In This Episode
Join us for Episode 27 of Mighty Finsights where Rory Holland interviews Alex McLeod, founder of Parlay, about small business lending and how banks and entrepreneurs are poorly served by the existing system. Alex talks about how her role as a military spouse informed her decision to found Parlay. They explore the stark challenges faced by small business owners and financial institutions, why AI should be deployed carefully to avoid harm and the role humility plays in finding good mentors. The conversation also touches on marketing strategies, brand positioning, and the urgency of adopting new technology.
Key Takeaways
- Parlay is bridging the gap between small businesses and lenders.
- AI and fintech can significantly streamline the lending process.
- Small business lending is complex and requires tailored solutions.
- Financial inclusion is crucial for empowering small businesses.
- Standardized processes in lending can improve efficiency and outcomes.
- Data plays a vital role in assessing loan eligibility.
- Marketing and education are key to reaching lenders effectively.
- The fintech landscape is rapidly evolving with AI and data-driven solutions.
- Community support is essential for fintech entrepreneurs.
- Understanding the needs of small businesses is critical for lenders.
Who Is Alex McLeod and What Is Parlay?
Rory Holland (00:00)
Welcome to Mighty Finsights I’m Rory Holland, joined by Alex McLeod, founder of Parlay.
Alex McLeod (00:06)
Yes, thank you for having me.
Rory Holland (00:00)
You’re not from Texas.
Alex McLeod (00:06)
What gave it away? I’m originally from England, but I live in Washington DC. Yeah. Been here for about 10 years working on social impact ventures, the latest of which is Parlay
Rory Holland (00:21)
Yeah, love it. What part of what part of England?
Alex McLeod (00:25)
My family’s from the south, but I’m a very weird kid in that I was raised in France, I was born in Hong Kong and I lived in the US a little bit as a kid and then moved back.
Rory Holland (00:34)
You have a beautiful accent.
Alex McLeod (00:35)
Thank you.
Rory Holland (00:37)
We actually have a fully distributed team and we have our chief of brand is in Sheffield, north of… So near Manchester.
Alex McLeod (00:50)
Lovely. Lovely.
Rory Holland (00:52)
Yes. I need to go adopt some of the language over there. Can improve on some of my…
Alex McLeod (00:54)
Yes, yes. Sheffield accent is strong. Very strong.
Rory Holland (00:55)
You guys sound very smart and like eloquent.
Alex McLeod (00:59)
When I get stuck on a complicated question, the English accent gives me just a little bit of time to figure it out.
Rory Holland (01:06)
Well, a little bit about Parlay. So Parlay is an AI-powered loan intelligence system that complements loan origination systems and helps community banks and credit unions get more small business approved for loans right off the website.
Alex McLeod (01:20)
That is perfect. Can you introduce me in every future podcast, please?
Rory Holland (01:26)
I can read off a script. So you already gave us a little bit of a backdrop. You’re in Washington DC now. That’s great. So it’s kind of going to be an interesting question because of the way that you said you’ve lived multiple places early, but what is something unique or unexpected about where you’re from that helps shape who you are today?
Alex McLeod (01:49)
Ooh, what a good question. So previous to being a founder, I was a linguist. So I speak multiple languages and I think that it comes from having moved around a lot. And I think one of the things that I bring from that into the work that we do at Parlay is communication, translation. The name Parlay actually refers to the tenuous dynamic between small businesses and lenders. Technically both need something from the other, but it’s not usually a comfortable conversation. Small businesses dread being rejected. Lenders can’t help every single small business. And so we wanted to have a play on the words, Parlay, which in French means to talk, but also it means that pirate face off, parlay, when you have to have a tough conversation.
Rory Holland (02:38)
I think I remember the word parlay in Pirates of the Caribbean. That’s a parlay.
Alex McLeod (02:43)
And that’s, I mean, that really is the dynamic between borrowers and lenders today. And it hasn’t got easier in the last few years. Interest rates got really high as a result of SVB falling two years ago on the day almost to us recording this podcast. And it’s just very tough to be a small business and they usually have no idea what it takes to get to a yes. And so our homage to that is okay.
We understand it’s really hard for small businesses and we understand that lenders have the remit, it’s in their charter, if you’re a community bank, to help them, but they need better systems, better tools to do that and that’s what Parlay does.
Small Business Lending Is Really Difficult
Rory Holland (03:21)
Amen to that. Better systems, better tools. So are banks and credit unions your primary market?
Alex McLeod (03:30)
Yes. So we collaborate, we sell our products to community banks and credit unions that have a small business customers or that offer small business loans out into their community or even nationwide. And they use our platform as an intelligent front end to intake a small business, help the small business get through it quickly, easily give that small business some insights they didn’t have. And then our system will crunch all of the numbers for the lender so that they could be more efficient with that intake, that decisioning, ultimately that funding, hopefully, of the loan on the other side.
Leveraging AI and FinTech for Efficiency
Rory Holland (04:04)
My experience over the years historically has been it’s a fairly cumbersome process. Whether you’re getting a mortgage for a home or you’re trying to get a small business loan. How have you’re using, and I know we talked about AI and just what I read about what you’re doing, but how are you using fintech and AI kind of together to solve that problem?
