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While text is a big part of our daily communications most corporations, particularly those in financial services, use it sparingly. Why is that when texting gets many times the engagement of email? We explain why in this interview. But this is all changing, in large part due to the work of my next guest on the Fintech One-on-One podcast.
Dave Baxter is the CEO of Solutions by Text (SBT), a text and payments platform focused on financial services. Their compliance-first approach to texting has resulted in the adoption of integrated payments text by many fintechs and banks as these companies realize they need to meet their customers where they are at. And that is via text message on their phone.
In this podcast you will learn:
- The big names in tech and finance where Dave cut his teeth.
- How and why he came to be CEO of SBT.
- Why SBT is focused on the consumer finance vertical.
- Why many companies in financial services have been hesitant to use texting.
- How SBT is able to assuage their concerns around using text as a channel.
- The most popular use case where SBT clients start.
- How they onboard a client and integrate into existing systems.
- What happens when someone clicks on a text payment link.
- How texting effectiveness cuts across demographics.
- How SBT is using AI in their text messaging systems.
- What they learned in their recent study with Datos Insights.
- The potential for text messaging in consumer finance.
Read a transcription of our conversation below.
FINTECH ONE-ON-ONE PODCAST NO. 522 – DAVID BAXTER
Episode 522 David Baxter
David Baxter: Well, what I do know is email is inexpensive, but it’s also ineffective. Only one in five emails are ever read. Close to 98% of text messages are open and read in under five minutes. We have customers that text beats every other channel five to one in terms of completion of payment, reduces charge-offs by 10%. Collections rates, they go up. DSO goes down. Consumers are happy. Ninety percent of people who went delinquent, they went delinquent because they didn’t get an alert or a reminder.
Peter Renton: This is the Fintech One-on-One Podcast, the show for fintech enthusiasts looking to better understand the leaders shaping fintech and banking today. My name is Peter Renton, and since 2013, I’ve been conducting in-depth interviews with fintech founders and banking executives. On the show today, we have Dave Baxter, the CEO of Solutions by Text, a compliance-first text and payments platform.
We talk about the power of the text message, the astounding attention it receives, and why now is the time for financial services to embrace it. They call their platform FinText as they are completely focused on consumer financial services, bringing real-time payments and more to the text channel. We dive deeply into what is involved in bringing a text platform into the production workflow of fintechs and banks. Now let’s get on with the show.
Welcome to the podcast, Dave.
DB: Thank you, Peter. Thanks for having me. Appreciate it.
PR: My pleasure. So let’s kick it off by giving listeners a little bit of background. I was looking at your LinkedIn. You’ve been at some big names in finance. Why don’t you tell us some of the highlights of your career to date?
DB: Really began my career at America Online, where my job was to educate the membership on online financial services and then monetize via those partnerships with the likes of the trades and AmeriTrade and Citibanks and the Wells Fargos of the world. And I guess that was sort of the beginning, if you will, of fintech, so to speak, large financial institutions starting to have an online presence back in the late 1990s. I then went to a company that was acquired by FIS where I spent six years building out a global business for FIS that we had eventually sold to First Data. And then that gave me an opportunity to get back up to the Northeast, where I am today in Princeton, New Jersey, building a bill pay company that is now subsequently part of ACI Worldwide, where I was running global sales for ACI Worldwide. I had always had a sort of a passion, if you will, for how it is that people
