May 14, 2025 • 31 mins
Darryl Hicks, founder and CEO of FlexPay, takes us behind the scenes of a problem costing subscription businesses millions each month – failed payments and the resulting involuntary customer churn.
From his early days cleaning toilets in his parents' commercial cleaning business to consulting for major telecom companies in the Twin Towers, Darryl shares his unique journey to founding a company that's now processing billions of transactions using sophisticated AI. What began as a solution he built for his own subscription businesses has evolved into a mission to fundamentally transform how payments work.
FlexPay stands apart through deep partnerships with financial institutions, sharing crucial data that has traditionally been siloed between merchants and issuers. This approach allows their machine learning models to continuously improve. For subscription businesses experiencing millions in monthly failed payments, even small improvements in recovery rates translate to substantial revenue.
The conversation reveals how payment system opacity creates unnecessary friction for legitimate commerce. When issuing banks make decisions without transparency – whether declining transactions due to suspected fraud or based on undisclosed policies against certain merchant categories – both businesses and consumers suffer.
While excited about innovations like stable coins, Darryl remains pragmatic about the future of payments: "I would not bet against Visa and Mastercard." Rather than trying to replace traditional rails, he's focused on reducing friction within existing systems through better data sharing and transparency. For entrepreneurs, he emphasizes the importance of building strong advisory boards and following your natural passions.
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Episode Transcript
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Speaker 1 (00:01):
Welcome to the Leaders in Payments podcast,
where we talk to C-level leadersfrom across the payments
landscape.
We'll be discussing theproducts and services that
impact the payment space today,as well as trends and
predictions for the future ofpayments.
We will also hear stories fromour guests about their journeys
to the top.
Greg Myers (00:18):
Hello everyone and welcome to the Leaders in
Payments podcast.
I'm your host, greg Myers, andon today's show we have a very
special guest, daryl Hicks, thefounder and CEO of FlexPay.
So, daryl, welcome to the show.
Darryl Hicks (00:28):
Hey, man, it's great to be here.
Thanks for having me, greg.
Greg Myers (00:30):
Absolutely.
So.
Let's start out by having youtell the audience a little bit
about yourself, maybe where youwere born, where you grew up,
where you went to school, a fewthings like that.
Darryl Hicks (00:38):
Yeah, sure.
So my entire career I've workedin the US, but I am a Canadian.
I was born in a small bluecollar town, very lower middle
income city and family out onthe very east coast of Canada,
so northeast of Maine, right onthe Atlantic Ocean small town.
I eventually moved to Montrealwhen I was in my late teens,
(01:00):
started community collegestraight out of high school in
Comp Sci but then saw that therewas an opportunity to start my
own business in cybersecurity,network infrastructure, network
architecture.
I knew I wanted to be anentrepreneur.
It's all my parents ever put infront of me as an opportunity.
They owned a small commercialcleaning business which I worked
(01:22):
for starting from when I was 11years old a little bit of a
child labor and net.
So starting from 11 years old Iwas emptying garbage cans and
cleaning toilets and ashtraysand stuff, working for my dad's
cleaning business.
But that was great.
He did pay me a couple bucks anhour and allowed me to have
some savings which gave me someseed money to be able to move to
a bigger city when I was in mylate teens, gave me some seed
(01:45):
money to be able to move to abigger city when I was in my
late teens and, yeah, I startedworking in IT, a self-taught
coder.
Next thing you know, I'mworking in New York in the Twin
Towers consulting for Verizonand Sprint securing all their
network infrastructure from badactors out on the internet.
It was the wild wild west backthen.
People would just take theirservers and plug them into the
internet and Windows NT'sbroadcasting port 139 net BIOS
(02:06):
out to the internet saying hereI am, log into me, and then
they're wondering why they'rehaving all these issues.
So that was really fascinating.
But that's where I built areally great network.
Executives and professionalseventually met my co-founders in
some of the later businessesthat I created in the early
2000s.
Just an incredible opportunityto meet some amazing people who
(02:26):
are at the bleeding edge of ITand network infrastructure and
stuff like that.
So, yeah, I've always stayed inCanada even though I had
American co-founders.
We were really enjoying thearbitrage of earning US dollars
and spending Canadian dollars.
So there's some pretty goodbenefits to have there and at
scale.
Eventually we built out.
(02:47):
I think at our peak we had 350employees working in the
business up in Montreal, withanother 60 or 70 scattered
around through the continentalUS.
Yeah, that's a little bit of mybackground on the journey.
I currently live in the PacificNorthwest, so I've been
progressively working my waywest from the East coast.
Now I live in a small towncalled Kelowna in the Okanagan
(03:07):
Valley.
It's about four hours driveEast of Vancouver and it's I'm
surrounded by wineries andreally great ski mountains and
golf courses and lots of watersports.
Around here we have a big,beautiful lake called the
Okanagan Lake.
It's 90 miles long and 950 feetdeep and it's just tremendous
for wake surfing and waterskiing, and so it's been a great
(03:30):
place to have the family Threekids, married for 24 years, and
a beautiful Bernese goldendoodle dog who is constantly
parked right next to me here inmy office Nice, nice, nice.
Greg Myers (03:42):
Well, thanks for sharing that.
Let's talk about FlexPay, sotell our audience what FlexPay
does.
Darryl Hicks (03:47):
So FlexPay helps really large subscription
companies reduce the churn thatcomes from failed payments.
We use AI to analyzetransactions and really figure
out where friction is happeningin the ecosystem.
It was a solution that we builtfor ourselves.
I mentioned I had theseco-founders that I met in New
York.
We built subscriptionbusinesses at scale.
I was the technical co-founderof those businesses.
(04:11):
I was always responsible forback office operations that we
would maximize lifetime valuewhile minimizing risk factors
like, well, obviously, churn,but even like refunds and
chargebacks, things like that.
(04:31):
So when I started out in thebusiness in 2001, I'd spend my
time swimming through the sequeland we would discover that
probably about 80% of all of ourchurn was voluntary churn
People reaching out to us byemail, phone, whatever, saying
they didn't want the productanymore.
But as the years wereprogressing, we noticed this
disturbing trend where more andmore of our churn was
(04:52):
involuntary churn, coming fromfailed payments, and so we
really had to do something aboutthis and we tried every
solution you can imagine underthe sun.
From third-party vendors, wehad some really wonderful
partnerships with some bigacquiring banks.
I noticed these weird things, Ithink, starting in 2006, we'd
have thousands of transactions,the data process.
We'd take 10% randomly selectedand we'd send them to one
(05:14):
merchant bank and 10% randomlyselected and send them to
another merchant bank.
On some days we'd see as muchas a 3% higher approval rate on
transactions going through thebanks in Boston.
I called up the father and sonfounder team of that merchant
bank and I said what's going on,guys?
And they said I don't know.
Why don't you come on down andsee if we can figure this out
together?
So that led to them creatingthe first ever optimization
(05:36):
product.
We were client number one onthat product in 2008.
Didn't write any of the code,but worked really closely with
the development team.
That also gave me access tosome really interesting
conversations directly with thebig networks like Visa and
MasterCard, because we'd besitting in.
I have to put on my suit andtie and fly to Washington DC and
meeting these big boardroomswith 14 executives around the
(05:57):
table Super intimidating for meas a young founder at the time
in my 20s, but really learned alot about what's going on inside
of the card ecosystem.
Fast forward to I guess it wouldbe 2012,.
They sold that merchant bank toa much larger bank and that new
bank said well, we don't careabout solving this problem
holistically.
We just want to use this as ashiny object to attract and
(06:19):
retain merchants.
And that didn't work for mebecause I had launched a
third-party administrationbusiness at that point.
We were taking everything thatwe knew about how to really
optimize subscription paymentsand selling it to really large
publicly traded companies in theUS.
We would take all their backoffice over on our billing
platform and customer serviceand for billing related issues.
So I had no choice but to buildmy own tech.
