2018, 2019 in fintech was late spring.
You get into 2020 and COVID, and that was utter insanity of a story.
Like 25% of all venture dollars in that period went into fintech.
Wow, 25%.
The stat after that is not a good stat which is starting in like the second half of 2022.
Like basically 0 of venture dollars went into fintech.
That was the drought, maybe.
Yeah, yeah.
FinTech winter was the second half of 2022.
Most of 23 and 24 things started to thaw a little bit.
And like now we're very much back in the spring.
It turns out, the biggest use case for AI is fraudsters committing fraud against financial services companies.
Financial fraud is growing at like 18 to 20 percent a year, which is insane.
And it's already a huge market.
I mean, the cattle win long term, but the mouse is winning right now.
At the peak of the boom, roughly 25% of all venture dollars were flowing into fintech.
Two years later, that number was close to zero.
Today, with A16z general partner, David Haber and Zach Perret, co-founder and CEO of Plaid, we trace what happened between those extremes and why the market is heating up again.
We look back at how the industry moved through its boom and bust cycle, from the explosive growth of 2020 and 2021 to the freeze that followed, and where things stand now as activity returns.
We dig into the biggest forces shaping FinTech today.
AI's impact on fraud and underwriting.
The shift towards deposits and full-stack financial products.
Incumbents finally adopting outside software and embedded finance showing up far beyond traditional banking.
Zach David, we did this podcast, I believe, seven years ago, and it's great to have the gang back together.
Thanks for joining.
Thank you for having us.
Great to be here.
Of course, a lot has happened since the last conversation in our personal lives and a lot has happened in FinTech more broadly.
I was listening to the episode that we did the last time we spoke, and we were talking about what has changed in FinTech from early 2010s to just before 2020.
And I'm curious if we could just sort of check in or reflect back since then.
The last time we spoke to now would have been some of the major themes in FinTech.
Catch us up if someone was in a coma after listening to the last episode and just woke up and said hey, what's changed in FinTech?
What would we say?
Let's see.
So last time we talked, we just called it 2018, 2019.
Is that right?
Yes.
Yeah.
So let's see.
A lot.
There have been like a bunch of different areas or like.
Maybe we can think of it as like almost seasons in some sense.
2018, 2019 in fintech was, I guess, kind of late spring.
A lot of really good growth.
Like the industry had a name.
The name probably came about.
I actually think that, David, you created the name.
Yeah.
But no one will give you credit, but I will give you credit.
I think you created the name in like 2015.
But we now had a name for this industry.
We had gone past like oh, some people are maybe building financial services products to like it is an industry and there are a lot of things being built.
We started to see the million flowers bloom to really overextend this analogy.
The million flowers bloom from, call it like 2014, 2015, up until 2019, 2020.
Like zillions of first time.
Hey, can I take this thing outside of a physical bank branch and deliver it to a consumer digitally?
So you saw applications like Robinhood come up and grow incredibly well.
You see all sorts of neobank, neobank for X or Y or Z sub market.
Those are everywhere.
You saw crypto, like the first crypto apps really start to emerge and grow a lot.
And then kind of from 2019, you get into 2020 and COVID.
And that was just utter insanity of a story.
The first few months of 2020 were totally normal.
Then you get into early COVID where everything froze.
Basically, every business kind of locked up, including all the fintech companies.
But within two, two and a half months, you then had this total inversion of fintech.
So you went from late spring to like big EDM pumping summer really fast.
Like the EDM music turned on very loudly, very quickly.
So you just had this insane growth period for fintech from kind of mid 2020 through kind of like the end of 2021 and even into early 2022.
And yes, a lot of new companies formed, but every investor, whether venture or public markets or whatever it was, wanted to push money into fintech.
And so you had just this huge boom in funding, tons of new stuff grew.
It was like really fun and very chaotic time.
Honestly, a hard time to manage because the feature chase the things that we had to build were going so rapidly.
I think like 25% of all venture dollars in that period went into fintech.
Wow.
25%.
It's a crazy stat.
Actually, I think it's a great stat.
The stat after that is not a good stat which is starting in like the second half of 2022.
Like basically 0 of venture dollars went into FedTech.
That was the drought, maybe.
Yeah, yeah.
So summer went into a very, very short fall.
So that was kind of like mid-2022.
And then immediately into winter.
And...
FinTech winter was the second half of 2022, most of 23, and 24 things started to thaw a little bit.
And like now we're very much back into spring.
Yep.
Different format, but it's been a fun cycle of the seasons.
Totally.
I think even to describe maybe what drove some of the seasons.
The rate cycle was a big part of that as, like a
From like a macro perspective, having very low rates, you know kind of drove Zerp obviously not unique to fintech, but a lot of technology broadly.
But certainly a lot of lending volume in the space grew massively in those periods.
