Latest / Leaders In Payments / Rhett Roberts, Co-Founder & CEO of LoanPro | Episode 317

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Rhett Roberts, Co-Founder & CEO of LoanPro | Episode 317 · Leaders In Payments

• 0:01
  Speaker 1: Welcome to the Leaders in Payments podcast, where we talk to C-level leaders from across the payments landscape.
• 0:06
  Speaker 1: 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.
• 0:14
  Speaker 1: We will also hear stories from our guests about their journeys to the top.
• 0:18
  Speaker 2: Keep in mind many folks in the ecosystem.
• 0:21
  Speaker 2: They'll have like a lending product that works for only a single flavor.
• 0:24
  Speaker 2: It'll only do auto loans.
• 0:26
  Speaker 2: But when you think about it for a moment, if you're in charge of a lending organization and you want to do auto loans and personal loans, you don't really want to run two separate software platforms.
• 0:37
  Speaker 2: It's not a great user experience to access your auto loans over here and somewhere else You're supposed to go find your personal loans.
• 0:44
  Speaker 2: It's a real challenge for folks.
• 0:46
  Speaker 2: So the first differentiator is going to be one platform that manages loans of any flavor, if that's B2B or B2C.
• 1:00
  Speaker 3: That was Rhett Roberts, the co-founder and CEO of LoanPro, and he's my special guest on this episode, episode 317 of the Leaders in Payments podcast, and I'm your host, Greg Myers.
• 1:09
  Speaker 3: Loanpro is an API-first lending and credit platform that has proven to unlock innovation through powering origination, servicing, collections and payments for virtually any class of loans, lines of credit and credit cards.
• 1:22
  Speaker 3: Rhett and I dive deep into LoanPro, including what makes it unique and different in the marketplace.
• 1:27
  Speaker 3: We also discuss LoanPro's unique startup story, as well as Rhett's advice on how we should think about how things ought to be.
• 1:35
  Speaker 3: We've got a great episode ahead, so let's get started.
• 1:37
  Speaker 3: Hi, Rhett, Thank you for being here and welcome to the Leaders in Payments podcast.
• 1:46
  Speaker 3: Happy to be here, I appreciate your time Absolutely, so let's go ahead and dive right in.
• 1:50
  Speaker 3: 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 and we'll circle back to your professional journey in a minute.
• 1:59
  Speaker 2: Yeah, you bet, my name is Rhett Roberts.
• 2:01
  Speaker 2: I grew up here in Utah.
• 2:02
  Speaker 2: I love the great outdoors, all kinds of different activities here.
• 2:06
  Speaker 2: I did my education in investment finance.
• 2:08
  Speaker 2: I was planning to go back onto Wall Street and about that time got married and decided to do a little bit of the entrepreneur route.
• 2:15
  Speaker 2: The last 20 or so years have been the journey running some family businesses that have led us into LoanPro today.
• 2:25
  Speaker 2: So the background in investment finance and accounting that's been quite a fun experience.
• 2:27
  Speaker 2: My wife and I we've got four kids and so we're in the thick of it with all the fun things going on with kid activities.
• 2:34
  Speaker 3: Awesome, thanks for sharing that.
• 2:35
  Speaker 3: So let's talk about LoanPro.
• 2:36
  Speaker 3: So tell the audience what LoanPro does, you bet?
• 2:40
  Speaker 2: So LoanPro, we're a cloud-native lending platform, so think of anybody who needs to give a loan and the software behind the scenes that makes all of that happen.
• 2:50
  Speaker 2: So, everything from the point of decision through the rest of the life of the loan, we've got a number of platforms that we've launched our payment suite, our modern lending core and origination suite, servicing collections and so forth.
• 3:02
  Speaker 2: I like to describe it in the kind of simple terms everything you need to do to get your money back.
• 3:07
  Speaker 3: Okay, so are your customers mainly banks, or more than banks?
• 3:12
  Speaker 2: So maybe I'll jump into a little bit of our Genesis story.
• 3:14
  Speaker 2: It'll explain the composition of the customers we engage with.
• 3:18
  Speaker 2: So after school I didn't really know what I was going to do and had intended to go back to Wall Street.
• 3:24
  Speaker 2: But I ended up joining my two brothers and we started a car dealership and we were new to the space and just curious on how everything worked there.
• 3:33
  Speaker 2: And we scaled at our auto dealership and that led us into we owned a service center, a number of things, and that got us into auto lending and we just fell in love with everything about loans.
• 3:44
  Speaker 2: They offset some of the volatility that happened in the retail sales space and so we just really leaned in on the lending for auto loans to help our customers get financed.
• 3:53
  Speaker 2: And so if someone came to our dealership to buy a car, a subset of those would end up getting a loan from our related finance company.
• 4:00
  Speaker 2: Many others would pay cash or get a loan at the credit union or bank or whatever.
• 4:04
  Speaker 2: We had a variety of options.
• 4:05
  Speaker 2: And as we scaled the lending business, it turns out the software to manage those loans felt like it was stuck in the 80s and you'd have six or seven different pieces of software that didn't really talk to each other very nice or even do their math in a consistent way.
• 4:21
  Speaker 2: So, long story short, we ended up building our own internal tool for our own lending company and fast forward to present day.
• 4:29
  Speaker 2: What was that internal tool has actually turned into what LoanPro is today.
• 4:34
  Speaker 2: So it turns out, everybody that gives a loan really of any flavor needs an operating system to manage and to do all the compliance and all the calculations and customer communications and waterfall application of the compliance and all the calculations and customer communications and waterfall application of the payment and so forth.
• 4:47
  Speaker 2: And so in the early days we were in auto lending, we didn't intend to commercialize this business right, it was just a tool for our own lending company.
• 4:55
  Speaker 2: And so in the early days we had folks reach out to us and essentially say, hey, can I use that software that you built?
