The Next Generation of Digital Banking

0:02Every time a new channel shows up in banking, the instinct is the same. Build a higher wall. Dig a deeper moat. From branch, ATM, online, mobile, from the bank's perspective, it's their customer in their data. They obsess about owning the drawbridge that crosses that moat and cuts through the walls that they've built. They want to control access and they want to keep the customer inside their citadel. The fourth channel doesn't come with a door. It's an AI agent. It works for your customer, not for you. And it lives inside somebody else's app. Last month, I sat down with Ryan Caldwell, founder and CEO of MX, on the main stage of the Money Experience Summit.

0:4420 minutes was not close enough to cover, so we found some extra time in Park City and kept the conversation going. We get into who owns the fourth channel. And shouldn't financial institutions allow their customers, their bank accounts to chat GPT? Right now, that's a hotly contested thing with JPMorgan putting a stake in the ground saying, no, we are controlling access to the Citadel. We then get into, should banks be charging for data access? Are they really protecting their customers or are they protecting their turf? And we talk about whether AI can finally give a single mom the advice that financial advisors were chasing Ryan around a golf course to give him when he was just a college kid, but it had his first exit.

1:26Then we switch gears. In 2022, Ryan stepped away from the company he'd founded to focus on his family. In 2024, he came back, the prodigal founder. Research on founders who return isn't kind. The world moves while they're gone. But there are some epic cases. maybe none bigger than, say, Steve Jobs coming back to turn Apple around. So I asked Ryan, what could he see from the outside that he couldn't see from the inside? While I haven't been able to pin him down for a full episode of Killing It with Alex and I, I was able to get in some of my burden questions. Stick around, here is Ryan Caldwell, founder and CEO of MX, talking about the fourth channel.

2:08This has been Bucket List Item for me is to actually be on stage with you. My time with MX is done after this. Yeah, well, it's great to be here. You know, look, starting off, it's interesting, you co-host a show that is labeled Breaking Banks. And you've been doing that for like 10 years now. Almost 15 now. A little over 10 years, yeah, yeah. Almost 15, a little over 10. And it's interesting that we have you here with a room of bankers. Yeah. Credit unions and bankers, and you're talking about breaking banks. Did banks break over these last 15 years, or were you guys early? Yeah. I mean, it's a great question.

2:51So here's what we know. So the podcast launched when my partner, Brett King, wrote Banking 2.0, right? Almost 15 years ago, 700 episodes ago. And what we've learned over that time is, well, Brett's written banking 3.0, 4.0, and 5.0 just came out. And so what we know is there is a high level of interest in people looking at it as like, are banks breaking? Also, Scheiden, Freud, and Sells, people want to watch the disaster happen. And I would say the last piece of it is it is a slow-moving disaster, like an Austin Powers steamroller kind of level of what's been happening. but we know it is happening because the listens just keep going up and up and up.

3:36And so I guess I'd turn to you. You've been in the industry a long time. Do you think banks are broken? You know, it's interesting to me. I think that it is a natural state of things in life that they are constantly breaking. And I think this is true in every industry. I think it's true in every technology. I think it's true in our personal lives, to be candid. Things are constantly breaking. So the question isn't, is if it's breaking, the question is how do we repair it and come back stronger? And, you know, Keen Su Gi, if I pronounce that correctly, I actually have a beautiful framed picture of a heart that has the gold lines of it being broken and sealed back together that family members gave to my family.

4:29after what happened to my daughter with her heart injury, talking about how do you take something when something that almost might be tragic that occurs, like a whole banking industry shifting and changing, the ground moving underneath your feet. And how do you have that breaking of what used to work, what used to be the norm, and how do you reform it back in a way that's stronger and more beautiful? Yeah. I love the Kintsugi kind of analogy, the creative destruction that takes place in the rebuilding. And I just want to acknowledge, I'm going to channel what a lot of people in the room are probably thinking.

5:04And I get a lot of flack sometimes from traditionalists at ICBA in particular is like, you're crying wolf. The irony, of course, that there were wolves last night at the opening reception of like, we've heard this all before, right? First it was internet banking was going to kill us. Then it was mobile, you know, banks and credit unions are done. You know, if you look at the first wave of the fintechs, I know Betterment's in the house and what we had launched together in 2008 around Occupy, Main Street. What would you say to those that said, you know, you're crying wolf, like we've seen this movie before and look at, we're all here.