The one benefit that I think has shown up more recently in fintech in the thaw period is that rates went up and it sort of shifted the mix of revenues for many of these fintech companies from zero lending driven kind of origination oriented stuff to deposits.
So many of these fintech companies decided, I forget the exact timing, but to go kind of full stack.
So you saw fintech companies like SoFi, you know BuyBanks, LendingClub I think Square got an ILC charter Robinhood, Mercury.
Many of these companies are generating very significant percentages of their revenue and profits today from deposit flows as rates have gone up.
And so that I think has helped thaw the market to some degree more recently.
Yeah.
Usually, yeah.
In 2018, 2019, FinTech was a startup industry.
Having gone through this entire cycle.
Yeah, some ups, some downs, but a lot of maturation, a lot of expansion.
We've ended now with FinTech is, in my opinion, synonymous with financial services.
I agree.
And it goes beyond just financial services as well.
So you've seen a few themes emerge.
One thing that we said for a long time, that Andreessen Horvath also likes to say, is that every company is a fintech company.
And that was kind of quite common from 2018 onward.
Now you see the emergence of embedded finance.
So some applied customers are like Ford and John Deere and these companies that like, yes, they do have captive financial services embedded within them, but you do not think of them as financial services companies or large billers or it's expanded quite a lot.
And then you see the banks themselves.
Historically, they said oh, we need to be fintech companies too.
Now they're saying we are the biggest fintech companies, like we invest heavily in technology.
And so you've seen this startup industry now become mainstream and the firmament of financial services, but also powering experiences well beyond financial services.
Let's go deeper into where we are today and where we're going, given that we're kind of in a exciting period.
Like, is it still early in terms of a lot of things to be built and some spaces you're excited about?
Maybe Zach, you take the first step.
Plaid ourselves have gone through a few phases, and we're lucky that we have this really broad view of what's happening in fintech.
I'm going to keep calling it fintech, but at this point realize that I mean financial services plus plus.
So we have this really broad view of what's going on in fintech.
And the things that we're seeing today are very different and much more varied than they were before.
So V1 of Plaid was how do we create access for everyone?
And I would say largely the fintech industry was focused on the same thing.
So, instead of making you walk into a bank branch to open a bank account, how can you open a bank account on your mobile app?
Instead of making you carry money and go to an exchange when you're trying to cross a border, how can we create a digital way to do remittances so you can actually move money across the border a little bit more easily?
And apply that across kind of every product that banks were building at the time.
We've solved the access problem.
Not completely, not in every little niche, but for the most part.
We as a collective industry have solved the access problem.
So I grew up in a small town, only one bank in our town.
And if you didn't happen to be a member of that bank, you couldn't get a loan easily.
Now, if you live in that same town, you just go online and you apply for a mortgage and you get 30 mortgage offers in an hour.
Or you can do it with Rocket and be done in five minutes.
These are awesome experiences.
That said, what we've done is we've taken traditional financial services and we've made it digital.
We haven't necessarily made it excellent.
That's like the next horizon for us.
And so a lot of things that we've been investing in now are things like credit scoring.
How do we make credit scoring more logical and something that a consumer can understand?
If you get a new job and your income goes up but your expenses don't go up.
You were a better loan risk.
However, that doesn't show up in your credit file for like many, many years, because your credit file is a long history of your repayments.
It's not necessarily indicative of your free cash flow.
And so that is the next horizon that a lot of the FinTech companies that I'm seeing are starting to solve.
So that's kind of one big area.
It's kind of solving those endemic problems that are long lasting things like fraud, things like credit scoring, so on and so forth.
The second is making financial services really easily available in places that you might not have otherwise thought it to be.
So putting BNPL on...
Kind of everything.
Yeah.
Or issuing a card, kind of everywhere.
Or issuing a wallet, kind of everywhere.
And so now we're entering this like FinTech is everywhere.
Not every company is a FinTech company but, like every consumer is surrounded by FinTech and all the places they might want to go.
And the future horizons are always looking at the next few things that are happening.
We look at AI and agentic financial services.
And right now that's mostly hype and people talking about it.
And there are a few interesting use cases.
But fast forward two years and the way that you get a mortgage is going to be talking to people.
An AI application, because that is just the most efficient, fastest way to do it.
So that's been a fascinating one to watch.
And then seeing what's going on with stables is, of course, fascinating as well.
So lots more to come.
On that note, is crypto basically just fintech?
Or, you know, people said it is the new version of the new internet.
Maybe hopefully it still happens.
But in terms of where it is right now, is it mostly just a subset of fintech?
Well, David, you're an investor, so you probably know better than me.
My take is Sometimes.
Ultimately, I don't think that consumers change all that much over time.
And so the kind of things that a consumer would want to do five years ago are similar to the kinds of things that they might want to do today.
But the form factor in which they can do it is very different.
So, you know, five years ago, a consumer might want to speculate.
