The student loan repayment revolution is being televised with Bobby Matson, Payitoff, CEO & Founder - Episode 23

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[00:00:08] Bobby Mattson - Founder & CEO, Payitoff: so, and you're able to enroll and about half of borrowers saved money and it financially benefits from just that flow. So we're talking about 22 million Americans today. They could save money that way

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[00:00:19] Tedd Huff - Host, Fintech Confidential: [00:01:00] Bobby welcome to the show

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[00:01:46] Bobby Mattson - Founder & CEO, Payitoff: Thanks for having.

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[00:01:46] Tedd Huff - Host, Fintech Confidential: You, and I have talked a little bit about this, but student debt continues to impact more and more Americans. And even the federal reserve, the college board, the federal reserve bank of New York and even lending tree have identified that about [00:02:00] 46 million Americans have racked up. Hopefully everybody's sitting in their seats about $1.75 trillion in student debt, and they're having more and more trouble paying it off.

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[00:02:33] Tedd Huff - Host, Fintech Confidential: And I'm glad to see that you are taking on this issue with pay it off.

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[00:02:55] Bobby Mattson - Founder & CEO, Payitoff: And you have other types of debt alongside it too. It's not an isolated issue, but it [00:03:00] one that's the hardest toand student debt is really emotional you're essentially taking out debt for your brain. different type of that.

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[00:03:16] Falling in to Fintech

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[00:03:18] Bobby Mattson - Founder & CEO, Payitoff: falling into FinTech. It's interesting. It was like, I mentioned very personal to me, but the the thing that's interesting is I spent a lot of my time historically. in my career. Being an engineer or an engineering lead at companies that help people make decisions like the Fango is one where it helps you find a theater near you, helps you find a movie time group on helping you find deals.

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[00:04:03] Bobby Mattson - Founder & CEO, Payitoff: And when I realized that no one had really taken that approach in the student loan arena or in the debt management arena that people were still using. Spread it primarily to solve this problem or spreadsheets that they were cobbling together. I realized there had to be a better way so that it was definitely not a, Hey, I need to start a FinTech company It's a, I don't know how I'm gonna be able to afford having kids at all or starting a family unless I do something about this now. So it's really a personal need that drove it. So I spent a lot of time researching, trying to understand each regulation in this space and codifying them so that we could solve it for ourselves.

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[00:05:14] Bobby Mattson - Founder & CEO, Payitoff: Next. And in fact, as we dug deeper into the space, like most financial apps didn't know most financial advisors had trouble figuring it out. Most people in general, even the policy makers. Had trouble articulate, articulating how these things worked. We found a lot of confusion and whenever there's a lot of confusion in an industry, whenever there's a market where there's just, it's really hard and there's not a clear answer, but it's clear software could help it.

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[00:05:50] When it becomes personal

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[00:06:11] Bobby Mattson - Founder & CEO, Payitoff: Yeah. I remember a lot of it very, very vividly actually. So the, first part was, Hey, this worked for us. It wasn't anything fancy at the time. It was building a basic engine for us. The thing about the engine is that it improves, the more cases you look at everyone's case is pretty.

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[00:06:56] Bobby Mattson - Founder & CEO, Payitoff: we. Save this much money. Here's what we're doing with this. And we can actually [00:07:00] family plan. And that wasn't really anything I thought it would be like, I thought might be a useful app. I didn't know if it would be anything more than that. But when I realized there was a market and a business is that friends and friends of friends were starting to ask,

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[00:07:34] Bobby Mattson - Founder & CEO, Payitoff: Like to just do this stuff, like just putting money where the interest was. I was like, okay, well, there's definitely something there. it's worth a year of my time to figure this And see if there's like actually an opportunity. And that's, I've been kinda looking for that. I'd worked on a dozen other.

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[00:08:12] Bobby Mattson - Founder & CEO, Payitoff: I mean, it feels like everybody in America with this debt could benefit from this. So why not expose it at the very least you help. A lot of people save a lot of and it was at that point that I just studied the industry and like who the players were and why it ended up in this situation.

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[00:08:47] Bobby Mattson - Founder & CEO, Payitoff: as it's. Really, personal thing. And that's the way we view it. We're very borrower focused even though we serve partners like FinTech and banks through our API.

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[00:08:58] Tedd Huff - Host, Fintech Confidential: What are some of the major [00:09:00] lessons that from your time working with carbon five shipping software for like millions of users at companies that we talked about, Groupon, I think you mentioned Fandango prosper is, another one you mentioned served you best with starting and building up, it off.

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[00:09:46] Bobby Mattson - Founder & CEO, Payitoff: It's you need to have, a, all the, like the right inputs. You need to have very reliable data. Where is that person at right now? Where do they? Where are they located in their device and they're device, and what are the two options they're most likely to click [00:10:00] And so that are best for them. What is the best fit for that bar and just, or that user in that moment?

