MX: The Next Frontier of Money Experiences

Jim Marous:
Hello. Welcome to Banking Transformed, the top podcast in retail banking. I'm Jim Marous, the Owner and CEO of the Digital Bank Report and Co-Publisher of The Financial Brand. Utah-based open finance solution provider, MX Technology, has named several PayPal veterans to lead the firm's next stage of growth. This growth will still include the continuation of using data to deliver intelligent and personalized money experiences, while concentrating and connecting technology partners to financial institutions with modern solutions and improved results.

Jim Marous:
My guest in the Banking Transformed podcast is Jim Magats, the CEO of MX. Jim shares how he and his team see MX moving forward, and the importance of data as a foundation for the entire banking ecosystem. Jim Magats, a nearly two-decade PayPal veteran, who's most recently the Senior Vice President of OmniPayments Solutions, is one of three Senior PayPal Executives who have joined MX in the past months. The question is, how will this major shift in management structure change the future course of the business at MX?

Jim Marous:
Jim, you were at PayPal before this. As you look back on your career, can you tell us a little bit about your career, but also how you think your career path before this had prepared you for this next part of your journey at MX? Also, to be honest with you, why MX?

Jim Magats:
Yeah. What I did at PayPal was, effectively, I came into a very ambiguous role. This is the early part of 2004, where I was asked to help PayPal navigate the financial institution ecosystem, evangelize PayPal. As usually happens at these type of organizations, two months in somebody leaves and they said, "Can you go do something totally different?" Ironically, my job ended doing exactly what I started to do, it just took 18 years to get there.

Jim Magats:
Basically, my job at PayPal was to help the company expand, first, geographically. Part of the job that I had through almost all the 18 years was really looking after our payment platform. Think of PayPal as a company that has Venmo, it has Braintree, it has PayPal Checkout. Underlying all that, we're effectively and continues to be a payment service platform, how people pay, take money out of the PayPal ecosystem.

Jim Magats:
So my job initially was to almost be like the Marines, the first boots on the ground as we were going to Europe, Japan, Brazil, Australia, China, and figure out, how do payments work in that market? Then backward engineer how payments needed to work to support PayPal, and effectively eBay because, at the time, we were under eBay. As eBay was going to the market, they wanted PayPal, and then we had to figure out how payments would work. So I did that from about 2004 to 2010. Then I moved over to Europe, and was the payments guru for our European business from 2010 to 2013.

Jim Magats:
When I was over there, I got involved with something called PSD2. PSD2 is, probably many on this know, I'd call the Magna Carta, or whatever you want to call it. The document that basically set the standards on open banking. I got an opportunity to help represent PayPal as that was being crafted. Came back from Europe in 2013, and I said to some of our Corp Dev people, "Hey, this open banking thing, I think is something that we should look at." We actually got involved with Plaid, and we were one of the early investors in Plaid.

Jim Magats:
We then took a lot of the open banking capabilities and we infused them into the PayPal experiences. I'd say pre 2015-ish, when you were trying to add your bank account to PayPal or Venmo, you'd go through a random deposit process, which probably all of you have done and have seen it. It's just a totally fractionalized experience. We started to use those services from Plaid, Yodlee, and we later invested in company called Tink in Europe, to basically just create a lot of frictionless services within the PayPal environment. So I got to see, in effect, how you would then take open banking services and then scale them for a service for all of our internal PayPal customers. Then, on the front end of that, how they would actually come to fruition.

Jim Marous:
Yeah. It's interesting because PayPal's gone through a lot of changes too. Keeping a challenger mindset, even in what we'll call probably one of the biggest fintechs in the business, is a challenge. So you had challenges at PayPal, and I can't ask you about what challenges you'll have at MX because it's still rather new. But what challenges did you have at PayPal with regard to embarking upon change, as well as communicating to the marketplace what PayPal was becoming?

Jim Magats:
Probably the biggest change that I was involved with was when we were coming out of eBay, we had to make some existential questions about the company. Which is, do we want to be a closed platform, open platform? How were we going to exist in the broader, I'll call it, ecosystem? If you were an investor, the thesis at 2015 was, we're going to spin out of eBay. Then probably, the average investor gave us 6 to 12 months to exist as a standalone company, because someone was going to come either crush us or buy us.