And you can speculate on gold.
You can speculate on a few of these other things.
And Bitcoin and other coins made it very simple for consumers to speculate.
So great, you can pull up an app.
You can speculate on things.
Speculation continues.
The form factor has changed.
Another thing that consumers like to do is make predictions.
So in the past, you might make a bet with some friends.
Now you might go on Cal State Polymarket and enter prediction markets.
Or you might do that via Robinhood or whatever it is.
Other things that consumers like to do are spend money, save, invest, so on and so forth.
And in as much as consumer behavior doesn't change.
It's a question of how and where does crypto and fintech fit into the existing set of consumer behaviors.
So I think if you look at, again, what a bank does, they're roughly tailored to what consumers want.
Consumers want to save money, invest, get loans, and so forth.
And I think the wisest product development strategy is to kind of take the things that consumers already do and just make them newer easier, more accessible, so on and so forth.
And so I suspect that there will be a convergence of one side of crypto and core financial services, be that exchanging, you know, like checking accounts with dollars in them for checking accounts with USDC in them, wallets with USDC in them, or similar.
Like I think there's a convergence that'll likely happen there.
But then also crypto does some crazy out there stuff and really pushes the balance on innovation.
And like, I'm not sure that that's necessarily going to end up merging with banks, but who knows?
Totally.
Yeah.
Yeah, I mean, I totally agree with what Zach was saying.
I think part of it is, you know, culture, right?
And how people, to Zach's point, you know, want to interact with financial services.
I think part of this has been driven from a regulatory perspective.
And I think maybe the more meta theme as I've sort of watched fintech evolve and I think this is permeating into crypto is just how the large incumbent financial institutions are embracing this innovation and technology.
You know writ large.
I think a lot of the you know I defer to my crypto colleagues who are much deeper in this space than I am.
A lot of the enthusiasm I would say here is about you know, the existing kind of financial system adopting.
You know things like stable coins or and maybe even tokenizing kind of real world assets.
And I think that's different, you know, from a lot of the more frontier stuff that I think the team had talked about internally, which was kind of more purely decentralized and kind of owning the internet.
But I think you know for crypto to go very mainstream and kind of plug into the broader financial system, that probably is and will continue to happen.
What Zach and the team have done, you know over.
You know the last 14 years, 13 years is remarkable.
I mean you know from my vantage point like you won the hearts and minds of the developer community.
You built this sort of foundational infrastructure that really catalyzed.
Like you know, I can't take credit for creating the fintech term.
You, like, created the enabling infrastructure to, like, create the industry in many ways.
You know, now have, I don't know, hundreds of millions of accounts, you know, connected.
And you're to your point now, bringing kind of this whole ecosystem of kind of value-added services and analytics, you know, to make financial products better.
And I think while we saw different seasons kind of over that period you know hay fever and long winters and you know euphoria in some moments you know many of these companies are now bigger than ever.
I mean, Robinhood is now, I don't know, $100 billion public company.
You know, I looked up SoFi's stock price.
You know, they're a $35 billion public company.
Affirm is a $20 billion company.
Like, these are outcomes that you couldn't even imagine.
Revolute.
Yeah, I mean, Revolut, $75 billion, you know, work for new investors.
And that phenomenon is not just U.S.-centric to that point.
It's become a global one.
I mean, NewBank, you know, $100 billion, you know, company, you know, in Brazil.
You know, my good friend, Pierre Paulo, who runs Wallah in Argentina, you know, Colombia, Mexico.
You know.
So these companies have worked and they've kind of proliferated and brought access of financial products.
You know everywhere, right?
And I think that trend will continue.
You know, I think while they started off in with point solutions and they kind of perfected whatever their wedge product was, you know, many of them have now rebundled right.
They want to become kind of the full, you know financial picture for their customers, whether that's through cards or accounts or lending.
Again.
Many of them have gone full stack and actually bought banks and actually hold deposits and are generating significant revenue.
You know from that float.
I think the other meta theme which has been interesting and I think is accelerating now with AI is just again the posture of a lot of the incumbent financial institutions, you know, to FinTech and technology broadly.
You know, I saw this kind of firsthand certainly, you know, as an investor back at Spark, as a founder and then inside of Goldman, just even their own sort of evolution and posture to technology.
You know.
For a long time.
Many of these institutions like if the technology wasn't built there, they weren't interested.
I mean, Goldman had literally created their own email client.
Like they didn't operate on Outlook or on Gmail.
They had this thing called Orbit.
I don't know why Goldman Sachs needs to create their own email client, but you know that was like a window into the psychology from a technology perspective.
Don't they still use like SecDB internally?
Like they have their own database that they built?
That makes more sense to me because it was like a centralized risk system for managing all their trades.
But Outlook equivalents like makes no sense.
You know.
Then, I think, there was this period where, you know, many of the large institutions were like we want to be the fintech companies ourselves.
