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Leaders In Payments
Leaders In Payments
John Gordon, CEO of ValidiFI | Episode 402
The future of payments is shifting dramatically as consumers demand more options and businesses seek better ways to assess risk. John Gordon, CEO of ValidiFI, takes us deep into how bank account behavior data is becoming the missing puzzle piece in understanding consumer reliability beyond traditional credit scores.
Gordon explains how ValidiFI sits at the critical intersection of compliance and fraud prevention, helping businesses meet NACHA's WEB debit rule requirements while gaining valuable insights into consumer payment patterns. By analyzing factors like bank account changes, previous negative balances, and account relationship patterns, ValidiFI provides powerful signals that predict payment outcomes and identify potential fraud before it happens.
What truly sets this conversation apart is Gordon's perspective on consumer financial empowerment. He notes how payment preferences are evolving rapidly, with account-to-account transfers growing yearly and programs like Target's RedCard demonstrating the power of bank-account-linked payment methods. The conversation explores how real-time payment networks and non-credentialed bank verification are creating new opportunities for businesses to offer seamless, secure payment experiences that consumers actually want to use.
Ready to rethink how you validate customer payment information? Listen now and discover strategies that go beyond basic compliance to deliver real business value while meeting evolving consumer expectations.
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, john Gordon, the CEO of Validify. So, john, thank you so much for being here.
Speaker 3:Well, thank you for having me. I appreciate the opportunity.
Speaker 2:Absolutely so.
Speaker 3:if you don't mind, start off telling 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. So I am a native Atlantan. There aren't many of us. I grew up in Marietta, Georgia, went to the University of Georgia and I now reside still in the Atlanta metropolitan area, north of the city, Lived here all my life, with the exception of the time that I was in school in Athens, and we're a rare breed, those native Atlantans.
Speaker 2:You definitely are and, by the way, I went to Auburn so we can have that banter at some point.
Speaker 3:Well, I married an Auburn Tiger, so I can commiserate to an extent.
Speaker 2:Yeah, I have a quick Georgia story. So when I was a kid, I actually went to a football game there and was lucky enough to go in the locker room before the game and I met Herschel Walker. Lucky enough to go in the locker room before the game and I met Herschel Walker, so that is something. Yeah, that's royalty, yeah, yeah, it was a cool thing. So, anyway, not payments related, but a cool personal story. So let's go ahead and talk about Validify, so tell the audience what Validify does.
Speaker 3:So Validify is we're a data. As a service company, we provide data really focused on the intersection between a consumer's bank behavior was as being additive to what you get with traditional consumer credit scoring methods. So the frequency with which a consumer changes their bank account, the PII, the payment performance of bank accounts, when was the last time they were in a negative position, how many consumers are associated with an account, how many accounts is an individual consumer associated with All of these things send very strong signals that help us to identify potential fraud, assess the risk associated with that consumer and predict payment outcomes. So Validify is really centered around that effort in helping our clients comply with Notch's web debit rule and then realize all of the opportunities for reduction of risk, identification of fraud that come along with that data of the consumer and their account.
Speaker 3:Okay, and who are your typical customers? So our customers really run the gamut. It's financial service providers, lenders, essentially any company that takes ACH payments. So the web debit rule says that you have to validate that an account is open, valid and facilitates ACH. That rule went into effect in 2021. In 2026, it will be upgraded to include a fraud aspect and our clients are people who are either doing ACH disbursements or taking ACH payments and we're helping them comply with that rule. And we're helping them comply with that rule, but, at the end of the day, what they tell us is if I'm going to that effort, you can help me by identifying people based on their risk profile or based on how they behave. That will help with selecting the right product for that consumer, arriving at the right credit line for that consumer. So our clients could be automotive companies, lenders, real estate companies, insurance companies, who are both taking consumer payments and making disbursements All of the above, really. So it's a large, addressable market at the end of the day, greg.
Speaker 2:Okay, and are you selling through partner channels, direct or both Both?
Speaker 3:both.
Speaker 3:So we have a sales force that is calling directly into the target markets and we've verticalized that group for the purpose of we want to learn right.
