Building the Trust Layer for Payments with Noam Izhaki, CEO of Ballerine | Episode 513

Welcome to the Leaders in Payments Podcast, where we talk to sea-level leaders from across the payments plan space. 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 topic. Hello everyone, and welcome to the Leaders in Payments Podcast.

I'm your host, Greg Myers, and today's special guest is Noam Azaki, co-founder and CEO of Ballerine. So, Noam, thank you so much for being here and welcome to the show. Thanks for having me, Greg. Great to be here.

So before we dive into your career and talk about the company, can you just give us a quick snapshot of your personal background, maybe where you were born, where you grew up, where you spend most of your time, and kind of maybe some things about you personally? Sure, yeah. So I grew up in Tel Aviv, Israel. I still spent probably half of my time in Tel Aviv, Israel, and half of my time in the US.

When I was young, I was a very, very curious kid. I think that uh partly seeing my father as a low-tech entrepreneur that did many, many different things kind of like intrigued in me the passion for creating things. So my father, um, one of his businesses was a flea market, who owned a flea market. And every Saturday I would go there and just try different things.

I was selling like bracelets of like Live Armstrong, if you remember those, and megaphones to kids who go to scouting and many, many different things. At some point, I also started to organize events, which taught me a lot about marketing, about creating relationships, about motivating people. And at some point I also built a social platform. It was back in the days when seeing your photos on HTML was still kind of like a cool thing before Facebook and all the big guys.

And I used to send photographers to different events, and at some point I just built a social platform to manage all those photos and forums. And that really was the way I entered the technology world, and that's what I've been doing since then. Okay. Well, maybe keep going on the journey.

Talk about your professional journey and maybe why you started Ballerine. Yeah, sure. So from building the social platform in the high school, I built a bunch of different online businesses. And at some point I also decided to work professionally as a programmer.

I studied business while working full-time in different tech companies. And at some point I just became very curious about growth, about how to bring those products, technology to consumers, today's day-to-day consumers. And I entered the financial services space at some point, and I joined as an early employee in a startup. And this is where I met my co-founders.

And in this startup, we focused on remittances, cross-border transactions, which by nature have higher risk. And I was shocked by the amount of time and resources we had to invest on risk, fraud, and compliance, even like pre-product market fit. And I saw like a huge difference between how automated everything was in the payment flow versus the process of vetting the individual or the businesses and whether they can accept and send payments. And it felt kind of like wrong, but at the same time, we were a remittance company.

I didn't know maybe just us, you know, doing like cross-border thin file applications, you know, small businesses, expats. And then I went to Wix. Wix is a website building platform, it's uh it's a Shopify alternative. And we launched a PayFuck at Wix, and uh, I had a very horizontal work job at Wix, and I noticed very, very similar challenges also at Wix.

And after those two experiences, my co-founders and I were, which we were still friends, just to ask ourselves if we are working in probably two of the most 1000 advanced, technically advanced companies in the world, what's happening in other financial institutions and how they're going to adjust to what's next. And that's how we started the Ballerine four years ago. And the idea was to allow any company to take any information they have around KYC, KYB, transaction analysis, and just putting it in one place where they can leverage AI and automate their decisions, but in a way that is under the control that is required in such a sensitive area like risk and compliance.

And with the time, we also got a lot of traction in the merchant acquiring space. And today many of our clients are also other types of financial institutions, but many of them are merchant acquirers, PSPs, card schemes, marketplaces, everyone who needs to understand seller trust. And we allow them to automate their decision-making processes across the seller lifecycle from onboarding, monitoring, underwriting, and basically allow them to reduce the trade-off between growth and safety in the way they manage risk.

So you mentioned your your types of customers there. So are you global or do you mainly focus on North America? What what is your kind of market coverage? Yeah, great question.

So payments is such a global business, right? And we're working today with companies in all the different continents, um, US, Europe, but um Asia and Africa. And many of our clients, even if they are headquartered in the US, they are global companies. We do have a global coverage when it comes to how we work with clients and their clients.

Well, what would you say is the biggest challenge that that your company is solving for your customers right now? Yeah, so it's really this trade-off between growth and safety, right? So our clients, they are basically facing an impossible task. They need to grow the businesses, they need to accept more merchants, they need to be able to work with all sorts of kinds of new channels and payment methods.

And at the same time, on the other hand, regulations just becoming stricter, the ability to create fake businesses just became, I would say, commoditized at the moment with vibe coding and uh and all those tools that allow you to create documents and websites within minutes. They have to choose uh whether they are able to grow and how, in the way that also satisfies the other forces of that industry. Um, and what we give them is the ability to be able to grow um whatever channel, whatever new type of payment method, new vertical, new geography that they are expanding to, but with all the knowledge as well as the tools to manage the risk properly.