Jim Magats:
We took the decision, at that point, to really think about, how do we think about our customers, not just as PayPal customers, but as financial service ecosystem customers? In many ways they're customers of Wells Fargo, Alaska Credit Union, they're basically customers of financial institutions, and of PayPal, and of Venmo. We thought about how we can create a mutual win-win across them. So we looked at our experiences, which ones were the most friction-filled. We made some commitments of things that we historically had steered people away from, cards onto ACH.

Jim Magats:
We basically said, "We're not going to do that anymore. Trust us." It took us about two to three years for them to trust us as we're going through that. Just built, from my experience, a lot of really integrated experiences. So if you're on a bank's website, you can automatically add your PayPal, add your card to PayPal. You can now pay with rewards on PayPal. Those are just examples. We shared risk score data as you go through that.

Jim Magats:
So really, we took a situation that was very much confrontational and we said, "Hey, we're going to be an open platform. We're going to be a customer champion company, and we're going to do what's best of customers." You'll hear me talk a lot about, I'm a huge fan of partnership. I'm a huge fan of, do right by the customer, they'll do right by you. It sounds very trite, but it's sometimes very hard-

Jim Marous:
But, at the end of the day, it's the hardest thing to do.

Jim Magats:
Because, you're very embedded into your model.

Jim Marous:
Yep.

Jim Magats:
When we made that decision, there were people within PayPal like, "Oh, we're going to be a $10 stock." When we first announced that, the stock went down like 10- 15%, and people were like, "Oh, I can't pay my mortgage. I was going to buy a house." We're like, "Look, it's the right thing to do for our customer." Over time, that proved to be the right thing. I think that's the mindset that I want to bring to MX.

Jim Marous:
It's interesting. I've been to a number of conferences recently. If you closed your eyes, and went from station to station, you're hearing very similar visions of what these firms are going to do. MX has a vision that's based on data analytics, brings in partnerships, brings in open banking, and deploys against personalization and experiences. A lot of other organizations talk to the same vision, I'll say. How does MX stand out, as you see it going forward, in a marketplace that's filled with companies saying what they say they can do, and maybe can't implement against it?

Jim Magats:
First, you have to do it, and you have to live it. It has to be part of your ethos as an organization. One of the things that we think a lot internally about is, how do we partner together? How do we make people understand that this is no longer a nice to have on data. If you look at the number one stress factor that people have, it's around money. I would argue that, when you actually boil it back, other industries have done an incredibly good job of creating good end experiences around technology and mobile. I actually think technology and mobile has actually caused more stress for people.

Jim Magats:
If you just look at the number of accounts I have, the number of accounts you have, and you try to just do a simple, where is my money? It's like, Where's Waldo? It's very hard to find where your money is. Then you couple that with problems of, there are organizations that sit out there that don't want you to know that you actually made a payment to them. So you couple those together, I think it's very much an imperative. The challenge sometimes is that people have old business paradigms and models. The good news is our model and paradigm is around win-wins. That if it's good for our customers, it's good for their end customer, it's good for us.

Jim Magats:
As we're thinking about it, first and foremost it starts with, how do you make sure that financial institutions or fintechs can actually get their data out? How do you then get that data out in a way that people can access it, and take action on it? Then I think you can build elegant experiences on top of that. There's so much innovation that we could be doing in this industry that you wince. If we just had our act together on data, and we had our act together in terms of making it available, and everyone worked together, the amount of return this industry could get is exponential versus what it's getting right now.

Jim Magats:
The industry, as you can appreciate, fights on two Jims here, which one of the Jims we have, and do we have both of them? Old models on things like interest margin, it really should be around customer satisfaction, because I would be glad to pay companies more and financial institutions more if I had a great experience. I think that's one of my learnings from PayPal, PayPal makes a decent amount of money because it created a great experience [inaudible 00:10:19].

Jim Marous:
As Amazon does-

Jim Magats:
As Amazon, yes.

Jim Marous:
As Apple does. You can get that value add if you provide the value on the front end.

