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Leaders In Payments
Leaders In Payments
Qi Cao, Co-Founder & CEO of Chargeblast | Episode 327
How did a pre-med student from Yale end up transforming the landscape of chargeback mitigation? Join us as Qi Cao, the co-founder and CEO of Chargeblast, reveals his fascinating journey from life science consulting and hedge fund analysis to pioneering tech-forward solutions in the payments industry. Discover how Chargeblast is slashing chargeback rates by up to 99% for hyper-growth startups using Stripe and Shopify. Get an insider look at the unique strategies Chargeblast employs, the pivotal role of social media for business growth, and the significance of strategic partnerships with industry giants.
This episode also uncovers the incredible potential of Generative AI in optimizing chargeback alerts across sectors like health, subscription SaaS, and e-commerce. You'll hear about the latest trends in payments, including the future of peer-to-peer transaction chargebacks and the crucial role of card tokenization. Qi also shares his personal passions, from daily workouts to mentoring a diverse team, offering invaluable advice for anyone venturing into the fintech or payments space. Don’t miss out on the practical tips and inspiring stories packed into this compelling conversation!
Welcome to the Leaders in Payments podcast, where we talk to C-level leaders from across the payments landscape. We'll be discussing the products and services that impact the payment space today, as well as trends and predictions for the future of payments. We will also hear stories from our guests about their journeys to the top.
Speaker 2:We actually get a lot of traffic from Reddit and Twitter, where these quote-unquote new era merchants and their founders are found, and because of our social media presence it's really helped us gain credibility with the Stripe and Shopify merchants to a degree where now they just kind of organically see a post about chargebacks and they'll see something related to ChargeBlast and then they'll sign something related to ChargeBlast and then they'll sign up for our service.
Speaker 3:That was Chi Sao, the co-founder and CEO of ChargeBlast, and he is my special guest on this episode, episode 327 of the Leaders in Payments podcast, and I'm your host, greg Myers. Chargeblast helps hyper-growth startups reduce chargeback rates by up to 99%. Chi and I talk about what makes ChargeBlast unique in the marketplace and how they help mainly customers of Stripe and Shopify decrease disputes and accept more transactions. We've got a great episode ahead, so let's get started. Hi Chi, thank you for being here and welcome to the Leaders in Payments podcast. Thanks for having me, greg. Absolutely Well, let's dive right in. If you don't mind, tell our audience a little bit about yourself, maybe where you grew up, where you went to school, where you currently live, a few things like that.
Speaker 2:Sure Grew up in a small town of Rochester, minnesota, and I was surrounded by a lot of doctors and researchers, because that's where the Mayo Clinic is based. That's probably what Rochester is best known for, and because of that I was quite influenced to go down the pre-med route in college. So I studied molecular and cellular biology in Yale, but I think I quickly realized that medicine wasn't for me, because I always found myself starting new projects and new startups here and there. So I resold Pokemon cards in elementary school, I had my own soda pop and candy business in middle school and had a couple of music and life sciences startups while at Yale. So I figured, look, I have a biology background but I really love business.
Speaker 2:So I did what is kind of the next best thing when it came to meshing the two together, which was life science consulting, did that for a couple of years. Did corporate development had a that for a couple of years did corporate development had a unicorn for a couple of years. And then I was an analyst at Point72, which is a long short public equities hedge fund, and I covered enterprise software and multi-industrials. So I mean, long story short, I haven't used my biology degree for many years now, but find it still very helpful in learning new spaces and meeting new people in terms of structuring my thinking process. We're based in New York. I live in Hell's Kitchen, been there for about three years or so and quite love it.
Speaker 3:Okay, well, obviously you started a company called Charge Blast, so tell our audience what Charge Blast does. Yeah, absolutely.