Right? And we are very proud by allowing such leading international payment companies and banks to be able to allow small businesses and large businesses to accept payments all over the world and to be this uh agentic power hub that allows them to automate those processes and reduce the dependency on hiring more and more people with any new product or region or vertical they are expanding to. Okay. Well, what would you say differentiates you from your competitors out there?

Yeah, so the fraud and compliance space is a very crowded place, right? There are many, many point solutions that give you signals that help people to understand better the picture of the client's risk. But the decision makers or the the way those decisions around onboarding, underwriting, monitoring investigations, mainly being done today, are still leveraging human intelligence on top of those signals. And what we really allow our clients is to take their own policy and their own risk appetite and really to automate judgment at scale in a way that deterministic workflows just can't do.

So, what you have seen so far are like companies are just leveraging those signals and people. I would say this is the standard in the industry, and that makes it very, very difficult really to scale up, especially with the clients' expectations and other trends that just will force them to enter kind of like the automated real-time world. And then you see companies that automate, but then they mostly use deterministic workflows or some machine learning, but it does not really allow them to automate expertise at scale because the environment of the internet is so unstructured, and there are so many different ways to present yourself as a business, which you can't really create just like a deterministic workflow to understand that.

And so we allow them to completely automate many of the things that they don't need to look at, anyhow, and really help them to focus where they really should be focusing on, and to have all the data and knowledge that they need when they need it. So faster growth, less headcount, and better risk and compliance controls. Okay. So many companies, and you were talking about this being international, they may have multiple payment processors, they may have multiple systems, especially banks.

So do you pull all of that data together and then the AI is sitting on top of that? Maybe explain that a little bit. Yeah. So we have clients that use us in different ways.

And some of them, for example, will just choose, you know, will just automate the async investigation that they do about businesses. So they will upload their policies and the things they want to know about. And we also embed in those AI agents all the knowledge that they need when it comes to different regulators, FinCEN, FDA, the card schemes, Visa, and MasterCard, and will just automate the analysis that they do online on what the merchant is selling, who they are associated with, what is their business model.

That's one use case. And then you see other clients that will also embed their transactions and will use us for the ongoing monitoring. In fact, today Ballarin is one of few vendors that is certified by MasterCard Merchant Monitoring Program. So banks that are using Ballerine get a significant fine reduction if they can show, demonstrate that they actually use us from the first transaction on a monthly basis.

We know how to start with clients that just want to automate one type of decision and very, very and to proof value very quickly. But many clients are also using us to all the decisions they make across the merchant lifecycle. Okay, well, let's talk about the future a little bit. Where do you see the biggest growth opportunity in your segment of payments?

Yeah, that's a great question. I I think that the payment space in general, you know, the payments is like it's an infrastructure, right? But what really affect the way payments work or the businesses and how they change? And if we are looking at the world right now, the world is definitely about to change.

And, you know, we're already seeing agent e-commerce, you know, kind of like even before the transaction, just the fact that you and I are advising with our agents on any purchase decision that is kind of important. It's a huge change in the flow and in the way buyers think that will affect how people transact. The ability to create new businesses today is like so much cheaper and it's so much easier to be able to be a one-man show and to build your own business, that's going to affect economics.

And and when when the world is changing, payments are changing just with it, right? So that's exactly also why I believe that those are exactly the things that payments companies need to ask themselves nowadays. If I'm gonna have like five times, you know, of my transactions and ten times of merchants in a year from now, will I be able to keep up with what's going on? So yeah, I think everything is gonna be much faster.

I think a lot of the flows are changing and are going to be more kind of like on the back end. A lot of power is gonna go to agentic platforms that include the LLM that we're all using, the foundational models, but also just other agent developers. I think it's going to affect not just like humans' interaction, it's going to affect also just how the agents can make decisions about bringing data, right? When you do research.

And they will suggest, hey, you ask me all those questions, I can do some research for you, but it would cost you some money to get the information that you need. Do you approve it, right? So the interactions of SAS and how it's being consumed by other agents, everything is gonna change, and I'm excited about what's next. Well, what does success look like for Ballerine, say, over the next three to five years?

Yeah, so Ballerine's mission is really to be the trust layer of the internet. So our hypothesis always was that more and more businesses from any everybody is gonna go in some way or another to the internet and and will offer the services through the internet. And where in a world that everything moves so quickly and also go to change kind of like from human interaction to machine interaction, trust is really one of the missing biggest layers that need to be addressed. I think that many, many companies today focus on the new infrastructure, right?