5:41We can still fill an auditorium. Yeah. I mean, look, I mean, for, for one, I think it's just the natural state of things that, that there are these challenges and that these things, again, are breaking. I think that's just such a great way to say it. But you have to look at the actual data. The data is unbelievably compelling of this wave of change that's hitting us now. But just like all the other prior waves, we've had a lot of FIs that didn't make it. And that's just the truth of it. And as far as, you know, crying wolf, this is something that the data says that certain FIs were either niche enough or were large enough, or the change is happening for the first few stages.

6:26Online banking and mobile and these different shifts happened very fast, but slow enough, definitely a lot slower than the shifts that are happening now, that it only took out a certain number. But the actual number that it took out is pretty large. Yeah. I mean, I remember asking this question of an audience almost 15 years ago, and I want to ask it now just because I think it'd be funny. How many of you in the audience don't have a mobile app? Is anyone willing to admit you don't have a mobile app? If we look at those data, they're very compelling around why AI is different, like you had called it in our prep, the 100x, where it took mobile four years to double from 22 % to 43%.

7:06But if you look at TD Bank, just had an article in American Banker, it went from 10 % of people asked an AI LLM for financial advice last year and 55 % asked this year. And already 30 % fully trust general AI that's not even from their bank to give them financial advice. So the fact that there's already such a high level of trust and such an incredibly high level of engagement, this wave is happening much, much faster. And what I find interesting about that is there's another survey that shows 29 % of people feel like they actually got bad advice from the LLM, but they still choose to use it. I'm not sure how that squares, but I think it is easier.

7:51Now, you said something really interesting there about large enough or small enough to survive. Is there a level of survival bias now, right? Like, call it the Darwinian approach. You're all here because you're survivors. Is it going to be different this time? I think it's going to be very different. If we look at each wave, we have about half of the financial institutions that we used to have a decade or two ago. I mean, the number, the change that's occurred, it's very pronounced. But this is different. This wave is, it is a degree of disintermediation like we've never seen before in banking.

8:30The degree to which you can go to a general LLM and ask it any questions that you want and for it to give you an incredible amount of detailed advice is creating this disintermediation at a level and a speed we just haven't seen before. And so, you know, we have an industry that needs to better and better prepare the financial institutions for these waves, but this is one that's just happening faster. Now, I'm going to channel my inner banker again and say one of the phrases I probably get five, 10 times a week is more of a fast follower. Do you think being a fast follower as an FI is going to work in this case?

9:09Absolutely not. So it's interesting here, and this is a little bit off our track of what we talked about in prep, but the number of ways in which people, as they start to engage with an agent, the stickiness is high. And I've seen this in every avenue of life. And so if you're waiting to be that second or third interaction for them, they're already built a certain amount of rapport, a certain amount of momentum with an existing experience, with an existing agent. And you get such value because every time you touch an agent, it learns a little bit more about what you care about, a little bit more about.

9:48And so if you have a, a, uh, experience that you've built on the chances of returning to that and returning to that are really high. We see a high amount of stickiness, um, amongst agents more so than we thought we would see. I think that's going to continue as, as, cause now it's changing where it's not just one-off question. You have really good memory in these agents. It has a lot more context. So this memory and context matters. And so if someone's already built up the context of all of their financial concerns and their worries and then get framed something around it, the effort to rebuild that with another agent is going to be high.

10:21You have to get out in front of this wave now and start to build that relationship right from the get-go or the chances of being left behind there are pretty strong. So Matt, Jazz Hands West, did a phenomenal keynote at Finnovate just a couple of weeks ago. If you guys don't know the Jazz Hands, I can explain later or actually ask Matt. He talked about the for space around AI being a different kind of interface, the evolution from people to internet to mobile to now this. And some of the feedback I got from banks and credit unions afterwards, because I was very curious how they'd respond to this, was somewhere between abject horror and disbelief, this idea of, wait a second, these are our data.

11:04I want to hold it. This is the moat like i build deep moats and high walls around these data and there matt's talking about like let the data free yeah what do you think for banks like that's a big change to let the data free and to let the customer interact with it outside of your confines yeah i mean letting Letting the data free is becoming more and more of, it's just not a question anymore, Jason, because the truth is the data is going to be gotten to no matter what. You have to think about the nature of what an agent really is. Agentic AI, it's representing you. I mean, think about the context here.

11:47You have agents that can learn your exact voice, that can mimic your exact face. you can have. And so the ability for the agent to go do tasks for you on your behalf and get to whatever data you could get to naturally yourself is 10 X-ing, a hundred X-ing. It keeps going that direction. So then the question is, all right, what I really want to do is own that conversation, have that person view me as they think about their financial life, how they're going to navigate it, where they're going to go. And so if you're not starting that channel and you're just providing a simple, what used to be a modern mobile banking, modern online banking.

