a specific MCC code right, one MCC code as opposed to hundreds, like we all a way to really get your hooks in the door, because attrition is going to continue to be a bigger and bigger problem and unless you're actually bringing real value to these companies, you're always going to struggle with that which could impact your valuation and your ability to grow and scale. So it could also be specialization of solving a problem, but maybe not a vertical industry. So being at the best at doing one specific aspect of the payment flow, I feel like in general, that helps design your ICP, it helps you to establish product market fit and it helps you to truly be the best at something, which is critical in any business, not just in payments.
Speaker 2:So, jeff, we've covered a lot of ground about you, about the company, the industry. Is there anything else you'd like to add before we wrap up the show?
Speaker 3:No, this has been wonderful. I appreciate you having us on the podcast and getting a chance to tell our story a little bit. If anybody's interested in learning more about what we do, they could go to our website. Probably be the best fit.
Speaker 2:It's underio underspelled, as you expect it U-N-D-E-R. Well, jeff, thank you so much for being on the show today. I really appreciate it. I know your time is very valuable, so thank you so much for being here today. Yeah, I appreciate it. Thank you so much, and to all you listeners out there, I thank you for your time as well, and until the next story.
Speaker 1:Thank you for joining us this week on the Leaders in Payments podcast. Make sure you visit our website at leadersinpaymentscom, where you can subscribe to the show and where you'll find our show notes. If you enjoyed listening, please share on your social channels as well.