Funding Solutions and Neo-banks with Sol Lax of Revenued.
funding solutions and neo-banks

AI, Avatar, and the Future of Banking with Revenued’s Sol Lax

Episode Overview

Episode Topic:

Welcome to an insightful episode of PayPod. We engage in a dynamic conversation with Sol Lax, the CEO of Revenued, a company dedicated to providing tailored funding solutions for small and medium-sized businesses. The episode delves into the intricate world of small business banking, highlighting the evolving landscape driven by both traditional and neo-banks. Sol shares valuable insights from Revenued’s recently published Small Business Banking survey, uncovering surprising trends such as the persistence of physical bank branch visits and the growing number of businesses maintaining multiple banking relationships. Listeners will gain an understanding of how these trends reflect broader shifts in the banking industry and what they mean for small business financing.

Lessons You’ll Learn:

Listeners will learn about the critical role that funding solutions and neo-banks play in supporting small businesses, especially those with lower credit scores. Sol Lax explains how neo-banks are disrupting traditional banking models by offering free, digitally-driven banking services, which are increasingly attractive to small businesses looking to reduce costs. The conversation also touches on the importance of efficient and dynamic underwriting models powered by machine learning, enabling companies like Revenued to offer capital to businesses that might otherwise be underserved. Additionally, the episode explores how AI and machine learning are poised to revolutionize customer service and financial advisory services, enhancing the overall banking experience.

About Our Guest:

Sol Lax is the CEO of Revenued, a pioneering company that specializes in providing innovative funding solutions for small and medium-sized businesses. With a deep understanding of both traditional banking and the emerging neo-bank sector, Sol brings a wealth of knowledge and experience to the table. His leadership at Revenued is characterized by a commitment to leveraging advanced technologies, such as AI and machine learning, to create more inclusive and efficient financial products. Sol’s insights are informed by years of industry experience and a forward-thinking approach to the challenges and opportunities within the banking and fintech sectors.

Topics Covered:

The episode covers a variety of compelling topics are covered. These include the evolving role of neo-banks in the financial ecosystem and their impact on traditional banking practices. Sol Lax discusses the findings from Revenued’s Small Business Banking survey, shedding light on the banking habits and preferences of small businesses today. The episode also explores the challenges and opportunities presented by AI and machine learning in underwriting and customer service. Other key topics include the necessity of multiple banking relationships for businesses, the cost-saving benefits of digital banking, and the innovative approaches neo-banks are taking to attract and retain small business customers.

Our Guest: Sol Lax – Revolutionizing Funding Solutions and Neo-banks.

Sol Lax is the CEO of Revenued, a pioneering fintech company specializing in innovative funding solutions for small and medium-sized businesses. Revenued’s primary focus is on helping businesses that might struggle with traditional financing due to lower credit scores. Under Sol’s leadership, Revenued has grown significantly, establishing itself as a leader in the financial technology space. The company leverages alternative credit scoring models to provide capital to businesses that are often overlooked by traditional banks. This innovative approach has allowed Revenued to process over $1.45 billion in Paycheck Protection Program loans and offer much-needed financial support during critical times​​​​.

Before joining Revenued, Sol Lax held key positions in the financial industry, including CEO of Pearl Capital, where he was instrumental in providing short-term capital advance solutions for under-banked and credit-challenged businesses. His extensive experience in alternative small business financing has been pivotal in shaping Revenued’s strategic direction and its emphasis on leveraging technology to create inclusive financial products. Sol’s expertise in fintech and his commitment to financial innovation have earned him a reputation as a forward-thinking leader in the industry​​.

Sol’s background includes a strong foundation in financial services, with a career that spans various roles in both executive and operational capacities. His leadership style is characterized by a commitment to leveraging advanced technologies such as AI and machine learning to improve the efficiency and accessibility of financial products for small businesses. Sol is also known for his dedication to transparency and customer-centric service, ensuring that Revenued not only meets the financial needs of its clients but also provides them with the tools and insights necessary for sustainable growth​​​​.

Episode Transcript

Sol lax: Capture a lot of deposits. We have some interesting collaborations, and experiments going on with different partners. One of these is with Founds, which is a neo-bank. That speaks to the point. When people come into the top funnel, we ask them, do you have a business?

Kevin Rosenquist: Hey, welcome to PayPod, where we bring you conversations with the trailblazers shaping the future of payments and fintech. My name is Kevin Rosenquist. Thanks for listening. Today I’m talking with Sol Lax, CEO of Revenued, a company that specializes in providing funding solutions, tailored for small and medium-sized businesses. The company focuses on helping businesses that might struggle with traditional financing due to lower credit scores. Sol has amazing insights into traditional banking, neo-banking, and what the future looks like for the industry overall. I hope you enjoy our conversation because aside from banking, we also chat about AI, avatars, and even dragons. Please welcome, Sol Lax. Your company, Revenued, recently published a Small Business Banking survey where you surveyed a hundred small and medium-sized businesses about their banking habits and the factors influencing their banking decisions. Some interesting stats came out of it. I think the most surprising one to me was that 13% of respondents still actually go to a local physical bank branch. I was like, “Really?”