Speaker 3:So, whether it's we're following where people make ACH payments and if I give you kind of an example of that, if that's all right, greg? Sure, absolutely. We have a partnership with a company called PDI that does. We've done a press release and are working on a case study in regard to this, and what they do is they enable payments to be attached to loyalty cards for convenience store programs, to be attached to loyalty cards for convenience store programs, and what they utilize, validify for is validating the connection between the consumer and the bank account that they are providing. What that does for the convenience store is it allows them to take advantage of payment channels that don't have interchange fees, and ACH payments have grown both in the total volume of payments and the aggregate amount of those payments every year for the last 10 years, and there's now that, with the emergence of the real-time payments network and FedNow, there's even greater value in that for our prospective clients. So we help them marry the consumer to the account and remove the risk and the potential fraud scenarios.
Speaker 2:Okay, and I assume your business is mostly in the US. It is totally we only serve US customers. Okay, and really the size of the customer doesn't matter, right, it's really just around whether they're accepting or making ACH type payments, that's correct.
Speaker 3:We seek, as you would imagine, economies of scale so that we work with some financial institutions who are enabling this solution for their treasury clients, so that they're offering that compliance scenario and helping them offer more secure payments and a greater variety of payment types.
Speaker 2:Okay, okay. And what would you say differentiates you guys from your competitors out there?
Speaker 3:So we have a collaboration with JPMorgan Chase, which grants us access to early warning services data, and if you want to validate bank accounts, having partnerships with a bank consortium and the world's largest bank are two great places to start, and so coverage is what differentiates Validify. Beyond that, the way that we operate is we don't ask our customers to pay setup fees or monthly minimums. We believe in performance pricing. If what we do is working for our clients, our experience says not only will they continue to work with us, they'll look for more opportunities to work with Validify, and our experience has also shown us that largely our clients, or any clients, grow to resent monthly minimums that they don't hit. Now, if we have a client who comes to us and says they're looking for some exceptional pricing, we might want to put some guarantees in there, might want to put some guarantees in there, but on the whole, we generally only ask for people to sign up with our agreements and work with us going forward, and then that aligns our best interests with theirs.
Speaker 2:Okay, and within your clients, who do you sell directly to?
Speaker 3:Is it the CFO office or, more on the technology side, it's treasury chief risk officer, chief compliance officer and a credit officer are typically the people that we interface with most frequently.
Speaker 2:Okay, Okay, Well, when you step back and kind of look at the payments industry as a whole, kind of where do you see it headed in the next maybe three to five years and obviously you can answer that within the lens of what you do but kind of your view of the future of payments.
Speaker 3:Well, I think we're seeing a leveling of the playing field in the marketplace as a whole and it's largely noted as consumer empowerment. So I hear a lot about open banking. Open banking in the United States does not exist in the way that it does in Europe as we're speaking today, not exist in the way that it does in Europe as we're speaking today. I believe that, as consumers have greater choice and they do and it's going to behoove service providers to enable the payment opportunities to meet those consumers in the ways that they want to pay. An example of that would be I never would have imagined and I think you and I are roughly the same age, greg when I was a kid, layaway meant you went to Kmart every week, gave them 10 bucks and after a while you got the bicycle. Nowadays you just agree to pay them later and they give you the bicycle today. So the buy now, pay later scenario, which is the fastest growing credit arrangement in the country today, is vastly different than what we've seen in the past, to the extent that it's even now extended to DoorDash. People are doing DoorDash orders and paying for arrangements. It's insanity to me when I think about it, but what it's showing's showing is that the consumer is going to have more power and more say in who they interact with, what data they make available to those end users, and consumers are demonstrating a willingness to share certain data more data than what they have in the past but only in exchange for an interaction that they think deems it necessary.