Alex McLeod (04:25)
Yes, so there’s kind of three main problems that we solve. One is that, to your point, a very cumbersome process and that breaks out into about a hundred problems underneath the hood. But the big one is that lenders need a lot of information from a borrower to make a determination of whether they’re eligible for something or not. And usually borrowers struggle to provide that information. So one thing is we need to make it easy for small businesses to be able to provide information, rapidly get an answer, yes or no, or something else on the loan. And then lenders need systems that can basically grab all that information, crunch it, and then surface an insight of whether this is an applicant that’s a good fit for a loan product that the bank or the credit union has. And so how we use fintech and how we use AI on that is one, we have something called an orchestration layer, which basically means that At the point of inquiry for a small business, we help the small business grab information that they need to give to the lender. And we do that instantaneously kind of behind the scenes. It’s a user permission system where if you authorize us to grab data for you, such as tax data, such as credit data, such as cashflow data, and if it’s easy for you as a small business, then you’re more likely to complete the inquiry versus say, okay, this is too hard, I’m done, I’m going somewhere else. And so we make that instantaneous and we make that fast, which is great for them. And then our system basically crunches all of the application information from the small business. We have a kind of common app experience where every small business goes through the same flow. We just ask different questions based on what the loan viability is. But then our system will classify inquiries by eligibility type. And what that means is we’re basically saying to the lender, hey, Rory, you have a thousand small businesses that have submitted an application for a loan. And instead of you having to figure out what loan product is good for them or individually crunching, whether somebody is a good fit for a loan, we’re just going to do all of that lift for you on the front end so that you do way less manual work. Cause for the lender, it’s really cumbersome too. It’s cumbersome for both sides. So the system will crunch it for them. The lender is still in the loop. Ultimately they make the final call, but we’re helping crunch the data, verify the data is true, and then surface whether the fit is right and what loan product is good for that small business.
Rory Holland (06:52)
Interesting, so that it does integrate with underwriting.
Alex McLeod (06:55)
Yes. So our system is a system of intelligence. We basically pipe data into the system of record. So different lenders have different tech stacks and they vary wildly. Some are good and some are, know, Jenga piles sort of toppling over gently. And there’s a lot of variety, but because it’s tough for lenders to navigate their existing stack of tech, we found a niche being able to plug into that existing stack. And so we piped data into the system of record, which means the lender can stand up new programs really quickly without needing 12 or 18 months to set something up and start. And that’s a big ROI for them.
Rory Holland (07:37)
Is it, from the lender perspective, is it like a scoring system? Like how does it report back?
Alex McLeod (07:44)
Yeah. So for the lender, there is a scoring capability. So what we do is every loan type, and there are a lot of small business loan types. So let me start with this. People think about small business lending as kind of one unified thing. And the reality is that there’s about a hundred different loan types for a hundred types of businesses across a hundred industries. It just, it’s giant. It’s really not one to one in the way that consumer credit worthiness and consumer lending is. And so what we do is we have lots of different types of credit boxes that we set up in our system. So for example, the SBA loan is one that we have, which is a type of government-backed loan. We have small business loans that are more conventional like C&I loans or working capital loans. There’s basically this menu of options that a small business could be a fit for and each one of them has a credit box. And the lender can parameterize it, they can change it, they can tweak it. But when a small business comes in, when they submit an inquiry, they are also massively run against every single credit box. And then the platform will also detect the right credit box and surface a score. But we are not the ones determining the score. The lender parameterizes how they want to score things. And that’s important because AI powered tools are enabling this vast, massive leap of efficiency for lenders, right? Historically, you would have to do all of your work on paper or PDFs. You know, there’s so much manual stuff in there. And now AI is helping cut all of that manual work out. And that’s really good. But we don’t want to take the lender out of the loop. They need to be in the loop. And so the way that we do that is we say, cool, Rory, you’re an experienced lender. We know you have a credit box against which you are evaluating these small businesses, we’re going to put that in the back end of the system for you. You can change that as you want to, but we know you have a frame and we’re just helping you be more efficient with evaluating whether applicants fit that frame. And then over time, you know, because we’re gathering a lot of data in the system, we’re becoming more and more predictive with that fit, that classification over time.
Rory Holland (09:57)
Complex.
Alex McLeod (09:58)
Small business lending is incredibly complex. If I could say anything about the last two years of work that we’ve done with different banks and credit unions, it’s that it’s just not simple. And it’s why financial inclusion for small businesses has not been solved, right? Like ultimately, I think we’ve cracked the code on some consumer credit worthiness capabilities, but small business remains a bit of a Gordian knot. There’s just so much in there that has to be unpacked. And I find that genuinely wonderful in that a lot of people are focusing on trying to crack it, including Parlay, that’s what we do, but because of that complexity there are lots of different recipes to how you solve it and that’s good. We’re still figuring it out.