Sol lax: Did you think that number would be smaller than that?

Kevin Rosenquist: Yes. I don’t know when is the last time I have seen the inside of a bank.

Sol lax: I’m not sure because the big banks that are still opening up branches, they’re the smaller, smaller number of branches used to be they must know something. So there has to be something about touch points still being relevant for people, showing up, or maybe even just a sense of security that I drive past Bank of America. I wave at and I go, okay, they must be real. So I’ll do my online. I was more surprised at the fact that there were more than 50% or so that had a second account, than a second or third bank account, because, I thought this stuff was super sticky. You have your account switching costs, and just who cares anyway? You’re just going to stick with your bank as long as it has reasonably good digital banking, to your point. So I was surprised actually, to find that 2 or 3 small businesses, and again, these are small but not tiny. They’re not the sole props. They’re generally going to have $20,000 a month at least in Revenued bank deposits. That will go up all the way to, someone doing, let’s say $5 million a year or $6 million a year. So it’s not the teeny teeny, large part of small business, which is quite large, but still that a business that size would have two banking relationships or three banking relationships, even to me, was an eye opener.

Kevin Rosenquist: Do you know why that is?

Sol lax: I’m wondering if a lot of these guys have just have just opened up a neo-bank relationship to see what it’s like because there was some free product. In other words, like ARAP, I’ll do my ARAP through that. it hasn’t necessarily captured you know a lot of the posts. I mean we have we have some interesting collaborations, and experiments going on with different partners. one of these is with Founds which is a neo-bank. That speaks to the point. When people come into the top funnel, we ask them, do you have a business bank account? Because that’s one of our requirements for, for doing the business card and, and flex line and a large number of them say, no, we don’t. So obviously they’re on the smaller side. They don’t currently have, a business bank account running out of their personal account. We say, well, would you like one, would you like us to introduce you to somebody who will give you one? a large number of them say, yes, and a large number of them will sign up with Found for example now we have relationships with Blue Line. They’ll sign up with Blue Line. They love the fact that it’s free. when it comes with some bells and whistles and then, call it 25 or 35% of those convert into people that actually have depository relationships right after opening it up, that they actually keep what looks like a reasonable amount of money in the account. Right? So I don’t know how many of the people are answering. I have 2 or 3 accounts, actually have 2 or 3 live accounts, similar to the way some will say, how many credit cards do you have? You might have like, I’m sure I have like two credit cards so they can enjoy that. I’ve never used it. So, I haven’t used it in ten years.

Kevin Rosenquist: I haven’t thought about or even realized you still have.

Sol lax: But I think the stuff that came back on the survey was, sort of, sort of my joke about diet, calorie-free ice cream is that largely we came across was this, give me free no. No fees. Give me a high payout, AP. Let me earn as much as possible on my money. Let me have some lending products, you know. Because I obviously have some need for capital. if you give me those three things, I’m just good. No problem. The number of people coming back with and again, this is not a huge number of responses. It’s built on 100 responses. But it does tie in though to another thing that we’ve seen which is a much, much more robust data set, which is our hookups to plaid of which at this point, there’s 15,000 or so where we’ve seen a rise in neo-banks and the common denominator and all of them, this is statistically, I think, significant at this point. people coming to us for capital, like which bank, who are they banking with? So obviously the big banks, Bank of America, and all the rest. But surprisingly bluefin and guys like that are starting to get traction. They’re showing up in the league list, far beyond the amount of, deposits they have. They’re teeny banks and the scheme of things, but they’re actually ranking in small business and the small business universe. I think that’s just it’s free. If you get digital banking and the average by the way, you, you, you totally blow your mind looking at some of the variances in terms of what people are actually paying and bankers, there are some small businesses out there that because they don’t just don’t know any better than not aware or they’re not looking at it every month, are spending upwards of $1,000 a year in fees.

Sol lax: So there are some people that are paying crazy fees. it’s it’s quite a lot. I mean the average is much lower than that, but still not nothing. it could be $200 or so and people are looking in and I think this I look at it go like, well free is free. Why shouldn’t I take the free offering? covered by the FDIC. It’s the same product. It’s digital-like. More to your point, I really need a branch to walk into. Right? If I don’t need a branch to walk into and it has a cool interface S, which at this point is just the cost of doing business and is not so complex to engineer and they’re not charging anything. Well, why wouldn’t I take that account and switch out of something that costs two $300? Is it right? Or in the case of the outliers who really don’t know what they’re what, they have no idea what they’re consuming or, spending $1,000. So I think I think that’s inevitable. I think that’s a sea change. That’s a shift that’s just going to have to happen. I think the challenge over there is just that the banks, or the neobanks, how do they make money?

Kevin Rosenquist: That would certainly be the question.

Sol lax: Yeah. Well, you’ve been interviewing a lot of these people on your side and say, well, what do you think the answer is? Like, how do they make money? I can tell you what they’ve told me, but what do you think? What? How do you think they make money?

Kevin Rosenquist: I mean, they have to they have to invest.