Speaker 3:So an example of that would be if you sign up for a mortgage, people are giving you two years of bank data. If they're enrolling for an online program, most consumers are viewing credentialed access to their bank account as a bridge too far, and so what we offer is non-credentialed bank data so that it's much less friction to the end user, and what we are efforting to do is to enable bank data access for our clients in the way that the consumers are willing to give it to you. Is it a real-time micro deposit? Is it that you provide me PII elements along with your bank account routing number? Or, in certain cases where it's merited, we have the ability to facilitate credential to access the consumer logs into their bank account securely. Our client gets 90 days of transactional data from their bank account for which we can conduct cash flow underwriting and give them back insights around that account Hugely valuable data, but it's hard to build a strategy on that when consumers aren't always willing to give you that level of access.
Speaker 2:Do you think there's a day when, instead of pulling out the debit or credit card buying something in a department store, you're going to pay with your bank account? I mean, I know it's possible. Today it's happening. It's full of friction, still right. So do you see a day when that becomes even the most popular way?
Speaker 3:I think it's growing. Account-to-account payments is growing and you know, there's so much generational information that's out that says millennials don't like debt, they don't want to buy homes. Gen Z's the silent generation. They're even less likely to interact. I think what we're seeing is that consumers want the ability to have as much opportunity to pay in different ways as possible, and I think what's happened is traditional scoring methodologies haven't changed in 50 years, but the way that consumers interact, secure and utilize credit has changed dramatically. So do.
Speaker 3:I think it's possible, Absolutely. I think we're rapidly headed that way. If you look at the Target red card as a case study, those are consumers attaching their bank account to that red card. When that program started, people thought Target was crazy because they were offering a 5% discount in exchange for that enrollment. But what they found is those consumers spend dramatically, exponentially more money on that red card and they're fiercely loyal to Target. So they have created this scenario where they've eliminated the interchange, they've put themselves at the center of the process and they've created a recurring customer dynamic that they previously didn't enjoy.
Speaker 2:Yeah well, they've enjoyed some money out of our account with that red card, that's for sure.
Speaker 3:I know that I understand the dynamics, sir.
Speaker 2:So it's hard to have a payments conversation without talking about AI. So curious in your business, obviously very data-driven. How much are you guys leveraging AI? Have you always leveraged AI? And it used to be called machine learning and we came up with a new fancy name. Just kind of curious your thoughts on that.
Speaker 3:You know, we have always used machine learning in analytics in our model builds, in the way that we do those things. Ai, to me, is a continued evolution of the machine learning. It's not as net new as what some of the fear mongers would have you believe it is. That said, it puts an impetus on us from a security standpoint to do. A flip side of that coin is and you asked me a question a moment ago that I think AI sort of delves into.
Speaker 3:As all of these processes and payment options change, it creates opportunity for fraudsters and AI is a hot topic and an amazing tool for fraudsters to utilize in perpetrating fraudulent events utilizing AI. And it is a continually moving target to try and help our clients, and that's why we help our clients within the fraud arena and we're very careful to say we don't solve fraud. We identify things that are potentially fraud and help our clients drive their underwriting or treatment strategies in a way that they're addressing that, whether it's injecting friction in the process by requiring the end user to log into their bank account, or whether we're identifying things that say that's a high risk bank account that a consumer has applied or that account event has been applied with 300 different social security numbers have used that exact bank account routing number combination. You likely want to steer clear.
Speaker 2:Gotcha Makes a lot of sense. So let's switch gears a little bit and talk about you. Maybe tell us your journey, how you got to Validify, and a little bit about your background.
Speaker 3:Sure, so since 1999, I've been working in what I would consider fintech so it's technologies that financial service providers utilize, and I started that in the electronic bill presentment and payment space, where we would enable our clients to make their bills available to the end consumer via their website. And over the course of time, I ended up meeting up with a serial entrepreneur and he and I have worked together four times now. His name is Greg Rabel. He started a company called Factor Trust that I joined in 2008. We sold that business to TransUnion in 2017. I worked there for five years.
Speaker 3:The investors in Factor Trust took an interest in Validify, which created an opportunity for me to join Validify. And here we are a couple of years three years into that process. Now we're a 40-person business. We are profitable and growing and looking forward to the evolution of these payments and the continued opportunity that ACH provides and helping our clients combat both risk, because a lot of the fraud that's out there these days, greg, is first-party fraud. You know it's not all fraud ranks. Sometimes it's the willful behavior of a first-party consumer, which is a whole different ballgame when you're trying to discover how those things occur. Yeah absolutely.