• 5:01
  Speaker 2: And for about two years my two brothers and I were like, nah, go build your own right.
• 5:05
  Speaker 2: Like, sorry, it's a rabbit hole of endless amount of money to go build your own software.
• 5:09
  Speaker 2: And we'll give you a couple pointers.
• 5:11
  Speaker 2: And they were fairly persistent, saying nah, I don't really want to build software, can I use yours One day in a meeting we're like all these people have asked us if they could use this product.
• 5:20
  Speaker 2: Maybe we'll pivot in our business.
• 5:22
  Speaker 2: That led to what LoanPro is today.
• 5:24
  Speaker 2: We ended up in the earliest days.
• 5:26
  Speaker 2: We got between 600 and 700 customers on the platform today across the US and Canada.
• 5:31
  Speaker 2: In the early days we started collecting customers that I often tease as the island of misfit loans.
• 5:38
  Speaker 2: There's just these weird different things.
• 5:41
  Speaker 2: There might be a solar loan that, if you're not familiar on solar loans, they often build into the solar loan an anticipated tax rebate at like 18 or 16 months down the road and they want to amortize it as such.
• 5:53
  Speaker 2: So these different kinds of accounts.
• 5:56
  Speaker 2: And so we have a lot of bespoke or specialty lending products that are on the platform, backed by everything ranging from a small mom and pop lender like we were, to banks, credit unions, hedge funds and everything in between.
• 6:08
  Speaker 2: And then, about two years or so ago, we really leaned in on the bank and credit union space and so we've got a number of banks and credit unions.
• 6:17
  Speaker 2: You'll see on our website.
• 6:18
  Speaker 2: We recently a couple months back landed SoFi as a client and a library of different banks and credit unions that are on the system.
• 6:25
  Speaker 2: So kind of straddles both.
• 6:27
  Speaker 2: A little bit of a long answer there, but the point being is that lending is a fairly complex and highly regulated space, and it's not just who you think of as the traditional banks and credit unions.
• 6:38
  Speaker 2: There's a lot of other folks that are doing that as well.
• 6:41
  Speaker 3: Okay, and how big is the company We've got about?
• 6:43
  Speaker 2: 230 or so people now today here in Utah and we're growing fast.
• 6:49
  Speaker 2: So we've been around for quite some time the variety of ways of measuring scale or size in an organization and we track a variety of things, including API calls and revenue and those kinds of things.
• 7:02
  Speaker 2: To kind of give you an idea, In Q1, we did about 1.1 billion web requests to our application, so kind of a high volume of different things happening in our platform.
• 7:14
  Speaker 3: And can you talk a little bit about, maybe, the go-to-market strategy?
• 7:18
  Speaker 3: Do you have salespeople out selling and partners, or a little bit of both?
• 7:23
  Speaker 3: Yeah, you bet.
• 7:24
  Speaker 2: So we have kind of a five-step approach on our go-to-market motion.
• 7:26
  Speaker 2: So we do a few things.
• 7:28
  Speaker 2: In the earliest days it was basically inbound only.
• 7:31
  Speaker 2: There's such a need in the space of managing loans the right way.
• 7:34
  Speaker 2: The interesting thing is in the last number of years there's been a variety of different labels put on a loan.
• 7:40
  Speaker 2: So think of especially for this conversation, think of loans as payments over time and a lot of things you know a buy now, pay later, or a variety of different labels that go on this concept of can I make a payment over time.
• 7:56
  Speaker 2: And so we got into that space and it's provided a lot of really interesting opportunities to dig in and see where technology might advance those areas for folks.
• 8:08
  Speaker 2: So in our go-to-market in the earliest days customers would call us and say, hey, I have this idea or I have some frustration or challenges in the existing software they were using.
• 8:16
  Speaker 2: Can I use your platform?
• 8:18
  Speaker 2: So we still do that.
• 8:19
  Speaker 2: Obviously in inbound motion We've expanded and we have an outbound motion.
• 8:23
  Speaker 2: We target four different verticals, so financial institutions and then in the bespoke or specialty lending, b2b and B2C, and then our fourth practice is card and so with those areas we really focus on outbound.
• 8:36
  Speaker 2: So obviously there's a motion of building top of funnel, the marketing and lead and nurturing those.
• 8:43
  Speaker 2: We also have expansion.
• 8:44
  Speaker 2: We have a fairly large customer set and a good footprint, so we expand the variety of different kinds of products they offer.
• 8:50
  Speaker 2: Maybe somebody starts out with a installment lending personal loan or invoice factoring or student loan or whatever it might be and they expand into additional product lines over time.
• 9:00
  Speaker 2: That's one of our core value propositions is one platform.
• 9:04
  Speaker 2: Through configuration, we can manage a whole variety of different lending types and so we'll have the whole spectrum.
• 9:11
  Speaker 2: We'll have somebody who might use us for invoice factoring or merchant cash advance, and the other end of the spectrum may be a personal loan or student loan.
• 9:19
  Speaker 2: We can manage the whole array.
• 9:21
  Speaker 2: And then the fourth component is partnerships.
• 9:23
  Speaker 2: We have a variety of partners.
• 9:25
  Speaker 2: This is a community out there in payments over time, a community where it connects things.
• 9:30
  Speaker 2: That might be fetching some data for underwriting, maybe looking up information and using that in the decision metric, or it might be partners that are in the banking space, that already have online banking providers.
• 9:43
  Speaker 2: We can plug into those ecosystems a few others.
• 9:46
  Speaker 2: And finally, the fifth go-to-market motion is about embedded finance.
• 9:51
  Speaker 2: We've got a number of deals we've done that we embed within existing ecosystems and were discoverable or they become discoverable in our ecosystem.
• 10:00
  Speaker 3: Great, I appreciate you explaining that.