And, you know, Goldman went very aggressively, you know, into Marcus and others followed suit.
I think there's a bit of a humbling that has happened.
Maybe I'm using them as one lens, but more broadly, I think the positive impact of that experience made them more open to adopting the best technology that exists in the market and no longer building everything in-house.
And so a lot of where I've been spending time the past several years has been in fintech companies that lead with software that ideally have the potential for a network effect and are selling into these larger financial institutions and solving real workflow challenges for them.
And I think we're at this interesting moment where, Because the software itself can actually do the work, you know, with AI, there's sort of this bottoms up momentum and top down pressure that's happening.
That, I think, is accelerating this cultural change.
You know, many of these institutions are beginning to adopt products like Cursor or, you know, even GitHub, Copilot or a broader ecosystem of kind of AI products in their employee base and people are seeing the productivity gains.
And then unlike, I think, prior periods of kind of product cycle or platform shifts, If you were the CEO of a big bank and you said you know, do I need to be in the cloud?
Like that was sort of an esoteric question.
Now it's like any CEO, any board member can plug a prompt into one of these models and sort of intuitively understand the impact that it could have on their business.
And so I think that's broadening the aperture, at least from my vantage point, of what fintech is.
And it's really, I think, to your point, just financial services.
And I think software in large part sold into financial services as well.
Yeah.
And David say more about sort of that change around when you know it went from 25 to you know significantly less than that.
What was changing in these businesses that caused that?
You mentioned sort of the macro environment.
Is there anything else we could learn from it?
And more around now, where are you particularly excited to invest or what are the sort of different, you know sort of subspaces that you're looking at or excited to?
I think 2021 period was sort of wild for lots of reasons.
I think you know, financial services is and remains obviously one of the biggest parts of our global economy.
And so I think people you know often get overexcited, maybe by TAM you know, and so every venture firm created a fintech team you know was deploying a lot of capital, you know, to that market.
You know, and again, many of these companies have continued to succeed.
But I think it it was probably too much euphoria going into that space relative to the amount of dollars.
No, no, I think it was the exact right amount of euphoria, just the pullback afterwards.
Exactly.
You know again, part of that was that companies you know, when rates are zero you can lend money and grow very quickly.
And there's a lot of, you know, margin to capture there.
I think when rates go up, your cost of capital goes up and that margin, you know, shrinks.
And there's a natural ceiling on on borrowing that people you know, both from a regulatory perspective and a kind of consumer appetite perspective.
So the business model on the lending side, I think, you know, kind of compressed.
But you also have to look at the underlying growth rates of these apps were insane.
Totally.
You look at the number of consumers that were, you know, signing up to invest, or signing up to take a loan, or signing up to buy Bitcoin or whatever it was.
Totally.
Like we just looked at the charts and like you know if the app was growing at 25 a month, It was actually a great venture investment.
I mean yes, you might know that the music at some point is going to slow down or stop, but 25 a month growth is insane.
Yeah, totally.
I mean, and this was like stimulus and there was a lot of... Helicopter money everywhere.
Yeah, there were a lot of reasons they were growing that fast.
100%.
And look, I think, like from a I don't know industry health perspective, like I think things have normalized but the companies continue to grow and succeed.
I mean, again, now they're, you know, bigger than they've ever been.
The great ones.
There was a washout.
And there were a lot of fintech companies that died or shut down in the second half of 22, in the first half of 23.
There were a lot that, you know, kind of went sideways for quite a while.
And a lot of lenders especially who just like basically closed off shop or merge or things like that.
But the ones that succeeded coming out of it across all of fintech, they were much, much stronger for it.
Totally.
So, as you said, like If you started off with a neobank and all they did was have a checking account and a savings account and maybe a card.
Well, in this period, if they wanted to survive, they needed to build the lending side of their offering.
And so they expanded there or build the investment side of their offering.
So they expanded there.
And so now you come out with these much more full-fledged, long-lasting companies.
So the winners became even more so the winners.
And yeah, there was an unfortunate number of companies that also didn't make it.
Yeah.
David, I'm curious how you or how we look at the sort of investable universe or sort of divide.
Is it you know that there's a certain type of form factors and it's you know each region is going to have their new banks, so to speak.
Or is it, you know, by sort of form factor or value prop to the?
How do we think about the universe and how do we map it?
You know, it's been interesting.
I mean, I would say from our vantage point, we haven't made as many consumer fintech investments in recent years as we have historically.
I think part of that is just it's more expensive to acquire customers and hit the kind of scale you need to really be in, a kind of venture scale outcomes.
And I think that's a function of, you know...
Just you know, consumer acquisition channels getting more expensive and some of these companies starting early and it was easier to acquire and then build massive LTV with their existing customer bases.
That does change around the world.
I think you know, in some markets people were entering the formal financial economy for the first time.