Jim Magats:
Ultimately, it's about converting a customer into a good experience, and getting them to do something that is good for them, and ultimately good for you.

Jim Marous:
It's interesting, as I mentioned as we started this interview, I've been a friend of MX and MD before that, for more than a decade. One thing that's always been true about this organization is they knew data, they knew analytics, and they knew deployment of that. Now the challenge sometimes is, it loses value in the interpretation sometimes. You've brought in some partners, the people that you've worked with at PayPal. How do you see the three of you really focusing on what MX is going to be in the future?

Jim Magats:
The people that I've worked with, Nandita and Wes, something that the three of us hold near and dear is, experience matters. Experience matters. Experience matters. I'll say it again and again, until I'm done saying it. Good experience matters. But, it's got to be scalable, and it has to be usable. It can't be one for one party and one for a different party. One of the things that I learned at PayPal is, we at PayPal had 30 million different merchants on the platform, and [inaudible 00:11:34] 200 plus different markets.

Jim Magats:
We were at our best when we were able to take a great experience, and make it uniform across all different geographies, and all different customers. I think one of the challenges that organizations have is, how do you not create one for one and one for another, because ultimately you suboptimize and you can't scale that. So for us coming in, it's about, how do you think about scalable? How do you think about great experiences? Great experiences aren't just like, "Hey, I created a great money map, and a great widget as you go through it."

Jim Magats:
Great experiences are on things like, are your APIs in a documented format that developers can easily work through? Great experiences is true end-to-end around things like documentation, as I mentioned, onboarding. We work with a lot of different partners, and we are in a position that they are effectively our sales force, and they have to be able to understand the product. We have to create simplicity across, how do we bill? How do we onboard? How do you service as you go forward?

Jim Magats:
Those are the things that I think the three of us have had a lot of lessons learned, that we have scars on to show that, and we can bring to the organization, then infusing the data piece to it. One of the things that I would say, that I learned at PayPal, PayPal had, this number may have changed in the time since I left, over 50 petabytes of transactional data. That's a huge number.

Jim Marous:
Oh, yeah.

Jim Magats:
So in effect, and Heard explains the Library of Congress to the moon and back 50 times, that's how much data exists within it. We struggled to really untap that data, because you didn't have a 360 view of the customer. It wasn't in a format that you could take action on. So we've seen the problem of innovation because of lack of, not data. The problem isn't that we don't have data, it's that you can't understand it, and you can't take action on it.

Jim Marous:
Right, exactly.

Jim Magats:
So that's what we're hoping to bring here.

Jim Marous:
You mentioned earlier, about embedded banking and banking as a service. How do you see MX playing in that realm? You have the data, you have the partners to bring to the marketplace. You have the partnerships with partners who you bring them value. But how do you see this working, and where do you see MX playing when you're talking about working with financial institutions going forward? Because, it's really at the very beginning stages of this whole embedded banking and banking as a service, but I don't know of any financial institutions that will be able to exist without playing in that, in some way.

Jim Magats:
Yeah. I see that's where the world's going towards. For us, it's not about competing with them. It's about enabling. Quite frankly, we get excited about all the use cases that a company could manifest themselves. You look at one of our, literary thousands, of institutions that use our platforms today, my dream, and maybe I'm a dreamer at heart, as you go through this is connecting them all together, and connecting them in a way that, if I have a good financial loan service, why can't that be embedded into a fintech? If I've got fintech that has a really great way of onboarding, or finding a way on documentation, or bringing in developers, why can't we find a way to marry those two together? So I really see us as that intermediary between all those different forces in trying to create a platform for them to utilize as we go forward.

Jim Marous:
It's interesting. I'm sure you've been here long enough to know that one of the things MX is really known for, and we're at the MX summit in Snowbird right now, it's a great example. It's the culture of the organization. The organization, from Missouri inception, has been just a major move in the marketplace as much because people wanted to be part of it as anything else. That's cultural.

Jim Marous:
How do you keep that in place? More importantly, as things are moving so fast, how do you not allow distractions to happen and keep the challenger mindset? I know at PayPal, they engaged with me, I think it was last year, when buy-now-pay-later is jumping all over the place. They said, "We took our eyes off the prize for a little bit," because you can get comfortable when things are going well. How you going to keep the culture issues strong here, as well as build from a challenger standpoint?