• 10:02
  Speaker 3: I think a lot of people listening will know banks have sort of a core platform right that they build a lot of things on top of.
• 10:10
  Speaker 3: Is it right to assume that you integrate with?
• 10:14
  Speaker 2: those Deposit core that manages like a checking and a savings account and all the compliance and things around that.
• 10:25
  Speaker 2: Then there's a lending core, which will be different lending products, and then there's often a wealth management, and those are three different flavors, if you will, of core.
• 10:37
  Speaker 2: And often when people refer to core it's specifically focused on the deposit core and many, many organizations will use a module inside of the same company.
• 10:47
  Speaker 2: Who provides a deposit core may have modules that support different kinds of loans, but often not the whole array.
• 10:54
  Speaker 2: And so almost everybody who runs a credit card runs that in a separate application or an auto lending program.
• 11:01
  Speaker 2: And so what you'll find if you go into these banks in the back office, if you look under the hood, they have a whole bunch of different softwares and then data gets orchestrated back to that deposit core for reporting and almost use it like a data lake.
• 11:15
  Speaker 2: So ViewLoan Pro is everything for the lending core, If it's a credit card or an auto loan or personal loan or invoice factoring, whatever the lending product is.
• 11:25
  Speaker 2: We support all of that.
• 11:27
  Speaker 2: And then we do integrate and have partnerships with a variety of different, both legacy cores and a couple of the new modern ones that have started.
• 11:35
  Speaker 2: And when I say core, the deposit side to it, the interesting thing when you're a banker, credit union and you're looking for a new software, really, when you look at the problem they're trying to solve.
• 11:46
  Speaker 2: So Clayton Christensen's book of Innovator's Dilemma, the job to be done.
• 11:50
  Speaker 2: What are they really hiring?
• 11:51
  Speaker 2: What are they trying to do?
• 11:52
  Speaker 2: They're looking for a low-risk technology modernization strategy and a thing of that happens to be I'm selling software, but you have to solve a few other things first before software is actually going to solve the problem.
• 12:06
  Speaker 2: For them to modernize their tech stack.
• 12:08
  Speaker 2: One of those examples is providing an architecture structure that, instead of directly connecting anything downstream from your core, you should insert a layer of a data lake and then have your applications stream data to your data lake and then have anything downstream If it's your online banking provider or if it's a website or a reporting system that should be connected to a data lake as an intermediary, giving more optionality and flexibility to the financial institution.
• 12:38
  Speaker 2: A little bit of a long answer, but the idea is that it's not just replacing a core, it's also modernizing the tech stack and providing an architecture structure that supports that.
• 12:49
  Speaker 3: That makes sense, and can you speak a little bit to your sort of business model how you charge for it.
• 12:55
  Speaker 2: So our model is to grow with our customers, so to enable their products.
• 12:59
  Speaker 2: We're a cloud native platform, so it's a SaaS product.
• 13:03
  Speaker 2: For our larger customers we also offer a private cloud that will do dedicated infrastructure just for them.
• 13:11
  Speaker 2: We're hosted on AWS and our monetization strategy is essentially to scale with our customers.
• 13:17
  Speaker 2: So we have several customers who start out small and we'll scale and grow over time.
• 13:22
  Speaker 2: But the general framework is there's a per what we call billable account fee per month and then there's a bunch of optional things that they can add.
• 13:31
  Speaker 2: For example, say, you have a million loans, you'll pay a platform fee to LoanPro that will include those loans in the system, and then you may have a bunch of optional usage.
• 13:40
  Speaker 2: Perhaps you want to physically print envelope and mail out all of your statements, or you want to do all these webhooks, or you want to process a bunch of real payments in the real world, or a long library of optional SKUs of things that you could do from the platform those that have usage fees associated and we can build those into a platform fee.
• 14:00
  Speaker 2: If there's high forecastability on them or if it just wants to be done as usage, we can add that, as they actually use it, view it as a SaaS model, but it's important to know that it scales and grows with the organization, because a lot of the customers we engage with are trying new things and so we can try to remove a barrier to entry to get them up and running.
• 14:21
  Speaker 3: Okay, well what would you say?
• 14:22
  Speaker 3: Differentiates LoanPro from your competitors out there?
• 14:26
  Speaker 2: Yeah, great question.
• 14:27
  Speaker 2: So the first one simply is going to be a little bit of our narrative, like our story about how we came into the space, Because the core reason that we built the platform was because we were lenders and just frustrated with what was available in the market.
• 14:42
  Speaker 2: So we really have a deep domain expertise of what was available out there and the problems that it was or wasn't solving out there and the problems that it was or wasn't solving.
• 14:51
  Speaker 2: So some differentiations there's a bunch of product and technical ones, right being API first, a configuration first platform that allows for a variety of different products.
• 15:00
  Speaker 2: Keep in mind many folks in the ecosystem.
• 15:03
  Speaker 2: They'll have a lending product that works for only a single flavor.
• 15:06
  Speaker 2: It'll only do auto loans.
• 15:08
  Speaker 2: But when you think about it for a moment, if you're in charge of a lending organization and you want to do auto loans and personal loans, you don't really want to run two separate software platforms.
• 15:19
  Speaker 2: It's not a great user experience to access your auto loans over here and somewhere else You're supposed to go find your personal loans.
• 15:27
  Speaker 2: It's a real challenge for folks.
• 15:28
  Speaker 2: So the first differentiator is going to be one platform that manages loans of any flavor, If that's B2B or B2C at a configuration, first at the product level, allows for a lot of pretty cool tools that they can do.
• 15:42
  Speaker 2: And then we have other cool things that we've filed a bunch of patents on, things like transaction level credit.
• 15:48
  Speaker 2: This is something where, on a line of credit or a credit card, you could charge a unique interest rate or fee structure on a per transaction basis.