Lenders Use Parlay to Simplify Data Collection
Rory Holland (10:42)
What is the experience for the lenders? How does this change, sorry. Let me rephrase that. What is the experience of the business owner trying to get, how is that experience and does Parlay, is it Parlay involved in that experience of data collection through the technology?
Alex McLeod (10:59)
Yes. So if you were a small business, let’s say you went to Bank of Rory, you know you wanted a small business loan. So you said, okay, I know Bank of Rory might have something for me. You would go to the website. There would be a link to say, submit an inquiry and you would be able to initiate an inquiry directly. And when the small business does that, they basically open, they initiate a flow using Parlay. And we have a universe of different flows that will basically pre-populate based on how that applicant is answering questions. So if I were somebody trying to buy a business, very different data collecting requirements than if I’m an existing business, I’ve been around for three years and I just want a bit of working capital to grow my business. Totally different information requests. And so the small business applicant navigating Bank of Rory’s flow is going to go through, they’re going to answer some questions about them, their business, who owns the business, and then they’re going to enable us to call the financial data of that business. We do that because small businesses struggle to provide that. It’s a big drop off point in the process right now. And it’s a problem where lenders usually get incorrect information. And so we help call it through APIs. It takes them 15 minutes or less. It’s a very simple, like plain English flow. And then when they submit the inquiry, they actually get insights on how they benchmark, how they perform against other businesses in that industry.
Big Struggles for Small Business Owners
So if I were a pizza shop, applying for a loan with Bank of Rory at the end, immediately, basically 15 minutes later, I’m getting feedback on what my numbers look like in comparison to other pizza shops, how I’m doing in terms of things like net income and revenues. And I get insights on which factor is especially impacting my eligibility. And we have to tread very carefully there because we can’t say here are the things you’re not doing well on, and this is why you’ll be scored badly. That’s not fair lending, right? We have to be very careful with that. But from talking with now thousands of small businesses, they shared with us that for them, the experience right now feels very black box-ish. You go onto a website, you either submit an inquiry or you send some documents and then it just vanishes into the ether. You get nothing, right? You’re like, okay, well, am I approved or not? And usually you’re not, right? One in five, maybe small businesses get approved for a loan, which means that four out of five do not. And they almost never know why. They don’t have enough insight to understand how to improve moving forwards. And this is a huge problem from a financial inclusion standpoint and one that we’re helping to solve by surfacing the information.
Rory Holland (13:40)
Yeah, are those, so you can surface the information, obviously fair lending laws and all that, I couldn’t agree with you more. Like the fact that we’re turning down over 20 % or 80 % in some cases is ridiculous, and not giving them a place to go. And we’ve experienced this here at CSTMR with my agency and standing up some marketplaces around CDFIs. So we’ve been very committed to the CDFI market for a number of years and trying to help small businesses and underserved communities and minority leaders of companies to find financing that fits for them so they don’t go through that process of that 80 % decline rate. Very frustrating. So my heart’s with you. And so that brings me to a question. Knowing what you know about what you do, what was the inspiration to start Parlay?
Why Alex Started Parlay
Alex McLeod (14:34)
Yeah, so we have a really unique founder story, would say. Myself and my two co-founders are military veterans, so they served in the special operations for the United States Army. I’m a military spouse. And when in 2021, the Afghanistan evacuation happened, a number of folks who had served, were Afghan and had served alongside military personnel that were American were evacuated to the US.100,000 people, which is a really big number. And the special operations community stood up to help them with, you know, housing and food and emergency needs. But my background is in refugee resettlement and empowerment. And I knew that everyone would focus on the immediate emergency needs, which is important, but no one would look at the next step, which is, OK, well, now that people are safe. How do we integrate them into society? How do we give them what we need? And the Pentagon Federal Credit Union Foundation, PenFed, basically sponsored a group of women called the Afghan Female Tactical Platoon. They are incredible. They are the coolest women I’ve ever met in my life. And there were about 40 of them, and many of them wanted to start their own business and become entrepreneurs. And so they said, okay, cool. Can anyone help with this? This is a very, can we help them get connected to what they need? And so we put our hands up because it’s a passionate mind and my team felt that we should help them as best we could. And we ended up connecting them to CDFIs to your point. We ended up teaching them how to build a business plan, think about building credit, all of that stuff. But through that process, we also realized how difficult it was for them. I mean, they are the most wonderful women, but when you come to the US with no credit score, you’re not familiar with the US banking system. You know, you’re a startup and now you’re trying to start a business. You are starting with a lot of rocks in your backpack. Let’s say that. And so we worked with a network of CDFIs to kind of try and connect them to that. And through that process realized immediately how hard it was for these women to even just fill out documentation, right? Because even the CDFI, even the most mission focused lender in America is still going to need information from you. And that process of requesting information was causing them, the women to just get overwhelmed and stop. Even if there was somebody helping them, it’s just, it’s just such a difficult ask. And so that’s when we keyed in, we said, okay, there’s a problem here. Like, why do existing systems, why do current front end systems not solve this? What is it about these information requests that’s causing these big drop-offs? And we learned that it wasn’t just a problem in the CDFI ecosystem. This was a problem that every lender that works with small businesses face. Right? 93 % of small businesses request a loan for a million dollars or less. Some bananas number like 85 % request 250k or less. Right? So there’s a gigantic portion of the small business ecosystem that needs a very small loan but that deeply struggle to provide the information required to be approved for one or to understand what it takes to get to a yes. And so that’s how we started Parlay.