And so offering a fee-free mobile first.
You know, bank account and a debit card literally gave them access to e-commerce and things like Netflix and Spotify and Amazon for the very first time.
Credit doesn't exist equally in every market around the world, nor do credit bureaus and credit data.
So there's, I think, still tons of interesting kind of macro opportunity from a financial product perspective, I think, especially in emerging economies.
I think AI could be an interesting kind of catalyst for a new resurgence of consumer fintech.
I mean, there's always been this promise of you know kind of self-driving money or you know PFMs that actually do the work for you and help you make.
You know, not just give you advice, but actually you know, help you earn, you know save and spend better.
And I think like we've yet to see as many of those companies today.
But I think there's the technology might be ripe.
I'm curious if you're seeing this, you know on your side like to actually deliver on that promise.
Yeah.
You know it's funny when we think about prospective apps the app that I wish that existed.
I wish that there was a self-driving money app that I could just say hey, my paycheck goes in here, sweep enough money into my checking account so that I can pay my daily expenses, but put all the rest into this high-yield savings account and invest this percent of it in the market.
I wish that this thing existed.
I don't actually know that that's necessarily a very good app to build, because I'm a weird power user.
I have insane trust in FinTech companies to do all this stuff for me.
I understand all the actions that the agent would take and I have enough background in the space that the actions seem logical to me.
But if I gave that to my mom...
She'd be like, where's my money?
What's going on?
Like, I don't trust this thing.
Like, wait, why did it move money over there?
I have all these questions.
And so, you know, I'm not sure that I'm necessarily the best at this.
Like, so I have all these visions of like the prospective apps that should exist out there.
But then you know, for us as Plaid, and in a lot of senses for you as an investor, you Certainly for us as Plaid, our job is we need to build the platform and then figure out what emergent behavior starts to exist on it and then go optimize for that emergent behavior as new interesting companies start to emerge.
And so that's how we think of our job.
So our job as it relates to AI is like let's build tools that allow consumers safely to link their data with agents.
Then let's build tools that allow those agents to take the proper actions, be that just analyzing data, or be that actually moving money or something else.
Let's build tools that allow those agents to take those actions.
And then let's see what happens and like have a team that's just like constantly looking at, like the emergent behavior and figuring out Oh, is that a good thing?
Do we want to optimize for that?
Oh, has that enabled some new vector of risk that we need to avoid?
And that's kind of the thought process that we take across all the things that we do.
So a lot of it is if you build it, they will come.
You just don't know who will come and what they'll look like and what exactly is going to be the next big thing.
But we have to be very prepared to react when we see it.
Yeah, and I think as a result, we've been focused on maybe more known problems.
There's so many, there's so much work that happens inside of all these large financial institutions.
That is just done manually by expensive people.
You know frankly, across risk compliance legal, you know, vendor onboarding, treasury management.
I mean, you know, I can go on and on and on.
Um, And now you have, again, AI to actually solve many of those problems.
And so that's, I think, largely where we've been spending time.
Companies like Moment that have built fixed income trading infrastructure.
If you're a wealth management client of J.P.
Morgan today...
You know, building a bond ladder is still a manual process.
You're picking, you know, individual securities one by one.
That's insane.
Like that hasn't existed for at least a decade in equities.
And so, you know, there's a ton of opportunity to solve, you know, kind of basic problems like that.
And I would argue, build you know very large, you know kind of software and kind of platform style, businesses online on the back of that.
And so, whether it's you know things like you know, you know a company like Salient which is doing, you know, bringing voice agents to loan servicing and collections right.
The idea that you know a voice agent can speak in 50 languages.
You know fully compliantly track UDEP.
You know do welcome calls and payment reminders.
You know and actually deliver on a better customer experience because it can speak their native language and get better results.
It's infinitely patient, right?
That is a really interesting opportunity for the moment, in large part because It's unlocking markets that were never particularly interesting to suffer into because IT budgets were small.
And now, you know, the TAM is largely labor.
And so that's been, I think, kind of one of the reorientations that we've seen the last few years, from kind of financial product-led companies largely to you know, software-led businesses and kind of financial services writ large.
Zach, you wrote about your predictions for 2026.
Maybe share one we haven't gotten to yet around where things are going or where you're particularly excited.
I was at a dinner a couple weeks ago, and so this might not be a prediction.
This might just be a recognition of current truth.
But I was at a dinner recently, and someone asked the table a question.
And the question was, what's the biggest use case of AI in financial services?
And some people had answers, and then it got to me, and I kind of flippantly said, doing fraud.
It turns out, the biggest use case for AI is fraudsters committing fraud against financial services companies.
And I said it jokingly and then realized, as I was saying it oh no, this is actually the correct answer.
The entire table was like, yeah, okay, that's the correct answer.
And so we're at this point in the ecosystem where AI has so much potential to change things, and who's using it the most?
