Putting Young Tech Minds and Friendly Faces on Debt Collection

By: Latoya Irby

*This post originally appeared at Techonomy on September 13, 2013

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After Detroit’s bankruptcy filing, there might not be a more apropos startup in Michigan than HealPay,

HealPay’s SettlementApp, for instance, is designed to let large billers such as hospitals, collection attorneys, and collection agencies create payment options so that debtors can make payoffs over time. Pointing to the Home Shopping Network’s enticing sales pitches that let customers “make three easy payments” or “get flexible payment options,” Bzovi says, “People are more likely to buy a service, or pay off their debt, if you give them options. Especially if you know the demographic, the geography, you can treat those people better.”

The company’s RentRollApp lets landlords accept money and monthly rent checks online. In just a year, HealPay has evolved from just a few hundred to thousands of transactions a month, and it generates revenue off of each one.

Techonomy spoke with Bzovi about his background and his vision for the business.

How did you get into payment processing?

I come from an ad-tech background. I cofounded a vertical ad network called Outdoor Hub, based on behavioral targeting, serving banners, and optimizing traffic. About two and a half years ago, we took that methodology and applied it to billing and collections—that was our SettlementApp. We started off consulting a collection attorney, and he became one of our angel investors. Now we have clients in Ohio, Chicago, and Michigan. That’s still our flagship product, but we’re growing into a full-service payment processing company. Just like Square, we provide great software for free, and make money on the transaction. I hate being associated with debt. But what’s funny is that Lance and I both have student loan debt, and we say that you have to be in debt in order to really understand debt.

Do the apps run on an algorithm or do you have a staff of people who vet the incoming collection details and propose a payment discount or a payment plan?

The more data we accumulate, the smarter our algorithms, the better our predictive analytics for the best payment option. Just like Google AdWords gives you a cost-per-click range that you should bid on, we can say, given this person—his demographics, his age, and his type of debt—what the propensity of him paying will be. And you can score it. If this person owes $1,000 in Detroit versus $1,000 in Beverly Hills, you’re going to want to give someone a deeper discount in the area where money is tighter. We do recommend best practices, but all the data we’re accumulating makes the software smarter and our decision engine more accurate. That’s why we say we’re data-driven payments. Just like an advertisement, you can see your click-through rate; you can optimize your receivables.

What are your backgrounds as tech entrepreneurs?

Lance is 26. He dropped out of college, and he’s been programming since he was 15. He used to work at Engine Yard, based in San Francisco, and he ran a consultancy called Ruby Skills. He’s a solid developer and entrepreneur.

I was at my last venture out of college when we sold a large stake of the company to a private equity group in Chicago. Almost the entire founding team left, and that’s when I was like, “Wow, I need to start something new on my own sometime, and I need to link up with someone who’s a developer.” We say “hacker and hustler”—when you have those two together, you can really start something.

We all do everything; we all can code and sell. Lance does the heavy lifting on the back-end stuff. I’m more of the sales business but contribute to the codebase by developing with the front-end team. Lance has taught me things like Javascript and CSS. Now we have four full-time people, an intern, and a dedicated salesperson. And we have an office next to a Starbucks.

What are some of the challenges you faced launching HealPay?

A big challenge has always been the sales cycle. We’re selling to enterprises of anywhere from 25 to 150 employees, so there are always multiple meetings with decision-makers before getting a deal done. It’s a challenge breaking them away from local servers to the cloud—that’s a big thing for them to do. So the education process is always there.

In the beginning we were just selling software services, like $1,000 a month for our software. But we wasted so much time integrating with third-party gateways, diverting other ways to process payments. So about a year ago, we stopped selling software as a service and transitioned to a transactional business by accepting payments—credit card, debit card, ACH, checks. It was an evolutionary process for us, but now we’re full-service. I call it end-to-end payments—we provide merchant services and software that can accept payments via Web, phone, and mail.

Does HealPay have a mobile app, or is it primarily a desktop application?

It’s mobile and tablet friendly, but it’s all through your browser. We market ourselves as a web application that embraces responsive design. We get a ton of people logging in with their iPhone 5 or their Android devices. It’s ironic that people who owe money have the best phones.

What are the advantages of being in Ann Arbor?

There’s a lot of leadership and mentorship available that’s not biased that can help guide people. But there’s a lot of chaos, and I mean that in a good way, a lot of people going in all these different directions, a lot of opportunities, people shaking stuff up, even people whose startups fail. We’ve seen so many startups that burn out but those kids are around and they’re usually the ones who want to get back into it, so there’s a lot of talent floating around with experience in startups already but lacking the backing or foundation.

What do you think Detroit can do to turn itself around?

There need to be a lot more success stories. Right now, Dan Gilbert is the centerpiece for all these things. That’s great, DVP is great, but the reality is that you need more participants. Entrepreneurs have to realize we have to continue to create, but we need to distribute things better, communicate better. Just being aware that we can do this together, not, “Oh my God, I don’t know where to go; I need to talk to Dan Gilbert.” No offense, but that attitude has to be erased in order for Detroit to succeed. Finding good mentors in your space is so much more important than finding guys with money.

How do you see HealPay growing?

I want to be at a point where we’re doing a million transactions a month. It’s scalable, so we see ourselves growing our team, growing our sales, and developing these products. We want to introduce another product that we’re working on for another vertical, because we believe there’s so much innovation with the way money is moved. The space is changing so fast and there’s just so much opportunity to build great technology that can facilitate these types of payment methods.