• 15:57
  Speaker 2: So imagine a card that you can charge a different interest rate on gasoline than you do groceries.
• 16:05
  Speaker 2: So a brief story on this.
• 16:07
  Speaker 2: We worked with a large credit union.
• 16:09
  Speaker 2: They have a constituency of US military.
• 16:12
  Speaker 2: They were focusing and they asked us hey, will you give us a little bit of the art of the possible?
• 16:17
  Speaker 2: What can you use this for?
• 16:18
  Speaker 2: In our system and we identified they had a drop-off rate of being top of wallet when the family member became active duty.
• 16:26
  Speaker 2: Essentially, what was happening is the active duty service member would get deployed and then this credit union who focused on military active duty.
• 16:32
  Speaker 2: Essentially what was happening is the active duty service member would get deployed and then this credit union who focused on military would have the financial relationship essentially shift over to their spouse and they had a drop-off rate.
• 16:41
  Speaker 2: The card was no longer top of wallet and so they're like, hey, can we solve that problem?
• 16:45
  Speaker 2: So as we approached it, we really thought, well, you need to do some things that the family who stays at home they feel like you've got them, you understand them.
• 16:53
  Speaker 2: Let's design your financial instrument in a way that supports that model.
• 16:57
  Speaker 2: So I said, why don't we do this?
• 16:58
  Speaker 2: If you attribute a credit card as a active duty member and we can proactively check that out with a few different lists and things, then let's geofence the primary residents send communications to their family and say, hey, this might be a challenging time in your life, we get it, we're here to support you Five mile radius around your home during the deployment, 0% interest on groceries.
• 17:21
  Speaker 2: So those kinds of differentiators that make finance personalized, I think make a huge differentiation.
• 17:29
  Speaker 2: And having the tech stack and the platform to support the idea of modernization or personalization, of course, this concept of optimize and move it forward in providing better financial products.
• 17:42
  Speaker 2: So those are just a couple of highlights or a few things that differentiate us, but there's a big part on the technology and product.
• 17:49
  Speaker 2: But it's an enabling function that we provide these really cool tools to our customers so they can do these personalized lending products.
• 17:57
  Speaker 3: That's a cool use case.
• 17:58
  Speaker 3: I really like that one.
• 17:59
  Speaker 3: Let's talk a little bit about the broader industry, and I typically ask this around payments, but obviously your segment is more on the loan side.
• 18:08
  Speaker 3: But where is the industry headed?
• 18:10
  Speaker 3: What do you see happening in the next, say, three to five years?
• 18:13
  Speaker 2: Oh so much.
• 18:13
  Speaker 2: It's very adjacent to payments too, right, because all a loan is is payments over time.
• 18:18
  Speaker 2: So obviously there's a lot of things going to happen in the technology, in authentication, right.
• 18:24
  Speaker 2: What people's credential is in the payment space, the credentials have moved from some kind of physical card to digital.
• 18:31
  Speaker 2: Those are going to go through different kinds of credentials.
• 18:34
  Speaker 2: We're working with several customers right now that the automobile will be registered to a PAN for a card and so just authentication.
• 18:42
  Speaker 2: Pulling your car into a gas station, you won't need to pull a card out of your wallet, you'll just receive a text message to confirm and the car itself is your credential and they have some pretty cool things like you can do.
• 18:55
  Speaker 2: Face recognition with the car equals authentication to purchase gasoline, and this is like for fleets maybe a card that's issued or a financial instrument that's issued to a fleet of semi-truck drivers.
• 19:08
  Speaker 2: Those kinds of things are some pretty interesting areas.
• 19:11
  Speaker 2: Of course there's a lot of semi-truck drivers.
• 19:12
  Speaker 2: Those kinds of things are some pretty interesting areas.
• 19:12
  Speaker 2: Of course, there's a lot of stuff going to happen with blockchain.
• 19:15
  Speaker 2: What's really interesting?
• 19:17
  Speaker 2: The crystal ball of the next three to five years, regardless of what happens with the election.
• 19:22
  Speaker 2: We're seeing the polarization of the politics here in the United States and what that creates in the regulatory framework is a yo-yo effect that it just kind of goes back and forth both at the state and at the federal level, including all of the alphabet of the different regulators and so the things that they're focused on, and the polarization creates a pretty big seismic shift when it moves from Democrats to Republicans or vice versa.
• 19:51
  Speaker 2: And so we think it's really important to make sure that the technology and platforms can support an increased velocity of the rules changing.
• 20:02
  Speaker 2: And we've seen that CFPB has done a bunch of things the last number of weeks even, and many of our competitors out there have to do software releases in order to support things like late fee adjustments or NSF fees or grace periods or the way interest rates work and so forth, and so we've been able to have a competitive advantage in that area.
• 20:22
  Speaker 2: So I think the first is a regulatory framework is going to continue to be a yo-yo effect due to the political polarization that happens and we also will see with interest rates coming back to be a little bit more normalized and they feel high to people, but historically they're pretty just normal.
• 20:41
  Speaker 2: They might even be a little bit low historically, but there's still a lot of money out in the economy.
• 20:45
  Speaker 2: So there's lots of conversations of a soft landing of things.
• 20:49
  Speaker 2: It appears that the most recent forecasts are going to be on the economy that maybe there's not even landing at all.
• 20:55
  Speaker 2: So it'll be interesting to see if rates come down this year.
• 20:58
  Speaker 2: I bring up interest rates because there's a direct correlation in the velocity of loans and interest rates.
• 21:04
  Speaker 2: We found some real interesting things in the data set, but it's kind of common sense.
• 21:08
  Speaker 2: The larger ticket items have a higher R-squared correlation to the velocity of new loans which, in easy speak, if interest is higher then you don't go buy the new house or maybe the new car if the rates are higher.
• 21:23
  Speaker 2: But on smaller ticket items and point-of-sale financing and those things personal loans we actually see it increasing.