view and pay their bills. So, in the beginning it was a lot of online banking, then it moved to home banking, then it moved to online transactions. So empowering billers to communicate with their customers, whether it’s over the web, IVR, or call center technology. And then that, of course, turned into apps, and we’re moving closer and closer to a real-time and on-demand world. And so, how did I get here to what I’m doing today? I had received a phone call from a partner at Edison Partners and asking if I would want to be on the board of one of their portfolio companies, which I’d respectfully declined because I didn’t know much about the nature of accounting software, so I didn’t think I could add some value. And then that conversation turned into they were looking at a compliant led messaging platform that focuses specifically in financial services, which then rang a bell because ACI Worldwide resells SBT. I didn’t commit to being the CEO at that time, but most certainly was going to help out my buddies at Edison, try to get an opportunity together as the two founders of SBT were really looking to exit the business. They built it to about as big as they could get it. And Edison had real big plans for the possibility of really commercializing messaging. Anyways, couldn’t get a deal done. So it all fell apart in January of 2021. At that point, I now started to learn a little bit about the messaging business, SBT, and the nature of their customers, and I felt like they were missing a key ingredient, which was payments. So of the billions of transactions that run across our platform, about 50 to 60% or so are related to an opportunity to execute a billpay, a one-time payment, set up recurring payments, a split pay, a service fee, a promise to pay, whatever it may be. So I went back to the two founders, and I let them know that, hey, I’d be willing to rewrite the SIM, but I want to be the CEO. Lo and behold, I did and here I am today. It took about 10 months to get done. And, you know, I haven’t looked back since. It was categorically the best decision of my career and really transforming how it is that people view and pay their bills in a world that is closer and closer to real-time. It’s on demand. Most payments, bill payments are made as a result of an alert or a reminder. Sixty percent of all payments are made one time. And what not a better place because the consumer is going to win than that of a message, right? So was 60 % of all bill pays and there’s roughly 7 billion bill pays or $17 trillion. We focus, in consumer finance, supporting auto, mortgage, student loans, card issuers, marketplace lending, and we’ve got some big marquee stadium brands that we facilitate really that communication effort and it runs from acquisition to delinquency and back. So I can help a card issuer in real time, open an account, service the account. Marketplace lending, I can help re-market these loans. I can handle the specificity around accounts receivable management. So, we lead with compliance. We focus in very highly regulated markets because they’re incredibly difficult to traverse, and payments hangs off of the platform. So if you think about everything that you could be doing in a call center, we do that over messaging. So, in and outbound messages. And I characterize the platform as this compliant orchestration layer for in and outbound messages, whether that’s RCS, MMS, SMS, and so on and so forth.
PR: Right. Gotcha. Okay. So before we dig into all of that, I do want to get a little bit of context here because you joined, you said, in 2021, but the company’s been around for quite some time. Was the company in financial services much before then, or what was the Solutions by Text that they were offering?
DB: I think the brothers, they just naturally fell into consumer finance. So there were, you know, other industries that they would support, whether it was major league baseball, franchise teams, food and beverage, travel, hospitality, kind of, you know, ran the gamut of many different industries. I became laser-focused, and let’s get really, really good in a particular vertical. And I just felt compelled to niche down and dominate consumer fi.
PR: Right. Right. Okay. So today, is that the vast majority of your business?
DB: Yes, it is. Yeah. So we consciously exited some of those other industries. Actually, we got so focused that when I came on board, there were just under 1500 accounts. Now we service about 700 accounts. Yet the business is about six times bigger than what it was in 2021.
PR: Wow. Okay. So then, who are you targeting as a user? I mean, you mentioned some of the different verticals. Are you finding banks are as receptive as fintechs? I mean, you talk about marketplace lending. I could imagine they would be early adopters, but tease that out a little bit more.