(06:41):
The first version wasrules-based and, lo and behold,
it performed way better thananything else that we'd ever
tried and was all internal use.
Fast forward again to 2016,.
We had over a billiontransactions and a proprietary
database, a pretty deepunderstanding of what actually
drives this problem.
But the rules were turning intospaghetti at scale.
It's like if this then that, ifthis then that, weighted
decision trees and algorithmsand conflicting signals and we
(07:02):
said you know what this reallyseems like?
A problem ready built formachine learning.
So we didn't get into AI andmachine learning because it was
sexy or buzzword.
Everybody in 2025 wants to bean AI company.
Now, right, I kind of jokinglyrefer to us as one of the OG AI
companies, because we've been.
I think we're on version 19 ofour machine learning models now.
We've deprecated 32 modelssince we started the business
(07:23):
and we now use like AI, neuralnetworks and things like that
for analyzing transactions.
But the first version of machinelearning that we launched in
2016 massively outperformed therules-based system, and that's
when I said you know what?
I think I want to take this andturn it into a standalone B2B
SaaS product, but if you back upfor just a second, it sounds
like, okay, flexpay is thissolution that helps merchants
(07:43):
reduce the churn that comes fromfailed payments.
But there's this underlyingthesis inside of FlexPay that
wherever willing participantswant to engage in legal commerce
, they should be able to do sowithout friction, and that's
just not the way that thecurrent payments ecosystem works
.
There's a lot of opacity,things are very broken, very
brittle.
(08:03):
The solution to this problem ismore trust and transparency,
and so that's really.
The mission of FlexPay is toprovide, to facilitate, trust
and transparency in payments,and so now we're working really
closely with financialinstitutions issuing banks.
We have data sharing agreementswith them, where we send them
tremendous amounts of data fromthe merchant side that they're
(08:26):
previously blind to, and inexchange they provide data
exports out of their fraud toolsthat help us build better
machine learning models tobetter understand how to get
merchants the approval ratesthat they deserve the good actor
merchants and we are very, verycareful to avoid any kind of
negative merchant bias in oursystem.
So you know who has a lot offailed payments.
(08:47):
Sometimes it's the higher riskmerchants.
We deliberately stay away fromall those kinds of merchants.
We're very choosy about who welet onto our rails because we
really believe and we have datato prove that the ecosystem is
not working properly that goodquality merchants are suffering
with a tremendous amount offriction.
It's suboptimal and we'reworking hard to deliver on this
(09:07):
promise of the next generationof payments infrastructure to
power the modern economy.
Greg Myers (09:12):
Okay, when you look at the subscription business
other than high risk, are thereareas that you focus on, or is
it really any business that hassubscriptions?
Darryl Hicks (09:21):
When we first started out we were focused on
SMB.
Tech works beautifully forsmall merchants and large alike.
But we noticed that we werekind of running into the Shopify
problem.
Our number one source of churnwas companies just going out of
business a lot of mom and pops,right.
So we eventually decided tomake the pivot in our
go-to-market focus and shiftmore upmarket.
(09:42):
So now we sell to large,mid-market, small enterprise
type merchants Just because,look, if you've got $5,000 a
month in failed payments,getting the best possible
recovery on that is probably notyour highest priority.
You've got a team to build,you've got marketing issues,
you've got HR, you've gotcapital that you need to acquire
in the business.
There's all kinds of differentdistractions.
(10:04):
But if, like some of ourclients, you have like $9
million a month in failedpayments, $14 million a month in
failed payments, $22 million amonth in failed payments, every
little incremental percentagepoint in additional performance
that you can get on that ismassively valuable to your
business.
And so selling into enterpriseis much harder and more
complicated than selling intoSMB.
(10:24):
But we've successfully madethat pivot and have a pretty
solid masthead of great logosnow I think selling into SaaS.
Saas is a really good verticalfor us.
A lot of streaming and digitalservices there.
But even you know auto ship onphysical products and things
like that and you know honestly,greg, like what isn't a
subscription these days.
Greg Myers (10:45):
Right these days.
Darryl Hicks (10:46):
I mean nobody buys a license of Adobe Photoshop
anymore.
Right, you sign up to thecreative cloud and they charge
you every year, so, but you knowwe also have merchants.
Our primary focus has been onsubscriptions, but we have
plenty of very large merchantswho also do just one-time
charges for products, and theystill have a lot of failed
payments and the tech worksbeautifully for them as well.
Greg Myers (11:06):
Okay, and you mentioned go to market.
So how do you go to market?
Do you have a direct salesforce?
Do you work through partnershipchannels, or what's the
strategy there?
Darryl Hicks (11:13):
Channel has been extremely important for us so
and channel means differentthings to different SaaS
businesses.
So let me clarify that a littlebit.
Channel is traditionallyreferred to as someone white
labels your product and takes itand distributes it and you give
them wholesale pricing and thenthey take care of selling it
and signing customers up.
We do a little bit of that.
There are some platforms outthere that provide billing
(11:33):
services to merchants and theydid come up with a press release
and they say we have this newAI driven failed payment
recovery tool.
This is why you want to switchover to our platform is because
we're going to help you deliverhigher lifetime value by being
on our billing platform.
It's actually FlexPay behindthe scenes powering that service
within their platform and wegive them a wholesale rate for
(11:54):
that.
But most of channel for us hasbeen referral partners, so that
could be payment processors, itcould be platforms, it could be
really large influencers andadvocacy groups.
There are payments consultants,but basically there's a lot of
people out there who work withexactly the merchant that fits
our profile and they refer thosecustomers over to us and we pay
(12:14):
them a fee on that.
So channel is kind of both If Icombine both of those together
the white label sort oftraditional channels as well as
referral partners.
It makes up probably about 42%of all the revenue that we have
right now, so a prettymeaningful chunk and that's
growing and we're very bullishon our ability to expand that.
The rest of it is a lot ofdirect selling.
So you know the traditionalstuff, like you know, hitting a
lot of trade shows, doingpodcasts like this and webinars.
(12:37):
We have a BDR team, we havelike a named account strategy,
so account-based marketingthat's working really well and,
yeah, that's kind of thego-to-market that we've had so
far.
Greg Myers (12:46):
Okay, what would you say?
Differentiates FlexPay fromyour competitors out there?
Darryl Hicks (12:50):
I'd say three things.
One, we just have a very, verydeep understanding of what's
causing this problem at the root, and we're working on not just
providing a service to merchants, but we're working on
infrastructure.
As I kind of walked out to youthis idea of facilitating trust
and transparency in payments,it's at a much deeper level than
(13:10):
just how can we come up with abetter widget for merchants.
Financial institutions that, itturns out, are really
passionate about this, and thereason why the partnerships with
the FIs are so important isthat there's who actually
decides whether a payment isgoing to be approved or declined
when you submit it.
(13:30):
It's very rarely your merchantbank like Stripe there's a
little bit of filtering they cando for fraud because they don't
want exposure.
It's very rarely the cardnetworks like Visa and
MasterCard.
There's a little bit that theydo to kill transactions that are
suspicious.
The vast preponderance of thedecisions to approve or decline
the transaction are made at theissuer level.
So it only makes sense that youhave direct partnerships with
(13:53):
those FIs and we get two thingsout of them insights and data,
and they're equally as valuable.
The insights are like well,what are you doing and why are
you doing it and how do you lookat this problem and what are
you really trying to solve forand what are the levers that
you're pulling on?
And this really helps us tobetter inform our machine
learning models.
And then the second is the rawdata that they send over.
We now have billions andbillions and billions of
(14:15):
transaction records, not justfrom our own processing, from
our own clients, but supplied tous directly from financial
institutions which we can thenrun machine learning on.
And that's important, becausetoy data sets generate toy
results.
If you want to get seriousabout machine learning and AI,
you really need massive treasuretroves of data, but then you
(14:36):
also need really savvy peoplewith the double master's degree
and the PhD degrees in math tokind of work on this.