Sol lax: In what? How do you, how do you get money? How do you get money out of the small business? Who went to you because you’re giving away your product for free? So how do you make money? That seems to be very obvious. It seems to be a very basic question. How do you make money? So think I think the answer for most of them is, is that, we think we could convert 10% of our customer stream., to a pay version, the higher tier. And, for 20 bucks a month, they’re going to buy something else from us. Better accounting by the aperture module. maybe some souped-up cash flow analytics. who knows what they’re going to buy from us. That’s going to be enough to, float our boat and give us give us enough and all that, we could sustain it. of course, it has to be run out over the course of, 2 million customers or something. I was going to say.

Kevin Rosenquist: You’ve got to get the volume in that scenario for sure.

Sol lax: It’s a tough business model. I’m not saying anyone’s going to make it, but it’s tough. coming back from the server, the server is basically a small business. They’re saying like, hey, I basically like free. Give me a lot of free stuff. Right? Not much appetite for paying for anything souped up. Not detecting any great like, okay, if you upgrade me to this, then I’m going to pay for that. it’s not like the airlines saying like, hey if you want your if you want to actually choose a seat, we’re going to charge you an extra 30 bucks. the banks. It’s hard it’s hard to figure what that looks like.. Yeah they’re trying to figure out some upgrade thing. I think where it ends up is, is really, the other thing that they’re telling us, which is, is, hey, we need capital. And banks are not doing that much of that. primarily that’s where we play. Right? So we provide capital. what we do is, pretty much I think where the whole market is moving to, the industry is moving to banks are moving to it, but very, very slowly, creeping along. Which is, is just, a new model, you can call AI, it’s a machine learning-driven a lot of data and just underwrites a small business more efficiently and better and potentially provides capital to people who cannot source capital otherwise and do it dynamically, do it real-time. I think everybody who’s going to be in small business banking has to shift to that model.

Sol lax: I think that that’s the way that, you can you can compete. Otherwise, inevitably, I don’t see how all small banks currently have a book of business with small businesses or are in competition with bluefins or Knowbots in the world who, whether or not they’re being sustained by, VC money or otherwise are offering the same product for free. I don’t see how they just stay in place and say, well, we’re not going to offer our thing for free because it costs five bucks a month to service this customer. So I’m not giving that away for free. without a response. The traditional response to small business has to be, well, I’ll, I’ll lend I’ll lend money to them. I’ll take them in as a depositor. There’s a spread and there’s enough lending business to make a spread and make money. Traditional banking model when they think. I think banks have to get better at doing that if they’re going to respond to the numbers, the blue lines of the world. But I think conversely, the blue, the blue lines, and the nova are the world. Blue is an exception because they’re coming from a lender’s DNA and are going to have to figure out how to lend to their, neobank small business customer, or else they’re not making any money. I’m not sure that I’m not sure. I’m not sure they convert them into the 10% is going to pay a fee for some souped-up version of my bank account. Yeah, they’re kind of they’re.

Kevin Rosenquist: Kind of rolling the dice a little bit, hoping that that works and that people do want to upgrade to the paid tier.

Sol lax: Yeah. I guess depending on how compelling it is. Look, I, I think the bundling is interesting too, because, what we’re doing with the, with our marketplace, which is, which is an experiment that, that my CMO Mike Bank put together is really saying, in terms of the Swiss Swiss knife thing, what are the things there’s a small business want to buy from you. But not the supermarket approach. sort of I have your data. I have your data because they have all your bank data. I have your data because I’ve underwritten your RNA. Now, how can I leverage that? And providing you something that I think you actually need at a better price point than you currently are capable of realizing an analogy to that is not the same thing, of course, but an analogy to that is what Jimmy, Jamie Dimon is doing now. Chase. They’re popping up now with advertising on your credit card portal. When you log into your credit card, you start to see some targeted advertising. Which is like a whole different Revenued stream. So. Oh, I don’t know if people yeah, I don’t know if this is not insider information.

Sol lax: It’s like the Wall Street Journal, but I also I also have I also have a Chase card. But this is like, I don’t know if people have to walk in the car and get out of my face. I’m just the car, I’m just looking at I just I’m just interested in. I’ll look at my credit card bills last month. I’m not buying anything more. for, through through your offices. Thank you very much. I already have an Amazon membership. That’s not what I expect from you. I don’t know if people push back like that or they like it, but, that’s that’s sort of that sort of the next level and the small business space, which is I have your data. I’m not just pushing out any product that you can. I use that data to figure out what you really need and make it easy for you to switch. So just for instance, go back to what we haven’t done as much, which which would be the next stage out is right now we’re just like very passively we prevent presenting, bluefin for example. The next stage out is I can go through everybody’s account and say, hey, you spent $300 last year on your banking fees.