Speaker 2:So Charge Blast helps merchants maintain their chargeback rates near 0%. We really pride ourselves on our tech forward platform and also our white glove client service. So if you look up our trust pilot, it's a 4.6 out of five stars and every single one of the reviews people call out our support team by name. So that's been a great differentiator for us, as we do play in the field of chargeback mitigation, chargeback pre-dispute alerts, so finding these ways of adding additional value to the fundamental service has been really important for our company.
Speaker 3:Okay, and who are your typical target merchants?
Speaker 2:That's kind of how we've also differentiated a little bit in terms of positioning our business. So the traditional high-risk space is kind of known for adult nutraceuticals and online gambling. However, we took a different approach and really targeted what we call new era merchants, so subscription software businesses or subscription e-commerce businesses Anything that really has a subscription and is direct to consumer has a risk of fundamentally having a higher chargeback rate that the card networks are not comfortable with. So we've really done well by targeting folks that are on Stripe and Shopify, as those are the new era merchants that don't really know what tools are available when it comes to mitigating chargeback risk.
Speaker 3:So are you, I guess, using air quotes official partners with them.
Speaker 2:Yes, we are official partners with Stripe and Shopify. They send us a lot of business, we send them a lot of business. So we've been working together now for almost a year and it's really helped propel our growth and we really value these relationships that we've built over there.
Speaker 3:Would you consider how you sort of position that as new era type businesses, the vertical, or are there like traditional verticals that we usually use in payments, that you kind of focus on?
Speaker 2:I consider that almost a vertical in its own, which would be just subscription merchants, and we've largely targeted these guys because, well, our background, my co-founders and I we actually had another company that was direct-to-consumer subscription, so that's kind of how we got to understand the space and by leveraging our background in ad spend, social media engagement, et cetera, we actually get a lot of traffic from Reddit and Twitter where these quote-unquote new era merchants and their founders are found. And because of our social media presence, it's really helped us gain credibility with the Stripe and Shopify merchants to a degree where now they just kind of organically see a post about chargebacks and they'll see something related to Chargeblast and then they'll sign up for our service.
Speaker 3:So maybe talk a little bit about your service. Talk about, maybe for those who may not know but I think most listeners will what a chargeback is, but maybe talk about how your service works and what merchants actually have to do to use the service.
Speaker 2:So the way ChargeBlast works is at the moment of a consumer or a customer charging back a purchase or disputing their purchase with a credit card company. Chargeblast is actually able to change the flow of information because of our engagements with Visa, MasterCard, so that instead of the processors knowing first, it's actually the merchants, and because we give the merchants 48 to 72 hours when they address the issue with the customer, usually in the form of a refund, we'll let the credit card companies know hey, everything's good, no need to open up a dispute. And thus, because there's never an official dispute open, the payment processors never officially see a chargeback. So that's how we help these merchants maintain low chargeback rates and they just really care about keeping their chargeback rates as close to zero as possible, Because the last thing that they want is being kicked off of their processor or losing their payment processing account.
Speaker 2:You can't process money If you can't take money. Well, you don't really have much of a business. So it's just a flow of data that we've leveraged to help the merchants. But the way we really differentiate is we can make every single transaction unique and by doing so we can have high fidelity, one-to-one alert to transaction matching. So our merchants and clients no longer have to search through thousands of similar looking or tokenized transactions to try and figure out which one is the right one to refund, Because every single transaction is unique. Thanks to our features, we can have that immediate one-to-one matching and then automated refund and subscription cancellation thanks to our integrations with Stripe and Shopify. So that's kind of how the product works in a nutshell.
Speaker 3:Okay, and you've talked a little bit about what differentiates you already, but I want to double click on the service side, so tell the audience a little more about the white glove service, what that means to the merchant.
