Debra LeJeune, CEO and Founder of Integrity Payments Group, recently joined Timothy Li on the LendAPI Partner Podcast to talk about what most payments companies get wrong and how IPG is building something different. From payment waterfalls and tokenization strategy to the Federal Reserve outage and the future of real-time payments, the conversation covered the full life cycle of payments in lending. Here are the highlights.
Listen to the full episode: LendAPI Partner Podcast with Debra LeJeune. Also available on YouTube, Spotify, and Apple Podcasts.
The Origin Story: Why Integrity?
Timothy Li: Tell us your story. Tell the audience who you are, what you're about, and your background.
Debra LeJeune: "My background really originated in banking. I didn't have the vision for many years to form Integrity. It kind of came out of being president of multiple companies that were owned by other people and seeing the industry of payments really miss the mark when it comes to putting the customer first. After seeing so many payments companies try to fit a special needs client into a standard hole and then also lock them into long-term contracts and not really have the customer's best interest in mind. I decided that we really needed to form a new company and that we could make it different by focusing on integrity, agnostic advice and agnostic representation so that each stack that we recommend for a client is specific to them."
Timothy Li: You guys really came through and it wasn't about APIs, it wasn't about the documents, it wasn't about the technical stuff, right? You guys understood what we're trying to do in a short amount of time, like a 20-minute call, and actually found all of the solutions that we needed.
Debra LeJeune: "We've taken the payment process and made it across the end life cycle. We actually help clients, especially lending clients and buy now pay later, think about everything from infrastructure to onboarding new borrowers to payment success. Sometimes we'll set a client up with five, six, seven different solutions so that they have the perfect waterfall. They can minimize those issuer declines and they'll see a lift of 10 to 30% in authorization approvals, which can result in millions to clients."
Timothy Li: If I want to set up a point of sale financing company for a pet care, pet surgery kind of outfit, what are some of the things I should worry about?
Debra LeJeune: "We help the lender from the very beginning point of infrastructure to say own your own payment data. Let's look at how you're tokenizing. Let's look at using network tokens or universal tokens beyond just a vendor token. It'll have 21 points of validating that borrower versus the nine you get when you get a vendor token. We really help them understand what it means to own and control their own payment data. And it gives them flexibility. If they have hiccups with a processor, we've embedded that infrastructure to allow them to waterfall onto other solutions with no downtime."
Timothy Li: So I can take that little wallet that I built for my client, encrypted, and go to another processor?
Debra LeJeune: "Exactly. You can direct that at any time and you can even build a waterfall from that token vault where its intelligent data will know, okay, Chase cards are going to approve better at merchant processor B than merchant processor A. So it'll automatically route those transactions where it has proven to have the highest level of success."
Timothy Li: If I process a couple thousand dollars, that eviscerates all of the so-called savings every time you have one of these payment issues.
Debra LeJeune: "Everybody else focuses on the rate you're paying. 'Oh, we're going to save you 10 basis points.' Our entire infrastructure is built on better success, not just saving 10 basis points."
Debra LeJeune: "We actually deep dive after the first month or two of onboarding a client. We'll download all of their payment and authorization data. We'll do a forensic analysis and say, if you enter this data on this transaction, that will help you qualify for lower interchange. If you enter this data, you'll have less false declines. And then we audit their statements to make sure they're not being billed for anything that they're not using or anything incorrectly."
Timothy Li: The service is rendered, everybody's happy. What happens with the remaining 11 or 23 payments? What can go wrong?
Debra LeJeune: "You could have a borrower that you've extended credit to and then none of their payments get approved because the bank declines them based on the MCC code or the name of the merchant. You've really approved a good borrower and the borrower has the intention to repay you, but they aren't able to get their payment processed. So we look at that data and then we'll change something or add a different tertiary processor into the waterfall."
Debra LeJeune: "We're offering payroll pay. Some borrowers that really want to be approved but have a problem with their credit, if they connect their paycheck to make those monthly payments and they're taking the payment directly from their paycheck, that lowers defaults by about 60%. And it's not EWA. It is completely borrower opt-in. That type of payment has no chargeback, no ACH disputeability. It is a payment that is locked in."
Timothy Li: It's just a payroll split, right? It just goes straight.
Debra LeJeune: "Exactly. No different than paying your healthcare. Straight out of the paycheck."
Timothy Li: What's the default waterfall you recommend to people getting into point of sale financing?
Debra LeJeune: "If it's a young portfolio or all first-time borrowers, they tend to struggle with compliance, authorization approval rates, and ACH return rates. We're also very focused on their cash flow. While ACH is going to have a three-day period of washing out those NSFs, there are some lenders and merchants that we have analyzed enough that we'll put them on a zero-day hold, and we know they'll never have a negative day. We'll recommend that new borrowers go debit card for the first three payments, and then if those first three payments are successful, you can move on to the least expensive ACH."
Timothy Li: ACH was in the news a couple of days ago. It stopped processing for a couple of hours. What happened?
Debra LeJeune: "The Federal Reserve was down. All ACH clears through the Federal Reserve. That's where the banks go to trade payments. I have a client that collects rent payments for hundreds of thousands of rental units — they process about $3 billion a year with us. I sent a message to that owner and said, 'I want to let you know your funding is going to be delayed. The Federal Reserve's having an issue.' And I offered to send my IT group over to the Federal Reserve to help them figure it out, but they declined."
Debra LeJeune: "I started in banking in the late '80s. The way that the banking industry processes today for the most part is the way it was in 1988. But all the payment technology has drastically changed. That's where we really come in with our payment waterfall strategy. We're much more of a payment strategy firm than a payment placement firm."
Timothy Li: What about this new thing the Feds came out with, Real-Time Payments? How's that different from a debit card? Anybody using it today?
Debra LeJeune: "There are people using it, but the coverage is not very widespread. RTP is only on the funding side right now. It's not on the pull side. You can push funds out to borrowers or merchants through the RTP process, but not many people are using it on the pull payments. The smaller banks are really putting that off because it's going to cost them a lot of infrastructure. I believe the banking guideline is that by 2027 all should be connected to the real-time payment networks, and that's when I think we'll see much greater adoption."
Timothy Li: There is no recovery. Once it goes, it goes. Doesn't that create a lot of fraud pressure?
Debra LeJeune: "It's gone. So it's very much like a Zelle or a Venmo. There's no pulling it back. You have to be very careful of who you allow to use this. You have to have systems in place to recognize if you've got two people using the same bank account number. That's a typical fraud pattern where you've got multiple borrowers using the same fraudulent bank account to get funded."
Debra LeJeune: "I'll have one client who's paying $3 for a return and another client paying 50 cents for a return. Who's looking out for them? I'll ask them, 'What do you think your ACH costs are compared to your card cost?' And they'll go, 'I only paid 35 cents for an ACH.' And I'm like, 'No, you do not.' Let's look at your actual invoice, how much you're paying in return fees, unauthorized fees, and what is that net effective rate compared to a card rate? With cards, you get your money faster, you have a defined dispute process. Our clients have a 75 to 80% win rate on the card dispute side."
Debra LeJeune is the CEO and Founder of Integrity Payments Group, a payment processing consulting firm that serves as an agnostic advocate for lenders and financial services companies.