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Automating Debt Repayment with Bobby Matson of Payitoff

The burden of student loans is felt far and wide. Not only because of the size of the debt, but also because of the complicated nature of navigating the different rules and regulations specific to student debt. Bobby Matson, CEO and Founder of Payitoff joins us to discuss the power and importance of automating every aspect of debt repayment for Fintechs, workplace providers and financial institutions – starting with student debt.

Payments & Fintech Insights In This Episode

  • The power of automating debt repayment.
  • How establishing trust and producing the best possible outcome for borrowers is essential.
  • The importance of showcasing the changing climate and use case bake-offs across varying products in the debt repayment vertical.
  • The role of security and privacy for consumers, and also for internal growth to ease partnerships with larger institutions.
  • And so much more!

Featured on the Show

Episode Transcript

Heather: Welcome back to PayPod. I’m your host, Heather Bodie. And today we are going to be discussing student loans. Joining me to help explore this topic is Bobby Matson, founder of Payitoff, a company that offers a suite of innovative tools for financial services and workplace providers to help their customers navigate student loan repayments and achieve better financial outcomes. Bobby, welcome to the show.

Bobby: Great to be here.

Heather: So, I wanna start off by exploring your career, your whole path in FinTech. What was it that led you to creating Payitoff?

Bobby: Yeah. So it’s actually a pretty personal story. My background is in company building. My first startup was at University of Michigan. Actually, it was in the more of like sky miles for entertainment model that we did right out of school. So, I got the entrepreneur bug pretty early and built up a pretty great team, and spent the next seven or eight years working in engineering, your eng lead positions, some of which was in FinTech. So, I worked on Prosper for quite a while, helping in the onboarding tool at that company. But I’ve also worked on Fandango, Stitch Fix, Groupon really used to taking these tough complex problems and automating them in a way that is simple for any end-user to understand. That was really what I did a lot of in my career that led to those. I was looking at other opportunities in FinTech and other avenues. I think there was a portion where I was looking at automating the way that you read an NDA and using some NLP tech for that.

So I had a couple projects going that I was proving out as I was working at these companies. And the biggest problem facing me personally is that my wife and I had six-figure debt that kept us from starting a family, a lot of which was student loans. So, what I did is I ended up codifying a lot of the regulations in that space. You know, most of the student loans are federal about 90% of all student loans. So, they’re subject to all these different rules that are very different than regular debt. So, what I did is codified the regs, built up a path-finding algorithm that helped us determine, based on our context, what is the best way to repay with our portfolio? And that saved us tens of thousands of dollars. Now, we have a family. So, you know, we’re sort of the patient zero first testimonial. So that was really where I started thinking, “Oh, wow. I wonder if my friends who have a lot of student debt and lots of debt could use this?” And they were having amazing outcomes with this tech. And I just felt that every borrower could realize the same relief with these tools.

Heather: I am someone who, right out of college worked two full-time jobs for years. I spent nearly, I can’t even believe I’m saying this, 12 years chipping away at that six-figure mountain of debt. It gives me the shivers. I’m very, very grateful to say that it is officially paid off.

Bobby: Nice.

Heather: But it took me 12 years. And it really complicated so many things in those early years, like inability to purchase a car. You know, there were a lot of things that I wanted to set up for myself in building a life that I wasn’t unable to do, because that debt was just so massive. So talk to me a little bit about how exactly Payitoff works? And what makes it different from any other sort of debt repayment, or strategy, or company?

Bobby: Yeah. So I think in the early days, even today, most of the debt repayment approaches are pretty vanilla. So, they’ll be like, see what happens when you add a $100 a month or refinance at 4% and save this money. But what I noticed, early on, but there was no one was saying, like, whether we should refi, there’s no sort of technology that was personalizing it to our context or allowing us to actually perform that action in-app. A lot of it’s like referrals, where you go to some other site, and you can’t really do much within the application that you’re trusting. So, that’s really what’s different about Payitoff is that we automate every aspect of determining the best repayment path for a borrower, starting with just linking your loan accounts. Then, we automate exactly what you should do next, whether it’s being in a forgiveness program, applying for a federal program, or if you should be better off prepaying and refinancing that debt. And those are very serious trade-offs that a borrower has to make.