Sol lax: And I knew that. here’s your analysis, because, I’ve just helpfully added it all up, and I sent you this nice little detailed report. in fact, I can show you via some of the other people exactly where you’re stacking up. Like, do you like that? Well, if you don’t like that, let me introduce you to someone who. You’re $300 to go to. Zero. Would you like that? click here if you want, if you like that or not. So, maybe some people just say no, no, I’ve been married to Chase now or. Yeah, I’m 25 years. I’m not going anywhere. I’ll leave you alone. Whatever. But again a surprisingly large number of people answered the survey saying, like, I’d love to hear more and. The knob is open to switching. in fact, I already have two banks. So I think I think if I was if I was a typical banker whose small business book was material to I would at this point be concerned, I don’t think it’s a material like a rim. You look you look worried.

Kevin Rosenquist: No, I’m not worried. It’s just it’s. I guess it’s interesting. I read I was looking at your, your LinkedIn post and then and then the report and all that stuff. I think, what I’m interested in with, with Revenued. So your models are different as far as loading. So you’re you’re kind of basically you’re investing in companies at the end of the day.

Sol lax: Is that investment an overstatement okay? It’s it’s the typical it’s a typical it’s more like a forward contract. It’s a typical thing that Shopify and anybody who’s doing, Revenued-based financing is doing okay. Which they’re telling you, they’re saying, look, you can sell some of your future Revenued. Well, what’s future Revenued? It hasn’t happened yet. So like, what if I go out of business tomorrow? Well, gee, then there’s no future Revenued. But I’m willing to buy that. Similar. Imagine you’re a farmer. And you know you need to get some capital, buy your seed, and buy your equipment and whatever. Traditionally your field is always produced X amount of, bushels of corn every year. You come to me and you go like, I’ll sell you part of my crop. Going forward and the forward contract. I need the cash now. I need to lock it in also, in case there’s a bad harvest or something so that I don’t get hosed. I’ll lose the farm. So that’s typically how this stuff was structured, hundreds of years ago, that’s where it started.

Sol lax: And I don’t know who thought of this first, but somebody said like, it doesn’t have to just be a farmer. Let’s look at every last business in the world this way. Unless you say, hey based on these patterns or whatever we could figure out about your business for the last, 20 years or two years or one year or whatever. You have the data for, what do we think that looks like for the next 12 months? And how bad you sell me? 10% of that, in return for my paying you upfront X dollars. Right? You can’t convert that in your mind into, a loan structure and think of an April or whatever. But that’s not what it is. One of the key differences is, is that if the Revenued doesn’t materialize, whoever you sold it to, which in this case would be us, we’re on the hook for that. You’re not on the hook. So, your next question, I think, is, so what happened to you during Covid? Well, I mean.

Kevin Rosenquist: I was it’s interesting because it’s you said you’re not investing, but you are betting a little bit you’re gambling that they’re gonna. They’re going to be successful.

Sol lax: Yeah. You’re absolutely betting. You’re betting, you’re betting. Couple things. You know you’re betting that you know trends continue So obviously, that’s much more difficult to forecast if you’re talking about going out three years. Sure, the stability of small businesses Revenued is hard enough. Hard enough, hard enough to forecast, 12 months out, let alone a couple of years. So you have that and then of course, you have which in our case, fraud is mitigated by the fact that we have to have people’s access to people’s banks. So people’s bank accounts are hard to actually fortunately produce it’s hard to make up a bank account from scratch or anything like that. But you certainly have the equivalent of friendly fraud, which is when someone says, hey, my business does not look good for the next six months. And I’d actually would like to retire or just shut it down and sell it to somebody. What’s the math? What’s the maximum I could extract tomorrow? I said like, oh, this guy’s Revenued. That looks like a good deal. solving my forward, my forward Revenueds. Then there’ll be no forward Revenued. Or in the case, of Covid, it was nobody’s fault. But all of a sudden you have this, mass, mass event that shuts down small businesses and there is no forward Revenued for anybody. Like what? What do you do then? What did you do? it’s actually a pretty a pretty crazy story, but, we’re looking at the best and going like, well, what do we do now? And we pivoted. We ended up processing million-plus loans. we just I was actually going.

Kevin Rosenquist: To ask if you did TPP loans.

Sol lax: We did that, we did that. and come back to the fraud thing. I’ll tell you about that. we ended up doing like a million TPP processing and million P loans and doing about $4 billion and TPP. Wow, as a vendor for a bank. it was a crazy ride, of course, because it was all Scotch tape. It was all like duct tape together. This is not a platform that was built on pylons. but one thing that we are proud of, we had an excellent anti-fraud team and we did not fall into the abyss of fraud as many people, fintechs that were doing PGP did. but I will tell you some. Some some stuff, which is, Scotland has gotten, infinitely scarier. which again, in the case of where you’re doing what we’re doing exactly, you have to get into someone’s bank account. It’s hard to make up bank accounts. Right? It’s hard to manufacture a fake bank account that has real cash flows, and we have to access it dynamically through Plaid. Like that stuff is hard to just.

Kevin Rosenquist: Yeah, that’s a long play right there you know.