Jim Magats:
What struck me from day minus two months into the job, to really deciding on the job, and really what brought me here, is the culture. It starts with our founders, those of you who know the MX story, two very mission-oriented founders. Unfortunately, Brandon Dewitt, who was our CTO, passed away last year. He had his Brandon-isms. I don't even know if that's a term, but I'm going to use it now. [inaudible 00:16:29].

Jim Marous:
Definitely is true, yes.

Jim Magats:
Okay. I'll use that as a term. Which was really around, do good. Do good, be bold. I think, if nothing else, that's part of the company's DNA. It's on the walls, it's in the bathrooms, it's on the billboards as you go forth. That's what attracted me to the organization. I would be disingenuous to say, that's something I want to change. I think where we have to think about is, how do we infuse that into the organizations that we serve and support?

Jim Magats:
I think we are at a juxtaposition right now, within the financial service's ecosystem at heart. Where, if we don't get our act together, and we don't figure out this data thing, I don't know if I can elaborate on this data thing. But I think if we don't, others are going to do it, and they're going to do it better. I'm not going to name names, but it probably will take you about 10 seconds to figure out who can. I think when they do, then that's when you'll really get this intermediation. When the power of data's in the hands of very few, there will be a suppression of innovation, and the ability to do good, which Brandon talked about, won't be there.

Jim Marous:
Let's take a short break and listen to what our sponsors have to say. Welcome back to Banking Transformed. I'm joined today by Jim Magats, the newly named CEO of MX. We've been discussing the future of MX, as well as the rapidly changing banking ecosystem. We keep on coming back, I don't think there's been one thing we've said together that hasn't dealt with data and analytics. I know that MX can take, what I'll call, garbage data from a financial institution and make it usable. But making it usable is only the first step. Because if Wells Fargo, my personal bank, knows everything about me but doesn't let me know they know everything about me, it has little use.

Jim Marous:
In fact, to your previous employer's credit, when somebody asks me, who's my business bank, the bank that holds my deposits is not really my business bank. My business bank is PayPal. I get all receipts through PayPal. I have all disbursements through PayPal, and PayPal continually offers me pre-approved loans, because they know more about me than anybody else. Now, we have a different situation when you're dealing with financial institution data in that, in most cases, you don't have good payments data, which is really the holy grail of the whole scenario. So how do you see the implementation of actually dispersing data, and analytics, and insights to the marketplace out of MX and, most importantly, making it so your partners, your financial institutions, and your fintech partners really learn to democratize that data, and have it go beyond the silo that has always held data analytics at a financial institution?

Jim Magats:
Yeah. The belief I have is that, even though we've done great things with fintech, and I'd be disingenuous if I said I wasn't part of that. I'd say, we did do great things. I think the companies like PayPal have done great things, and there are many others. The challenge that I see is that, it's insight and the ability to have an end-to-end journey on your money is totally fractionized. I think it's actually worse than it was. I tell the story sometimes of, as I grew up, we had one bank. Go see the bank manager. That's where our money was. If there are any questions about money, you go see that.

Jim Marous:
Oh, yeah.

Jim Magats:
My family, now of four, has over 16 different bank accounts, 20 some other institutions. Those are the ones my family and wife tell me about, so I don't even know what else they're up to. But, let's assume that's the case. It's really hard to create an end-to-end money experience when, in your case, your end deposit is with Wells Fargo. Your transactional information is with PayPal. You probably have a myriad of investment accounts.

Jim Marous:
Acorns. Betterment. SoFi. Yeah, exactly.

Jim Magats:
So the end-to-end experience is totally fractionalized. There's almost like a first moment of ah-ha that we all need to realize that the data, Jim, is your data. It's your data. It's not Wells. It's not Acorns. It's your data. If you want to be able to share that data amongst all those institutions, we should be able to let you do that. In return, all those institutions should get the benefit of knowing that you do have a lot of transaction information at PayPal, and you are investing at Acorns. I look at my own situation. I've got a couple mortgages with Wells Fargo. Citibank, who has been my family's primary account holder, has no idea, because they have no idea. Now, wouldn't it be interesting-

Jim Marous:
Now, they could.