DB: This is actually fascinating. Last year, though texting for you and I, it’s ubiquitous. It’s the most preferred and effective channel, right? Think about just your daily life. If you look at, you know, depending on generation on average, people look at their phones roughly 23 times per hour. They’re on their phones roughly 13 hours a day. Ninety-eight percent of text messages are opened and read in under five minutes. And yet out of our new logo wins last year, 75% of our new logo wins last year, they hadn’t been texting in the past because they were definitely afraid of trying to traverse the complexities of telecommunications, highly regulated business, FCC, SEC, CFPB, CTIA. But that’s where we come in. And so we keep our customers on the right side of compliance. So, who are we talking to at these large financial institutions? We’re talking to somebody who is thinking about originating an auto loan. We’re talking to somebody who is thinking about servicing an auto loan, a mortgage, or a card. We’re thinking about somebody who is upselling and cross-selling new products and services within a financial institution. So, marketing, we’re talking about people who are deeply concerned about customer care and thinking about how to augment my call centers and empowering in and outbound messaging. We’ve got a large card issuer, as an example, who leverage us in their call center. They have repurposed call center seats for people that just do text in outbound messages so they were able to take what was an eight minute time to resolution. So think about, you know, you call a call center, I’m opening a card, I’m closing a card, I’m disputing a transaction, I’m making a payment. Whatever may be. That generally takes roughly eight minutes. But because of the text and the levels of anonymity that texting provides, speed and accuracy, the conversations are curated. So I know what you had called about in the past or texted in the past. I can work on multiple cases at once. Time to resolution on average for a text message in that call center went from eight minutes to two minutes. So we’re really talking across the enterprise, anybody who’s just really concerned about, how am I issuing new loans? How am I servicing these loans? How am I marketing new products and services to my existing base? How am I taking care of my customers and empowering them to think about, you know, my day’s sales outstanding? What am I doing to really meet consumers where it is that they want to be met over their most preferred channel that they’re on? As I said, you know, close to 13 hours a day. The consumer is always going to win. Yet these businesses were just definitely afraid of leveraging the power of text until Solutions By Text came along because we characterize ourselves as allies. We think about the concerns of the telecommunications providers and what they’re trying to prevent over across their channel. And what they’re trying to prevent is exactly what happened in email, right? Spam. So we are allies of the industries that we serve as we’re allies to our customers, keeping them on the right side of compliance. And of course, we’re allies amongst ourselves. Yeah, we talk to people really across the enterprise and educate them as to the merits of messaging.
PR: Right, right. So, you’ve mentioned compliance several times. Say someone’s listened to this and they haven’t used text messaging before. What are the pitfalls, and how can you assuage their concerns about using text messaging?
DB: Sure. So, our tech stack is built for purpose around compliance. So we understand, is it Peter? Is it his phone? Is it a mobile phone? Where is Peter? What time of day is it? How many times have we contacted Peter? Under what context is it? Is it in the right time of day? What is in the message is as equally important, right? If you were dealing with sometimes messages that could be, you know, financial services related, right? I could be sharing – I have access to account numbers, amounts, due dates, and funding information. If any of that goes wrong, it creates a lot of risks for our customers. So yes, we know exactly who it is, where you’re at, who your carrier is, how many times you were messaged, whether you’ve opted in, whether you’ve opted out. We are built around templates, so we understand exactly what can and cannot be said, which is terribly important, right?
And we work in real time, so we take a look at these templates and we leverage AI to validate the templates to make sure that all of our messages are in compliance with all of the regulatory bodies that I had mentioned. So that is a really, really challenging endeavor to take on, which is why that’s what is a major differentiator for Solutions by Text, where it characterizes the leader in inbound and outbound compliant messages. Now, that’s not to say that if you’re like, you know, if you think you can do it on your own, you know, go for it, right? But you know, you take a look at some of my competitors, and you know, they’re built for developers by developers, and they don’t want any part of getting in the middle of compliance. But that’s really where we shine. We really shine, and we’re thinking about compliance every single day. We’re very close to the regulators. We’re very close to the people that are making up the rules, and we appreciate that. As good allies, as I said earlier, to the industries that we service. Being compliant, I also think, sure, there are the technical aspects about being compliant, but I also think being that trusted advisor and a leader in compliance and sitting and having a seat as a trusted advisor to the regulators for many, many years, that is something that you cannot build or buy, right? That is something that takes a very long time to be able to become the trusted advisor in all things compliance, right? And so we call our platform FinText for a reason because we sit in the center of financial services, servicing financial institutions and lenders, and then on the other side, we’re sitting in the highly regulated world of telecommunications, right? So both the financial institutions and payments and, you know, managing to those rules, as well as appreciating the, you know, how the CFPB operates and thinking about the telcos. So that’s why our platform is called a FinText because we sit squarely, in the center of both industries.