Sol lax: Yeah, that doesn’t happen. You know you get somebody sometimes who says no it wasn’t really me. It was my cousin who made me believe he was me. You know had you had he got access. sometimes you get you get something like that, but you don’t actually get a wholesale fake. But people well we did see which, which today it would be much harder to catch. So at one stage in PDP, we did require, access to people’s banks. But in PDP what you saw was, was people were providing driver’s licenses and after a while, you were able to catch that, 50 of them had the exact same stock photography. Right? The little pictures of Kevin Rosenquist’s smiling face that they had ripped off your website and going like, hey, there’s not 50. Kevin’s applying all over the country, okay? From different companies that are that are with different names., that was an obvious tell. Then you were able to sort of roll it backward and say, okay, where are these emanating from and what’s the IP address? And who’s the common factor in them? Things like that. Well, you were able to figure out like a fraud map today with, with, with the ChatGPT generated ability for pictures, from scratch and fake personas and everything like that, the ability to have someone who has, what looks like incredible virtual persona and is a real person that someone has cultivated over, two years with at very low cost is frighteningly real. Mhm. I don’t know I don’t know about you how many times you’ve been hit up on LinkedIn by a person who does not exist.

Kevin Rosenquist: I would, I would guess they don’t exist if they do. I’m not sure what they’re, what they’re after. But yeah, I mean there there’s some definitely. A lot of that I get. Linkedin texts, emails, and all sorts of stuff.

Sol lax: Okay. So, so, this is, this is just I’m sorry if I’m diverting from where you were going, but. Oh, that’s okay. This is what I found out it’s super interesting. Right? So initially I would get something very crude over LinkedIn. If you were looking at the person’s profile, it was just like obviously made up. Mhm. Over the last 12 months, I started getting you know background that actually made sense. Is somebody from this in this company? They’ve gone this and this far or that. I sent 2 or 3 of them to my anti-fraud person. Just as a drill I said, I said, Sam, what do you make of this? Right? And, he came back to me 20 minutes later. the picture is a model in Slovakia. The person at this thing actually looks like that. Right? And this thing is off and that’s things off. But, today, the ability to go to a chatbot or similar, any one of the multiple ones that you can think of, and I’m sure there’s stuff in the dark web now that’s, that’s that, been has, been broken, jailbroken and everything and say like create a profile for me of somebody who’s this, this and this and this, create a picture.

Sol lax: So in this case, someone is not even able to find a real picture of somebody who looks roughly like this. go reach out on LinkedIn to 200 people. Let’s say you get like 30 people who say, yeah, sure. Okay. All The rest ignore it upside down. You do that in an automated fashion, like once a week. I don’t know, you don’t want to saturate it or something. you’re going to get 2000 connections over a year and a half. Like, who’s going to doubt that someone with 2000 connections, has a real CV? That actually makes sense. a picture that you can’t find anywhere. So it’s not just been taken from someone else who’s really gonna like, potentially their messaging. You like they want to have a business conversation who’s going to right away say like, no. That’s, that’s that’s totally fake. That’s a fake. So the ability to fake stuff, fake documents, fake personas, fake IDs, and everything, I think is a huge challenge. Well, have you seen?

Kevin Rosenquist: Any of the AI influencers out there on social media? Some of it is like. I do a double take, I’m like. pretty, pretty legit. It’s pretty like when you start to look at it further, you’re like, all right, that’s when you could start to see where it’s fake. and certainly the people are always beautiful, generally speaking. So but it is, it’s amazing. It’s come a long way in a very short time.

Sol lax: I was looking at one of the media magazines that whatever they had an article on should be using artificial influencers. I think it’s a great it’s a great business case. There are some of them that have real, real traction. You basically own it. It’s a version of modern slavery without the moral without the moral problems.

Kevin Rosenquist: Avatar Slavery.

Sol lax: You got avatar slavery all of a sudden you got a spokesperson for life. That is totally, totally, totally locked down. You’re not going to get blown out of the water by scandal. Unless you unless you manufacture it. You can manufacture an artificial scandal with someone else’s artificial. I’ll want you to purposely do that. It’s never going to blow up. It’s never going to go off-message. It’s always going to be available. it’s never going to cost more than your creative team behind it. You know charge you know is required in salary to do that. Otherwise, you know I’ve been we’ve been playing with influencers with good results. You know it’s it’s been an effective channel. But the higher up you go in terms of the number, you know the audience size and everything, it gets pretty expensive. Yeah for sure. All So the fact that you might have an artificial one that actually has some audience. Hey, we’re not it’s still novel. We’re not at the part of the cycle yet where audiences are going like, no, I want that ugly person right doing, doing, whatever. Because there’s authenticity to it versus beauty.

Kevin Rosenquist: I was just going to ask you about the authenticity part, because that’s the one thing that I think that, even though we all know somewhere in our brains, everybody knows that influencers are being paid, and that doesn’t necessarily mean that they love that product. it’s just they’re getting paid for it. but if we know it’s a bot, does that change somehow subconsciously, you know?

Sol lax: Did you watch Avatar the movie?

Kevin Rosenquist: I didn’t see the second one. I saw the first one.