So, getting that right is really, really important. So, we’ve really seen that student debt itself was so difficult to perform any of these actions that could really benefit you financially. While at the same time, 47% of borrowers financially benefit from these programs, like income-driven repayment, public service loan forgiveness. And none of the applications back then really factored in that type of guidance. And we’re still the only API provider that offers it. That’s really what makes us pretty different. But we also factor in being able to say, “Hey, based on your…we’ll stimulate, adding an extra dollar to your payment every month and adding $2 and $3, and actually chart out what your personalized prepayment amount should be.” There’s all these different creative ways that we’ve applied algorithms to determining how you can best repay your debt. That’s really what has needed to exist is leveraging existing technology and applying it in a new way. For us, it’s focused from the early days on offering just clarity. That’s what every borrower seeks is clarity, so they can… As you mentioned, you had six-figure debt over 12 years. Once you have clarity, you can actually make other financial decisions, like, think about having a mortgage, which could be another six-figure debt, right? Like, that’s an impossible thought when you come out of school. So, I think that’s really where we focused is on align the system to produce the best possible outcome for the borrower and do it in-app in a way that isn’t, you know, you can just do it on your phone, in your bank account, in whatever financial services app you trust. That’s really what it’s about.

Heather: And I think that trust is just so essential. It can be so overwhelming to navigate the ins and outs, like you were saying of the different makeup of a series of loans. You know, if some of them are federal loans and some of them are private, or however, you’ve structured your school debt. I know it’s an old joke, but we don’t allow 18-year-olds to buy a beer, but we trust them with six figures’ worth of debt, right? And then assume that they’re going to be on a path where they can have the time and resources to sort of dig into the details of how it functions. It’s wild. It doesn’t make any sense.

Bobby: Yeah. You know what makes it even more crazy is that, it’s so hard for a borrower to make a decision with that kind of debt, but it’s also really hard for the apps they use to know what to do for them. The tools out there, right now, we compete directly with Plaid Liabilities. And all they do is surface loan data. And they’re just surfacing the data itself. Then the actual app implementer has to know what to do with that data. And in many times, it’s kind of risky to do the wrong thing. So, what we’ve seen and what we’re offering is to go beyond just the data, it’s to provide the guidance and the insights on top of it, that’s automated so that you can be implementing a debt repayment program and not need to know the ins and outs of federal loans. Even as a developer, you don’t need to know about whether it’s private or how to organize it versus federal, or any of the details of a loan type in the various programs and repayment plan types. And what we’ve seen is with Plaid Liabilities specifically, you know, we came to market, lots of our partners were using that. Now, they’re all using us because the data is just like Swiss cheese versus our concrete where we know what to look for to provide the right guidance.

Heather: So, as a B2B product, what does that process of becoming a customer look like? What does onboarding look like for an institution who is wanting to provide your service to their customers?

Bobby: Yeah, it’s a great question. So, it’s very easy to get started with Payitoff. So the first thing we’ll wanna do is meet and align on use case. I think it’s great to save borrowers money, but you also need to make sure it aligns with the goals of the business. So, typically, we have people come in, whether it’s a FinTech, a financial institution, wealth management firm, they have some idea of wanting to solve this problem, but they don’t really know how. And it’s important to figure out and educate exactly the best path for the business. It could be average savings per borrower using our tools as 240 a month, that could be used to drive deposits at a bank and free up cash flow, for say, investing in a Robo advising tool. So, there’s a lot of say, retail use cases that we could align on. But once we’ve found that use case that helps the borrower and helps the business, then we just get, from there, it’s all about just testing with live accounts, proving the model, you know, open a shared Slack channel, share API keys, get testing right away. Sometimes we’ll run a bake-off against Plaid. We’ve never lost one of those. And we fill out, you know, an order form. Well, I’m proud of the team. I’m honestly…

Heather: You should be proud of it. I just haven’t heard of it.