But the most critical componentof this and this is really the
third differentiator for us isthis deep understanding of
what's actually happening insideof the payments ecosystem and
why, so that you can shepherdthe machine learning and the AI
models to focus on the rightthings, on the right dimensions
(14:58):
and on the right levers.
So the deep understanding ofthe problem leads to working
with the right people, whichleads to getting massive amounts
of data and having really smartpeople to kind of work on the
problem, which leads to moredeeper insights, which allows us
to have better informedconversations with the FIs.
So you can see, it kind ofbecomes like a feedback loop
that spins.
Greg Myers (15:17):
Okay, great.
So when you step back and lookat sort of the payments and
fintech industry as a whole,where do you see it all headed?
Say, maybe in the next three tofive years?
Darryl Hicks (15:26):
Yeah, I think I'm really excited about all these
alternative methods of payment.
I'm bullish on stable coins.
I really like, and I think youknow a lot of people were really
excited about the promise ofBitcoin and we've kind of
realized that it's a fantasticstore of value.
But there are some realchallenges to using it as a
means of trade and there aresome really interesting
(15:48):
companies that I'm personallyinvested in as an angel investor
that are working on some ofthose problems and I hope that
they'll be able to make someprogress on them.
But my assessment, lookingreally closely at all the
players and the incentives inthe ecosystem, is I would not
bet against Visa and MasterCard.
There's just tremendous biasbuilt into the system.
They're deeply embedded from aregulatory perspective.
(16:09):
There's such an important,meaningful part of the economy
that literally it's like tryingto turn the Titanic at this
point to get anything off ofthere, and so that's why I've
decided to double down andartificially constrain the
activity of FlexPay, my company,to really making the Visa
MasterCard networks work better.
We're not trying to replacethose networks, we're trying to
reduce the friction within thosenetworks.
I still think, long-term, someof these things like FedNow and
(16:32):
RTP, like real-time payments andstable coins and stuff, we'll
start to pick away at theperiphery.
I think there's some reallygreat use cases for those, but I
don't think that we're going tosee any shift anytime in the
next decade or so meaningfullyaway from the Visa MasterCard
rails.
And especially if we're able todeliver on our promise of
upgrading those networks withbetter connective tissue and
(16:53):
more trust and transparency, Ithink that only makes them even
that much more valuable.
So that's where I think in theshort term, in the next 10 years
, what we're going to see.
And of course I'm answering thisquestion specific to my lens
Like, oh, I'm talking about openbanking and loans and insurance
products and all these things.
Like we can talk about some ofthose other things.
You probably find people thatcan be much more intelligent to
riff with you on those.
I have conversations with ourfinancial institution partners
(17:15):
about those kinds of productsand the innovation that they're
looking for in those areas.
But you know, when I thinkabout where we really have deep
expertise in the Visa MasterCardnetwork and where payments are
heading, that's what I see forthe next decade.
Beyond that, I think it'll beinteresting to see will Visa
MasterCard roll out stable coinfunctionality within their
networks.
I know that they have petprojects that are fully built
(17:38):
and that are just kind ofsitting on the shelf because
they don't want to rock the boat, right now but they are ready
to pivot and to adapt shouldthose things become a little bit
more mainstream.
Greg Myers (17:49):
Yeah, I'm curious of your thoughts because recently
both Visa MasterCard madeannouncements around AI and
payments and you as an OG in AI,as you mentioned, I'm curious
what are your thoughts?
I mean, I think from myperspective, what I read into it
is something that's very highlevel that we've all kind of
talked about in payments isreally making that payment
disappear.
But I don't know if that's theintention over time or sort of
(18:09):
the goal, but I'm just curiouswhat are your thoughts on that?
Darryl Hicks (18:12):
I think that there are some really really good
people, really smart people withgreat intentions sitting inside
of the Visa MasterCard networkwho really care about creating
more transparency, for example.
Unfortunately, what we see isthat the right hand doesn't know
what the left hand is doing.
Quite often, I don't think thatyou need me to tell you, greg,
(18:32):
that innovation very rarelycomes.
If you look historically atwhere innovation happens very
rarely comes from within thesereally large organizations.
They're so big that they're toobig.
They can't get it out of theirown way, basically as they roll
things out.
So there are some people thatsay the right things and that
mean to do really well and areactively working on these things
(18:53):
, but they're fighting againstmultiple conflicting forces.
Not everybody inside theseorganizations agrees on what the
right solution is, and I thinkthat, unfortunately, there are a
lot of people that benefit fromhow opaque the current network
is.
Visa and MasterCard have done areally really good job of
making sure that merchants nevertalk to financial institutions
(19:14):
directly, because as soon as youhave them directly
communicating, you're one stepaway from disintermediating the
networks, and they don't wantthat to happen, and so they have
this incentive to kind ofcreate this opacity and to stay
deeply embedded into the middleand say, well, you don't need to
talk to each other, just workwith us and we'll make it all
work better.
But then that lack oftransparency enables all kinds
of bad behavior.
(19:34):
Human beings are incrediblygood at following incentives,
and so there's all theseunintended second order and
third order consequences of thislack of transparency that turn
into the friction that we'reseeing.
And, by the way, fraud is aproblem.
The need for FlexP pay wouldnot exist, I believe, if there
wasn't fraud.
It's because of the prevalenceof fraud that a lot of the
(19:55):
networks and the issuers saywell, we can't be transparent
about what we're doing and whywe're doing it, because then the
bad actors are going to reverseengineer our fraud systems and
we're going to have more fraudlosses.
And we have to keep thesesystems, even if you think about
it.
Anti-money laundering and OFACare two really important
considerations from a regulatoryperspective for FIs.
They must have systems embeddedthat check against lists that
(20:17):
say we're not going to processtransactions for embargoed
countries, or even withincertain countries, there are
certain merchants or certaintransaction types that are
embargoed.
But as soon as you have thissystem that's able to filter,
then all of a sudden, you'llhave a financial institution
that says well, I have a moralproblem with gambling, so I am
not going to facilitate any ofthe online gambling transactions
, but they don't publish thatanywhere on their website.
(20:40):
They don't tell their customerswhen they're switching to that
FI.
By the way, if you get a creditcard from my bank, you're never
going to be able to go onDraftKings.
Go on DraftKings, but yeah,that ends up being the way that
it works.
So I think it's totallyappropriate in a free, open
market for a financialinstitution to make that kind of
decision.
I just think that it should betransparently disclosed and
there are certain cardholdersthat are going to be very
(21:01):
aligned with that vision and say, yes, that's the kind of FI
that I want to work with and Idon't care because I don't do
online gambling and I like allthe other bells and whistles
that I get working with that FI.
So the transparency will meanthat certain people in the
ecosystem are not going to beable to do things that they do
today, but I think everyoneunderstands that ultimately,
that's where we need to go, thateveryone will benefit and you
(21:23):
will have like if we could justperfectly identify which
transactions are fraud and thatwe want out of the ecosystem,
which ones aren't, then everyonewould really benefit from that.
And then all these ancillarythings where people are taking
these off-decisioning platformsand crowbarring other things
into it and, by the way,cardholders are also gaming the
system right All these virtualcards where you can turn on a
virtual card, you can sign up toa subscription because maybe
(21:46):
there's a promotional offer oran incentive and you get the
incentive, and then you log inand you turn your balance to
zero and then the merchant's notable to charge the card anymore
and they don't reallyunderstand why, because there's
no transparency in what'sactually happening.
So the opacity of the system isfacilitating all kinds of edge
cases all over the place ofsuboptimal behavior from
multiple different players, andthat's really what we need to
(22:07):
get out of the ecosystem.
Greg Myers (22:08):
Okay, well, let's switch gears a little bit and
talk about you.
You talked a little bit aboutyour journey, but maybe talk us
through the kind of foundingstory Are you the sole founder?
Maybe a little bit about thebackground there and just kind
of walk us through that if youdon't mind.
