Payitoff automates student loan repayment for financial institutions, reducing defaults and saving, on average, $240 a month per borrower, says company founder and CEO Bobby Matson. The New York-based business-to-business solution provider connects borrowers to repayment and refinancing opportunities by offering banks a white-label product that they can embed into their existing architecture.

Bank Automation News recently spoke to Matson to learn how Payitoff improves borrower financial outcomes while increasing deposits and improving borrower debt-to-income ratio (DTI) for financial institutions.

BAN: Can you explain a little bit more about what you offer?

Bobby Matson: We help banks deliver compelling outcomes for their customers with student debt by automating every aspect of the repayment experience. Our infrastructure handles everything from syncing loans, to automating guidance, which includes federal programs, as well as acting on that guidance, so our partners don’t have to build that infrastructure from scratch. That includes life-changing outcomes like digital enrollments into income-driven plans or looking into loan assistance programs, of which there are hundreds for public service sector workers, teachers and military service members.

Our proprietary system is built to scale and already exposed to millions of borrowers. We’re strictly B2B, though. Our goal is aligning incentives, so borrower outcomes are tied to the financial institutions’ strategic goals and value creation events, such as improving retirement outcomes, qualified plan participation and overall financial wellness.

What’s different about us versus other companies in the ecosystem is that we’re strictly focused on enabling our financial services customers to generate the outcomes for the borrower so that they create engagement, loyalty and ROI. One use case that we commonly see is lowering a borrower’s monthly payment by enrolling them in an income-driven repayment option. On average, our partners save the average borrower $240 a month with this functionality.

That’s $240 that could go toward 401k contributions, savings or toward paying down other debts. We’ve saved borrowers well over $10 million with the technology today.

BAN: What does your solution automate for financial institutions that doesn’t already exist already?

Matson: There are some loan aggregation tools out there. The key difference in what we’re doing is we have a higher fidelity and robustness than current aggregators, with respect to student loans specifically.

If you look at fintechs that aggregate consumer liabilities, you’ll see that they’re pretty thin and broad. It might look good in the docs, but when you’re actually using it in the wild, every single servicer will return different pieces of data here and there. You see a lot of null values and it becomes very difficult to build reliable interfaces.

What we’ve done is provided what’s called “value consistency.” There are no more nulls for key fields — you’re always getting reliable fields that are important for borrowers, such as repayment plan types for Great Lakes, which is an important field to help understand what a borrower’s situation is and how to give them effective guidance. Over 7 million borrowers use Great Lakes, so that’s a big gap that we fill. [Editor’s note: Great Lakes is a student loan servicer.]

Another thing that just hasn’t existed before is just in the amount of data we’re returning. It’s roughly two to three times more data than existing solutions per loan. We’re also the only API that offers fiduciary-compliant federal guidance and enrollment into loan assistance programs. Our read/write access via the API enables partners to effect immediate changes on the borrower’s account.

We have an automation in place to flag any enrollments that could be rejected to ensure that it meets Department of Education standards based on its requirements with the servicers. We’ve codified every regulation tied to student loans, so that it reflects current law. That’s something that is typically a swamp of liability and regulatory mess. We’ve just focused on being an effective source of truth so every partner can deliver reliable outcomes for their customers.

BAN: What is the technology that’s underneath the hood?

Matson: We’re built in the Erlang programing language, which is the same thing that WhatsApp is built in. Most of our telecom systems are built in Erlang, so it’s a highly distributed, highly available system. It scales extremely well, which is why we’re able to handle any load that gets thrown at us. It’s well suited for this type of use case where you’re calculating immense amounts of data, taking all these complex decision trees and distilling them into simple pieces of data in real time. My background is in engineering, working as a software engineering lead and scaling products for tech giants like Groupon, StitchFix, and Fandango. Our CTO and I worked together on “Hello Alfred,” where we were using Erlang under the hood. We’ve seen the pros and cons of other language choices, and this is well suited for this problem. [Editor’s Note: Hello Alfred is a resident management software application that enables real estate developers and property managers to provide in-home services and experiences to their residents.]

BAN: Are you cloud-based?

Matson: We host our services using AWS (Amazon Web Services). We’re SOC 2, Type 1 compliant and in process for Type 2. We’re very deliberate about our security; it’s a huge part of our business so we must take it seriously. As an engineering culture, we’ve seen what can happen when you don’t take security seriously. So, we are hypervigilant in that respect.

BAN: In what other ways do you add value for financial institutions?

Matson: Using our API, financial institutions create life-altering outcomes for their customers that result in increased deposits and improved debt-to-income (DTI) ratios. On average, we’re freeing up $240 per month that can then be invested into other banking products. There are lenders who have high declines because they didn’t know their borrowers could enroll in an income-driven plan and then, boom, their DTI is immediately improved just by opting into federal programs that already exist.

Another added value is increased 401k contributions. Student loans get in the way when employers are trying to offer 401k benefits. In my experience, I couldn’t imagine contributing to my 401k when I had six-figure student loans. It was impossible for me to make any sort of decision until I had a plan for my student loans.

Luckily, there are a lot of ways to act on your student loans because they’re mostly federal; roughly 47% of borrowers financially benefit from a federal program. That’s an important stat. Thirty-one percent of borrowers will benefit from some kind of prepayment and only 8% will benefit from a refinance.

BAN: What’s new or has changed in student loans recently?

Matson: Speaking of retirement outcomes, the Secure Act 2.0 that passed the House Ways and Means Committee on May 5 has bipartisan support in Congress, and includes tax incentives for student loan payments. Companies will be able to match student loan payments and route their contribution to the employee’s retirement account — even if the employee made no other contributions of their own. The employer market for these services is set to exponentially grow in the next few years, given legislative tailwinds in the space, and we’re here to facilitate these opportunities for financial institutions.

What’s even more exciting for banks and financial institutions right now, when it comes to student loans, is what we’re calling the “student loan tsunami.” In September, 46 million borrowers are re-entering repayment all at once. This is a once-in-a-lifetime financial services event. Never before have millions of borrowers exited repayment and then needed to re-enter all at once at such a scale. Servicers will be overwhelmed by this because every borrower will be asking the same question: What do I do with my student loans?

It’s just a massive growth and retention opportunity for financial institutions. Most borrowers benefit from federal programs financially, and borrowers everywhere are going to be looking to take advantage of the federal programs. We offer a turnkey, plug-and-play solution that meets that need. We’re still the only API that offers guidance on the federal programs. If you’re looking to own the borrower relationship, to be a part of their journey, and have that all happen within your existing digital experience, then we’re the choice to help meet that need in September.

Sponsored content brought to you by Payitoff.

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