Bobby: What’s wild is that, like for us, it is an awareness thing. You know, in reality, it’s important for us to showcase what is really happening on the ground. Last week, in terms of our service or connection health, we were at 95% on daily syncs. And, you know, we’re seeing reports of like 50%, 60% with existing products that compete with us. And it’s just like that. You’re gonna have terrible user experiences with that. So, our focus is on providing the best possible experiences that borrowers need and are focused on their outcome. So, I mean, when we’re doing these bake-offs, it’s pretty obvious once you run the data, the difference. You can see it, the developer can see it, the user experience improves. And then at that point, you’re filling out an order form and planning a kickoff. And that’s when our whole customer success program begins. We have a whole sort of dialed-in customer success program, we have a 10-minute integration guide. If you just wanna use our out-of-the-box UI, if you wanna go all API, we can do a much deeper integration. So, it all depends on that initial use case.

Heather: I wanna switch gears a little bit and talk security and privacy. FinTech has a key role to play in protecting both consumer and business data, and especially when we’re talking about debt and banking, what is Payitoff’s philosophy when it comes to security?

Bobby: Yeah. Security is really important to us because… I mean, as an engineer by trade, I just take security really seriously. I mean, we started our SOC 2 certifications over two years ago, and we regularly pen test. And it’s one of those things that’s just built into our process. We have thousands of automated tests that run on a build, that even are like gut checking outcomes for borrowers and real-life scenarios. And that’s all automated. So, we’ve really focused on security first. And now that we are working with much larger financial institutions, there’s an even higher significant standard that we meet. So, we’re really glad that we invested in that early at the company. Because, you know, getting past procurement, isn’t difficult or InfoSec and getting to the contract negotiation because we’ve already got proof of meeting those SLAs support reliability. So, those are the things that I think actually are an advantage in the sales process for a company our size. You know, we’re 4 and-a-half years old, but we’ve been really focused on that from the beginning.

Heather: I’m gonna switch this up again. Over the last couple of years, over 40 million people have experienced a pause on their loan repayments. We’ve also seen major shifts in career paths. And for so many people, just total restructuring of what it means to manage their personal finances throughout the pandemic. So, what do you think we’re gonna see happen once those payment requirements are reinstated?

Bobby: It’s an awesome question. If you think about it from the borrower’s perspective, they’ve shifted their spending and not included that payment anymore, right?

Heather: Right. Yeah. That’s exactly what I mean.

Bobby: Yeah. I mean, it’s $400 that is not going towards that payment. So it’s been reallocated, right? So, what you’re gonna see is a big drop in consumer spending and very significant economic impacts. Whether it’s investing, could see serious dips in crypto, depending on the audience. But we’re looking at billions a month directed back to student loan repayment. So, every financial service provider, at the same time, will need to answer, “What should I do with my student loan payment at once?” So, that’s the real rush where we’re preparing at this, the industry for is, “Hey, when this resumption happens, you know, right now it could be May, it may be later. But the reality is it’s going to happen, and there needs to be a plan for it, not just for the borrower, but for the apps they use every day.”

Heather: If you could sort of look into a crystal ball, what do you see long-term when it comes to student debt and loan repayment? I mean, what might this landscape look like, say, 5, 10 years from now?