Jim Magats:
Now, they could.

Jim Marous:
If they went to the credit bureau, they'd find that out.

Jim Magats:
Yes.

Jim Marous:
Yes, exactly.

Jim Magats:
But it comes back to, you asked the question, how do we get there? First, it's a complete understanding that it's in the customer's best interest, should the customer want this, which I think most would, to democratize the data. That's number one. Number two, we've got to figure out a way to do it very easily. It all exists, the open banking standard. You can look at the FDX standard as we're going. The roadmap is there, we now need to invest in it.

Jim Magats:
Then third, and probably more importantly, once we have access and everyone has access to that data, how do you clean it up? How do you make it insightful and actionable? Again, I go back to my 50 petabytes of data at PayPal. PayPal's a great organization. It was stimy, or has been stimy, because it would love to do more, but that data is not in a position that they can actually do things with. So it starts with the industry just coming together and understanding that one plus one equals two.

Jim Marous:
Right.

Jim Magats:
Three to the end's power, of just coming together on this. So I think our job is to continue to evangelize. You go back to that culture thing. The culture thing's important because we actually believe in the end goal here, to make people financially stronger, take stress out of money. That's what we're here to do. At the end of the day, we want to actually see that come to fruition. It's in our DNA. It's not about interest rate margin, or all the things we talked about before. It's, can I look at a customer and say their life is financially better, which is the number one stress that they have, because we help them with data, and the industry got together and do this.

Jim Marous:
So it's interesting. If you were to take data, and analytics, and insights, and give them to one of the top five banks, they could take that in and find marketing messages, and use it to deploy to the consumer. Most of your clients are not of that size. They need not only the insights and what you can see in the data, but they really need you to help them go that final mile, that's the most important mile.

Jim Marous:
It almost goes back to the origins of MX where the money bubbles, and everything else, were really great. But very few organizations knew, how do I deploy this to the consumers so that they realize I'm engaging? Where do you see MX coming, with regards to actually helping organizations deploy these insights to the consumer in a way that they can use it? Because that's, again, the last mile is the most important one.

Jim Magats:
Yeah. I think there's two things that I would say. One would be, it isn't about cross-sell. So I wanted first off, this is not a situation of, Hey bank. We provided you Jim's information and now you can cross-sell something to, that may be a derivative benefit. The benefit is actually just looking at the end-to-end experience and saying, "Hey, by sharing data together, it's better." I'll just give you hypothetical but illustrative examples. There is no reason why I get hit with an overdraft when I have money in my PayPal account, or I have money somewhere else, because the bank should talk to [inaudible 00:24:15], "No. Jim has money there, and it automatically should be moved."

Jim Marous:
Everybody would be happy.

Jim Magats:
Yes.

Jim Marous:
The bank would have their money.

Jim Magats:
Yes.

Jim Marous:
Yes, exactly.

Jim Magats:
That's just one, I could go on with a lot of simple examples. To me, that's where we need to get people to understand. Amazon and Apple, you reference them up front. They didn't like chain shopping. We still shop, just made the experience easier. For me, the ah-ha of this is not about cross-selling. They'll be cross-selling opportunities. Whoever makes it easier will make the cross-selling opportunity just naturally happen, in context. Where do we fit into that? We fit into that about trying to explain what you can then do with that data, would be number one. Number two would be, can we demonstrate ways of applying that data? As I just mentioned, here's a way that we could now syndicate and experience an overdraft.

Jim Marous:
One, by the way, that plays with every one of your clients. Once you've figured out the magic sauce, you can deploy it across the industry.

Jim Magats:
Correct. Correct. So that's how we've started to think about it. It's not about, "Hey, you can now give you a HELOC loan, because I know you had a mortgage." That'll all happen. It's really about the end-to-end experience. I could go on with things like, you could take financial, transactional data, and it could be as an identity service, back to people when they're trying to log in. I just changed my phone and my computer. The amount of time I spent on passwords is insane, trying to re-authenticate myself.