Darryl Hicks (22:22):
Yeah, so when I first started out, FlexPay is my
eighth business Well, ninth, ifyou include my window washing
business.
I started when I was 18.
I'm not so sure that one counts, but I'm definitely a serial
entrepreneur and I've builtmultiple large businesses.
I'm very proud of the fact that, in aggregate, across the
businesses that I founded orco-founded, I've created over a
thousand jobs in North Americaand generated in the hundreds of
(22:45):
millions of revenue and reallygood returns for our
shareholders.
I've had a couple of exits inthere as well.
I had an amicable parting of theways with my co-founders back
in 2011.
And so went back to becoming asole proprietor at that point.
But, like any great founder,I've got an incredible team that
works with me, and quite a bitof the executive leadership team
(23:06):
inside of FlexBay have beenwith me through multiple
businesses.
So a lot of them worked with usin the previous business where
we were incubating thistechnology that became FlexBay,
and we worked through likedivesting ourselves and selling
off assets and getting rid ofall the rest of the other
business so that we could focussolely on this business.
So that's part of the originstory.
We are institutionally backed,so we've raised a fairly
(23:29):
significant amount of capitalfrom financial institutions,
from FinTech focused VCs andprivate equity.
You know very grateful to havetheir support, and you do need
capital to go out and build thistech and to be able to fund the
growth and the speed, but I'mstill majority shareholder and
largest shareholder inside ofthe business.
I paid for that privilege.
The seed capital for thebusiness came out of my own
(23:51):
genes from previous exits, and Ithink that that's also
something that's reallyimportant If you're going to go
solve this problem and I've seenthis across other industries
having a I don't want this tocome across the wrong way, like
a from a place of ego oranything but being able to have,
like one person that can reallymake the call you know who has
voting control, chairman of theboard, founder, CEO the deep
(24:15):
understanding and the will tojust drive something through.
There's still no guaranteesthat someone's going to be
successful, but there's so muchthat you're able to do from
being nimble and really pushingthings through and bringing
people together in order toreally bend the market to your
will, so to speak.
That, I think, comes as anadvantage.
Along with that, as far as whyI'm really passionate about this
(24:36):
, I had a bit of a troubledchildhood.
Growing up, I was really badlybullied when I was in elementary
school and junior high got beatup a lot, jumped from behind.
I had my front teeth chippedout and chased with broken
baseball bats and had a prettynasty experience with some of
the teachers in my school aswell a real lack of support from
them which really caused me tobe super sensitive and really,
(24:58):
really upset about creating moreaccountability, a real sense of
justice and fairness as well,Understanding that people in
positions of power the greaterthe amount of power, the greater
the need for accountability.
But in order to createaccountability, you need
transparency.
If the people in the positionof power had all the facts
available to them to reallyunderstand the ground truth of
(25:20):
what's happening and knew thattheir decisions were going to be
out in full sunlight foreveryone to see, I think that we
would build a much bettersociety and system.
And so some of those, some of myown personal experience from my
teenage years, really createdthat sense of, I'd say, justice
and the need for trust andtransparency.
It's deeply embedded into myDNA.
(25:43):
It's also one of the corevalues of Flex Bay radical
transparency.
Ray Dalio talks about this inhis book Principles and how it's
a double-edged sword.
Not everybody's able to worksuccessfully inside of an
organization that's radicallytransparent, but that's one of
our core values as well, and Ithink it's one of the reasons
why this team is perfectlysuited to go work on this
(26:03):
problem, because this is what'sneeded.
If you talk to the people whoreally deeply understand what's
broken inside of payments today,they'll tell you that more
trust and transparency in thepayments and the ability to very
transparently share all thedata that's available on all
sides of the ecosystem and to beable to make better decisions
based on that data is the realanswer to the problem, and so
(26:24):
that's what we're working on.
Greg Myers (26:25):
Okay.
Well, it's obvious what yourpassion is on the business side,
but what about a personalpassion?
Darryl Hicks (26:30):
Yeah, I mean I live here in the Okanagan Valley
for a reason.
You know, I lived most of mylife in really big cities.
During the pandemic, the valueproposition of living in a dense
urban environment was seriouslymitigated, especially here in
Canada.
The lockdowns were prettysevere.
In Montreal we even had curfewsat one point because, you know,
covid only comes out aftereight o'clock.
(26:52):
But it turns out that quality oflife here in a place like
Okanagan Valley was tremendous,because everything that people
do in dense cities is like goingto nightclubs and restaurants
and festivals and the symphonicorchestra and sports teams when
they're in the playoffs.
That's all the best stuff ofbeing in a big city, whereas
here the greatest stuff ishorseback riding and water
sports and golfing and hikingand snow biking and skiing, and
(27:16):
this is a mecca for all thosekinds of outdoor activities.
So it's been a real blessingfor the family to be here.
Everyone's so much more active.
We're a wake surfing boat.
We get out wake surfing on thelake all summer long.
We're blessed to have a ski in,ski out at a really beautiful
ski resort up in the Rockieshere close to where we live.
(27:37):
So it's been a great life and Ihave a lot of passion around
all those sports, but doing itwith my family.
I travel a lot, like every CEO,but when I'm not traveling I'm
all in and really working hardto get the family together and
out, doing these really amazing,active things.
Greg Myers (27:52):
Okay, well, daryl, if someone comes to you maybe
they just graduated from collegeand they're looking to go into
a career in payments or fintechand they come to you and say,
hey, daryl, what do I need tofocus on to be successful, what
kind of advice would you givethem, Well, I mean, there's the
obvious ones on, like, thinkabout what you're really
passionate about.
Darryl Hicks (28:10):
This is what I even do with my kids like what
you're naturally drawn to, andlike what kind of YouTube videos
you watch in the evenings andthe stuff that you do, where you
just get into a state of flowand you completely lose track of
time.
Like, my oldest son is justsuper passionate about all
things cars and he's constantlywatching YouTube videos and like
how to change your ownsuspension and change your own
radiator and change your ownbrakes and he's just and he's
(28:30):
always been really giftedmechanically with his hands.
Well, that's probably going tobe a really great place for him
to focus on.
You know where he's going to goand work.
If you are really passionateabout payments which is rare but
does happen I'd say the one ofthe biggest lessons that I
learned early in my businessthat I try to share with people
is, I think, one of the smartestthings I did.
(28:50):
Before I had my first dollar ofrevenue in FlexBay, we built a
killer advisory board.
You can't do things on your ownand being able to find, curate,
incentivize, communicate,compensate a really killer
advisory board, or a tribe ofpeople around you has been a
massive unlock for me.
I would not be where I am todayif it wasn't for the advisory
(29:13):
board that we built together.
I have a really great frameworkon that, which I teach to
founders and to executives.
I recorded a video on it and Ishare it with people completely
for free.
The framework that I learnedfrom a mentor of mine and then I
kind of added to it and refinedit with some business coaches,
and I think that that applieseven for people just kind of
like graduating out of school isgetting yourself out there,
like showing up as half thebattle, and I mean like showing
(29:35):
up in person, like go to thepockets where there are people
that are actively working on thething that you're really
passionate about, find out whatproblems they have and find ways
that you can provide value tothem and start to build that
connective tissue and thoserelationships with them, and
just get yourself out there andfind out more and who are the
major movers and shares andplayers in the ecosystem, and
(29:56):
you'll find that all kinds ofdoors will open to you as a
result of that.
Greg Myers (29:58):
Okay, great Thanks for sharing that.
So we've covered a lot ofground about the company, the
industry and you.
Is there anything else you'dlike to cover before we wrap up?
Darryl Hicks (30:33):
no-transcript need for transparency.
It's something that I'm deeplypassionate about and I think
it's something that we needacross all kinds of aspects of
our society.
I'm working on it in payments.
I got payments.
I'll take care of that, but Ithink that there's a lot of
other things.
The same thesis that's reallydriving success in FlexPay and
(30:55):
in this particular problem couldwork in a lot of other areas.