Sol lax: I saw the first one I tried getting through, the second one I couldn’t get through the second one. The first one I heard, I like the first one. Yeah, I saw I saw it first with my wife. We both liked it. Did you like it? Yeah, I did okay. Was it authentic? Grip you for like, the two hours or so it went on. Yeah, Okay. So, like, I think, I think we look towards we look towards commercials to some degree to entertain us as well. and you certainly can entertain and inform using an avatar. The recommendation piece I agree with you. I don’t think you’re going to, you’re going to trust the avatar unless you have a hole in your head. But you know maybe but, but the rest of it.

Kevin Rosenquist: Maybe it’s a lot of people.

Sol lax: I was talking to one of my marketing people yesterday. I said, I said I was I was saying, great, I was, I was reading right there talking about the number of guys, especially guys that are hooked up on this point on I girlfriends now. Do you read anything about that?

Kevin Rosenquist: I did, I did there was a company. I can’t remember what they were called. They got on pretty early trying to do the AI avatar or the AI girlfriends. Yeah, I first thing I think of is the movie. Her. I’m sure you probably saw that. That’s the first thing I thought of. But okay, okay. Got into some trouble though, as I recall. Anyway.

Sol lax: So., definitely very scary. From a societal perspective. From a mental health perspective everything okay? Even though, theoretically, it could be good, but who knows? But you definitely see that if there was, I call it the equivalent of a small business girlfriend. The boyfriend. Who’d be there? Or maybe not. It’s a girlfriend. Boyfriend. Maybe it’s simply an older advisor. Who pumped you up in the morning and go? Like, when I wake up in the morning, I’m a delegate. I saw your founder get out there. Conquer the world. I believe in you. I’d say, like, here’s my problem. They go, well, here’s, my advice. Whatever. you get good enough, you’re smart.

Kevin Rosenquist: Enough, and doggone it, people like you.

Sol lax: You got you got it. You can you can get hooked on that stuff. Sure, sure. So, so so do we think do we think that that’s not going to happen? I sort of think that. That will happen. So, so so the application, the application of some of these things, leaving the authenticity piece aside, I think I think we’ll get real traction. It’s an interesting question I agree.

Kevin Rosenquist: How do you guys how do you guys you guys use AI in your decision-making? Is that correct?

Sol lax: So, I think I think it’s it’s it’s sort of a stretch to call it AI versus just good old machine learning. So we’re not using LM stuff, these language models, and decision learning. So it’s all it’s all machine learning. But it is an automated model. It’s it’s it’s actually, 100 plus automated models that are running in tandem that are, that are coming to decisions. The LM stuff we are playing with because we just think that it has a huge scope. certainly in terms of efficiencies, if you can answer basic product questions or take off some of the stress from customer service by having an LM, that’s good. Actually. Answer stuff. I would say that it’s not for the faint of heart. We were running not exposed to customers, but running, like, a little like a data. Let’s try them and see if we can answer the basic questions coming out of our content. it would have gotten us into a lot of trouble. it just really, it was like, yes, it is free. No, there are no, you know.

Kevin Rosenquist: You don’t have to pay this back.

Sol lax: No, there’s yes, there is no problem. it was just it was it was a slow start. But when you look at how people find us. How does somebody find a card? How does somebody find a bank? How does somebody find, a whole host of things, like what do you do? So our industry, there’s a whole bunch of intermediaries, there’s affiliate sites. Somebody goes to, somebody goes to the points guy, somebody goes to nab, somebody goes to Fundera, Motley Fool, somebody. Yeah, All these all these things. Right? Somebody goes like, you got it. Nerdwallet. Somebody so many things. He goes, so he goes like, okay, what is the best card for whatever? it says, okay, here are the five dimensions you could filter against. Like, introductory offers Apr, how hard is it to get I don’t know what else they ask. maybe they give you four, four dimensions. Yeah, that may be five. Right? They’re not. They don’t give you the ability to sort out, 200 dimensions.

Kevin Rosenquist: Right. It’s usually like it’s usually rewarding APR. I suppose like introductory. If there’s any introductory offer or matching balance or matching first balance or whatever it is or something like that.

Sol lax: Let’s say you want to ask something a little more complicated. You want to say like, I need a balance transfer of $5,000. I want to lower Apr. But I also need it now because I do a lot of traveling. I also need good travel, whatever. I need no foreign exchange fees or whatever. you can’t ask it that. You start, you start reading the fine print and everything. Right? And if you go to a chatbot and it goes to the primary sites, it’s just going to kill the whole affiliates. It can answer whatever complex question you want to put to it right now, for whatever reason. They’re not doing that right, meaning they are going to the intermediate sites to pull their answer. Like if you go to a chatbot and say, ask something like that, they will go to all the sites you just mentioned and say, oh, it says our NerdWallet. Like this. It says on like that, and it says on forums like this, put together the answer for you. Yeah, yeah, it does divert traffic away because now I may not bother going to those underlying sites, but it’s still going to those underlying sites.