Speaker 2:So maybe even before getting into the white glove service, understanding how we're even able to offer that level of service is important. So Charge Blast is really built around self-service, meaning a lot of our clients will come to us, they'll never actually speak a word to us and they're up and running the next day. All of this is thanks to our ability to do risk underwriting and due diligence on the merchants, because we have deep integrations and partnerships with Stripe and Shopify integrations and partnerships with Stripe and Shopify and because around 80% of our business is actually self-serve, the remaining 20% we can provide additional attention to whenever they have issues. So that is one big factor. Right, there is our ability to concentrate on the larger clients that may need more tailored solutions. And then we have our support team, who absolutely is fantastic I cannot say it enough. They're based out in the Philippines, but they work 24-7.
Speaker 2:And our response times. To a first inquiry or when someone types into the chat box a question for the support team, the response time is less than 30 seconds typically. So you're getting real quick service. You're getting really detailed and technical responses that a lot of the merchants are asking for. So it's not just high-level service. That's really fast. It's really deep, and technical service that's really fast. It's really deep and technical service that's incredibly fast and can help a merchant resolve problems, an issue that they have in probably less than five minutes. That's what our average is.
Speaker 3:Can you talk about the kind of business model? Is it a SaaS model? Or how do you charge the merchants?
Speaker 2:The business model is a consumption model, so a merchant will sign up with us, they'll start receiving alerts the next day and by the end of the month we'll invoice them for the number of alerts that they've consumed. This is largely because of our own relationships with Visa, mastercard being consumption as well, but at the end of the day, our ability to offer these value-added services and the white-glove client service enables us to capture a premium and also offer some solutions that are actually a complete subscription as well, but those services are not a very large percentage of our revenues at all. It's mostly just the alerts consumption.
Speaker 3:Okay, and where do you see and I'll ask this kind of in a broad term, but then you can kind of narrow it down to specifically how it might affect your business but where do you see payments headed, say in the next three to five years?
Speaker 2:So payments is about to get much more intelligent and I know everyone brings up generative AI, but with my co-founders and I, our first company actually was around Gen AI with OpenAI. This was just before the big Gen AI wave. That happened late 22. And that's kind of how we got into this space is, our Gen AI company had a lot of chargebacks. So payments as a whole is going to get a lot smarter and fraud is going to get a lot smarter, and fraud is going to get a lot smarter as well. Because of these Gen AI ability to detect certain patterns and output basically human-level responses, you're going to see a big rise in fraud or just generally very intelligent fraud.
Speaker 2:When it comes to to chargeback space and we've discussed this with both Visa and MasterCard directly there is a lot of room for Gen AI to play a role in optimization of chargeback alerts as well as other chargeback mitigation solutions. So what do I mean by that? Well, every vertical whether it be in the health vertical or the subscription SaaS vertical or the online e-commerce vertical every vertical has a fundamental chargeback rate that it has to deal with. However, not every merchant really should be keeping their chargeback rates at 0%. If you're keeping your chargeback rates at 0%. Well, you're well below any of the risk thresholds that Visa MasterCard have put in place and you're refunding a lot of transactions. So we've been working with some of our clients on solutions in the Gen AI space that allow us to better tailor to their needs, based on their vertical and also based on their risk appetite for where they want to keep their chargeback rates at.
Speaker 2:So we consume a lot of information of what type of cards do the merchant typically accept.
Speaker 2:Are they heavier, like weighted towards Amex, or are they more weighted towards MasterCard, etc. We look at the transaction volume and the average order volume and put that in the model and the output is effectively look, you don't need to be paying us this much for alerts. You can actually cut back on some. Let's put your threshold on receiving alerts to a hundred bucks and, based off of all the historical data we have, that technically should keep you at a 0.4% chargeback rate, for example. Right Could save a merchant tens of thousands of dollars based on the size, like every month, and that creates a lot more transparency on the size every month and that creates a lot more transparency as well as confidence in the relationship that we have with the merchants, as opposed to the merchants feeling that they're getting overwhelmed with all these alerts and the bills becoming humongous, et cetera. We try and cut down on the bills for our merchant and we try and offer as much value possible so that they can drive as big of an ROI as possible, and all that is thanks to GenAI.