Rory Holland (17:51)
That’s great. So you stepped right into it.
Alex McLeod (17:53)
Yep, we went straight in. We love hard problems.
Standardization in Lending Has a Long Way to Go
Rory Holland (17:58)
Why aren’t there more standards, like standardized processes for, let’s just stay with CDFIs for a minute?
Alex McLeod (18:06)
Rory, you are talking my language. So there’s about 10,000 lenders in the US on the community side, and I’m including CDFIs. 10,000 institutions have 10,000 ways of intaking information from small businesses. Yes. And so you can imagine how chaotic that becomes.
Rory Holland (18:25)
That makes me crazy. That is like so inefficient and unproductive.
Alex McLeod (18:28)
It’s very inefficient. It’s very unproductive. And one, it’s difficult for a small business. If you’ve decided to apply to 10 lenders, you’re going to be asked 10 different things. I see a parallel in the common app, right? So I think about Parlay like the common app for lenders, you know, one single way of intaking information from small businesses, because if you do it 10,000 ways, one, you actually don’t have a base of data to build and learn from. And lenders need to be able to more efficiently lend. But they also need to be paid back, right? And so if you don’t have standardized data across that 10,000 lender universe, then how can you learn? How can you be predictive about default and expected loss rates? And so, you know, there is a piece of law that came into effect, 1071, that basically mandates that every lender that does small business loans captures data a certain way. But most lenders see that as a headache, right? That like, well, this is a lot of work for me to do. And so one, it’s great that systems like Parlay can help just capture that data the way that CFPB 1071 asks them to capture it. But the problem with that legislation is while it requests that you capture data and report it a certain way, it doesn’t give you the data back to learn from. So lenders need that. They need a common standardized data set from which to learn so that they can improve their predictiveness around default rates and how to lend to small businesses in a risk adjusted way. And that is our deep mission is to help enable that by cutting out the work.
Rory Holland (20:00)
That would be huge and it just seems so obvious. That’s what, it’s really hard. No, I get it. I think it’s very complex. See, you answered my question why you started, but what inspired you, the problem? You and I were talking off camera, there’s more to it. So what business are you really in when you think about it?
Parlay’s Vision for Economic Opportunity
Alex McLeod (20:06)
Yeah. So our vision, our mission and vision at Parley, right? Yes, we help, we help lenders and that’s very important. But our mission is to unlock the next $5 trillion in economic opportunity in the US. And that sounds like a banana’s large number, but the CFPB estimates that the small business lending market right now is a $1.4 trillion market. you know, extrapolating from the fact that only a teeny tiny subset small businesses actually get approved.
The opportunity is much larger. And if you think about the political context that we’re in right now with this kind of America first message of, we need to reshore manufacturing. need to build our industrial strength. We need to compete economically. All of that. Great. Small businesses account for half of our GDP. So if we’re going to do that, we have to change how we lend support, empower, and actually get small businesses to that point where they can grow. And capital is a crucial component of that dynamic. So our mission is to unlock that economic opportunity. We have a financial inclusion mission that relates to that. And so we identified that the best way to do that was to partner with lenders who had that remit too, but who needed better piping and better systems and better data to do that. And so that’s how we achieve that mission in partnership with those lenders.
Rory Holland (21:52)
Yeah, and part of that when I hear what you’re saying and I’ve read about you guys and your mission and what you’re doing, how do you, I wanna talk about your brand a little bit. How do you feel like you’re positioned in the market for where you are now but actually more so where you’re headed?
The Parlay Brand Is Positioned to “Do No Harm”
Alex McLeod (22:10)
Yeah, it’s a very good question. You know, we position Parlay as that intelligent front end. We want to partner with the systems of records. We know that lenders have their 10,000 ways of doing things. And so we want to help them standardize that. We do have a very intense do no harm ethos. And I think that’s really important because there’s an explosion right now of AI-powered tools in the market, Parlay included. And I think that’s great.
Lenders, they have outdated systems. They need ways to be able to do less manual work so they can focus on structuring deals, building relationships, doing the things that they’re really skilled at. But I worry that the explosion of AI-powered tools could cause lenders to lend more in a way that could ultimately harm small businesses and potentially impact the safety and soundness of lenders.
I think we need to make sure that while we’re increasing efficiency, we’re not also causing lenders to do more lending that is bad or that could ultimately harm the small businesses on the other side. And that’s a very difficult balance. And so from a brand perspective, I hope that we are positioning ourselves in the market as that intelligent intake tool, that tool that can unlock those efficiencies, but that also has a very risk adjusted and very pragmatic way of thinking about how we empower that with the right guardrails. And we do a lot of collaboration with the regulators to empower that. We know that lenders love innovation and that’s great, but risk comes first. And so we are trying to help them cut out the work that it takes to do that, but also keep them in the box that they need to stay in.