PR: Right. So, when a company comes to you, do they typically come with a specific problem? Like they want to work on their collections or they want to make it easier for someone to send a payment because I mean, you’ve just described like a huge number of use cases. I imagine that when a company comes to you, they don’t say, “We’re just going to convert everything to text.” What is the most popular use case that they come to you first for?
DB: The most popular use case tends to be in collections and payments. We land in collections and payments, and then we expand into other use cases. That’s most of the time. That’s not to say that we just had a very large auto lender there using us in servicing and marketing.
PR: I’m just curious, do you have sort of benchmarks about, you’ve talked about eight minutes down to two minutes, that’s phenomenal. But I’m curious about the collection space or getting someone to pay, whether it might be part of the accounts receivable process; they might not be late, though. Is there a sort of effectiveness of texts compared to email as far as successfully securing payment?
DB: Well, what I do know is email is inexpensive, but it’s also ineffective. Only one in five emails are ever read. Close to 98% of text messages are open and read in under five minutes. We have customers that text beats every other channel five to one in terms of completion of payment, reduces charge-offs by 10%. Collections rates, they go up, DSO goes down, consumers are happy. Ninety percent of people who went delinquent, they went delinquent because they didn’t get an alert or a reminder. They just didn’t know that their payment was due or what the due date was, and that’s where we come into play. You know, really meeting consumers where it is that they want to be met.
PR: Right, right. So then I’m curious about how you interface with existing systems, and someone says, “Right, I do want to implement you guys.” They’ve obviously got their loan management system that they’re using. How do you onboard a client, and how do you interface with existing systems?
DB: I’ve been articulating this to the extent that “all roads” because of where we’re sitting and being the leader in consumer fi messaging, all roads are leading back to SBT. So I think about these ecosystems, and I think about who are we partnering with, you know, in the loan origination systems, because that varies if you’re a mortgage lender, you’re selling banking product, you’re selling cars, you’re selling auto. So we interface with the loan origination systems. We integrate to the loan management systems, billing and payment systems, the various systems of records, because we’re only as good as the information that we’re able to extract in real time about said consumer to then propagate in a way that is meaningful to the end user that is also personalized. That’s one of the best things that we do. You know, I was talking to a large credit union, and they asked, “How can you improve my business?” Well, I can give your members a bespoke experience, right? And it is tailored to them as opposed to just, you know, pumping out an email that was meant for everybody. We can really personalize messaging, and especially as it relates to payments, our payment text pay is very unique in the market given what we know for that first transaction. So we’ve got all the different payment types and wallets and split pay and service fee. But that first transaction, I know that it’s Peter, I know who your auto lender is, I know the amount due, the due date, your address. And then as soon as I capture that funding information, which I then store, tokenize, and vault, subsequent transactions are just based off of a keyword. So you get a message from whoever your auto lender is: your amount is this, it’s due tomorrow, would you like to make payment right now? Reply yes or reply with an emoji or whatever the driving factor is. That’s actually one of the best things we do. So we have about 65-ish integrations built all around consumer finance, from acquisition to delinquency and everything in between. So we really sit in the center of this ecosystem in trying to, as I said, extract the relevant information at the right time to then compliantly push to our customers’ customers.
PR: Right, right. So then, I just want to clarify something. You said that someone can process a payment just by replying “yes” but I presume that’s after you’ve got their information.
DB: Right.
PR: When you’re first connecting with them, and you send them a link, I presume the destination of that link is very carefully thought about, right? Because if you put in five layers of friction, you’re going to, the link is pointless then. What happens typically when someone taps a link on their phone? I’d love to get a sense of what the typical situation is.