• 21:31
  Speaker 2: The number of loan velocity are increasing, which is essentially another way to say that families are feeling a little bit strapped and they're looking for alternate financing options, and so we see a lot of retail cells providing financing options just embedded within their flows.
• 21:48
  Speaker 2: So instead of using Chase or somebody else that you have a financial relationship with, you can now have your financial relationship directly with wherever you're checking out, and so we see embedded financing options happening in everything from Amazon to local mercantile stores.
• 22:05
  Speaker 2: So it's kind of like this interesting go back to how it was in the wild wild west where, way back when, your primary creditor was the local Mercantile store.
• 22:14
  Speaker 2: Well, it's a little bit going back that direction and instead of having just your financial relationships with a big national brand, it's becoming more part of a community and in the community banking space, historically folks have described community banking and that was a proxy for geography banking.
• 22:34
  Speaker 2: That was only because geographies were concentrated for communities.
• 22:39
  Speaker 2: So if you went to like a community banking up in Chicago, maybe that would be a banker who really understood, like the meatpacking business, because there happened to be a concentration in that geography.
• 22:50
  Speaker 2: Well, what we're seeing in community banking is the definition of community is no longer being tethered to geography and it might be community of fill in the blank, but across a larger geography.
• 23:04
  Speaker 2: Those are requiring a digitization experience because you're not physically in front of them, and so we've already had a whole trend of digitized user experience online banking, application origination.
• 23:18
  Speaker 2: That's been the last decade and a half that that's happened.
• 23:20
  Speaker 2: What we're seeing big trends is all the back office now, and so you hit a point of diminishing returns of innovation at the glass.
• 23:28
  Speaker 2: Now, under the glass needs to innovate.
• 23:30
  Speaker 2: That's precisely the space that we play in.
• 23:33
  Speaker 2: We see a lot of opportunities.
• 23:35
  Speaker 2: Almost every financial institution has publicly announced it's one of their top initiatives to modernize their tech stack.
• 23:42
  Speaker 2: The regulations are changing fast enough.
• 23:45
  Speaker 2: They need to do that.
• 23:46
  Speaker 2: Everyone expects it right.
• 23:48
  Speaker 2: We all have our Android or our iOS phones and we are used to that kinds of experience.
• 23:53
  Speaker 2: You essentially expect that experience all the way through.
• 23:57
  Speaker 2: If you work at the bank or if you are a customer of the bank, you expect that type of experience.
• 24:03
  Speaker 2: Those are just a couple of crystal ball things that we see that are happening, but it'd be a very, very active next couple of years.
• 24:09
  Speaker 2: Great.
• 24:11
  Speaker 3: Well, let's switch gears a little bit and talk about you, and you told us a little bit about your professional journey already, but I did have a question.
• 24:18
  Speaker 3: So what was the reason to start a car dealership?
• 24:22
  Speaker 3: I'm just curious little kid.
• 24:24
  Speaker 2: So high school and pre-high school, we ran a bunch of different ideas.
• 24:27
  Speaker 2: If you will, I'll call them more jobs than they were businesses.
• 24:42
  Speaker 2: But when I was like 14, 15 years old, I went to a shooting range and I noticed that on the floor was all the discarded shells.
• 24:46
  Speaker 2: And so I went over to the folks running the range and I asked them hey, what do you do with all of these?
• 24:52
  Speaker 2: And they basically said, oh, they're just trash, we throw them away or we just sweep them out there.
• 24:56
  Speaker 2: And I said, well, you're closed on Monday.
• 24:57
  Speaker 2: Can I come in and clean them up?
• 24:59
  Speaker 2: And I'll do it for free, but I want to keep all of the shells, he's like sure, whatever.
• 25:04
  Speaker 2: So I got him to sign a little thing and I went home, got busy that week and built this a conveyor belt and a magnet and all these things.
• 25:17
  Speaker 2: Essentially, we took that trailer over to the shooting range and ended up recycling, shoveling the rocks and dirt and the shells into this machine and it processed that summer 14, 15 years old, a whole bunch of 55-gallon drum barrels of dirty brass recycled, made tens of thousands of dollars doing that and I just got super excited like, wow, you can make up an idea and turn it into reality, and that just got me hooked.
• 25:42
  Speaker 2: The next one we did was we invented and actually filed a patent on I received it a bridge.
• 25:49
  Speaker 2: You could suction cup to a windshield and do injections of resin into a rock chip to fix the windshield.
• 25:55
  Speaker 2: And then we built software to submit the insurance claims to the insurance companies, built a summer sales team with pop-up tents at car washes and knocked doors across the Southwest ran several hundred people doing that.
• 26:09
  Speaker 2: I think I was 17 years old when we did that, did these serious things with my brothers over the years, and so post-college we just said, hey, what would be the opportunities?
• 26:18
  Speaker 2: And we thought, well, everybody's buying and selling cars, let's see what this might be.
• 26:23
  Speaker 2: And so when I was finishing my last year of university, my two brothers just decided to jump into it.
• 26:28
  Speaker 2: So the very first car we sold was actually my car.
• 26:32
  Speaker 2: I didn't have a car to drive home.
• 26:34
  Speaker 2: Sold my car, so I had parked my car out on the lot and we had a handful of others that we were selling and the person wanted to buy mine and I was like well, I guess, sure, in the earliest days the big motivation is always to try to have financial security and you're just trying to stay alive and that means you're pivoting and adjusting and very fast feedback loop and you don't really to stay alive and that means you're pivoting and adjusting in a very fast feedback loop and you don't really know what's going to work.
• 26:59
  Speaker 2: I certainly didn't come out of business school saying I'm going to start a software company that manages loans.
• 27:05
  Speaker 2: But that book of Move With the Cheese, you learn stuff and then the feedback loop and you look for an opportunity.