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[00:10:26] Bobby Mattson - Founder & CEO, Payitoff: So it was just a lot easier to kinda arrive. the, a path finding algorithm when you've been in that environment before you've seen those problems exist and you've seen that solution be a really good fit. So that was like the first thing that, that I went to. you can simulate adding an extra dollar every month.

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[00:11:02] Tedd Huff - Host, Fintech Confidential: We

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[00:11:02] Tedd Huff - Host, Fintech Confidential: talked about. coming up to the point where you decided to to go all in and to spend, I think you said a year really focusing in to seeing what was behind it. Now it's been five years that you've been working on, pay it off. Tell me about what that journey's been like. I'm assuming that it's, not been just like a nice straight linear path with everybody throwing rose pedals at your feet.

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[00:12:20] Bobby Mattson - Founder & CEO, Payitoff: Is there like a monetize a path to revenue that could that you could generate here. And so that was a focus for me that most people say focused on growth over revenue, but I, just felt like I needed to know that there was a way to monetize this. And then that helped year two out where I was basically Ram and profitable.

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[00:12:57] Bobby Mattson - Founder & CEO, Payitoff: We looked at like maybe five or six channels [00:13:00] that, that got semi-serious. I probably looked at dozens colleges and all these places where this could live and what I realized though, is that financial advisors started pinging me and saying, Hey, can you just do this for my clients? Or can I just do this through your tool?

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[00:13:38] Bobby Mattson - Founder & CEO, Payitoff: So some value they could provide. So I just found a very underserved market, which I would say if you're early stage and you're looking the more niche, the better, in my opinion, focus on a really, defensible niche, cuz we still use a lot of that. We still have a tool used by dozens and dozens of RAAs today.

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[00:14:15] Bobby Mattson - Founder & CEO, Payitoff: And that was the third model of, Hey we're making revenue on this advisor product. There's very few players in this space that can really do this. And then that led to what about. The neobank of the world or any bank or like any financial app has these that's where people are.

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[00:14:58] Tedd Huff - Host, Fintech Confidential:

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[00:14:58] Tedd Huff - Host, Fintech Confidential: How long did it [00:15:00] take you to get to that point where you realized building out the APIs was going to be a really big thing for you?

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[00:15:26] Bobby Mattson - Founder & CEO, Payitoff: It could be a more generalized solution for other types of fin fintechs. And that was where so yeah, I spent the plenty of time wondering if this, there could be an API option here. The, really where I said, okay, this could be like a whole new category of company was when. I just put up a splash page and it was like June of 2019 and I was like, let's see who signs up for the wait list and sent, out a couple emails.

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[00:16:14] Bobby Mattson - Founder & CEO, Payitoff: What are your repayment options,

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[00:16:16] Bobby Mattson - Founder & CEO, Payitoff: those different things. So really the guidance engine tied to that data. So that was the initial go to market motion. So that I could see a lot of folks like really quickly sign it for the wait list, ask a lot of questions they wanted definitely to see what are the Capabilities here because it will take me three years to build this engine.

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[00:16:55] Bobby Mattson - Founder & CEO, Payitoff: And API's just a conduit. It's just a way a partner [00:17:00] interacts with your app. We've evolved since then. It become a lot more than. that. Or we have different workflows. We're more embedable now than any of our prior sort of products. But early days it was API because we could just surface existing functionality that we knew.

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[00:17:23] The Legos of Student Debt Repayment

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[00:17:34] Bobby Mattson - Founder & CEO, Payitoff: today it's interesting. So we do offer our primary product is guidance, our guidance product I've been talking about, but what we've evolved to is that we provide a lot more than that. We're actually also. Working directly with servicers and have the ability to sync a bar was account directly with the servicer and provide guidance on that data.

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[00:18:15] Bobby Mattson - Founder & CEO, Payitoff: There's hundreds hundreds of them out there, loan assistance programs. So those are all the things that it's basically fine found money for these borrowers they don't know about though, but literally every borrower has some option. So that's how we'll essentially surface these opportunities.

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[00:18:49] Bobby Mattson - Founder & CEO, Payitoff: We really think of ourselves as like the Legos in this space where we're. You can put the Legos together in the way that works for you, or you can buy the star wars kit or the death star or whatever you want. [00:19:00] Pre-built so these types of that's really the way we think about it.

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[00:19:14] Layering Creative Solutions

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[00:19:22] Bobby Mattson - Founder & CEO, Payitoff: Some of the ways that were surprising, some of it was not surprising. I'll say since we moved money to servicers moving money to we move you can specify loan. And if you're in a student loan contribution company, or you're trying to offer student loan benefits, you can bolt us on.