It's the fraudsters.
And right now we're at a point where financial fraud is growing at like 18 to 20 a year, which is insane.
And it's already a huge market.
And So I guess, in that vein, one of my predictions for 2026 is unfortunately, financial fraud is going to continue to accelerate in a way that we don't quite understand and probably can't quite feel out and predict yet.
Because, you know, it's a cat and mouse game, but the mouse is winning right now.
I mean, the cat will win long term, but the mouse is winning right now.
And so it's kind of a depressing prediction, but I think likely.
What are you guys doing about it?
Well, so we build an anti-fraud product suite.
I promise this will not be me teeing up, bragging about mine.
I'm curious because it's a hard problem to solve, but if anybody can kind of try to figure it out.
Well, we can't solve it all.
We can solve pieces of it.
So we build an anti-fraud product suite.
It's called Protect.
Within that, we have this analysis of every user and every user action that we can assign a score to, to say what's the trustworthiness of this user, this account, this user action that they're taking.
And we pull this data and build it based on looking at every user action that's taken across every fintech company that we work with, plus the data that's coming from the bank account, plus device data, plus a zillion other data sets that we match it all with.
And so it's the first kind of network-linked, cross-fintech, cross-bank type of anti-fraud tool.
And it's awesome, and it adds some amazing signal to the companies that we work with.
But this is one of very many solutions that need to exist.
Right, we're starting to get good at fighting deep fakes as well.
I mean, like as an industry and Plaid specifically, but like still very early there.
But, you know, the stuff that freaks me out is, you know, have you heard of pig butchering?
For those listening on a podcast, I'll explain it briefly because it's kind of a gruesome term.
But it's basically when you get a text message that says, hey, how you doing?
And that, that, and you respond to it, don't ever respond to those.
But if you do get one of those and you were to respond to it, they would then strike up a conversation with you and eventually they would find some complex way to ask you to give them money.
And when you go up and execute that transaction, you have just sent money to a total stranger on the internet and yes, they've stolen the money.
That is in 100 of cases.
What happens?
That used to be done based on these like like human factories in like Malaysia, where they would like have these people like locked in rooms sending text messages to unassuming people, in the US mostly, but around the world.
Now that's all AI.
You don't need these human factories anymore.
The AI can do all that.
And the AI is just getting better and better and better.
And like, how do we fight that?
Because it's a human taking an action that they think is sending money to a friend, and they've been tricked.
It is fraud, but it's very hard to fight that kind of fraud.
So...
I mean, there are so many more tools that we need to build as an industry collectively and, of course, as Plaid specifically.
Totally.
We were talking about the different eras of fintech.
I'm curious what have been sort of the different eras of Plaid.
Of course there was the you know, sort of acquisition that didn't go through with Visa, and sort of the ups and downs that you guys have had, you know, alongside the macro, and obviously you're in an incredible position right now.
Is the...
Talk more about the different areas of Plaid or how the Plaid vision has evolved or stayed true to the original.
So I started working on a thing that wasn't Plaid but pivoted into Plaid in the very end of 2012.
We launched, We pivoted into what we were doing in kind of mid-late 2013 and launched to the world in 2014.
So...
You know it's been a good 11 to 13 years, depending on how you count that series of bad products that we built first.
David actually was a friend and knew us then.
But I'm going to actually brief aside.
David, I don't know if you know this.
David found Plaid.
He was the first investor, led the seed round at Spark, actually like sourced the deal as like you're an associate, I think, at Spark at the time.
Then he went to Goldman around the time that Goldman invested you weren't involved in the investment specifically, but you were at Goldman at that time and probably helpful in the background.
Then came to Andreessen and Andreessen invested and has been like a huge friend and supporter of Plot over the years.
So we owe a lot to David and a huge amount of thank you, and he also creates all the important industry terms.
So you know the fintech industry owes a lot to David.
I don't know.
Anyway, so Plaid started, let's say 2014.
We launched.
And then 2014 to like 2019, that was all about linking bank accounts.
Like how do we enable you to link a bank account so that you can gain more access to financial products broadly?
So link a bank account so you can pay a friend on Venmo.
Link a bank account so you can get a loan on LendingClub.
Um, uh, that was kind of phase one, uh, kind of 2019, 2020.
Um, you know, we we called this what like like late um uh, like late spring, like blooming spring, um continuing to grow in that vein.
Um, in 2020, um, uh, January, 2020, we signed paperwork to sell the company to Visa.
Um, and you know, still late spring, uh, we didn't know that COVID was coming.
We.
I remember chatting with you I think it was like February or March, you know, like it was probably March right when COVID was just beginning.