• 27:11
  Speaker 2: And our family we grew up in and our experience led to this strong belief of you can take an idea and turn it into reality and it's just a matter of persistence with that.
• 27:22
  Speaker 2: So the car dealerships themselves were like an opportunity.
• 27:25
  Speaker 2: That was a gateway for us.
• 27:27
  Speaker 2: They opened into, we owned some service centers, we had a bunch of dealerships, we got into lending, we learned all kinds of things about that and that ended up leading to the lending, to the software, and then we've been doing that for 17 years now.
• 27:42
  Speaker 2: The software side to it.
• 27:43
  Speaker 2: And so for anyone listening, the thing that I would highlight and I often talk to groups about, I hear apprehension from a lot of people that they don't really know what they want to do, and I would say nobody does right.
• 27:54
  Speaker 2: You got to get started and then look for opportunity.
• 27:58
  Speaker 2: Keep your eyes wide open and opportunities will present themselves.
• 28:01
  Speaker 2: And if you believe that you can turn an idea into reality, that's when you can get busy with the things that present themselves.
• 28:08
  Speaker 3: Great, great Thanks for that story.
• 28:09
  Speaker 3: That's great.
• 28:10
  Speaker 3: So what are some things you're passionate about?
• 28:12
  Speaker 3: So, maybe one work-related passion and one personal passion.
• 28:15
  Speaker 2: Oh, you're going to see how nerdy I am with these things Related to work things.
• 28:20
  Speaker 2: I really just have this fascination of helping finance work the way that it ought to.
• 28:26
  Speaker 2: In air quotes, there's a book by D Hawk.
• 28:28
  Speaker 2: He's the founder of Visa, actually from Utah, where I live.
• 28:32
  Speaker 2: There's a principle he teaches in there that really has stuck with me.
• 28:36
  Speaker 2: I have it written on my board here at the office and I think about this every day.
• 28:40
  Speaker 2: Now, to summarize it, it basically says in our society we spend a significant amount of time thinking about how it was, how it is, and if you get really ambitious, you think about how it might be.
• 28:53
  Speaker 2: But when you design softwares or systems, we should spend more time thinking how it ought to be and then work back to reality.
• 29:01
  Speaker 2: So this concept of was is, might and ought to be.
• 29:05
  Speaker 2: So I spend a lot of time and I'm very passionate about this concept of how ought it to be.
• 29:12
  Speaker 2: And so in the world of finance you think on the example I shared a few minutes ago about transaction level credit.
• 29:18
  Speaker 2: That concept came from years ago.
• 29:21
  Speaker 2: I was in Costco with my wife, have a bunch of kids we're standing in line to check out.
• 29:26
  Speaker 2: Got a mountain of food in our cart and the guy in front of us purchased two items.
• 29:31
  Speaker 2: He didn't even have a cart with him, right, he had a giant thing of toilet paper and a $10,000 something diamond ring and I just thought that was fascinating.
• 29:40
  Speaker 2: First of all, unusual that you could buy both of those items in the same place.
• 29:44
  Speaker 2: Right, that's cool.
• 29:45
  Speaker 2: I thought about it for years, and what bothered me about that was he used his credit card to buy it and you're like, well, yeah, that probably makes sense, a revolving card, pay it off in full.
• 29:55
  Speaker 2: You get your points.
• 29:56
  Speaker 2: But on the diamond ring, there's tons and tons of financial products out there that would have provided, like, 12 months zero interest or a balloon, an interest only loan for a year.
• 30:09
  Speaker 2: These like preferred financial options.
• 30:11
  Speaker 2: Why didn't he do it?
• 30:13
  Speaker 2: Well, he had my family standing behind him in line.
• 30:15
  Speaker 2: He didn't want to fill out the application.
• 30:17
  Speaker 2: Almost every loan application out there has the general assumption you're a terrorist before you start it, right, it's just going to suck all of your time.
• 30:26
  Speaker 2: It's a very unpleasant experience, and so there's just too much friction introduced into the ecosystem.
• 30:32
  Speaker 2: It's too hard.
• 30:33
  Speaker 2: So I got thinking about that.
• 30:34
  Speaker 2: How could I design a product that could have it work the way that it ought to Can.
• 30:39
  Speaker 2: He just swipe his card and the card auto does the smartest thing it splits off the diamond ring into an installment loan and provides preferential terms, and it does a revolver on that.
• 30:49
  Speaker 2: So that's where we got started with the idea.
• 30:52
  Speaker 2: As it turns out, everybody who owns the receipt-level SKU-level data, like the items you purchased, they could do that in our platform today, but most of them do not want to share level two or level three data SKU-level data through the network.
• 31:06
  Speaker 2: If they control that, they could use my platform to split it out, but if they don't control that, they can do it at the transaction level.
• 31:13
  Speaker 2: There's a bunch of attributions at the transaction.
• 31:21
  Speaker 2: That's one example of one of my passions, this idea of let's build the right tools so that we can have finance work the way that it quote ought to.
• 31:24
  Speaker 2: That's a big driver for me.
• 31:26
  Speaker 2: At one point I'm going to write a book.
• 31:27
  Speaker 2: The topic is going to be about temperature and it's something that just fascinates me.
• 31:31
  Speaker 2: Obviously, it'll be from the lens of business, and it's something that just fascinates me.
• 31:33
  Speaker 2: Obviously, it'll be from the lens of business, but this concept of how things ought to be.
• 31:37
  Speaker 2: It's fascinating to me that what everybody takes as truth in our physical world around us changes when the temperature adjusts.
• 31:47
  Speaker 2: And so the most easy example of water freezing at 32 Fahrenheit or zero Celsius and all the things that you take to be true, your assumptions that you can dive into it and you can swim around and the buoyancy and whatever you can imagine is no longer true at an extreme temperature of negative and it's also no longer true at an extreme temperature of positive.