DB: So, for that first transaction, we drive a customer to a site that is already pre-populated for you. So it’s already, you know, I know who you are. I know your address. I know your account information. I know the amount. I know the amount due. What I’m lacking is the funding type. So once I capture the funding type, that’s the only thing I’m going to ask you to do. When I capture the funding type, you then submit payment. And now I have your funding types for all future transactions that send, you know, driven by a keyword that will change once we start pushing RCS, the rich, rich communications and wallets. It be like a, it’s a much richer experience. I can do everything via RCS that I can do in an app. If you have, let’s say, for example, you’ve got Google Pay, Apple Pay, PayPal, we would take that payment right in the experience as well, if we don’t have the funding information. Look, nobody gets excited in the morning to go and, except for me, like I love Bill Pay, but nobody gets excited in the morning to think about Bill Pay. But it’s like, it’s a have-to-do, it’s not a nice-to-do, and I just want to create the best user experience in a way that provides the right levels of anonymity depending on where you are in your relationship with the biller, but also just make it a super easy experience, just a super easy experience. We’re transforming, you know, really turning off paper and … imagine a world where I can now start delivering documents right with MMS, and opening accounts, I can share with you my W2, my proofs of address and my driver’s license. We’re working on a on a use case right now with the large financial institution leveraging RCS to not only originate a new credit card, but then also drop a virtual card in an RCS in real time to that person’s phone, which would then get populated into your mobile wall. So you can start, you know, transacting, immediately.
PR: That’s cool.
DB: Yeah.
PR: That is really cool. Okay. So I’m curious about the end user, the person receiving the texts. You said that 98 % of people read a text in five minutes.
DB: Yes.
PR: I’m just thinking about like, I have a teenage daughter who, you know, she’s texts a hundred to 200 times a day. Then I imagine there are older people who, you know, don’t take, I don’t take 200 times a day, I can tell you that. So, is there a difference in demographics as far as the effectiveness, or do you find this sort of cuts across all ages?
DB: It cuts across all ages, without a doubt, though I would say gen X and younger, the numbers do, they do improve. It’s fascinating to me. Over 90% of all customers say that, yeah, I would love to make a bill pay over text. Yet only, gosh, I want to say somewhere just north of 30% have been given the opportunity. Yeah.
PR: You got work to do.
DB: We have a lot to do for sure.
PR: You mentioned AI before, and I, as you’ve been talking, I’ve been thinking about this quite a bit because there’s a lot of AI chatbots out there now where you can, you know, you can have a chat. You can even have a chat via text or whatever. So I’d like you to sort of share exactly how you’re using AI. You mentioned one use case, but does it sort of permeate your business, or what do you do?
DB: You know, I have different opinions about AI, just given the levels of pretty sensitive information that’s being in and out of text messages, right? As I said earlier, being compliant, also you need to have a deep appreciation for the message and the dialogue that is happening in and out of those messages, right? So, we’re a little bit sensitive to that, and that’s why we leverage AI in reviewing our templates to make sure that those templates are in compliance with, right? That’s what we’re doing next. I do think that there is a world where we could engage and empower, let’s say, a delinquent consumer to self-cure their debt in a two-way text that could be driven with AI based on our customers’ business rules. Let’s say I am delinquent on my mortgage. We know what the large financial institution’s appetite is for negotiating that debt. I could see that happening. I could see offers being made. I could see making up a series of payments. I could see loan modifications. I could see promise to pay, split payments. So that’s where I think we could be leveraging AI in ways that are just simply not happening today.
PR: Gotcha. Okay. I want to talk about a study that you did. This is sort of the catalyst for our conversation because I was looking at this study with Datos Insights. It was from last month. If you could share some of the findings of that study and what did you learn?