I was like, wow, you really timed that well. you know and then and then the business starts ripping and it was like oh that's a very expensive free call option yeah you know on the business and so walking away from that is pretty in an acquisition like at least in our acquisition you sign paperwork that says we're in exclusivity and as soon as everything is uh cleared like all the check boxes are checked then the deal will close um and so we had a year of exclusivity and it started in january of 2020 um And yeah, in late March of 2020, or maybe early April, we were talking and it was like, yeah, we have this deal to sell the company for just over $5 billion.
And it's a fixed price.
Visa stock price is going down.
So all of the stock compensation that we're going to get out of this deal man, that's worth a whole lot more as a percentage of Visa.
Like we own a large chunk of Visa.
That seems interesting.
And then we looked it through the docs and like they have these things called like material adverse event.
So you can get out of a deal if something crazy happens.
And there was a provision there that says you cannot get out of the deal, even in the case of a global pandemic.
And like some lawyers somewhere in some room had like come up with like oh, let's just like add this in.
And I don't know, we were like, oh man, this is great.
We got, we got everything set.
They can't get out of it in case of a pandemic.
Like we're going to get a huge truck visa.
Um, we're going to be off to the races.
Um, and then, like the deal took forever to close because the DOJ was investing in a visa for being a monopolist and like all of this overhead.
Um and like kind of for the next, the next phase, the EDM music just like started getting louder and louder and louder.
And like summer started happening and like FinTech started growing and people were stuck at home.
They needed to use digital finance to, to live their financial lives.
Um.
And so at the end, a year later, we looked at it and we said for a large variety of reasons, it makes sense for us to part as friends with Visa.
And we'll go our own way.
We'll keep running Plata as an independent entity.
And then we raised a big up round and off to the races.
But through that, you tell the company, hey, we're selling.
Okay, great.
That's a really hard thing to convince everybody to still be excited even though you're selling the company.
A year later, hey, we're not selling.
Another very, very hard thing because you're telling everybody you know you're not going to get all that cash that you thought you were going to get.
Like you can't buy the house, I'm sorry, but we'll try to do a secondary soon, so maybe you can buy a car.
And you have to like really change the culture.
It's like almost a refounding moment at that point.
Then you go through the rest of the summer and that was great, lots of growth.
But then into like fintech winter, And that's another, like, we got to all come together.
Like, our customers are growing more slowly.
Yes, we're producing great products.
Yes, like, Plaid is growing.
But, like, you know, it's not the growth that we're used to because we're in FinTech winter.
And then it's nice to finally be back in spring.
But, like, there's definitely a lot of ups and downs on that journey.
Like I think it was like multiple, like refounding, or like multiple crucible moments along the way.
Was there a period in that where you found your –
Maybe you always had it, but like your second win, because at least from the outside it's felt like your product velocity really increased at some point in the last, like you know, two and a half years.
Yeah, yeah, it has.
I mean, I shifted my role quite significantly.
So like I'm our chief product officer, like I am in all of the product stuff.
And a lot of it was like.
For us really, it was like building the data set to the size that we can actually run analytics on it.
So we build fraud scores that look at your actions relative to every other user that we see in our platform and identify if you're anomalous.
If we didn't have enough data to identify if you were anomalous, then it wouldn't be a relevant score for us to build.
So we got to one enough data and then two, we finally figured out how to like build and launch products would be, and so that's been like one of the most fun things for me.
Actually, weirdly like, I think I was like like not as happy in the period of like EDM pumping like fast growth.
Everybody's like throwing money at FinTech.
Like that industry.
I think I was like a little less happy because it was like I don't think I'm adding differential value.
I think I'm just like, you know, running as fast as I possibly can.
And you know, maybe I make some good decisions but, like you know, it all doesn't matter because everything's up and to the right.
Like, I think I was like happier in that like, winter period.
So I'm like, oh man, this is where we become an amazing company.
This is where we prove ourselves and we really step up and help our customers.
We launch the next wave of products that really matter.
I think I felt similarly, to be honest.
Having done fintech since I don't know 2011 people, you know that felt early.
You know to be investing then.
And then it's like, okay, everybody like, you know, found out that this thing existed.
Everybody became a fintech investor from, you know, 2019 to 2021.
And then everybody's you know some of the best fintech investors in the world like came out on podcasts and were like fintech is dead.
Yeah.
FinTech is dead.
Everyone should go home except for people that are building FinTech.
Right.
Exactly.
You guys can leave and just stop investing in FinTech.
We will continue.
The FinTech team is still here, you know, despite the naming conventions.
The rebrand.
The rebrand.
The brand expansion.
And I think that's actually benefited us, you know, I mean, selfishly.
But I think it's tested the people like the true believers.
And in some ways, it's brought the community together, I would argue.
Yeah, and, you know, the tourists go home.
And we saw it on our team even.
Like there were people that joined Plaid in 2020, when the music was loud and it seemed like the industry to be in.
And, you know, then they've gone and chased the next trend and the next trend.
And, well, we'll miss them and they're nice people.