Marketing Ideas to Help Lenders Win
Rory Holland (23:53)
What type of, on a similar note, marketing? How do you feel your, how effective is your marketing now? What types of things are you doing?
Alex McLeod (24:01)
Yeah, well, we, so we’re a young company, but one of the things that I’ve really enjoyed doing over the last few months is starting to write more. Because Parlay is, we have an opinionated take on how to do this and not everyone agrees with our methodology and that’s okay. but also a lot of lenders are now coming to us and saying, okay, well, how should we do this? Right now that it’s technologically possible to lend faster.
What should we use? What intake? What method? What data? And so we’re getting to weigh in on that. And I think the most effective part of our marketing recently has been writing more. Either ourselves, you, we have a white paper we released a few months ago on our kind of philosophy and approach on the lone intelligence system category, but also collaborating with thought leaders in the space to say, yeah, small business lending is hard.
It’s not simple or we would have cracked it. Now let’s talk about the details. Now let’s get into it and say what’s left and how can we iterate and experiment in a way that still, you know, keeps lenders and borrowers safe.
Rory Holland (25:08)
Yeah, staying on the marketing topic. Banks and credit unions are inundated with technology options. I mean, the guys here, Jason Henrichs and crew at Alloy Labs who are downstairs with us this weekend. My goodness, how do you even navigate that when you’re a banker, a finance person, and you probably don’t understand tech? And a lot of them have some capabilities in marketing, but then themselves could hire companies like us to help them, companies like mine. So I’m curious how you feel like back to the brand, back to your positioning, back to your marketing, how you can, how effectively are you reaching them and maybe some of the challenges that you’ve experienced so far.
Navigating the World of Banking Tech
Alex McLeod (25:55)
Yeah, well, you are completely right. If you’re a lender, right, there’s 10,000 community banks and credit unions in the US. And I think that incorporates the large lenders too, i’s a finite universe of lenders for now, which means that lots and lots of vendors are sending lots and lots of emails and lots of cold outreach and all of that a day. I think somebody told me that the average lender gets 70 emails a day from various lenders in the universe. And once in a while, we will come up against some resistance when we meet someone for the first time who says, yeah, but I have a digital intake system. And then I have to explain, I’m like, yes, but it’s a bunch of static workflows that don’t change based on the scenario, the situation, you know, somebody could put in incorrect information, how does that impact you? And ultimately education is helping them understand that, but in order to kind of stand out from that space, we’ve definitely had to zig a little bit while others zag and so we talk a bit less about Parlay specifically and a bit more about the category of software that we’re building and why it’s important we try and educate people, we try and help them backtest data. We try and say, okay, I hear your concerns. I hear them. You’re tired of a bunch of people bombarding you with that sounds really frustrating. so recently, one of my favorite things to do has actually been when we talk to lenders who clearly are tired of being promised things that are not good is to say, okay, well, you know, we put our money where our mouth is. You can test our system. We’ll backtest your data. Like, let me show you. And you can be hands on keyboard today and you can spin up our platform and see for yourself. And they’re usually taken aback because it’s unusual that you can say, yeah, Rory, I can spin up a version of my platform for you now. You want to try it now with me on the call? And I’m like, what do you mean? Because it really is different. And so I think we’re just trying to surprise people by giving them information and insights that are valuable. Even if they don’t ultimately pick Parlay, my goal is to help them understand how to better do what they want to do. Ultimately, if they pick another vendor, but we’ve helped them understand how to better score or evaluate or intake or serve small businesses, I would still consider that a win. Maybe not in the moment, but long term I would because my mission is to get more small businesses approved for loans. And if we do that in partnership with other vendors or by ourselves, or if we don’t ultimately win a contract, but that other vendor helps achieve that mission, that’s a good.
Rory Holland (28:17)
You just nailed it. We said my mission is to get more small businesses funded. That’s awesome. So the heart behind what you’re doing is wonderful, you can only imagine if we could help call it 10 more percent, we go for 20 % approval rate to 30 % approval rate and..
Alex McLeod (28:36)
I would die a happy woman if we moved that needle. I would die a happy woman.
Empowering Entrepreneurs Through Education
Rory Holland (28:40)
Yeah, I mean there’s so many pieces. So if you could wave a magic wand, what is one thing you wish more people knew about Parlay?
Alex McLeod (28:51)
Hmm, I think that’s… The current challenge that is taking a lot of my time is getting people to understand how radically their processes could change as a result of using a new category of system, which is the Learn Intelligent System. And the recent thing that we’ve managed to do to shift that is just to let people test it and just say, listen, like, I know you think that I’m just selling you a piece of garbage, you know, like some other piece of software that is going to give you more work, but let me show you the art of the possible. And I wish that people out there in the world wrangling their different systems and just wondering how on earth they’re gonna get out of the trap of their products, roadmaps and all that, could realize how much we could revolutionize how they do something that is currently difficult and time consuming. It’s also technology has caught up with what we wanted to do. We’re in a third wave of innovation where suddenly you can intake in minutes a small business and get them an answer. A yes or a no. A quick no is good, you know, and a small business that gets a quick no is empowered to do something about it. So that mentality shift is what we’re working on right now.