It's something that I'm deeplypassionate about.
Greg Myers (31:00):
I think that's a great way to close out the show.
So, daryl, thank you so muchfor being on the show today.
I really appreciate it.
Darryl Hicks (31:05):
Yeah, it's great to be here.
Thanks, Greg Cheers.
Greg Myers (31:07):
Absolutely, and to all you listeners out there, I
thank you for your time as well,and until the next story.
Speaker 1 (31:12):
Thank you for joining us this week on the Leaders in
Payments podcast.
Make sure you visit our websiteat leadersinpaymentscom, where
you can subscribe to the showand where you'll find our show
notes.
If you enjoyed listening,please share on your social
channels as well.
Welcome to the Leaders in Payments podcast,
where we talk to C-level leadersfrom across the payments
landscape.
We'll be discussing theproducts and services that
impact the payment space today,as well as trends and
predictions for the future ofpayments.
We will also hear stories fromour guests about their journeys
to the top.
Greg Myers (00:18):
Hello everyone and welcome to the Leaders in
Payments podcast.
I'm your host, greg Myers, andon today's show we have a very
special guest, daryl Hicks, thefounder and CEO of FlexPay.
So, daryl, welcome to the show.
Darryl Hicks (00:28):
Hey, man, it's great to be here.
Thanks for having me, greg.
Greg Myers (00:30):
Absolutely.
So.
Let's start out by having youtell the audience a little bit
about yourself, maybe where youwere born, where you grew up,
where you went to school, a fewthings like that.
Darryl Hicks (00:38):
Yeah, sure.
So my entire career I've workedin the US, but I am a Canadian.
I was born in a small bluecollar town, very lower middle
income city and family out onthe very east coast of Canada,
so northeast of Maine, right onthe Atlantic Ocean small town.
I eventually moved to Montrealwhen I was in my late teens,
(01:00):
started community collegestraight out of high school in
Comp Sci but then saw that therewas an opportunity to start my
own business in cybersecurity,network infrastructure, network
architecture.
I knew I wanted to be anentrepreneur.
It's all my parents ever put infront of me as an opportunity.
They owned a small commercialcleaning business which I worked
(01:22):
for starting from when I was 11years old a little bit of a
child labor and net.
So starting from 11 years old Iwas emptying garbage cans and
cleaning toilets and ashtraysand stuff, working for my dad's
cleaning business.
But that was great.
He did pay me a couple bucks anhour and allowed me to have
some savings which gave me someseed money to be able to move to
a bigger city when I was in mylate teens, gave me some seed
(01:45):
money to be able to move to abigger city when I was in my
late teens and, yeah, I startedworking in IT, a self-taught
coder.
Next thing you know, I'mworking in New York in the Twin
Towers consulting for Verizonand Sprint securing all their
network infrastructure from badactors out on the internet.
It was the wild wild west backthen.
People would just take theirservers and plug them into the
internet and Windows NT'sbroadcasting port 139 net BIOS
(02:06):
out to the internet saying hereI am, log into me, and then
they're wondering why they'rehaving all these issues.
So that was really fascinating.
But that's where I built areally great network.
Executives and professionalseventually met my co-founders in
some of the later businessesthat I created in the early
2000s.
Just an incredible opportunityto meet some amazing people who
(02:26):
are at the bleeding edge of ITand network infrastructure and
stuff like that.
So, yeah, I've always stayed inCanada even though I had
American co-founders.
We were really enjoying thearbitrage of earning US dollars
and spending Canadian dollars.
So there's some pretty goodbenefits to have there and at
scale.
Eventually we built out.
(02:47):
I think at our peak we had 350employees working in the
business up in Montreal, withanother 60 or 70 scattered
around through the continentalUS.
Yeah, that's a little bit of mybackground on the journey.
I currently live in the PacificNorthwest, so I've been
progressively working my waywest from the East coast.
Now I live in a small towncalled Kelowna in the Okanagan
(03:07):
Valley.
It's about four hours driveEast of Vancouver and it's I'm
surrounded by wineries andreally great ski mountains and
golf courses and lots of watersports.
Around here we have a big,beautiful lake called the
Okanagan Lake.
It's 90 miles long and 950 feetdeep and it's just tremendous
for wake surfing and waterskiing, and so it's been a great
(03:30):
place to have the family Threekids, married for 24 years, and
a beautiful Bernese goldendoodle dog who is constantly
parked right next to me here inmy office Nice, nice, nice.
Greg Myers (03:42):
Well, thanks for sharing that.
Let's talk about FlexPay, sotell our audience what FlexPay
does.
Darryl Hicks (03:47):
So FlexPay helps really large subscription
companies reduce the churn thatcomes from failed payments.
We use AI to analyzetransactions and really figure
out where friction is happeningin the ecosystem.
It was a solution that we builtfor ourselves.
I mentioned I had theseco-founders that I met in New
York.
We built subscriptionbusinesses at scale.
I was the technical co-founderof those businesses.
(04:11):
I was always responsible forback office operations that we
would maximize lifetime valuewhile minimizing risk factors
like, well, obviously, churn,but even like refunds and
chargebacks, things like that.
(04:31):
So when I started out in thebusiness in 2001, I'd spend my
time swimming through the sequeland we would discover that
probably about 80% of all of ourchurn was voluntary churn
People reaching out to us byemail, phone, whatever, saying
they didn't want the productanymore.
But as the years wereprogressing, we noticed this
disturbing trend where more andmore of our churn was
(04:52):
involuntary churn, coming fromfailed payments, and so we
really had to do something aboutthis and we tried every
solution you can imagine underthe sun.
From third-party vendors, wehad some really wonderful
partnerships with some bigacquiring banks.
I noticed these weird things, Ithink, starting in 2006, we'd
have thousands of transactions,the data process.
We'd take 10% randomly selectedand we'd send them to one
(05:14):
merchant bank and 10% randomlyselected and send them to
another merchant bank.
On some days we'd see as muchas a 3% higher approval rate on
transactions going through thebanks in Boston.
I called up the father and sonfounder team of that merchant
bank and I said what's going on,guys?
And they said I don't know.
Why don't you come on down andsee if we can figure this out
together?
So that led to them creatingthe first ever optimization
(05:36):
product.
We were client number one onthat product in 2008.
Didn't write any of the code,but worked really closely with
the development team.
That also gave me access tosome really interesting
conversations directly with thebig networks like Visa and
MasterCard, because we'd besitting in.
I have to put on my suit andtie and fly to Washington DC and
meeting these big boardroomswith 14 executives around the
(05:57):
table Super intimidating for meas a young founder at the time
in my 20s, but really learned alot about what's going on inside
of the card ecosystem.
Fast forward to I guess it wouldbe 2012,.
They sold that merchant bank toa much larger bank and that new
bank said well, we don't careabout solving this problem
holistically.
We just want to use this as ashiny object to attract and
(06:19):
retain merchants.
And that didn't work for mebecause I had launched a
third-party administrationbusiness at that point.
We were taking everything thatwe knew about how to really
optimize subscription paymentsand selling it to really large
publicly traded companies in theUS.
We would take all their backoffice over on our billing
platform and customer serviceand for billing related issues.
So I had no choice but to buildmy own tech.
(06:41):
The first version wasrules-based and, lo and behold,
it performed way better thananything else that we'd ever
tried and was all internal use.
Fast forward again to 2016,.
We had over a billiontransactions and a proprietary
database, a pretty deepunderstanding of what actually
drives this problem.
But the rules were turning intospaghetti at scale.
It's like if this then that, ifthis then that, weighted
decision trees and algorithmsand conflicting signals and we
(07:02):
said you know what this reallyseems like?
A problem ready built formachine learning.
So we didn't get into AI andmachine learning because it was
sexy or buzzword.
Everybody in 2025 wants to bean AI company.
Now, right, I kind of jokinglyrefer to us as one of the OG AI
companies, because we've been.