Bobby: Yeah. I think we’ll see, and we’re starting to see it a little bit now is ed is gonna continue providing loan assistance and relief programs that are borrower-focused. We’re really excited about what they’ve done with the PSLF waiver. That gives much a wider breadth of borrowers forgiveness who are in public service. We can expect to see similar things in teacher loan forgiveness and other occupation-focused loan assistance programs. And we’ve seen similar things for people who got defrauded by schools, borrow defense claims are much more likely to be approved now. So, you’re seeing a lot of borrower-friendly programs. And I think we’re gonna see more of that, whether we’ll see blanket forgiveness is relatively unlikely. But I do think some partial version of that is very possible. So, a very borrower-friendly environment. Now, when it comes to servicers, though, we’re gonna see a lot of shifting servicers. That landscape will change quite a bit and already has. I mean, from December to January, 6 million borrowers went from Navient to Aidvantage. So, that was a big shift that borrowers had trouble even knowing where their loans were because all their federal loans were suddenly gone from their account.

So you are gonna see a lot of shifting servicer environments. Where we plan to influence it as by applying our technology to improve the system itself. So, to better align with the borrower outcomes, because a lot of the processes today still require humans, like, the call centers requiring people to call in. And I think that we’ll see some regulatory change, where it’ll be a much easier and friendlier, much more simple for a borrower to enter, say, into certain loan forgiveness or assistance programs. But there’s definitely a push from ed, you’ve seen it. There’s a program that used to be called Next Gen, they’re calling it USDS now where they are trying to build some sense of unification, like a single brand in a servicing environment. But at this point, they really need the servicers to participate in that because it’s a complicated thing to service. You know, there’s nothing more complicated than student loans when it comes to servicing with all these programs. So, the more that we use technology to help with the decisions so people don’t have to call in, I think that’s what we’ll see more of is borrowers having better access to their data and being able to make decisions where they don’t have to call. And that’s exciting.

Heather: Can you talk to me a little bit about the user experience at Payitoff as somebody who doesn’t have student debt anymore? I think all that is everything. It would not be a customer of this through my banking institution. But somebody who is, I’m just curious, I feel like the trend right now, specifically with app-based life management is sort of gamification and colorful user-friendly educational-type layouts. What is the user experience like for Payitoff?

Bobby: Yeah. So, we have out-of-the-box UI that exists as say a widget. So, similar to what you would see with a Plaid Link, we have our own widget called Nexus. And what you’re able to do in that user experience is link your loans and then get guidance immediately on what to do next and verify, “Hey, these are my loans, these are the actions I can take on my loans, and then actually perform those actions.” So, the primary use case we see is with the federal programs because that’s really our bread and butter, but we also are introducing a lot of exciting things this year where we’ll be applying that type of guidance outside of student debt, as well as being able to provide different guidance that wouldn’t be offered before, so…

Heather: Say more. Can you not tell us, is it a secret?

Bobby: I can’t tell you everything. I can’t tell you everything, but we have a bunch of exciting things we’re gonna release. The thing, though, that is important to note is that not only do we have user experiences, but we often are working with partners to design their user experiences because everything we do is accessible through the API. So, we have a pretty big split. There’s some partners who will just use our tech-to-link loans and then they are totally using the API the rest of the time to manage the guidance and say, set up Autopay, or make an extra payment, or any of the things that they wanna do with the API. There’s just a lot of use cases that we drive. So, say you’re a FinTech that wants to add student loan benefits to your workplace platform. So, you can spin that up with us in no time. You’re a neobank who wants to drive deposits in an ADP in-app without knowing anything about student loans, but you wanna capture that win in your app. That’s another use case that’s very common that partners have worked with us on. So, I think some partners we see, one, out-of-the-box UI that was prebuilt that we already have ready to go. But sometimes we find that there’s the most impactful implementation is, “Hey, you’re just linking loans through that widget.” And then the rest of it is, “Hey, a playbook say of the best practices we’ve seen for the use case you’re looking for.”

Heather: So, you mentioned integrations. Can you dig a little bit deeper into that?