12:25You have that great experience, but you don't have that ability to really interact and have a complex conversation that has memory and context and all of those things. That fourth channel, as Matt described in that great presentation, it's critical. And so if you don't own that, the idea of hoarding or holding onto the data versus saying all the data that's out there, including the data that you don't have is going to be accessible. How do I build the relationship? How do I make that tie to that consumer really strong and build trust there? That's the most important thing that a financial institution should be focused on, not trying to lock up or mowed off data.

13:01Well, let's talk about trust for a second. And I wasn't there, but I heard this secondhand, but someone on my team and you were in the room, the AI native conference here in Utah last week, two weeks ago, right? And it is a group of people oriented to believe in AI. That's why they were here, right? To attend the conference. Yet, Sammer said less than 10 % of people had trusted AI to do a transaction on their behalf. What is the leap that's going to need to take place other than the, you know, call it the VCs and the fintech nerds on Twitter that are like, you know, all in on how, you know, letting intrinsic, you know, book reservations and book things for them.

13:45What's going to have to happen to see that shift? You know, it's just going to be, it's going to be experiencing it. Like, um, let me give an example. Um, the degree to which a human mind is, it's almost scary how it will, you know, we're, we're learning creatures. And so we're an experienced creature. If we're all of a sudden we experience something and we of trust and we have trust, it can start to build pretty rapidly. So, um, uh, you know, I happened to drive a Tesla and, um, it would have it self-driving that I would try from time to time. So I turn it on and it would, Oh, it's cool. It's kind of driving.

14:23It's a little odd. And then every once in a while I'll do something a little weird or come around a corner and kind of do its rigider thing that it would do. And I'd be like, okay, it's not there yet, but it's, but it's neat. It's cute. It's cool. Yeah. Yeah. I mean, it's impressive. It's super impressive, but I sure is how I wouldn't trust it. And it's given me 10 times the anxiety letting it drive than if I just drove. But then all of a sudden, one day they added to the screen, tap right on the screen to self-drive. And I was like, oh, I remember the morning that happened. I'm like, oh, that's kind of a cool thing.

14:50I mean, obviously they must be more confident. I wonder if they've gotten a meaningful upgrade. So I tapped the button. It drove flawlessly. It drove me and parked in the exact right parking spot, the location, it was, it was thoughtful. It drove just the right amount of aggressive. It wasn't so slow that the cars around me were getting annoyed. And I was like, okay. And I was nervous the whole time that first drive, but the confidence went up. And then all of a sudden I did it the next time and the next time. And now I find myself almost too confident in it, but it does. I mean, I'm like, okay, well now there's road construction.

15:25It's not going to navigate that now. Now there's, you know, there's a bunch of pedestrians. It's not going to navigate that there's a human flipping a stop sign and a slow down and a go. And I'm like, okay, it's not in it every time it did it perfectly. Or I'm on the freeway and debris slides across and I'm like, okay, I should take over. And it just navigated it better than I even I would. And I'm like, wow. And then I noticed that it starts to look out for me that there's, it's trying to get out of a lane and I don't know why it's getting out of the lane. And I'm like, why does it keep wanting to change lanes?

15:54And it'll listen to you. So I put it back in to get back in the lane. And all of a sudden I I realized I couldn't see, but all of its cameras could see that there was a fire truck racing down the side of the median, trying to get to some accident that was ahead of us. And it was getting me out of the way proactively. When you start to realize that this thing is making really good decisions, you start to say, oh, you know what? It's fine moving that money. It's fine doing those things. So I think what's going to happen is people are going to do that same thing. They're going to let it experiment a little bit more, a little bit more, but they're not going to do this over years or decades.

16:24They're going to do this over days and weeks and months. Well, in tying that back to something you said earlier that I think is really interesting about having to be in the game and the context, part of that context is trust. You developed trust in the Tesla's self-driving over time and with experimentation. And if you're going to be a fast follower as an FI, you're not building that context. You're not building that trust with your agent. They're developing that trust somewhere else. Correct. Yes. Yeah. And it's not. So the trust is a critical thing, but it's not just the trust. it's the trust comes from context yeah the trust comes from data the fact that you're interacting with that they interact with your model early on and then they get to like have an experience with it they're giving it information around its concern around the consumer's concerns their worries around where their finances are their real dreams of where they want to head and this is that soft stuff that a bank usually can't get to it's just someone walking in who's already thought through their whole financial life and just says i need this loan or i want to move this money And so they're usually left very in the dark.