I think we're on version 19 ofour machine learning models now.
We've deprecated 32 modelssince we started the business
(07:23):
and we now use like AI, neuralnetworks and things like that
for analyzing transactions.
But the first version of machinelearning that we launched in
2016 massively outperformed therules-based system, and that's
when I said you know what?
I think I want to take this andturn it into a standalone B2B
SaaS product, but if you back upfor just a second, it sounds
like, okay, flexpay is thissolution that helps merchants
(07:43):
reduce the churn that comes fromfailed payments.
But there's this underlyingthesis inside of FlexPay that
wherever willing participantswant to engage in legal commerce
, they should be able to do sowithout friction, and that's
just not the way that thecurrent payments ecosystem works
.
There's a lot of opacity,things are very broken, very
brittle.
(08:03):
The solution to this problem ismore trust and transparency,
and so that's really.
The mission of FlexPay is toprovide, to facilitate, trust
and transparency in payments,and so now we're working really
closely with financialinstitutions issuing banks.
We have data sharing agreementswith them, where we send them
tremendous amounts of data fromthe merchant side that they're
(08:26):
previously blind to, and inexchange they provide data
exports out of their fraud toolsthat help us build better
machine learning models tobetter understand how to get
merchants the approval ratesthat they deserve the good actor
merchants and we are very, verycareful to avoid any kind of
negative merchant bias in oursystem.
So you know who has a lot offailed payments.
(08:47):
Sometimes it's the higher riskmerchants.
We deliberately stay away fromall those kinds of merchants.
We're very choosy about who welet onto our rails because we
really believe and we have datato prove that the ecosystem is
not working properly that goodquality merchants are suffering
with a tremendous amount offriction.
It's suboptimal and we'reworking hard to deliver on this
(09:07):
promise of the next generationof payments infrastructure to
power the modern economy.
Greg Myers (09:12):
Okay, when you look at the subscription business
other than high risk, are thereareas that you focus on, or is
it really any business that hassubscriptions?
Darryl Hicks (09:21):
When we first started out we were focused on
SMB.
Tech works beautifully forsmall merchants and large alike.
But we noticed that we werekind of running into the Shopify
problem.
Our number one source of churnwas companies just going out of
business a lot of mom and pops,right.
So we eventually decided tomake the pivot in our
go-to-market focus and shiftmore upmarket.
(09:42):
So now we sell to large,mid-market, small enterprise
type merchants Just because,look, if you've got $5,000 a
month in failed payments,getting the best possible
recovery on that is probably notyour highest priority.
You've got a team to build,you've got marketing issues,
you've got HR, you've gotcapital that you need to acquire
in the business.
There's all kinds of differentdistractions.
(10:04):
But if, like some of ourclients, you have like $9
million a month in failedpayments, $14 million a month in
failed payments, $22 million amonth in failed payments, every
little incremental percentagepoint in additional performance
that you can get on that ismassively valuable to your
business.
And so selling into enterpriseis much harder and more
complicated than selling intoSMB.
(10:24):
But we've successfully madethat pivot and have a pretty
solid masthead of great logosnow I think selling into SaaS.
Saas is a really good verticalfor us.
A lot of streaming and digitalservices there.
But even you know auto ship onphysical products and things
like that and you know honestly,greg, like what isn't a
subscription these days.
Greg Myers (10:45):
Right these days.
Darryl Hicks (10:46):
I mean nobody buys a license of Adobe Photoshop
anymore.
Right, you sign up to thecreative cloud and they charge
you every year, so, but you knowwe also have merchants.
Our primary focus has been onsubscriptions, but we have
plenty of very large merchantswho also do just one-time
charges for products, and theystill have a lot of failed
payments and the tech worksbeautifully for them as well.
Greg Myers (11:06):
Okay, and you mentioned go to market.
So how do you go to market?
Do you have a direct salesforce?
Do you work through partnershipchannels, or what's the
strategy there?
Darryl Hicks (11:13):
Channel has been extremely important for us so
and channel means differentthings to different SaaS
businesses.
So let me clarify that a littlebit.
Channel is traditionallyreferred to as someone white
labels your product and takes itand distributes it and you give
them wholesale pricing and thenthey take care of selling it
and signing customers up.
We do a little bit of that.
There are some platforms outthere that provide billing
(11:33):
services to merchants and theydid come up with a press release
and they say we have this newAI driven failed payment
recovery tool.
This is why you want to switchover to our platform is because
we're going to help you deliverhigher lifetime value by being
on our billing platform.
It's actually FlexPay behindthe scenes powering that service
within their platform and wegive them a wholesale rate for
(11:54):
that.
But most of channel for us hasbeen referral partners, so that
could be payment processors, itcould be platforms, it could be
really large influencers andadvocacy groups.
There are payments consultants,but basically there's a lot of
people out there who work withexactly the merchant that fits
our profile and they refer thosecustomers over to us and we pay
(12:14):
them a fee on that.
So channel is kind of both If Icombine both of those together
the white label sort oftraditional channels as well as
referral partners.
It makes up probably about 42%of all the revenue that we have
right now, so a prettymeaningful chunk and that's
growing and we're very bullishon our ability to expand that.
The rest of it is a lot ofdirect selling.
So you know the traditionalstuff, like you know, hitting a
lot of trade shows, doingpodcasts like this and webinars.
(12:37):
We have a BDR team, we havelike a named account strategy,
so account-based marketingthat's working really well and,
yeah, that's kind of thego-to-market that we've had so
far.
Greg Myers (12:46):
Okay, what would you say?
Differentiates FlexPay fromyour competitors out there?
Darryl Hicks (12:50):
I'd say three things.
One, we just have a very, verydeep understanding of what's
causing this problem at the root, and we're working on not just
providing a service to merchants, but we're working on
infrastructure.
As I kind of walked out to youthis idea of facilitating trust
and transparency in payments,it's at a much deeper level than
(13:10):
just how can we come up with abetter widget for merchants.
Financial institutions that, itturns out, are really
passionate about this, and thereason why the partnerships with
the FIs are so important isthat there's who actually
decides whether a payment isgoing to be approved or declined
when you submit it.
(13:30):
It's very rarely your merchantbank like Stripe there's a
little bit of filtering they cando for fraud because they don't
want exposure.
It's very rarely the cardnetworks like Visa and
MasterCard.
There's a little bit that theydo to kill transactions that are
suspicious.
The vast preponderance of thedecisions to approve or decline
the transaction are made at theissuer level.
So it only makes sense that youhave direct partnerships with
(13:53):
those FIs and we get two thingsout of them insights and data,
and they're equally as valuable.
The insights are like well,what are you doing and why are
you doing it and how do you lookat this problem and what are
you really trying to solve forand what are the levers that
you're pulling on?
And this really helps us tobetter inform our machine
learning models.
And then the second is the rawdata that they send over.
We now have billions andbillions and billions of
(14:15):
transaction records, not justfrom our own processing, from
our own clients, but supplied tous directly from financial
institutions which we can thenrun machine learning on.
And that's important, becausetoy data sets generate toy
results.
If you want to get seriousabout machine learning and AI,
you really need massive treasuretroves of data, but then you
(14:36):
also need really savvy peoplewith the double master's degree
and the PhD degrees in math tokind of work on this.
But the most critical componentof this and this is really the
third differentiator for us isthis deep understanding of
what's actually happening insideof the payments ecosystem and
why, so that you can shepherdthe machine learning and the AI
models to focus on the rightthings, on the right dimensions
(14:58):
and on the right levers.
So the deep understanding ofthe problem leads to working
with the right people, whichleads to getting massive amounts
of data and having really smartpeople to kind of work on the
problem, which leads to moredeeper insights, which allows us
to have better informedconversations with the FIs.
So you can see, it kind ofbecomes like a feedback loop
that spins.
Greg Myers (15:17):
Okay, great.
So when you step back and lookat sort of the payments and
fintech industry as a whole,where do you see it all headed?