Sol lax: There really is no technical reason that they cannot go to what sits behind those sites. They go directly to a thousand credit card companies and all the banks in America the Federal Reserve and everything else that they want to pull information from and answer questions cogently and in a better way than any affiliate site can. Right? So there you got billions of dollars of Revenued vaporizing and potentially with better customer experience, and also, frankly, like a larger opportunity for large banks or anybody who has the real financial information already that enables them to answer the question more appropriately. Do you have a whole layer then that could be a little advisory, like, if I’m chasing somebody and I actually own a good part of your financial life and I understand your financial information, you want to ask a question like that, you may not bother going to NerdWallet if Chase can produce that in their chatbots. They did. So I think I think that’s probably a very large, a very large sea change. That’s, that’s, that’s going to roll out across a lot of verticals. But, the vertical that concerns me most is, is obviously what we do.

Kevin Rosenquist: It’s. Yeah, I get that. Well, you guys, you guys work with a lot of you. You say underserved businesses. it’s like.

Sol lax: It’s Fico below below 680. Okay. If the owner has a Fico below, we’ll do the above as well. probably a third of our customers have, prime Fico scores, and they’re coming to us. Not not so much for the card as much as for the flex line product, because the capacity that will give them is generally going to be much higher based on their forward Revenued numbers versus what they would get from, Chase or somebody. but the two-thirds that are below that are simply are simply unbankable, meaning if you have below 680 Fico score, traditionally the way of business card company or a line of credit company, what’s the virtue line of credit companies left alive? But, the way they’ll underwrite you is they like Kevin, what’s your Fico score? And they go, well, I got a 780. I go, oh, wonderful., we’ll give you some money if you go to Kevin the second and he says, well, I got a 660 because when I started my business, I put everything on my credit card and I had to juggle stuff and everything. By the way, I’m running a pretty good business now.

Sol lax: But, I haven’t built back my credit yet. I’ll say, well, come back to us when you get a 780 Fico score. We don’t really do much at 660. In fact, we do nothing at 660. Right? That’s because underwriting for small businesses is still stuck in, you are your Fico or you are your real estate. They’ll do a real estate loan. You have hard assets that just can secure a loan. They’ll do that. They don’t do a card, they’ll do a card, do a loan. but there has never really been an option to holistically look at a small business, primarily as cash flows and similar, and say, well, what is the business going to do? And the pioneers in that, on the cabbage Blue Thorn for MCA industry I’m probably leaving out somebody there. they all took the same premise, which is, first of all, I can eliminate a lot of friction by doing that type of underwriting because I can digitally collect a lot of the information. Second, I can expand the box or in some cases restrict the box. Somebody might have, a really nice Fico score, but a business that’s failing, right, which you would see in the bank accounts.

Sol lax: But primarily they were looking to expand the the credit box on the side. Well, let’s forget about you for a second. Let’s think of it from the prism of just the business. the example of the farm. we’re looking at how do I take your crops going to do your crop is going to exist. even assuming that the farmer sells it or passes away and is and this kid takes over. the farm produces X as long as somebody is working it right in a business, you might look at it and say, well, abstract the owner, though of course, in a small business that’s hard to do, a lot of small businesses, the owner walks out the door don’t exist. But assuming a steady state and I forget about your personal credit, what does that look like? And that’s that answers a different sort of question, which enables a different credit person, which opens up the box to doing something with not everybody below a 680, but, call it 30% of people below 680. so, it’s it’s interesting.

Kevin Rosenquist: So you’re basically looking at it like, okay, these guys might have struggled in the beginning, because they were trying to get off the ground, but they’re doing really well now. They’ve got a good business model. They’re they’re fighting back. So I’m it’s it’s a good bet to bet on these guys that kind of kind of how it works.

Sol lax: Yeah. Except except it’s not that makes it sound noble and emotional. I’m like that. That’s like, and it’s a banking movie. I’m going like, Kevin, I believe in you. I know you struggled getting up and running and we’re going to. inspire.

Kevin Rosenquist: It’s really inspiring music.

Sol lax: I would love I would love to do the promo that way. You know we could walk down, you know we’d be looking at the field and I go, okay, Kevin, I believe in you. actually after. Yeah, it would make, it would make it would make a good promo. But poor reality show. So the reality of it is, is like, it’s, it’s master of them and it’s a bunch of guys above my pay scale, they may report to me because I’m running the business, but, they’re the quants are doing this are busy going like, okay, based on this last 10,000 deals that we did, what do you see? Like, this morning, I got good news from the president of the company. He said, oh, I think we can get another ten. Percent out of the model. basically by incorporating it, we haven’t refreshed it. in more than 12 months, just the refresh is going to give us 10% more efficiency. He hasn’t spoken to that merchant. He has no idea if that merchant has now turned it around or not. it’s it’s it’s it’s it’s numbers-driven. That that’s the that’s the reality of it. The reality of it is, is as, as, as data advances and as the ability to do stuff with data advances, in some ways, it’s a better world. In some ways, it’s a scarier world. The odds of that guy saying, Kevin, I believe in you, was going to get it’s going to get diminished because he’s looking at a model and it says, like, Kevin looks like a good guy, but do not give him the money. Well.

Kevin Rosenquist: It’s very nice, but he’s not good with money.

Sol lax: It’s very nice. But you’re not giving the money. So the model, the model is going to say something like that on that smiling bank is going to say, I’ll take you out for a beer, but, but, but no money. So, you know.