Rory Holland (30:08)
And what is one story, or two maybe, that where Parlay has made an impact on a customer?
Alex McLeod (30:15)
Now do you define a customer?
Rory Holland (30:16)
I mean, as a business.
Alex McLeod (30:17)
The small business?
Rory Holland (30:18)
Yeah, do you have any stories? Do those flow back up to you?
Real Impact Stories: Transforming Rejection into Generational Wealth
Alex McLeod (30:23)
Yes. So we recently helped a veteran small business owner who had applied to 10 banks to get a loan and was furious because he did 10 separate applications and heard nothing back and it was months, right? And usually when small businesses apply for a loan, they need it now, right? And one of the issues that usually comes up is if it’s going to take you weeks or months to get funded for a loan and you need it now, you could be really financially vulnerable by the time you the funding if at all, right? And it’s only one out of five times that you will. And so he went through our flows. He, one, we were able to match him to a lender, which is great. But two, he didn’t understand how complicated his case was. And I think that we need to put the, we need to empower small businesses to understand what it takes to get to that yes. And so he was able to submit an inquiry through our system, get the insight on the other side. And then we ultimately did match him to a lender. it was complex though, and sometimes small businesses think things should be quick and they don’t realize what it’s going to take. And so just giving him that information like why does the experience have to be for a small business like taking an exam without knowing the answers. It’s terrible, right? But to say okay well listen you’re a startup you’re asking for a half a million dollar loan which is a large amount but you are a startup which is too big for a startup as a loan request. Let’s iterate on this together let’s shape it so that it’s right so that you can get to that yes. It’s not a no, it’s just a different version of the request than you maybe initially anticipated and that’s okay. Now he knows, right? Instead of 10, you know, totally manual requests and this much feedback in response. Now he knows and he got to that yes. It was complicated, but we got there.
Rory Holland (32:13)
That’s great. How’s he doing now? Do you know?
Alex McLeod (32:22)
He’s good. Yeah. He set up a, it was a franchise and so he, he’s on, he’s off to the races. And that, that’s job creation. That’s wealth, generational wealth. That’s, I mean, it’s just, it’s so empowering and so many veterans, by the way, veteran owned, women owned and immigrant owned small businesses are like particular focus of mine. And veteran businesses are really unique because most people leave the military and want to start their own business. And they are super, super rigorous, determined and gritty, but this is a net new thing for them and like learning the financial system is not a fun thing for them and so it’s been a real joy to support that and to get them connected.
Rory Holland (32:58)
My nephew is a veteran and starting up his own business with three other veterans. Couple of them combat. I’m sending them your way. Now that I know there’s your side hustle, your consulting too.
Alex McLeod (33:10)
My listen, it’s I would do that and I do that for free. We don’t like it doesn’t matter, what matters is that they get the yes.
Stay Humble if You Want Good Mentors
Rory Holland (33:19)
Who’s been, who would you describe has been a key influence on your journey? Like whether it’s a mentor or an ally and like what did they teach you?
Alex McLeod (33:27)
A mentor or an ally? There are a lot of people in this space that I truly, truly respect with regards to what they do and how they do it. You know, there’s a universe of founders who are gentle and sweet and kind of check in on us as we grow, but also Jason Henrichs. I mean, we met him two years ago and he’s been wonderful. He always gives very pragmatic advice. He has that regulator side that he knows really well and that’s huge for us.
Alex Johnson, in the space, an incredible writer and thought leader. I’ve had the privilege of writing with him recently and I really, really admire his perspective on the market. I think he goes out of his way to educate people. And I think that’s just so important for a space that is just so complicated. You know, we kind of covered that today. So huge fans of them, huge fans of, there’s a whole universe of kind of venture capitalists who fund this kind of work and who have been just angels to us.
Joe Maxwell was, he’s a partner at JAM FINTOP and he was one of the first people I met in the space who, you know when you meet somebody and within about a minute it’s clear they know a lot more than you do about the subject and so you just have to start listening and not talking and he’s been like that with us but he has been just incredible helping us grow. You know, there’ve been lenders who took early chances with us and who were willing to help us grow from the go. Mike Bollinger, one of my favorites, is an inclusive lender at Live Oak Bank. We’ve collaborated with him now for nearly two years. He’s wonderful. I could go on, honestly. There’s so many people have taken a chance on helping us. Wayne Miller at the ICBA, he’s been a wonderful mentor. There’s a host of folks who run accelerators and different programs that kind of focus on fintechs, Kristen Castell at Cafe, yeah, a lot of wonderful people.
Rory Holland (35:15)
You’ve been incredibly blessed with a wonderful group of people.
Alex McLeod (35:16)
Incredibly blessed, it’s true.
Rory Holland (35:17)
Well, and it’s showing up in your work.