• 32:12
  Speaker 2: And that concept's very interesting to me of this shift over time.
• 32:18
  Speaker 2: And if you have an axis that you can insert of temperature, I think it's a really good proxy to explain how things work in business, of how you have to take iterations, of feedback loops and what was true when you introduce new ingredients to the formula is no longer true, and being able to mentally map that out and know what makes sense for activities.
• 32:41
  Speaker 2: When the water's frozen versus when it's not, versus when it's hot enough, it actually turns into steam and that concept of temperature I think explains the concept in business real well.
• 32:53
  Speaker 2: As you shift from a small business that you're just trying to stay alive to a larger business where you're now product to market fit, you're getting profitable, you're customer set, then even larger, where now it's about being prepared, and your go to market motion and continual innovation, and then even much larger, and you kind of get the idea it's similar to the temperature of the water changing what's true at one is no longer true at the other.
• 33:20
  Speaker 2: That's kind of nerdy.
• 33:21
  Speaker 2: But that's one of my big passions is focused on related to business.
• 33:24
  Speaker 3: That way, what about a personal passion?
• 33:26
  Speaker 2: Yeah.
• 33:27
  Speaker 2: So my brothers and I, we started a public charity called Become More.
• 33:30
  Speaker 2: I love that concept that the purpose of this life is for each of us to become our best selves and to just generally the spectrum of becoming more.
• 33:39
  Speaker 2: So we started a nonprofit.
• 33:41
  Speaker 2: It's a full public charity and its first initiative is actually in Cambodia.
• 33:45
  Speaker 2: And one of my brothers he didn't do the business with us, but he got his PhD in economics.
• 33:51
  Speaker 2: He did a bunch of different topics.
• 33:52
  Speaker 2: One of his studies for his dissertation was the economic impact of the landmines in Cambodia.
• 33:59
  Speaker 2: So in the Vietnam War the soldiers would actually come through Cambodia on this trail called the Ho Chi Minh Trail and flank the US soldiers.
• 34:07
  Speaker 2: And so the United States, even though we weren't at war with Cambodia it's adjacent to Vietnam we just bombed the crap out of Cambodia.
• 34:15
  Speaker 2: In fact the United States dropped more bombs in Cambodia during that campaign than collectively everybody did in all of World War II.
• 34:24
  Speaker 2: And so, as you can imagine, there's a lot of unexploded ordinances throughout the country in this area, especially around the Ho Chi Minh Trail.
• 34:32
  Speaker 2: Long story short, my brother did his dissertation on a topic that he traveled to the country a bunch and recognized hey, all of these people are getting maimed or killed even today, and so he found that it wasn't just some random dude walking across a field getting his leg blown off.
• 34:50
  Speaker 2: It was.
• 34:51
  Speaker 2: The folks were economically depressed to the point where they actually were seeking out these metal unexploded ordinances, tinkering with them to break them apart so they could scrap the metal, because the scrapped metal sold at the border could feed their family for three weeks, and so changing the economic incentives.
• 35:11
  Speaker 2: The five-year period this is almost 15 plus years ago, the five-year period prior there, 15 plus years ago, the five-year period prior, there are about 10,000 people a year that was dying.
• 35:19
  Speaker 2: With this post implementing his dissertation findings, they're under 100 people a year, and so it saved a huge number of people's lives, but just fell in love with the people in that process.
• 35:30
  Speaker 2: So the public charity we started is this concept of.
• 35:33
  Speaker 2: The first initiative is in Cambodia and it's trying to increase Americans' level of fulfillment, at the same time increasing prosperity.
• 35:43
  Speaker 2: In Cambodia in 1978 through 82, where they killed what was estimated to be 25% of the population, and inside that population they specifically targeted the educated.
• 36:01
  Speaker 2: So it's estimated they killed 83% of people who could read, and now fast forward 50 years or so.
• 36:08
  Speaker 2: If you kill everybody who can read, who's going to run your country?
• 36:11
  Speaker 2: That's the challenges they're having, all the things you could imagine that come from that.
• 36:15
  Speaker 2: And so going to Cambodia, we take some folks there.
• 36:18
  Speaker 2: We have over 700 kids in English school English because it's the international language of business.
• 36:24
  Speaker 2: Somebody who speaks English fluently in Cambodia has a significant increased earning potential than even someone who only speaks Khmer with a significant education.
• 36:34
  Speaker 2: And so providing at English school, we do that.
• 36:37
  Speaker 2: But you have to also do some health initiatives.
• 36:39
  Speaker 2: So we also do the first rung opportunities economically.
• 36:43
  Speaker 2: So we have a fat cow family farm program that we do, that we go in and we've provided.
• 36:48
  Speaker 2: Almost every family owns a cow already and so they just are very skinny cows and emaciated and not vaccinated and they don't feed them the right things and so they have a variable gestion period.
• 36:58
  Speaker 2: So they have a baby every two years, versus a healthy one can have a baby every year.
• 37:03
  Speaker 2: And so we do these things to help them them economic principles, where it's important to us that it's not just us coming there to fix a problem for them but instead we can provide a first rung where they can do the becoming journey themselves.
• 37:22
  Speaker 2: So the visual of they're in a pit and they can't reach the ladder to climb out.
• 37:27
  Speaker 2: You can provide them a rung and then they can climb the ladder.
• 37:31
  Speaker 2: And it's important that they climb the ladder because of the person they become in the journey of climbing, versus you just grab them out of the pit and put them at the top of the ladder.
• 37:40
  Speaker 2: Because those models don't work.
• 37:41
  Speaker 2: They just are a hamster wheel of raised money and spend it well-intended but it doesn't actually bless the people there.
• 37:48
  Speaker 2: So it's been really awesome.
• 37:49
  Speaker 2: We have a bunch of trips that folks go over.