Speaker 3:Okay, are there other trends that you're seeing that are going to affect your business positively or negatively? I mean, you've got, obviously, pay by bank and maybe that becomes more of a payment method. You've got all your other kind other payment methods that are coming online. You've got crypto and Bitcoin and blockchain and all those buzzwords. Any of that affect your business either positively or potentially negatively?
Speaker 2:Yeah, absolutely. I mean, you can't charge back when it's peer-to-peer transactions, at least not with the current infrastructure, and crypto definitely can't charge back there because the chain is immutable. However, this is why it's important to keep your ears to the ground when it comes to developments in the payment space. At some point, there will be an opportunity for folks to charge back peer-to-peer transactions. The infrastructure is just not fully built out yet, but from my conversations with folks that are pretty in the know with the space, at some point there will be the ability to charge back and there will be a way for folks to determine whether the chargeback was legitimate or not. And when that day comes, yeah, we'll certainly be well positioned for offering alerts and other solutions there.
Speaker 2:But something else that's one concern for sure. Right, it's the peer-to-peer transactions, but something that we're actually quite excited about is car tokenization. A big problem in the alert space is the inability to match alert to transaction. Even having alerts, it will resolve in chargebacks hitting your processing account. Like I said, we have the ability to make every single transaction unique, regardless of tokenization. So, regardless of whether it's Apple Pay, google Pay, regardless of the alert last four regardless of whether it's Apple Pay, google Pay regardless of the alert. Last four digits of the car number is different than what's in your CRM. We're able to do that matching with high fidelity, and that will hopefully allow us to stand out as more and more Apple Pay and Google Pay are being done across the world.
Speaker 3:Yeah, that makes a lot of sense. Well, let's switch gears a little bit and talk about you. You mentioned already a little bit about kind of your career journey, but maybe let's dive into the backstory on the company. You started to tell it a little bit, but you've got some co-founders and maybe tell the kind of startup story what led you to actually starting this and why.
Speaker 2:Yeah, absolutely so I really took the jump into entrepreneurship when I turned 28. So this is more of a personal thing, but in my mind I'm hoping to have kids at 32, 33. So turning 28, I thought to myself, well, I only have four to five years, right, and I've always wanted to have my own company. I've always wanted to take a real stab at building up a legitimate large-ish company. And four to five years, I mean, it seems like a long time, but building a company could certainly take four to five years, right. So I had this uneasy feeling on my 28th birthday where I basically determined, hey, it's kind of now or never. My background is in strategy, consulting, operations and finance. So I kind of provided myself a business school learning through my career, and I was able to wear a lot of the hats that a startup founder needs to be able to wear. So when I turned 28, I reached out to my long friend, stephen Stephen Pedrudi that's my co-founder and CTO, and we chatted about some ideas that could be interesting, easy to spin up, easy proofs of concept, right. And we landed on kind of a direct-to-consumer subscription app idea and we grew it quite a lot. I mentioned that it was in the Gen AI space. So the Gen AI wave certainly helped with that.
Speaker 2:Well, one thing led to another. Our chargebacks started increasing pretty materially and we were really concerned, like, look, we're on Stripe. We don't want to lose our Stripe account. Stripe has an algorithm that can be kind of stringent when it comes to risk. So we were at, I think, at 0.6% 0.7% chargeback rate at the time and we were looking for solutions left and right and we leveraged a few solutions, but we kept on seeing these chargebacks slipping through and we were wondering to ourselves what's going on here? We signed up for this solution. It should basically bring our chargeback rate to nothing, but we're still seeing some chargebacks that are coming through that should have been caught.
Speaker 2:We reached out to our account executive. It took about two weeks for them to get back to us and we were just on the edge of our seats the whole time because at any moment we were afraid that our Stripe account would get shut down. And I think at that moment we realized, after looking through all the available solutions at the time, we realized there was a gap in the market. Whether it be big or small, we didn't know. At that time we realized there was a gap in the market, whether it be big or small. We didn't know at that time. Honestly, we didn't even know all the folks playing in the space at the time. But we figured look, this company that we're working with is relatively big.