17:28They're now invited into the light of the comprehensive nature of this consumer's finance. Well, and they can really be the trusted advisor. And I think this trust aspect, if you look at recent polling shows, 86 % of people trust their financial institution. But it's less than 29 % of people trust LLMs to act autonomously for them. And I think that is the opportunity of what we're talking about over the next two days. And it really comes full circle. As we close, I want to come back to actually how I got to know you and a great talk at an MX summit, what, five years ago, six years ago, when Brandon was talking about the nobility of banking.

18:10But I want you to go back to the way back machine of a little company called Money Desktop and how banks were not yet broken in that way and you were ahead of your time with Money Desktop, but the ethos are very much the same, if you could tell that story. Yeah, so I think MX has an interesting origin story and Brandon and I always resonated very strongly on the nobility of banking. There was one time I was invited to keynote at Innovation Summit for one of the top banks here in the US. And my main talk was about how with the discrete exchange of value, all innovation stacks on top of that. Of that, that all of the things that we've been able to do as a society, that we've been able to do as a species, is the fact that we're able to hyper-specialize and have this incredible banking system and this lending system that allows us to do things we could not do otherwise.

19:06And so we've always felt this very much so in our core. One of my early experiences with this is, you know, I grew up where my family, my incredible mother, you know, single mom with five kids and had to put herself back through school and became an elementary school teacher. And, you know, we got by on not a lot, you know, and financial advice would have made a big difference. It could have really helped. And I remember that when I was in college, I was able to build a company and then sold it a few weeks before I graduated and for a decent amount. And all of a sudden there were wealth advisors around me.

19:45There were financial advisors around me. And I remember one time I was on a golf course, which is not someplace that I should be because I'm not a good golfer. But I'm there getting advice from multiple humans, hyper-specialized, well-trained, telling me all about tax advantages and certain investment strategies and ways in which I could maximize that wealth. And I thought, I need this advice a thousand times less than people like my mom did, right? That could benefit from it. But yet it was readily available for me in this human form. And the thought was, it is inevitable in the future that we're going to have digital access to this financial data, that we're going to have algorithms that will eventually lead to AI type solutions that will be able to give better advice than even these highly trained humans on this golf course.

20:38And we can bring that to not just people who have a certain amount of wealth, but we could bring it to everybody. We could democratize it. And so that idea of being able to unlock that, to be able to bring that amount of financial aid, we're seeing it occur. And it had to go through these stages of a first access to data, the ability to have a mobile banking app right on your phone. Now empowering that mobile app with true intelligence, with this fourth channel of guidance is now unlocking the ability for everyone, the entire wealth spectrum of America to provide upward mobility in that guidance.

21:14It's changing everything. It's going to completely change the game. If a bank doesn't participate in that, if a credit union doesn't participate in that, then they are going to get left by the wayside, which goes back to our kind of canary in the coal mine statement of someone can say, well, I'm fine. I'm standing. I haven't broken as a bank. And we're like, look around you. There's a lot of canaries in the coal mine and things are changing faster, not slower. Well, and the things are changing faster. And to tie it back to the kongitsu of like, this is the interesting opportunity to tear apart and rebuild both banks and credit unions and what they can be.

21:49It's no longer just the account. The account is a means to an end. It's not just the loan. The loan is a means to an end that AI really does give us the opportunity to put into the context of that person's life. Well, I mean, you strike at the core of it. Consumers don't just need a loan. They don't just need a place to put their money. What they need is they need their financial lives to be empowered. They need to be able to have the tools that enable them to live a strong financial life and have upward mobility. And we all know that as a society, we benefit from that. Banking, that's why it's so noble, is it sits at the absolute core of that system working.

22:30And it's in a highly regulated industry for a reason, because we absolutely need it. Just like the medical industry is highly regulated. These are the things that change the entire nature of how someone's life is going, if it's running well. And so if a bank views itself as just this transactional thing that I've often said, oh, we give you a loan. We hold your money for you. What else do you want? That's not you as a bank. That's not the true nobility of banking is, how do we get you to your dreams? How do we make you live that strong financial life? And to not participate in that is taking away the best of what it is to be a bank and is taking from society what they really deserve to get from banking.

23:09Yeah. Well, when we were prepping for this, we realized there's not nearly enough time in 20 minutes to go into what we wanted to. So I'm looking forward to later this afternoon, we are going to spend a full hour on this recording and that it should be out on Breaking Banks in a week or two when we get really under the covers of what that rebuilding looks like. So thanks for having me. Well, it was great to spend some time with you, Jason. Thank you. That's it for another week of the world's number one fintech podcast and radio show, Breaking Banks. This episode was produced by our US-based production team, including producer Elizabeth Severins, audio engineer Kevin Hirsham.

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