The people now that are focused on it are like these are the people who really want to be here in the long term.
Like, they deeply believe in the mission.
And, you know, they're in it in the way that we all want to be in it.
So it feels great.
Where are we now in the cycle?
How should we think about this moment?
Early to mid-spring, I would say we see like green shoots, like lots of emergence.
It's been a pretty good year for many parts of fintech and it's been a shaky year for others.
I mean, if you look at the lending markets you know it's not as bad as last year, but it's not as good as it was.
And there are elements of the economy that are pretty scary, and parts of like a large part of consumer spending is being propped up by a small number of people and so like there are all these things that are scary, but for the most part, you know, you continue to see companies that are building very solid products.
You do see like, great startups emerging and But they look a little different than they used to.
Like, they're thinking more responsibly about markets in the long term.
Like, they're more thinking about, you know, profitability and growth.
And you're also seeing, like, the insanity of AI funding go on kind of, like, in AI land.
And some of it's starting to bleed into fintech, because you're seeing these, like fintech, AI products start to come.
So I would say spring.
Like, lots of green shoots, lots of exciting stuff.
Still some, you know, still some snow in the background.
Snowmelt is still happening.
Right.
But looking pretty optimistic right now.
Awesome.
Okay, so let's wrap on just what does 2026 and the near-term future look like?
David, how are we approaching it?
It still feels like we're in early innings, you know, even spring in AI land as well.
You know.
So just incredibly excited and enthusiastic by the momentum we're seeing, you know, for AI, again largely software companies selling into financial institutions.
That's kind of been our orientation in the fintech ecosystem.
You know again, I sit on the board of a company called Moment, which we, you know, described earlier.
That is now bringing some largest wealth management platforms online.
You'll see them You know, they announced LPL.
We have another, a number of other large institutions that we'll be announcing early next year.
You know companies like ModernFi which have built, you know bank-to-bank deposit marketplaces that are really starting to grow and see significant volume in that network.
And again, just more broadly, really excited by the opportunity for AI to actually do the work within these institutions and the momentum and excitement there to adopt new products.
And are we excited David, because they're such great customers, or because they're so underserved or they're finally transitioning?
Or why have we narrowed in on that focus as one that we're particularly excited about?
I mean, look, the industry is still massive, right?
Like if you, if I look back at even just Goldman Sachs and I know you use them as an example often but like the entire firm was you know they called the kind of middle and back office, the federation.
You know again, these were folks living in Excel, largely not using Excel as a modeling tool, but using Excel to track work.
And so there's just such opportunity to build amazing software products to solve everything from compliance to payments, to treasury management to again, all of the kind of manual work that goes into making the financial services industry tick.
And I think AI is again creating kind of a new window and wedge opportunity for entrepreneurs to kind of build software companies that couldn't have existed years ago.
And And again.
I think the appetite for adopting new products and new software to solve some of those problems is huge, is more real than ever.
Because again, the most senior people at these institutions, you know, can intuitively understand the impact that AI is having on their business.
And so I think there's just a lot more conversation and momentum happening at the board level, you know, and it's making the enterprise sort of sales cycles, you know, for many of even our early stage companies happen a lot faster than I've seen in.
You know my experience, you know investing in this space.
Yeah.
Zach, how about you and how you think about things at Plaid and more broadly?
We this past year launched, as I said, the anti-fraud suite on Protect called Protect and tons and tons of acceleration behind that.
We launched a credit score, a modern consumer credit score that's based on your income, your expenses, the things that you do in your daily life.
So your score goes up if you have a higher income.
Your score goes down if you start having way higher personal expenses, like the logical credit score.
So we launched that.
It's called LendScore.
We launched that last year.
These two things are going to be major drivers for us in the coming year.
So distributing this new version of a credit score into all the lenders and then, of course, on the protect side, helping fight this AI-driven financial fraud that we're seeing.
And then for us, like you know, we're back to like hiring and recruiting and growing.
And so you know, despite the fact that FinTech has been through these waves like I still think that Plaid is like one of the most amazing places to work.
Please tell all your friends.
If you want to work with big data, if you want to have a huge impact on consumers' lives.
Again, financial freedom is the core focus of what we do.
And then you want to have an opportunity.
We try to think of ourselves as the most customer-centric employer, where we put engineers in the customer so that they're actually talking to them.
We think it's an incredibly fun way to work.
So not forward-deployed engineering, but forward-deployed company.
So tell all your friends we're hiring lots of people and I think it's going to be a great 2026.
Zach, David, you guys are pioneers in the space, in the category.
And I can't wait to have you both back in 2030.
And we can talk about how the space has evolved.
Thanks so much.
Let's do it sooner.
It's so far away.
Exactly.
We don't even wait, you know.
That's true.
We don't have to wait every five years.
Zach, David, thanks so much for coming to the podcast.
Great.
Thank you both.
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