Speaker 2:For whatever reason, we couldn't get all of our chargeback alerts up and running correct and it took about two weeks for us to get a response from the account executive, who told us that he didn't know. So we did a little bit more digging. We understood, we did a lot of analysis on how Stripe works and we figured out the problem. And that kind of gave us a little bit of moat because no one else could solve this Stripe problem or chargebacks were still coming in. But we did, and so we integrated deeper and deeper with Stripe and Shopify and the white glove service. I want my clients to be able to get a response from our A-squad support team in less than 30 seconds, not two weeks. So putting that all together, I mean it looked like we kind of hit the nail on the head because it's been a little bit less than a year but we're protecting about a little bit more than $2 billion in annual GMV when it comes to our clients' transactions.
Speaker 3:Yeah well, thanks for sharing that story. It's always interesting to hear. Those that are successful typically find a problem and solve it, and sometimes that problem is one that they've had themselves. Oh yeah, this was definitely a big problem too, so. Right, well, what are some things you're passionate about?
Speaker 2:So maybe one work-related passion and one personal passion. I'll start on the personal passion first. I love working out and hitting the sauna every day. So no matter if I work 12 hours, 14 hours, eight hours, doesn't matter. I find myself in the gym kind of giving myself space from work, and I find myself, after doing some weightlifting, in the sauna to really zone out for 15 minutes. No music, no text, no nothing, just 180 degree heat and my body sweating out all the stress.
Speaker 2:So that is most certainly one of the things I love nowadays and when it comes to work, the thing I love about building a business is mentorship. I mean, we have a team of around 20 people, many of them offshore, but we treat everyone like their family, give them a lot of responsibility and a lot of ability to reach farther than they thought they could, and with that it makes me feel great that I'm affecting someone's life in a positive manner, Because at the end of the day, your team is really just an extension of you and it's a result of the investment that you put and time investment that you put into the team. So that is most certainly one of the things I love most about building a company is seeing everyone grow around me.
Speaker 3:Okay, well, one final question, and it's somewhat related to that mentorship and seeing people grow around you. What would your advice be to someone who's looking at starting whether it's starting out right out of school and maybe they're looking at the payments industry or the fintech industry and saying, hey, I want to build my career in that industry. What advice would you give them to be successful in payments or fintech?
Speaker 2:Honestly, I could use that advice right.
Speaker 2:I don't have any background in payments or fintech until last July, but I'd say what really helped out and what enabled us to get traction is chatting with people who have 10, 15, 20 years of experience in fintech. The thing that surprises me the most, or I'm most in awe about, is the fact that there are so many folks that have been in fintech basically their whole careers. I've never seen an industry where people have just been in that industry for 10, 15, 20 years and I think that's really awesome and I think it really speaks to how exciting the spaces and how much opportunity the space has for people who do dive into the payments and fintech space. But yeah, honestly, just building relationships and asking for advice from people who have tens of years of experience, because, at the end of the day, everything is pretty connected when it comes to fintech and the world is quite small I've come to know and in the payment space, so it's good to treat each other well, get to know each other and don't be shy about asking for help.
Speaker 3:Well, I think that's great advice. Well, Chi, we're going to wrap up the show now and I just want to thank you for your time. I know it's very valuable. I know a startup CEO can be incredibly busy, so I know a startup CEO can be incredibly busy, so I really appreciate your time and thank you so much for being here today. And to all you listeners out there, I thank you for your time as well. Until the next story.
Speaker 1:Thank you for joining us this week on the Leaders in Payments podcast. Make sure you visit our website at leadersinpaymentscom, where you can subscribe to the show and where you'll find our show notes. If you enjoyed listening, please share on your social channels as well.