Speaker 2:Well, what are some things you're passionate about? So, maybe one work-related passion and one personal passion.
Speaker 3:So my work-related passion, because of the last 15, 17 years of doing this, is I believe we've lost some effort to deal in just the facts. I'm going to give you an example of that. Last year, the credit bureaus decided that we would no longer have medical debt as part of consumers' credit profiles. Meanwhile, the CFPB, such as it was then and then we all are, the suspended reality that the CFPB is in now was holding out for lenders, our clients, that you had to determine a consumer's ability to repay, that you had to determine a consumer's ability to repay. So, on the one hand, we've got the information source determining that we are not going to include buy now, pay later transactions. If it's detrimental to the consumer, we're not going to include medical debt. They still owe the medical debt. Then we have the regulator saying you should have known better, mr Company, that that consumer could not afford that product for which they applied.
Speaker 3:So my passion is the fact that I believe we've lost our ability to operate with the right amount of information. Help marry consumers who are non-fraudulent into products that offer them the best path forward of success, in a graduating sequence, so that those consumers have an opportunity to repay and grow financially At the expense of all of that. We are saying it's about inclusion, it's about allowing consumers opportunities. It's about inclusion. It's about allowing consumers opportunities.
Speaker 3:Well, not every consumer can afford a mortgage at every point in their credit journey, and I think we have credit scores today that are built on your experience, your debt ratio, your utilization of products, but what we're missing is any of the real-time aspect. That is part of that what's happening today, and so, while credit scores are lagging indicators of behavior, I believe there's an opportunity to fill in those gaps, and if we do it thoughtfully, then we lower the overall cost of credit for every consumer, for every consumer. So I guess, at the end of the day, I'm passionate about the fact that information, real facts and data still have a place in the conversation, and we shouldn't lose that. So I hope that answers your question, and makes sense.
Speaker 2:Yeah, it makes a lot of sense. What about on the personal side? What's your personal passion?
Speaker 3:So I have three children and I'm way over married, so I spend a lot of time with them and so I'm passionate about my family, my faith and I love football. I love Georgia football. I'm a huge fan of that, so our whole family enjoys sports, so we do a lot of that as well.
Speaker 2:Great, great. So, John, if someone comes to you maybe they just graduated from Georgia and they look at payments in FinTech and they say, hey, I want to build a career in this space what advice would you give them to help them be successful in their careers?
Speaker 3:I would tell them to be intentional about trying to experience both sides of the equation the corporate payment scenario scenario and then see it from more of a ground view smaller operation so that you can understand the puts and takes of how potentially a large payments provider or a credit bureau views the marketplace, as well as how someone who's much closer to their clients and a smaller, more focused organization looks at it. And I would tell them that payments is a great space because it's constantly changing and there'll never be a day we don't pay. So as that changes, there is opportunity in that.
Speaker 2:Yeah, absolutely. I think that's great advice. So, John, as we wrap up the show, is there anything else that you'd like to discuss or go over before we wrap up?
Speaker 3:Not off the top of my head. I guess I would leave it with this. As the web debit rule for 2026 comes into being applied, there's so much more opportunity outside of just complying for our clients that we are helping them identify opportunity with their customers. The ability to reduce fraud, the ability to mitigate risk all by assessing the consumer's bank account, and the consumers are open and willing to sharing that data to a far greater extent than they are to log into their accounts. And the emergence of real-time payments is taking legacy trusted processes like micro deposits and bringing them into the speed at which we operate today. So not everything. Every application meets every consumer's desire. Having a complete strategy and that offers you compliance really has a lot of lift for a business from an efficiency and a cost reduction and a fraud elimination standpoint.
Speaker 2:Okay, I think that's a great way to wrap up this show. So, john, thank you so much for being on today. I know your time is very valuable, so thanks for being here.
Speaker 3:Greg, thanks for your time. I really appreciate you having me.
Speaker 2:Absolutely, and to all your 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.