Bobby: Yeah, definitely. So, it’s really, really easy to get started with Payitoff. So partners can spin up our widgets in just a few minutes with a few lines of JavaScript. So, we have the pre-baked UIs that can be used very quickly. If they’re looking for a deeper integration on the APIs, I mentioned we’ll align on success for their use case. And we also have dedicated support to getting it launched. So, we’re all about speed-to-test delivery and drive the outcome. So, that’s what we’re really focused on for our partners and for the borrowers. And for us, again, it’s really about bringing that value to the borrowers. Like, whether you’re trying to add student loan benefits to your workplace platform, your neobank driving deposits, and ADP in-app without knowing anything about student loans, these are all common use cases that we can bring our best practice to the table for and help execute on really quickly. And the system itself, just even at a high level, is designed for the end-user to save as much money as possible and improve their financial outcome. So that aligns the incentives with the apps they’re using and makes for really, really sticky experiences. So, there’s just a lot of proof that we have an evidence of that, that we can share when we’re going through the integration phase.

Heather: Got my mind spinning about all the possibilities of things that are gonna be coming. I’m definitely gonna keep an eye out. I’m really excited for you. And I’m excited for, you said moving into those different spaces outside of student loans. Because I know, as both an entrepreneur, and I’m an executive in a non-profit organization, I don’t prioritize the energy and the time to really be intimately involved with my finances and with my debt. And I think that something like this could be really exciting. So, I’m excited for you and I will be paying close attention.

Bobby: I appreciate that. Yeah.

Heather: Yeah, absolutely. So we have a segment we like to end every show with, five questions, rapid-fire. Bobby, are you ready?

Bobby: Oh, I hope so.

Heather: Okay. Here we go. Make a prediction about the changes in the immediate future of student loan repayment. What do you expect will happen in the next 12 to 24 months?

Bobby: Yeah. So, I think some of it is what I touched on, but it’s more targeted relief programs and eventual resumption of payments where borrowers will be flooding call centers, looking for guidance and Googling like crazy, and potentially partial blanket forgiveness, depending on the landscape. I mean, the resumption is really a political football right now. And when that happens, will be kind of dependent on how we do with COVID and how the pandemic sort of ends or we live with it. So, the immediate future of repayment is actually pretty heavily tied to how we’re handling the pandemic.

Heather: All right. What’s one cool piece of payment or finance-related technology that you’ve come across, and you can’t say Payitoff, recently that it impresses you?

Bobby: That’s funny. I was like, “Oh, well, aside from what we’re doing?” But, yeah. I mean, I think I see a lot of cool stuff with our partners. We have a partner, Phosphorus [SP] right now, who’s we’re powering their benefits platform that they’re working with employers that offer a very specific forgiveness program to defense lawyers, and that type of occupation. And I’m just seeing a lot of…and they’re a non-profit as well. So they have a lot of interesting ways that they’re using our tech. We’ve seen a lot of apps that we power that are just creating incredible outcomes. I’d say, outside of that, though, like, on the payment side, I am seeing interesting partnerships. So, there’s a company, Method Fi, who Jose had built GradJoy. They were at a YC, and he’s pivoted to a payments product in the loan space. And I think they’re partnering with, I think it’s FIS or a similar type of provider. And it’s really interesting with seeing, I love what they’re doing and pivoting from GradJoy to that. And just the interesting angles I’m seeing with these larger providers getting more involved with FinTech. And it’s a good time for this industry. I mean, there’s more visibility in this problem space. Loan repayment is a critical part of the consumer spending package. So, I’m just glad that we’re seeing more participation from the larger players.

Heather: Yes. In the next five years, most people will make a purchase with either Bitcoin, Apple Pay, or something else, which one, and why?

Bobby: Something else. And honestly, five years, we probably won’t even be the ones making the purchases. I think, in reality, we’ll authorize a way of spending that allows us to make purchases for us is probably what I would say. We build some financial decision layer that was directly related to that kind of autonomy for our money. I think that’s kind of where we sit is long-term for us. And I think this is why Lightspeed invested, and a lot of our other investors are excited is we have an eye on really being a big part of the financial decision layer. Like, what we’ve done with student loans is applicable outside of that, it’s everyone has some financial decision they should be making or could be making. And they just either haven’t been given the clear A, B on what the trade-off is and/or the action to do that. So, I think that’s where the more we see that happening, where people can very simply improve their financial outcome with doing very little, I think that’s gonna keep happening.