• 37:51
  Speaker 2: We'll probably take about 400 people this year of Americans that go over dental trips.
• 37:56
  Speaker 2: We do clean water.
• 37:58
  Speaker 2: We do the fat cow program there.
• 38:00
  Speaker 2: That really helps them on paying that forward.
• 38:02
  Speaker 2: The proceeds from selling the boy cows actually pays for the education.
• 38:07
  Speaker 2: The break-even equilibrium is 177.
• 38:10
  Speaker 2: We're currently at about half of that and so my brothers and I have funded a lot of money.
• 38:14
  Speaker 2: Some other donors have put money into it.
• 38:16
  Speaker 2: Get up and running.
• 38:17
  Speaker 2: But the idea is, once you hit equilibrium it's fully self-sustaining and pulling entire communities out of extreme poverty.
• 38:24
  Speaker 3: Wow that's fascinating.
• 38:25
  Speaker 3: Congratulations on doing that.
• 38:27
  Speaker 3: I know that in and of itself is a lot of work, and you're also running a company, so I'm sure that keeps you busy.
• 38:32
  Speaker 3: Yeah, so I'm sure that keeps you busy.
• 38:33
  Speaker 3: Yeah, it's a lot of fun.
• 38:33
  Speaker 3: That's awesome.
• 38:34
  Speaker 3: So one final question.
• 38:35
  Speaker 3: You talked a little bit about this already.
• 38:37
  Speaker 3: But say, someone is interested in going into payments or fintech, and they come to you and they're like Red, I'm graduating from college next year and I'm looking at career opportunities and one of the industries I'm interested in is payments.
• 38:50
  Speaker 3: What would you tell them they need to do to be successful in this industry?
• 38:53
  Speaker 3: What would you tell them they need to do to be successful in this industry?
• 38:54
  Speaker 2: That's a great question.
• 38:55
  Speaker 2: We actually sponsored a scholarship at my alma mater at University of Utah in the area of fintech, so we started a program there at fintech.
• 39:03
  Speaker 2: Fintech sets an interesting space because it requires cross-discipline expertise right, it requires a regulatory understanding.
• 39:11
  Speaker 2: You need to know technology, you need to know the business stuff, and so it's kind of this triangle of these different areas, and so my best recommendation would be to be curious.
• 39:20
  Speaker 2: In fact, that's what we did.
• 39:22
  Speaker 2: The criteria for the scholarship we didn't care if you came from a family who had money or not, or if your grades were awesome or not.
• 39:29
  Speaker 2: The intent was it's my thesis that people who are just regularly curious want to know how things work and how to make an impact.
• 39:37
  Speaker 2: Those are the folks who are going to help us build the world of how it ought to be, and so it's really simple but just be very, very curious and that will lead you to.
• 39:46
  Speaker 2: If you're interested in a career in fintech, you're going to need to understand regulation.
• 39:50
  Speaker 2: You're going to need to know what was the intent of the regulation, not just jump through the hoops, but what were they trying to do with the regulation and why.
• 39:58
  Speaker 2: And then you need to understand technology side of things, how that's providing, but also the job to be done.
• 40:05
  Speaker 2: What is the technology trying to achieve?
• 40:06
  Speaker 2: Is that a better user experience?
• 40:08
  Speaker 2: Is that saving time?
• 40:09
  Speaker 2: Is that lower fraud rates?
• 40:11
  Speaker 2: Take a bunch of stuff.
• 40:12
  Speaker 2: That's happened with advance in speed in payments, without name dropping.
• 40:18
  Speaker 2: There's a bunch of folks who move money very, very quickly.
• 40:21
  Speaker 2: Now Turns out that everybody's ready and willing to receive money very fast, but very few people want to send it really fast.
• 40:29
  Speaker 2: Well, that's because that's just fraud fast.
• 40:32
  Speaker 2: There's some intentional reasons why moving money is a little slower.
• 40:37
  Speaker 2: There's friction introduced into the process on purpose and it's because we haven't been able to solve all of the things around fraud exactly the right way, and there turns out to be a lot of really smart crooks and so you got to be careful that you're solving the right problem.
• 40:55
  Speaker 2: Second advice would be, if they remember back to business school days, mckinsey's first law of first understand your problem, I think there's a lot of folks who start solutioning a solution instead of first understanding the problem they're trying to solve.
• 41:10
  Speaker 2: And so you think in payments, so many people have tried to solve payments fast, but maybe that's not the problem we're trying to solve.
• 41:18
  Speaker 2: Maybe we're trying to solve trust and reliability.
• 41:21
  Speaker 2: Well, blockchain does a really good job of that and it also happens to have fast, but then you got to deal with a bunch of fraud stuff, so I think that just the intent around it is.
• 41:31
  Speaker 2: The second one is just understand the problem that you're trying to do, what you're actually trying to solve, and just be super curious.
• 41:38
  Speaker 2: Check those out.
• 41:39
  Speaker 2: We have a number of folks who have actually joined us, and some of them don't have experience in the area of fintech, but if they show those areas of curiosity and problem-solving skills, they'd often turn out to be some of the very best hires.
• 41:52
  Speaker 3: Great.
• 41:53
  Speaker 3: Well, I think with that we're going to wrap up the show.
• 41:55
  Speaker 3: So, rhett, thank you so much for being on the show today.
• 41:58
  Speaker 3: I know your time is very valuable, so thank you so much for being on today, hey thank you Appreciate the call, and to all you listeners out there, I thank you for your time as well, and until the next story.
• 42:15
  Speaker 1: Thank you for joining us this week and Payments podcast.
• 42:17
  Speaker 1: Make sure you visit our website at leadersinpaymentscom, where you can subscribe to the show and where you'll find our show notes.
• 42:19
  Speaker 1: If you enjoyed listening, please share on your social channels as well.