Jim Magats:
It would be quite interesting if we just pulled data and said, "Jim, I know you were at Starbucks today. Did you buy a croissant? Or, did you buy a muffin?" With some proper authentication standards around that, that's probably a much more elegant and powerful way of just taking financial transaction data, and utilizing it in a way that could be very additive to people as they go forward.

Jim Marous:
It's interesting. The marketplace moves very slowly. I just got a message from Wells Fargo that, from now on when I travel overseas, I'm not going to have to notify them any longer. You're going-

Jim Magats:
Okay. Yes.

Jim Marous:
I'm sorry. How many of us who travel very much say, "Wish this had come a decade ago, and it's that hard."

Jim Magats:
Of, course. Yeah. Yeah.

Jim Marous:
I talk about me buying a automobile, and putting all the feelers out that I'm buying an automobile. Every test drive became a credit bureau, and every dealer and every manufacturer contacted me. But not once did a finance institution say, "I've got a loan for you." Are we moving from experiences to engagement? I know that's a big mantra at PayPal. The super app issue is saying, how many times can they get a person to come to the app to use it because they want to, as opposed to because they have to. Do you see this as really a role that MX is going to play to help financial institutions really build engagement that's about the experience?

Jim Magats:
I can't speak to what's going on at PayPal anymore. But, at the same token, I think you're right in terms of the trend of driving people into their app, into those points of destination. I go back to what I said before. When I was growing up, I'd go to the Cayuga County Savings Bank in Auburn, New York. That's where our money was. When we had issues with money, that's where I went to.

Jim Magats:
With proper use of data, creating it in a way that's democratized, permissible, all the things that are important around that, we can create a situation for financial institutions, and fintechs to be destination places. At the end of the day, all of them will be destination places. Then, who can create better experience and conversion around that, I think is ultimately going to be the winners. But, that's what the customers want.

Jim Marous:
Finally, the last question in a lot of these interviews is, where do you see the industry in three to five years? Well, we can't use anymore, because COVID taught us that anything longer than three years, you're blowing smoke, or you're really rolling the dice. You've come here. You've been here a little while. You've seen a lot of the people. You've brought some of your team with you. What are your aspirations, in a general sense, for MX going forward? How do you see it shifting a bit, if at all, from what we've seen in the past?

Jim Magats:
Look, I want people to appreciate that we are about helping people take the stress out of money. That's what I want people to appreciate. I don't think that has changed, that will change. Money's very personal. Money's something that people want to, in some regard, make and empower their lives. That's how we think about it. I think data is the epicenter of that. We want to unleash the power of data. We talk about, in decades, 2000 to 2010 was the browser-based decade. Mobile was 2010 to 2020. We see data as the epicenter of innovation for the 2020s, and excited to be part of it.

Jim Marous:
Jim, thank you very much for being on the show.

Jim Magats:
Thanks, Jim. Appreciate it.

Jim Marous:
Great to meet you. Great to understand more about you. But also, the melding of what your past is, as well as what MX's future is going to be. Honestly the whole industry's having to deal with this in different ways. And it's a matter of saying, how can you bring a lot of these opportunities together? Even more so, how can we partner with financial institutions to make them stronger, make them smarter, and make them better for their consumers than business they serve? Because, that's the missing link that we all miss, and it's the area where most financial institutions feel the most underwhelmed as far as what they can do. They're not mature in that space, and they need you to help them along that way. Thank you.

Jim Magats:
Look forward to it. Thanks, Jim.

Jim Marous:
Appreciate it. Thanks. Thanks for listening to Banking Transformed, the winner are three international awards for podcast excellence. If you enjoyed today's show, please be sure to give our show a five star rating, in your favorite podcast app. Also, be sure to catch the recent articles on The Financial Brand, and check out our research that we are doing for the Digital Bank Report.

Jim Marous:
This has been a production of Evergreen Podcast. Special thank you to our Producer Leah Longbrake, Audio Engineer Sean Rule-Hoffman, and Video Producer Will Pritts. I'm your host, Jim Marous. Until next time, remember, while change will continue to happen, the foundation for success remains surprisingly consistent.