Alex McLeod (35:18)
Thank you.
Rory Holland (35:19)
Yeah, it’s showing up in your work I think what I what I’ve observed and now witnessed in conversation with you the heart for what you’re doing is just fantastic and, as you and I were talking off camera, it’s a theme here not just the fintech house every year, but so many people in the industry one they have their own story and their own inspiration for why they got into this industry, how they got into the industry. But even more so, the heart behind the work that they’re doing to make a positive impact. That’s why this podcast exists. I want more people to know the heart behind the brands and the businesses. That it isn’t just tech, it isn’t just finance. It’s actual people trying to help people. And we’re all working in a system that could be improved, should be improved, will be improved. And you just gotta have a lot of energy and a lot of passion.
Alex McLeod (36:05)
You have to love it, right? It’s hard work, you have to love it. But it’s just wonderful. We’re really blessed.
Future Trends in Fintech: AI and Beyond
Rory Holland (36:22)
What’s on the horizon for Parlay, like any exciting projects or goals that you can tease out for us?
Alex McLeod (36:27)
Yeah. So we have a couple of strategic partnerships that we’ll be announcing in the next couple of weeks, which we’re really excited about. For us, the priority is how can we help as many lenders as possible? So for us to be able to assist lenders, they need to be able to get data that is indicative of what the market is doing, and so that means that we need to scale. And so we have a couple of distribution partnerships that are coming on that are going to make a really big difference in how quickly we can do that with some truly dynamic and really forward thinking folks at the helm that I’m very privileged to get to work with. So, more on that soon.
Rory Holland (36:56)
That’s great. We’ll be we’ll be watching.
Alex McLeod (36:58)
Thank you.
Rory Holland (37:00)
So zooming out a bit. Where do you see the fintech industry going in the next three to five years and how do you hope Parlay might play a role and contribute to that?
Alex McLeod (37:15)
Yeah, well, two giant topics, would say right now. One is AI. Everyone is using that term very liberally, I might add, but there’s just a lot of excitement around that term and what it means for how quickly, how efficiently, how massively we can achieve things where historically it would take months, years, hundred people to do something. Now you can just do it with AI and you can do it instantaneously. And that is really cool. So I think we’ll see more and more use cases that are good come online. I think last year there was a lot of like talking about use cases in AI and not much doing. There was a lot of proof of non-cepts to use, my friend, Maya Mikhailov’s terminology. And I think now there’s pragmatic excitement. There’s, this isn’t just a good idea. Like we’re actually generating the returns. We’re actually seeing what this can do. Agentic AI to use a kind of market category term is the latest flavor that people are excited about. Autonomous systems basically being able to do and lift and kind of solve these things that historically humans had to do. I think the guardrails of that are still being defined because again in banking what a system does if it’s something that the bank is extending, it reflects back on the bank. And so the regulators I think are still wrapping their heads around how to handle stuff like agentic AI. I mean, if a lender’s system does something, but the lender wasn’t necessarily aware and it did something outside of the realm of which the lender would normally do it, how do we regulate that? So there’s a lot there to unpack still, but AI is definitely a big flavor. And then guess crypto has sort of made a big resurgence recently. And I think a lot of people also use that term very liberally distributed ledgers and kind of the technology pieces that underpin crypto, lots of cool and pragmatic use cases, I would say, in banking, especially crypto itself remains quite speculative. there’s a lot of, know, Javier Milei, South American leader, recently like endorsed some currency that a bunch of people then bought and then they were financially put in harm. And so the big question again will be, okay, well, there was a bubble in 2021 and then a lot of people and consumers were harmed and then there was a backlash and now we’ve sort of leaned back in. So what have we learned and how do we prevent that from happening again? And I think banking as a service is the last flavor. You know, there was a lot of, it was a punishing regulatory environment the last few years making sure that BaaS providers didn’t harm consumers. And there were lots of incidents where that did happen, and I think regulatory response is definitely valid. But I still think that there are lots of exciting use cases that we’re still seeing emerge on that side too.
Rory Holland (40:04)
Yeah, it’s hard to predict what’s going to happen, the velocity and complexity of things happening all at the same time, particularly just these last couple of months.
Alex McLeod (40:15)
This is, I love that point velocity because I think lenders have been used to stuff new things happening and coming their way for a long time. I don’t think at this exponential scale though, like AI is a good example of things that it’s changing how we do work, how we achieve different tasks and jobs. So fundamentally that once in a while I’ll talk to a lender who says, yes, that is very exciting, but.
We have a core conversion underway. So let’s talk next year. And I think, man, one year from now, where are we going to be? Things are changing so fast and certain banks are leaning in and doing things that will fundamentally put them ahead of the rest of the pack. And so I worry for those banks who say, OK, well, this sounds cool, but next year and I think, well, you’re losing potentially forever a competitive advantage that you may never get back. And if you consider yourself a small business lender or whatever it is a lender, whatever space it is, if you’re not thinking about how to rewire what you do, you may be left behind.