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[00:20:03] Bobby Mattson - Founder & CEO, Payitoff: but they were. Asking us for certain features and certain functionality that we just hadn't exposed. we had it available things like, Hey, I wanna see all the repayment options with the PSL F overlay, which is a specific public service related benefit. And the reality was we had that capability and we just surfaced it for them.

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[00:20:42] Bobby Mattson - Founder & CEO, Payitoff: That's what we try to pay attention to. I'm trying to think of anything we've had a lot of use cases. Scholarship automation tools anyone who does automation in FASFA. this is very much a, very that one surprised me a lot, but the use case is definitely, [00:21:00] Hey, how do you retain?

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[00:21:19] Bobby Mattson - Founder & CEO, Payitoff: I didn't expect that as much as we've seen, we've seen a lot of demand for it.

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[00:21:37] Simplifying the Ecosystem of Student Debt Repayment

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[00:21:49] Bobby Mattson - Founder & CEO, Payitoff: the simplification is in taking loan data or a group of loans that a borrower is linked and just one or two inputs from the user. And we could save them, like [00:22:00] hundreds of dollars a month. And so the borrower just sees what's available one or two, a. This one saves me more money.

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[00:22:33] Bobby Mattson - Founder & CEO, Payitoff: This is like acronym city, student loans. is So the reality is I can definitely get the weeds too much. I definitely have the knowledge curse. That's another one I'd say that founders should watch out for is in early sales context, especially I would just go right into the weeds when they, why you don't really need to the reality.

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[00:23:18] Not a One Trick Pony

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[00:23:48] Bobby Mattson - Founder & CEO, Payitoff: for starters the servicers we really view as industry participants they want, they've put in this position where they need to do what department of ed says, if that's their client They [00:24:00] just have certain regulations to follow.

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[00:24:52] Bobby Mattson - Founder & CEO, Payitoff: What's interesting though, is when you look at competition from like, FinTech side of things plaid liabilities helps surface connections to [00:25:00] servicer accounts. They do credit cards and mortgages, but it's a really thin product, you're gonna have some data here and some data there.

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[00:25:12] Bobby Mattson - Founder & CEO, Payitoff: they're all flavored a bit differently, I think right foot is an abstraction layer that sits on top of Dowalla and Plaid and sort of is dependent on that data stream.

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[00:25:38] Bobby Mattson - Founder & CEO, Payitoff: There's more sort of debt, API focused companies out there. You're seeing more and more. I hope there's a dozen a year from now, Cause it just means that the market itself is maturing and you're seeing more and more capabilities in the space. So I'm expecting to see more. And I think that there's just like pros and cons to working with each type of debt API.

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[00:25:59] Tedd Huff - Host, Fintech Confidential: with [00:26:00] credit markets tightening up, how do you see pay it off, helping your customers through that process?

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[00:26:50] Bobby Mattson - Founder & CEO, Payitoff: So I, I think our timing on this is really, really good because we can make broad impact with this technology. And the next couple years are gonna be about looking at that the average [00:27:00] person's bottom line. the debt repayment outcome becomes very important. When drive delinquencies.

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[00:27:25] Bobby Mattson - Founder & CEO, Payitoff: Obviously what we do is we automate every aspect of debt management for financial apps. so we're. Embedable within any debt vertical. So that's where what we're that's what we're actually doing today outside of student loans, because you have to have the holistic context in order to really help the borrower with more than the student loan problems.

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[00:27:59] What happens when Forbarence ends?

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[00:28:04] Tedd Huff - Host, Fintech Confidential: It makes me think putting on my capitalism brain, why would lenders want to support a tool? Like pay it off that essentially when everything resumes, starts to take money off the table and reduce their revenues.

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[00:28:43] Bobby Mattson - Founder & CEO, Payitoff: There's lots of forgiveness programs, lots of like I've been mentioning these repayment options that are income driven. They're all government programs that are set up to help borrowers repay. And for the most part, prepayment isn't really viewed in that space as like a negative thing. [00:29:00] There are definitely refi use cases , where, there's prepayment risk built into the model. I think delinquency risk is much higher, weighted, which is what something we really hope borrowers stay in repayments. stay current that's really a big part of our place in the ecosystem. And everyone wants borrowers in repayment, people don't.

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[00:29:36] Bobby Mattson - Founder & CEO, Payitoff: We make see some friction. It's just what happens when you innovate in a space is that there may be cases where there's certain cards, programs that don't want prepayment. But that's not the only option to help a borrower. Prepayment actually is about, at least in student loans, about a third a borrower benefit most are through federal programs or, refire, things like that. The reality is when you look at the broader market of debt, when you look at all the different types of debt, out there [00:30:00] the prepayment use case is, just one of many, there's, so many different ways that you can consolidate your loans or you can creatively refi or you can find better ways to pre-pay balance transfers, things like that.

