Sramana Mitra: What was the concept of MX?
Ryan Caldwell: MX is addressing one of the core issues for mankind, which is people don’t have visibility into their finances. Finance is, in fact, a critical part of life for people. So much of the intangibles that we care about whether it’s family or health are directly correlated to financial flexibility and emergency funds that may or may not be available and to certain amounts of financial freedom.
If an individual throughout their life doesn’t have a solid grip or understanding of their finances, it can not only affect them in their early stages of their life, but the later stages can be truly terrifying as they enter into old age. If individuals didn’t have control of tier finances and didn’t have the ability to reflect on their finances and see insights into where they were potentially off track and adjust from that, then there are these cascading effects that not only impact that individual’s life in many powerful negative ways, but also negatively impact those communities or the world at large. It was definitely a problem where I felt that if we could have an impact there, it would have a domino effect. It would be pretty powerful.
Sramana Mitra: How did you get this off the ground?
Ryan Caldwell: In 2010, there were a few companies who consulted me because I had a reputation of being able to help people evaluate strategies if they’re on track. I was advising a handful of companies, three of which were in the FinTech space. They were doing some derivative of digital money management or what people have called Personal Financial Management (PFM). I saw their approaches. Some years prior to this, Mint had come out of the gates pretty strong. It had been touted as a really new cool innovation, but there hadn’t been much innovation since then. There were a lot of people who were fast followers for that, but a lot of the ideas they had were not going to scale the way they really needed to scale.
If you want to have an impact on millions and millions of users, the only way you could do, and do it quickly, is design a software that would be powerful for a bank and distribute it through those channels to benefit the end users. In the future, banks and credit unions will have to become good actors. Plenty of banks and credit unions are good actors, but the space has a little bit of bad reputation where there are a few bad actors, or there is a good bank but it does something bad for a while. The most recent incident has been the Wells Fargo one where they were adding accounts that users didn’t want added. That type of action has given the space a really bad reputation.
We see two fundamental forces driving change worldwide. Those two fundamental forces are increased choice and decreased switching cost. When you have rapid worldwide increased choice and decreased switching cost, it inevitably necessitates an advocacy-based approach to business. If a business doesn’t take really good care of its customers, there’s so many other choices. The switching costs are so low that eventually the abusive players will end up getting pushed out. We’ve seen this again and again, like Google fighting a larger Overture back in the day.
Overture chose to have ads that were less relevant and that were more spammy for the user. Google focused on even willing to give up revenue but making sure that the ad content was relevant. In the long run, that allowed a company like Google to dominate what was a much larger Overture. From a banking standpoint, that was where banking’d inevitably go. Whether banks choose to be that way on their own and they would beat competitors or whether there will be FinTech innovations that would take dollars or customers away from banks, the space is going to be driven to advocacy.
If that’s the case, do the banks have the proper software to be able to help a user understand their full financial picture? Do the banks and credit unions have the software to help the user understand if their net worth is going up or down? Are they saving enough? Are they properly saving for retirement? If the bank wants to be on the end-user side, they have to provide services like that. Banks and credit unions are not technologically developed to do that. The software providers that were providing software to banks were providing pretty basic software that met regulatory requirements, but didn’t meet what the end user really cared about which is, “Am I financially okay?” They want to know what the transactions are in their account but they also want to have insight into that.