Rory Holland (41:20)
Yeah, complacency, I see that and I hear that more than I would like in the small community and community credit unions, small community banks. And for the last decade I’ve attempted many times to try to help facilitate building their brands, building their business, like through my work with marketing and branding. And it is frustrating. Like, no, we still do handshake deals or we do it over lunch or we don’t need a digital program. I’m like, well, you do. Or you face irrelevancy. And then as technology has accelerated, like you just said, a year could be 10, a year could be forever if you miss the window to be competitive. And I’m not saying that to make banks or credit unions fearful, but…
Alex McLeod (42:07)
We’re trying to help them.
Rory Holland (42:08)
At the end of the day, I believe there’s a real need to have community banks. I think it’s very important to have local financial institutions to help people locally that they can trust and actually physically walk into. My concern is that might go away.
How Banks Should Prioritize Their Technology Efforts
Alex McLeod (42:20)
I think so, Ithink you’re right. You know, I went to a conference last year and it was a small state conference of community bankers and they were talking about, you know, fintech and what they actually meant. And they were talking about it in a negative way, like the risk of fintechs. And in the beginning, I was really curious about why there was such a negative connotation. And what I realized they meant by fintech was lenders displacing us, right? So fintechs that are lending instead of us. So what they meant was online lenders, know, your Kabbage’s, your OnDeck’s, your other lenders who can basically replace the community lender in that dynamic. And to me, pointing the finger at the competitor that way is missing the point, right? The point is that consumer expectations have shifted and small business expectations have too. Like the small business wants to submit an inquiry, a submission, whatever, and get same day feedback on whether this is going to move forwards or it isn’t. And that is not rocket science. Like we have the technology. We really have it. And, you know, lenders who are okay saying, well, you know, we’ve always done it the in-branch PDF way. Well, what happens when all of your customers expect something else now? How are you going to meet that need? And if you don’t, then yes, they will go to the online lender, but you could also choose to partner with vendors to help you do that. Or you could build it yourself, right? That’s always an option, but at small banks, it’s generally not as easy because they don’t have a large talent pool to pull from to build net-new technology, but it really is a do or die moment from my perspective.
Rory Holland (43:54)
Yeah, and we definitely advise the banks and credit unions we work with to look at those opportunities. But even more so, try to help them not stress out about all the options. Identify some core priorities that you want to solve for the market that you serve. And don’t only select a technology. Let us, in our case, our business, let us help you market it so that your consumers actually know you have it. Because we are seeing a lot of that too. Well, they’ll spend a ton of money and time and energy adopting a new technology, spend a ton of money and time integrating it, then not. And then they’ll be like, OK, now we have it. Everybody’s going to use it. No, it doesn’t work that way. You got to let people know. So that’s kind of been big on my mind.
Alex McLeod (44:38)
That’s huge. That’s an ask we get a lot actually, where people say, well, that’s great. You can enable this efficiency, this scale. That’s awesome. Can you also market to small businesses? And we’re like, well, no, that’s not what we do. So one, I’m making note that maybe next time we need to reach out to you guys. But two, that’s definitely a core piece of this too, right? It’s efficiency and volume of throughput. How can we marry up those two things to meet demand?
Rory Holland (45:02)
Well, like you, we share some of philosophy. We just want to help more people. So that might not mean you might not hire me at my agency, but I can maybe point you in a direction or at least give you some advice or guidance that you can go do it yourself. I’m happy to spend the time. So yes, call me anytime, of course. One last question. Yes. So for folks either stepping into fintech or wanting to get into the space, what advice might you give them? And this could be your younger self too, if you think back.
Advice for the Next Generation of Fintech Leaders
Alex McLeod (45:28)
Yeah. Okay. One, look for the helpers because there is a community of folks in the space that have helped us beyond measure. Thought leaders, people who were just given a listening ear, people who are out there doing the work. I think the mistake that fintech founders make very often early stage is that they just come to market and they’re like, we have this thing. It’s great. People should want it. And you’re like, okay, well, first of all, that’s not how people buy technology in this space. This is a relationship-driven business. Two, you may not be aware of other things that are happening. So bring your curiosity, go find people who know more than you, ask them questions, check in with them often, ask them to sanity check your work. I remember once I asked Jason Henrichs to review an article that I wrote and I was like, look, it’s all about the efficiency and how we help small businesses. And he was like, well, I feel like lending to small businesses is easy, but getting them to pay you back is pretty hard. like just, just that type of feedback, you know, just that’s a silly example, but there are people who know more than you go find them, go red team your own questions. You know, people in the space want you to show that you’ve got what it takes to hang in there. And the way that you do that is by showing up and being humble and asking questions and not assuming that you know everything and learning your own blind spots with a community of people who have the same mission and vision as you.
Rory Holland (46:54)
Wonderful advice Alex McLeod, Parlay.
Alex McLeod (46:56)
Thank you so much.
Rory Holland (46:57)
It’s been great. Hope you enjoy your weekend here in Austin and we’re definitely gonna be following your progress
Alex McLeod (47:04)
Thank you so much for the time.
Rory Holland (47:05)
Thank you.
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