So we see the new protocols and like how a person can just speak with an agent and knows what there is in the other side, like the inventory, the shipping, all the fundamentals. But there aren't really many companies in the world that understand merchantry as we do at Ballarin, and also bring the right tech to be able to understand any type of service, any type of merchant at a global scale and make trust decisions in real time. So that's what we want to be. We want to be the trust brain of the internet and to allow marketplaces, agents, platforms, PSPs, you and I, everyone will need to try to understand the risk of engaging with another business.

What does it mean for them, depending on their specific contacts in real time? Well, I know we've kind of touched on on the next question a little bit, but maybe we can go go deeper. The question is what are the biggest trends that are reshaping the industry? And obviously, agentic payments, whether it's agents buying for consumers, whether it's agents buying from other agents.

I mean, the the it's endless, and that trend is huge. And we could dive into that more, but are there other things that are reshaping the industry that you wanted to touch on? Yeah. So I think that the fraud industry is growing significantly, right?

I think that fraud today, you know, we used to see like many scammers that, you know, kind of like it was quite kind of like easy to understand that there are scammers, right? Based on how they they speak, what the language they use. And and now we see so many dormant accounts and companies that and the problem is that it's not really just to understand the de facto operators, because there are companies helping them, like the fraudsters, to create those fake profiles, and we call it transaction laundering as a service.

Um, so we see a huge trend of companies that you know from uh singular fraudsters build businesses that commoditize different building blocks of fraud. And I won't be too specific, but let's say that we we we see a lot of those, and yeah, that's just going to increase, fortunately. I think that what another aspect that is like really interesting is like what the definition of business is businesses is changing. You see right now AI companion, like full AI-based services that help you to do certain things, and there is no there is no company, there is no human, there is sometimes one human behind it, and they have lots of different customers, right?

And that's changed a lot about the the economics and of like payments, businesses, yeah. So I think those those are the those are two things that we see a lot. I think that the third piece is just the integration of our workforce with software. I'm not trying to be here like you know, too scary to scare anyone, but I do see that many of the tasks that humans are doing today are going to be more and more automated.

And the the separation between what software is doing and what humans are doing, it's kind of like it starts to mix up a little bit, and there are many new models and new kind of like type of services that are going to accelerate it. There is the optimistic side in me that really that appreciates it and you know the exciting times that we live in and the opportunity. There is the other side that just think, are we ready for that, right? As a society, but yeah, I won't go too deep into that in the last uh probably 10 minutes of our discussion, but uh I will stop here.

Yeah, I think we could talk for for an hour about about all of the uh implications of of AI. So a couple of final questions before we wrap up. So this is this is more about sort of your your career and being a leader. So if you could go back and give yourself advice at the start of your career, what would it be?

So I think while we are all appreciate being passionate and being curious and in our actions, we sometimes underestimate it and we make a lot of um rational decisions that uh affected by by society and how people around us see what's good and bad. And I think that relatively I I was on the side that actually I was following my passion and my curiosity, but but I think that the how far you can go with it is like way, way more far than what I've been doing. And every time that I made a decision where I followed my my passion and curiosity, it always ended up being one of the best decisions I've made.

So a little bit being less pressure on on time and you know, kind of like where I am in my development cycle and following even more, which I definitely did, but I mean like taking it to the extreme, I think that's what I would suggest to my my younger self. Okay, great. So let's let's kind of wrap up the show with one kind of segment and talk about what is the one thing that payments leaders who might be listening to the show today, what do you think they should be thinking about right now?

It's a little bit like what I said before, right? I think they need to ask themselves let's say that the world is completely changing. You'll have many more merchants, many more businesses from kinds you didn't know exist and you don't really know how to underwrite or how to manage the risk, and many, many more transactions. Would you have to hire more people in order to support those new opportunities?

If the answer is yes, a lot, you are in problems. Because if you are not one of the companies that are able to change with where the world is going to, you have a problem nowadays. Because being a commodity payment company and just relying on your access to consumers and to merchants, it doesn't going to hold water in like a few years from now. So I think like that's the first, you know, you know, do I have the right mindset to capture those opportunities?

Do I have the right people to capture those opportunities? And do I have the right infrastructure to keep up with everything that is going on? Those are three questions I would ask myself nowadays. Well, let's wrap up the show with you, maybe give us the the what you want people to take away about your company, about Ballerine, what you do.

Just give us the 50,000-foot level and then we'll wrap up the show. So if you are a financial services company that needs to understand businesses at scale and want to remove the friction between the growth of your business and safety and compliance and strong controls, we're the address. So speak with us, and I'm sure we can help. Okay.

Well, I think that's a great way to wrap up the show. So, Noam, thank you so much for being here. I know your time is very valuable, so I really appreciate you being on the show today. Thanks a lot.

Great to be here. Thank you. And to all your listeners out there, I thank you for your time as well. And until the next story.

Thank you for joining us this week on the Leaders in Payments podcast. Make sure you visit our website at leadersinpayments.com, 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.