Say, maybe in the next three tofive years?
Darryl Hicks (15:26):
Yeah, I think I'm really excited about all these
alternative methods of payment.
I'm bullish on stable coins.
I really like, and I think youknow a lot of people were really
excited about the promise ofBitcoin and we've kind of
realized that it's a fantasticstore of value.
But there are some realchallenges to using it as a
means of trade and there aresome really interesting
(15:48):
companies that I'm personallyinvested in as an angel investor
that are working on some ofthose problems and I hope that
they'll be able to make someprogress on them.
But my assessment, lookingreally closely at all the
players and the incentives inthe ecosystem, is I would not
bet against Visa and MasterCard.
There's just tremendous biasbuilt into the system.
They're deeply embedded from aregulatory perspective.
(16:09):
There's such an important,meaningful part of the economy
that literally it's like tryingto turn the Titanic at this
point to get anything off ofthere, and so that's why I've
decided to double down andartificially constrain the
activity of FlexPay, my company,to really making the Visa
MasterCard networks work better.
We're not trying to replacethose networks, we're trying to
reduce the friction within thosenetworks.
I still think, long-term, someof these things like FedNow and
(16:32):
RTP, like real-time payments andstable coins and stuff, we'll
start to pick away at theperiphery.
I think there's some reallygreat use cases for those, but I
don't think that we're going tosee any shift anytime in the
next decade or so meaningfullyaway from the Visa MasterCard
rails.
And especially if we're able todeliver on our promise of
upgrading those networks withbetter connective tissue and
(16:53):
more trust and transparency, Ithink that only makes them even
that much more valuable.
So that's where I think in theshort term, in the next 10 years
, what we're going to see.
And of course I'm answering thisquestion specific to my lens
Like, oh, I'm talking about openbanking and loans and insurance
products and all these things.
Like we can talk about some ofthose other things.
You probably find people thatcan be much more intelligent to
riff with you on those.
I have conversations with ourfinancial institution partners
(17:15):
about those kinds of productsand the innovation that they're
looking for in those areas.
But you know, when I thinkabout where we really have deep
expertise in the Visa MasterCardnetwork and where payments are
heading, that's what I see forthe next decade.
Beyond that, I think it'll beinteresting to see will Visa
MasterCard roll out stable coinfunctionality within their
networks.
I know that they have petprojects that are fully built
(17:38):
and that are just kind ofsitting on the shelf because
they don't want to rock the boat, right now but they are ready
to pivot and to adapt shouldthose things become a little bit
more mainstream.
Greg Myers (17:49):
Yeah, I'm curious of your thoughts because recently
both Visa MasterCard madeannouncements around AI and
payments and you as an OG in AI,as you mentioned, I'm curious
what are your thoughts?
I mean, I think from myperspective, what I read into it
is something that's very highlevel that we've all kind of
talked about in payments isreally making that payment
disappear.
But I don't know if that's theintention over time or sort of
(18:09):
the goal, but I'm just curiouswhat are your thoughts on that?
Darryl Hicks (18:12):
I think that there are some really really good
people, really smart people withgreat intentions sitting inside
of the Visa MasterCard networkwho really care about creating
more transparency, for example.
Unfortunately, what we see isthat the right hand doesn't know
what the left hand is doing.
Quite often, I don't think thatyou need me to tell you, greg,
(18:32):
that innovation very rarelycomes.
If you look historically atwhere innovation happens very
rarely comes from within thesereally large organizations.
They're so big that they're toobig.
They can't get it out of theirown way, basically as they roll
things out.
So there are some people thatsay the right things and that
mean to do really well and areactively working on these things
(18:53):
, but they're fighting againstmultiple conflicting forces.
Not everybody inside theseorganizations agrees on what the
right solution is, and I thinkthat, unfortunately, there are a
lot of people that benefit fromhow opaque the current network
is.
Visa and MasterCard have done areally really good job of
making sure that merchants nevertalk to financial institutions
(19:14):
directly, because as soon as youhave them directly
communicating, you're one stepaway from disintermediating the
networks, and they don't wantthat to happen, and so they have
this incentive to kind ofcreate this opacity and to stay
deeply embedded into the middleand say, well, you don't need to
talk to each other, just workwith us and we'll make it all
work better.
But then that lack oftransparency enables all kinds
of bad behavior.
(19:34):
Human beings are incrediblygood at following incentives,
and so there's all theseunintended second order and
third order consequences of thislack of transparency that turn
into the friction that we'reseeing.
And, by the way, fraud is aproblem.
The need for FlexP pay wouldnot exist, I believe, if there
wasn't fraud.
It's because of the prevalenceof fraud that a lot of the
(19:55):
networks and the issuers saywell, we can't be transparent
about what we're doing and whywe're doing it, because then the
bad actors are going to reverseengineer our fraud systems and
we're going to have more fraudlosses.
And we have to keep thesesystems, even if you think about
it.
Anti-money laundering and OFACare two really important
considerations from a regulatoryperspective for FIs.
They must have systems embeddedthat check against lists that
(20:17):
say we're not going to processtransactions for embargoed
countries, or even withincertain countries, there are
certain merchants or certaintransaction types that are
embargoed.
But as soon as you have thissystem that's able to filter,
then all of a sudden, you'llhave a financial institution
that says well, I have a moralproblem with gambling, so I am
not going to facilitate any ofthe online gambling transactions
, but they don't publish thatanywhere on their website.
(20:40):
They don't tell their customerswhen they're switching to that
FI.
By the way, if you get a creditcard from my bank, you're never
going to be able to go onDraftKings.
Go on DraftKings, but yeah,that ends up being the way that
it works.
So I think it's totallyappropriate in a free, open
market for a financialinstitution to make that kind of
decision.
I just think that it should betransparently disclosed and
there are certain cardholdersthat are going to be very
(21:01):
aligned with that vision and say, yes, that's the kind of FI
that I want to work with and Idon't care because I don't do
online gambling and I like allthe other bells and whistles
that I get working with that FI.
So the transparency will meanthat certain people in the
ecosystem are not going to beable to do things that they do
today, but I think everyoneunderstands that ultimately,
that's where we need to go, thateveryone will benefit and you
(21:23):
will have like if we could justperfectly identify which
transactions are fraud and thatwe want out of the ecosystem,
which ones aren't, then everyonewould really benefit from that.
And then all these ancillarythings where people are taking
these off-decisioning platformsand crowbarring other things
into it and, by the way,cardholders are also gaming the
system right All these virtualcards where you can turn on a
virtual card, you can sign up toa subscription because maybe
(21:46):
there's a promotional offer oran incentive and you get the
incentive, and then you log inand you turn your balance to
zero and then the merchant's notable to charge the card anymore
and they don't reallyunderstand why, because there's
no transparency in what'sactually happening.
So the opacity of the system isfacilitating all kinds of edge
cases all over the place ofsuboptimal behavior from
multiple different players, andthat's really what we need to
(22:07):
get out of the ecosystem.
Greg Myers (22:08):
Okay, well, let's switch gears a little bit and
talk about you.
You talked a little bit aboutyour journey, but maybe talk us
through the kind of foundingstory Are you the sole founder?
Maybe a little bit about thebackground there and just kind
of walk us through that if youdon't mind.
Darryl Hicks (22:22):
Yeah, so when I first started out, FlexPay is my
eighth business Well, ninth, ifyou include my window washing
business.
I started when I was 18.
I'm not so sure that one counts, but I'm definitely a serial
entrepreneur and I've builtmultiple large businesses.
I'm very proud of the fact that, in aggregate, across the
businesses that I founded orco-founded, I've created over a
thousand jobs in North Americaand generated in the hundreds of
(22:45):
millions of revenue and reallygood returns for our
shareholders.
I've had a couple of exits inthere as well.
I had an amicable parting of theways with my co-founders back
in 2011.
And so went back to becoming asole proprietor at that point.