Heather: No one has put it exactly the way that you just did. And what comes up often is sort of, like, the magic of Apple Pay, the magic of waving your phone near some sort of something and the purchase happening for you. And my guts, when you said that, locked in, like, yes. So, anything we can do to sort of get away from having to make decisions around those transactions, but instead sort of automating that process to make sure that things are working for us in the best way that they can be so that we can be the healthiest financial versions of ourselves. I just think that’s awesome. Okay. What’s one piece of advice you have for someone who is considering payments or financial tech as a career?

Bobby: Piece of advice, I’d say, just start building. I think that the more tinkering you can do, the more curious you are. Payments isn’t a done industry, right, there’s so much that we’re gonna see in payments, so much we’re gonna see in FinTech. And you’ve probably worked on something or you’ve probably seen some perspective that could help a whole population of people, you just don’t know it. So, the sooner you can test out ideas, really get validation and spend a lot of time researching and doing customer discovery, that’s all what contributes to making the plunge and either company building or joining a FinTech. And that’s totally aligned with where you think the industry’s going. I think those are the ways to approach it. But you could approach it as a company-building exercise where you say, “Okay. In three to five years, this has to exist like X, Y, or Z or X, Y or Z company will be acquiring a company like that, or be looking to build or buy in that timeframe.” Start building it now so that then you’re a player in this space. That’s one way to approach and reverse engineer that company-building process. But the other is to say, “What do I believe in? And what are the things I want the future to look like?” And then join a company that’s doing that. Whether they’re a series A, series B, and that’s really where I think you’re gonna get a lot of fulfillment in this industry, if you’re interested in.

Heather: All right. And then the last one, this one’s a little bit of a doozy. What’s the best business advice you’ve ever received, and from whom?

Bobby: So the first thing that comes to mind here, when I was at Michigan, we were in this entrepreneur program. This was at Ross Business School, which is mostly like a factory for ibankers. So it was really, I was like one of a couple entrepreneurs there. And they brought in the CEO of Lloyd’ s of London, this guy, Richard Ward. I don’t know what he’s doing these days, but he is one of the longest-running CEOs there. And I talked to him about what we were working on in sort of, like, a smaller setting. And I said, “Well, what guidance do you have?” We were doing, I think our second fundraiser at that time. And he said, “Never take a risk you don’t understand and treat investors’ money like it’s yours.” And that, for some reason, those two pieces have always stuck with me. And to this day, I still am not taking risks that I don’t understand. And I’m still treating any investor money like it’s mine. That really changes the dynamic and the perspective when you’re building a company. So, that’s something that I would say is the best business advice I’ve ever received.

Heather: Bobby, that does it. Thank you so much for joining us today. If folks wanna get in touch with you or learn more about your company, where can they find you?

Bobby: Yeah. So, I’m on Twitter as @bomatson. And you can just email me, it’s bobby@payitoff.io.

Heather: Great. Thank you so much for joining us today. We really appreciate it.

Bobby: Thank you.

Heather: If you enjoyed this episode and wanna hear more, head on over to soarpay.com/podcast to subscribe on your podcast listening platform of choice, that’s soarpay.com/podcast.

Industry Spotlight

Payitoff

Payitoff is a debt infrastructure company based in NYC and LA offering a host of services that help fintechs, workplace providers and financial institutions save the average customer $240 / month on their student loans. With our tools, any financial service can easily: – Sync the richest loan data – roughly 2x more data per loan vs. alternatives – Automate any type of guidance, including forgiveness programs that already exist – Digitally enroll borrowers in federal repayment options that save them money – Embed several student loan workflows with a few lines of javascript Partners using their technology have collectively saved borrowers over $10 million to date.