Kevin Rosenquist: I got a beer out of it.

Sol lax: Yeah. We’re moving. We’re moving away from the emotional, trust gut decision on credit and to a more quantifiable just, as a probability, as you said, you’re betting, right as a probability bet. if you do this 10,000 times, is it going to work or is it not going to work? That’s, that’s that’s sort of where we’re moving. We’ve moved to we moved to a long time ago. personal credit card stuff was not driven by emotions like, I trust you, I don’t trust you.

Kevin Rosenquist: Or it doesn’t matter. You know what? What race you are, what gender you are. Anything like that. We can.

Sol lax: Now start. There are enough stats out there. the credit card models are not, are they? They don’t see you. They don’t care. They don’t care who you are. You’re a mathematical abstraction to them. For them.

Kevin Rosenquist: You’re a data point sort of.

Sol lax: That’s your data point. That’s all you are.

Kevin Rosenquist: That’s depressing. No, I’m just kidding.

Sol lax: You’re the you’re in the matrix. You might be a cool data point though. That’s what you hope for.

Kevin Rosenquist: You just hope you’re Neil. That’s all you can say.

Sol lax: That’s it. Oh, nobody’s cooler than him. Come on.

Kevin Rosenquist: Yeah.

Sol lax: Okay.

Kevin Rosenquist: Is it as far as like it can be very risky. Obviously working with people with less credit or the with worse credit I should say, does the data points and all that. Do they have you have they been successful? I mean do you get you get burned much or do you have you been pretty good at predicting? Of course.

Sol lax: Well, what I admit to it, if I get burned much, come on, it’s a podcast. My board’s going to listen to this.

Kevin Rosenquist: Listen, I just wanted to see how far I could take it.

Sol lax: You thought you were going to catch me? Yeah, of course, of course, of course, of course. You get burned. you only you only stay in business if you get really good at credit. Right? It’s sort of the naive, like, I like to call it the West Coast. East coast. we say like we’re an East Coast shop. The naive go fast and break stuff does not work in credit. Because generally what you break is yourself. Because it’s all levered. if you make a lot of mistakes in credit, you may not have the room to recover. So it’s more like judiciously pushing on, pushing you out. it’s like think of it. The guys who went to see back in the day when there there be dragons there. You were creeping out each time. You looked at the map and pictures and dragons and you go like, how far can I go out without getting eaten? Right? And each time you go out that far and then you go like, oh, good, the dragon didn’t grab me. I probably go out another like, five miles next time. And there aren’t too many guys who take the big like. Not that he didn’t. In reality, we take the big Columbus leap and go like, hey, let me give out, $1 billion to people with, 680 and below, Fico scores. let’s just try this landing and it’s going to work. It’s going to land on the other side. It generally doesn’t work that way. It’s more like, you judiciously keep on pushing out stuff. You take a certain amount of money willing to risk, and then you see, this work, this break, this what?

Kevin Rosenquist: So what do you what’s on the horizon that you can talk about for Revenued? Do you guys have any changes? Do you have any you did talk about maybe messing around with the large language models a little bit? Anything else?

Sol lax: large language models are interesting. now basically basically extending the product set. We’re really we’re really we’re really doing some experimentation and thinking about, what is what the beginner of this product looks like. Right now we’re saying no to call it 60% of the applicants, 50% of the applicants, because they don’t have enough Revenued. We’re thinking like, oh, if they have less than 10,000 a month right now, we say no to them. What would a product that works that, what would that look like? What would it cost? Would it be good for them? How do we make money off of it? we’re sort of noodling around that stuff and playing with that. So the marketplace is the first language of the. Is like, well, if we offer you stuff that you really need, what’s the demand for that? And if we do it in a smart way, where we look at your bank accounts and we say, hey, you can actually save money by switching to this stuff, are you interested in that? If we give you some insight that you didn’t have beforehand, that we have because we’re got smart at looking at, your data, and we reflected back to you.

Sol lax: Do you say like, oh, that’s really good? Let me use that. so that’s, that’s sort of the, the direction that, that we’re moving in the Elm stuff probably used internally first for customer service and that and then, do we go after this big idea that we discuss, which is, do we have this all bot answering all your questions about your small business, waking, waking up in the morning and saying, go get it, Kevin., advising you on your small business and totally, disrupting all the vendors of the world, do we go in that direction? Yeah, maybe it’s not. It’s not it’s not our day-to-day right now. But is it is it a possibility out there? Sure. I think someone will do it. It will definitely do it. Somebody will do it. I got you excited. Yeah, I know you think we’re living in an avatar.

Kevin Rosenquist: That’s right, that’s We’re going to be living in Avatar. I want That’s, I can you can use my likeness. but, Yeah, I’ll charge you for it.

Sol lax: You got it. Well.

Kevin Rosenquist: Well, well, it’s Sol Axe with the company is Revenued. thank you very much for joining me. I really enjoyed chatting with you.

Sol lax: My pleasure. I did it as well. All Okay.

Kevin Rosenquist: Thanks again.

Sol lax: Have a good one. Take care. Bye bye.