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[00:30:39] Bobby Mattson - Founder & CEO, Payitoff: You can build trust and it's a no brainer. that'll really. Trump. any sort of prepayment risk that, you would see. we haven't seen that friction to be totally honest, just because it's very competitive in this space.. I'm sure we'll run up against it, we've seen all sorts of all we've seen all sorts of things.

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[00:30:55] Tedd Huff - Host, Fintech Confidential: education seems to play, a huge role in the debt repayment. [00:31:00] Ecosphere. Tell me about how see pay it off, playing or helping in that, educational space.

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[00:31:33] Bobby Mattson - Founder & CEO, Payitoff: we have the rails that can drive those, types of outcomes. If you look 10 years in the future, where you're not really ever looking at Reddit to think about your debt, you're not look, you're not trying to make decisions with your money based on pieces of information, like it's already available to you. And I really think about us more and where we're, What we've really unlocked in student loans that we're unlocking in other debts and eventually other financial products is this financial decision layer [00:32:00] where. you're just you might not even be the one making the decision eventually with that, you set up your policy as a person on how you think about money or, there's a way to inform that in some way.

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[00:32:42] Bobby Mattson - Founder & CEO, Payitoff: that's way too much to ask of the average person. it's just cognitively very difficult. I view it more as like you've had the plaid, there's like the Yodlee's and then the plaids, and then there's sort of us in the next realm where it's the decisions on the important parts, not so much the data, we're still doing the [00:33:00] data fight today, but over time that'll pan out and the decisioning is what's gonna be important, to driving behavior.

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[00:33:08] Tedd Huff - Host, Fintech Confidential: You've talked about a lot of the process you went through to build out, pay it off. You've talked about how customer feedback has impacted a lot of the things that you were doing and, really how it was purpose built, with a vision to support the, the debt repayment, community to solve the problem that you had. If you were to start, pay it off all over from scratch again, knowing what you know today, what is one thing that you would have done completely differently?

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[00:33:55] Bobby Mattson - Founder & CEO, Payitoff: Like I think I spent a fair amount of time working on all sorts of different [00:34:00] things. And I, all of that helps with today, being able to spin up a prototype for on my own. right. Was a very useful skill in my job. And I think I was really focused on being a technical CEO. I'd been a, I'd had a startup before, pay it off before I was coding professionally. And I really wanted to, at the end of that journey, focus on being a strong technical leader. And I think there I, don't think you have to really wait and to towards the right time. Like I think if you have something going on I, you could be really aggressive. And just Hey, I'm gonna take a week.

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[00:35:00] Bobby Mattson - Founder & CEO, Payitoff: You shouldn't stop yourself from doing it. You just need to, you need to be in a situation where your. There's never enough like technical ability you'll have, or I think if I look back, there's probably a couple years there where I could have started earlier, gotten on the journey of it earlier and learned a lot more the process.

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[00:35:43] Changing your perspective on Loan Debt

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[00:36:01] Bobby Mattson - Founder & CEO, Payitoff: Well, the first thing that comes to mind is that when people think about debt, they typically think there's only a couple options someone can do. And they typically think there's you can pre-pay or maybe you can refi or there's only like a few things you can do. But what I've realized in digging and digging and digging in this space is that almost everybody has some option they don't know about and. I'd say everybody probably has some action they can take right now on their finances that they aren't, us both included on this podcast is probably something I could be doing to

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[00:36:46] Bobby Mattson - Founder & CEO, Payitoff: So it's the same thing in student loans is that that problem's magnified by a hundred X because it's so much

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[00:36:51] Bobby Mattson - Founder & CEO, Payitoff: than any other debt. But I will say in debt in general, repay. There's always some option a [00:37:00] lot impactful to just unlock a little bit for a lot of people than you would think.

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[00:37:20] Tedd Huff - Host, Fintech Confidential: You mentioned something that we'll probably have to do some other time, but I love the idea you brought it up very last minute is, the trust factor. that is huge, especially when you're talking about people's money. FinTech is all about building up that trust. And I would love to hear more about that later, Is there anything that maybe I haven't covered, that you wanted to make sure the audience knows and understands. also what's the best way to get ahold of pay it off to see if it is a good fit for them.

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[00:38:16] Bobby Mattson - Founder & CEO, Payitoff: We'r

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[00:38:16] e gonna be at money 2020 in a big way. So definitely come see us at our booth. or just.

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[00:38:35] Bobby Mattson - Founder & CEO, Payitoff: And the users you serve Then I think that's, definitely something I wanna make sure folks know about..

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[00:38:47] Bobby Mattson - Founder & CEO, Payitoff: Yeah, thanks for having me. It's been great. Appreciate it.