DB: You know, at the highest of levels, I think what I learned was just, you know, truly validating through the lens of consumers, the need and the desire to want to be met where they’re at, which is their mobile phone, right? The other thing is the numbers, just, keep on improving. They keep on improving and businesses, this is a, not a nice-to-do anymore. This is mission critical. I was speaking to the CEO of a large marketplace lender when their other texting provider went down; they were using that texting provider for online applications. Their application delivery rate, or acceptance rate, went down 40 % during the time period by which they were not accepting applications over text. Consumers are demanding to be met over text. Businesses are afraid of traversing the complexities of the regulatory environment. And I think that that’s been really the barrier to entry, but it’s got to change. When I think about the information from Datos, it’s just very validating: who we are, who we service, how we service them, and why we’re on this journey. And it’s really to just provide the, you know, it’s like, I had that aha moment many, many years ago when I had my first Uber ride, living in New York City, and I never rode a yellow cab again.
PR: Gotcha.
DB: It was a better experience.
PR: Yeah. Yeah. So, last question. It sounds like what you’re saying is every single financial institution in the country should be using text, and they all should be using SBT. But I’m curious about what you see as the potential for SBT. A hundred percent of the market is not realistic, but where are you taking this? What’s the potential here?
DB: I think we were going to be the category leader of in and outbound compliant messages. That’s what I think. And I believe that everything that you do and how you communicate with your bank today is going to change. I think about how you open an account, how your account gets serviced, how you want to make a bill pay, how you want to discover new products and services with your financial institution, your auto lender, your mortgage service provider, your card issuer is forever going to change. I see, as I mentioned earlier, the call centers, nobody wants to get a phone call, right? I do not pick up my phone if I don’t recognize the number.
PR: Same here.
DB: I hate calling. I hate calling call centers because it’s ineffective. It takes too long. They don’t have that information readily available. I want to communicate the way that I prefer. I prefer to get in and out with levels of anonymity and speed, effectiveness, and efficiency. And that happens throughout the entire customer journey with whoever their relationships are. I think we are going to, you know, I think we’re going to lead that way. I think we’re going to bring RCS to North America, along with our partners. And I think we’re going to dominate B2C compliant messages. That’s what I think. Our competitors, the large competitors, we’ve got a head start in some of these areas. We’re squarely focused in consumer fi, so we understand the dynamics of the regulatory environments in consumer finance. We also have a deep appreciation of Telco. We got a bit of a, we have a bit of a head start. I think our laser focus is going to really help us win the market. We’re not building for developers, by developers, and we’d love to see what you build on our platform. We provide that level of service that, hey, look, our NPS score doesn’t lie. It’s 74. So our customers love us. Our retention rates are world-class. Our net revenue retention rate is as high as I have… you know, I think that it’s like, it’s 135. So, our customers are growing. They’re using us for different use cases. We’re clearly the marketplace leader. We get a ton of inbound inquiries from large banks, and you know, I think we’re scratching the surface. You know, even with all the success, Peter, I honestly think we are truly scratching the surface. I think our volume has doubled every year since I’ve been here, and I think we’re going to continue to do that if not more, once we can really gain some traction at the largest institutions when they embrace really meeting their customers where it is that they want to meet. There’s just no denying that you’re on your phone the best majority of the day, right? And if I can get that best experience, why would I ever want to log back into a website?
PR: Right. Yeah. Understood. Well, I can hear the passion in your voice and see your enthusiasm over the video here. And, you know, best of luck to you. I think it’s a really interesting application. And what you’re doing, I think, is really helping a lot of consumer finance companies. And as I said, there’s a lot of runway ahead of you.
We are living in a more mobile phone-centric world. That, I think, is undeniable. Our phone is already where we verify our identity, and a large percentage of the population uses the mobile wallet on our phones for payments. It isn’t much of a stretch to see text messaging for payments becoming ubiquitous, particularly when information is all pre-populated when you click on a link, and all you need to do is enter your payment information, which could just be a seamless connection to your mobile wallet. For those who don’t want to set up an automatic payment, this is probably the next best thing. Anyway, that’s it for today’s show. If you enjoy these episodes, please go ahead and subscribe, tell a friend, and leave a review. And thank you so much for listening.