But, like any great founder,I've got an incredible team that
works with me, and quite a bitof the executive leadership team
(23:06):
inside of FlexBay have beenwith me through multiple
businesses.
So a lot of them worked with usin the previous business where
we were incubating thistechnology that became FlexBay,
and we worked through likedivesting ourselves and selling
off assets and getting rid ofall the rest of the other
business so that we could focussolely on this business.
So that's part of the originstory.
We are institutionally backed,so we've raised a fairly
(23:29):
significant amount of capitalfrom financial institutions,
from FinTech focused VCs andprivate equity.
You know very grateful to havetheir support, and you do need
capital to go out and build thistech and to be able to fund the
growth and the speed, but I'mstill majority shareholder and
largest shareholder inside ofthe business.
I paid for that privilege.
The seed capital for thebusiness came out of my own
(23:51):
genes from previous exits, and Ithink that that's also
something that's reallyimportant If you're going to go
solve this problem and I've seenthis across other industries
having a I don't want this tocome across the wrong way, like
a from a place of ego oranything but being able to have,
like one person that can reallymake the call you know who has
voting control, chairman of theboard, founder, CEO the deep
(24:15):
understanding and the will tojust drive something through.
There's still no guaranteesthat someone's going to be
successful, but there's so muchthat you're able to do from
being nimble and really pushingthings through and bringing
people together in order toreally bend the market to your
will, so to speak.
That, I think, comes as anadvantage.
Along with that, as far as whyI'm really passionate about this
(24:36):
, I had a bit of a troubledchildhood.
Growing up, I was really badlybullied when I was in elementary
school and junior high got beatup a lot, jumped from behind.
I had my front teeth chippedout and chased with broken
baseball bats and had a prettynasty experience with some of
the teachers in my school aswell a real lack of support from
them which really caused me tobe super sensitive and really,
(24:58):
really upset about creating moreaccountability, a real sense of
justice and fairness as well,Understanding that people in
positions of power the greaterthe amount of power, the greater
the need for accountability.
But in order to createaccountability, you need
transparency.
If the people in the positionof power had all the facts
available to them to reallyunderstand the ground truth of
(25:20):
what's happening and knew thattheir decisions were going to be
out in full sunlight foreveryone to see, I think that we
would build a much bettersociety and system.
And so some of those, some of myown personal experience from my
teenage years, really createdthat sense of, I'd say, justice
and the need for trust andtransparency.
It's deeply embedded into myDNA.
(25:43):
It's also one of the corevalues of Flex Bay radical
transparency.
Ray Dalio talks about this inhis book Principles and how it's
a double-edged sword.
Not everybody's able to worksuccessfully inside of an
organization that's radicallytransparent, but that's one of
our core values as well, and Ithink it's one of the reasons
why this team is perfectlysuited to go work on this
(26:03):
problem, because this is what'sneeded.
If you talk to the people whoreally deeply understand what's
broken inside of payments today,they'll tell you that more
trust and transparency in thepayments and the ability to very
transparently share all thedata that's available on all
sides of the ecosystem and to beable to make better decisions
based on that data is the realanswer to the problem, and so
(26:24):
that's what we're working on.
Greg Myers (26:25):
Okay.
Well, it's obvious what yourpassion is on the business side,
but what about a personalpassion?
Darryl Hicks (26:30):
Yeah, I mean I live here in the Okanagan Valley
for a reason.
You know, I lived most of mylife in really big cities.
During the pandemic, the valueproposition of living in a dense
urban environment was seriouslymitigated, especially here in
Canada.
The lockdowns were prettysevere.
In Montreal we even had curfewsat one point because, you know,
covid only comes out aftereight o'clock.
(26:52):
But it turns out that quality oflife here in a place like
Okanagan Valley was tremendous,because everything that people
do in dense cities is like goingto nightclubs and restaurants
and festivals and the symphonicorchestra and sports teams when
they're in the playoffs.
That's all the best stuff ofbeing in a big city, whereas
here the greatest stuff ishorseback riding and water
sports and golfing and hikingand snow biking and skiing, and
(27:16):
this is a mecca for all thosekinds of outdoor activities.
So it's been a real blessingfor the family to be here.
Everyone's so much more active.
We're a wake surfing boat.
We get out wake surfing on thelake all summer long.
We're blessed to have a ski in,ski out at a really beautiful
ski resort up in the Rockieshere close to where we live.
(27:37):
So it's been a great life and Ihave a lot of passion around
all those sports, but doing itwith my family.
I travel a lot, like every CEO,but when I'm not traveling I'm
all in and really working hardto get the family together and
out, doing these really amazing,active things.
Greg Myers (27:52):
Okay, well, daryl, if someone comes to you maybe
they just graduated from collegeand they're looking to go into
a career in payments or fintechand they come to you and say,
hey, daryl, what do I need tofocus on to be successful, what
kind of advice would you givethem, Well, I mean, there's the
obvious ones on, like, thinkabout what you're really
passionate about.
Darryl Hicks (28:10):
This is what I even do with my kids like what
you're naturally drawn to, andlike what kind of YouTube videos
you watch in the evenings andthe stuff that you do, where you
just get into a state of flowand you completely lose track of
time.
Like, my oldest son is justsuper passionate about all
things cars and he's constantlywatching YouTube videos and like
how to change your ownsuspension and change your own
radiator and change your ownbrakes and he's just and he's
(28:30):
always been really giftedmechanically with his hands.
Well, that's probably going tobe a really great place for him
to focus on.
You know where he's going to goand work.
If you are really passionateabout payments which is rare but
does happen I'd say the one ofthe biggest lessons that I
learned early in my businessthat I try to share with people
is, I think, one of the smartestthings I did.
(28:50):
Before I had my first dollar ofrevenue in FlexBay, we built a
killer advisory board.
You can't do things on your ownand being able to find, curate,
incentivize, communicate,compensate a really killer
advisory board, or a tribe ofpeople around you has been a
massive unlock for me.
I would not be where I am todayif it wasn't for the advisory
(29:13):
board that we built together.
I have a really great frameworkon that, which I teach to
founders and to executives.
I recorded a video on it and Ishare it with people completely
for free.
The framework that I learnedfrom a mentor of mine and then I
kind of added to it and refinedit with some business coaches,
and I think that that applieseven for people just kind of
like graduating out of school isgetting yourself out there,
like showing up as half thebattle, and I mean like showing
(29:35):
up in person, like go to thepockets where there are people
that are actively working on thething that you're really
passionate about, find out whatproblems they have and find ways
that you can provide value tothem and start to build that
connective tissue and thoserelationships with them, and
just get yourself out there andfind out more and who are the
major movers and shares andplayers in the ecosystem, and
(29:56):
you'll find that all kinds ofdoors will open to you as a
result of that.
Greg Myers (29:58):
Okay, great Thanks for sharing that.
So we've covered a lot ofground about the company, the
industry and you.
Is there anything else you'dlike to cover before we wrap up?
Darryl Hicks (30:33):
no-transcript need for transparency.
It's something that I'm deeplypassionate about and I think
it's something that we needacross all kinds of aspects of
our society.
I'm working on it in payments.
I got payments.
I'll take care of that, but Ithink that there's a lot of
other things.
The same thesis that's reallydriving success in FlexPay and
(30:55):
in this particular problem couldwork in a lot of other areas.
It's something that I'm deeplypassionate about.
Greg Myers (31:00):
I think that's a great way to close out the show.
So, daryl, thank you so muchfor being on the show today.
I really appreciate it.
Darryl Hicks (31:05):
Yeah, it's great to be here.
Thanks, Greg Cheers.
Greg Myers (31:07):
Absolutely, and to all you listeners out there, I
thank you for your time as well,and until the next story.
Speaker 1 (31:12):
Thank you for joining us this week on the Leaders in
Payments podcast.
Make sure you visit our websiteat leadersinpaymentscom, where
you can subscribe to the showand where you'll find our show
notes.
If you enjoyed listening,please share on your social
channels as well.
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