From Infrastructure to Analytics: The Plaid Playbook

Narrator: 0:00

This is PYMNTS On Air, a PYMNTS podcast. In-depth conversations, expert panels, and exclusive research brought to life by PYMNTS Intelligence. In this episode, hear how Plaid's products are helping solve some of the hardest challenges in the industry, from cash flow underwriting and real-time identity verification to network-level fraud detection and smarter bank payments. Karen Webster's conversation with Plaid CEO Zach Perrett will give you a look at what's next, how Plaid is scaling into the enterprise, redefining bill pay and bringing intelligent AI models to help companies fight fraud and improve credit scoring

Karen Webster: 0:46

Zach, thanks for joining me today. I appreciate you making the time. I'm looking forward to a far-ranging conversation, not about the journey that Plaid has taken over the last 12 to 13 years, but about what's next. So thanks again for making the time.

Zach Perret: 1:01

Thank you so much for having me. I'm very excited to dive in.

Karen Webster: 1:03

I think it's going to be fun. So 12 years ago, people talked about Plaid as the connectivity layer, the data rails between bank accounts and mostly fintechs. And that's the business that you've built and probably many people still associate the brand with. But as they say, that was then. This is now. And fast forward five years. What do you want Plaid to be known for then?

Zach Perret: 1:32

So great thesis and you're too kind. I think 12 years ago, nobody knew who we were. It took a little while for people to get to know us for anything. As you kind of look to the history of Plaid, we've been very focused on, as you say, creating the connectivity rails to allow consumers to access their financial data and use digital financial products out there on the web. The thesis was that there's a missing link in financial services that caused digital finance not to really grow at the pace that many industries had seen. digitalization. And so that's what we focused on was this data connectivity layer. Over the last two to three years, we've made a major shift in the way that we think about our business. So at this point, we have a large proportion of the US population that is linked to bank account through Plaid. In addition to having the bank account linkages, we also have a lot of data around the user patterns and the actions that they're taking. So we've started to launch a series of data analytics products to solve some of the most persistent and hard to solve problems across financial services. One great example being financial fraud. If we can see the fact that you've just signed up for seven loans in the last two hours, okay, that might actually be a fraud signal. And so we're starting to take a lot of the data points that we see and feed them back into a set of algorithms that we built to flag things like financial fraud, to build a better set of credit scores, which we can go into more, to build a better set of payments analytics. And the summation of all these is that Plaid is, yes, a platform that you can use to link bank accounts, but more importantly, a platform that increasingly has more and more financial analytics that help our customers, be they fintechs or banks or large enterprises, solve some of those most persistent problems in financial services via better data analytics.

Karen Webster: 3:17

So in a sentence, five years from now... How do you want people to describe you?

Zach Perret: 3:25

So I would say still it would be the analytics platform for financial services or the data platform for financial services. The concept hasn't changed in that we are still very much a platform, but the products that we build, that is changing quite rapidly.

Karen Webster: 3:39

Got it. Let's talk about AI because why not? Everyone talks about AI and I know that you use it within the current construct of the business, but I want to talk about it as it is evolving and it's still very early days for a lot of these new concepts like autonomous agents that we know at some point will do a lot of things for us, shop, invest, pay the bills. I had a conversation with the Circle co-founder who's building the first AI regulated bank because his thesis is banking will be done by agents. It won't be done by people going forward. Now, given that, if you believe that, what is the role of Plaid in that future where agents are are talking to agents, talking to banks directly, are you more relevant or less relevant?

Zach Perret: 4:29

It's a great question. I think in a lot of senses, we are much more relevant. But the form factor of financial services, as you said, is going to change meaningfully. So first, in a world in which agents are taking actions on your behalf, yes, elements of the banker might become driven by AI. Things that the banker does will become agents. But you are still a consumer. You're still a fundamental person on the other side. We're not building banking for AI bots. We're building banking for humans. And if you are a human trying to do a thing, one of the most fundamental concepts is verifying who you are. Um, so, uh, building that, that, that verified source of identities that verified link to a given user, uh, will be very crucial. Of course, Plaid does a lot of that. And then aggregating data from all the places that you have it, uh, to enable you to take actions, um, that will become more and more important. So, um, I have, uh, you know, a bank account with JP Morgan Chase. I have a bank account with local branch, uh, and I have investment account, uh, somewhere else. And, uh, having a picture of all three of those will actually inform the actions that the agents take. And so I actually think that in an agentic world, the underlying data and the underlying identity source, those are gonna become two of the most crucial elements. And fortunately for us, that's a lot of what we build. I am incredibly excited by the way, for this agentic world. I think that there is still a big trust gap in the industry between allowing a banker to do something for you and allowing an agent to do something for you. But I'm on the other side of that one. I just want to try it. I want it all to exist. And I'm excited for the rest of the population and the rest of the technology to catch up.

Karen Webster: 6:09

I agree with you. It simplifies a lot of the complexity and all the different stutter steps that people have to go through today. And sometimes because there's necessary friction that needs to be built into the system to really validate that it is you and you are who you say you are and all of that. But I do think that it saves time. I think it provides an incredibly powerful experience for all the players in the ecosystem. And I agree with you. I think data becomes more relevant. Identity, though. I want to focus on identity because clearly in this world today and the world that we just talked about, having this persistent, portable and secure financial identity as the passport to traverse that, I think becomes really very important. How do you see Plaid in that world? Are you the steward of the identity or are you the owner of the identity?

Zach Perret: 7:00

It's a good In our opinion, the consumer is the owner of the identity.

Karen Webster: 7:05

Well, of course, but who's managing and issuing that identity?

Zach Perret: 7:10

Exactly. So I think instead of just talking about identity in abstract, let's put it into kind of a more concrete format. Let's say you're signing up for a new financial product online and you need to, yes, transfer data over to that new account. You need to verify that you are who you say you are in that new account. And kind of one of the big things that Plaid does is exactly that. So we help you transfer data and verify that you are who you say you are. In that sense, you could say that we're allowing you to create a financial passport to move from one place to the other. You could say it more simply, we're just allowing you to set up that new account. That is the core to what we do. Now, there's a lot of different concepts and a lot of different elements that will exist out there. So we don't believe that we're going to be the only ones that are going to be a financial passport or kind of an underlying identity source for any action that a consumer may take. There may be many of them. We would like to make ours the most convenient and ideally one that is of high utility to the consumer. But ultimately, when you think about our business, identity and portability is a very core part. It's about enabling the consumer to take the action that they want to take and the place that they need to take it and to do so seamlessly. So one of the products that we've really been pushing on is this concept of layer. So if you verify your identity in one place, can we make it dead simple for you to verify your identity in the second place? If you're trusted on one platform and under one set of data and you still are who you say you are, there have been no changes in your identity or your risk levels, you should likely be trusted in the next platform. And how do we make it easy for you to go from one to the next to the next in a way that's seamless for the consumer, but still very safe and fully compliant for the underlying applications?

Karen Webster: 8:50

Doesn't that make you the identity network?

Zach Perret: 8:53

You could say that. I would like to say that we are one of a few, one of many. There are many ways, again, to verify your identity. I do believe that what we do is very powerful. And over time, I think a lot of our customers will continue to gain a great deal of value from it. Got it.

Karen Webster: 9:08

I'm sure you've noticed this, Zach, but everyone's embedding everything into everything. Banks, networks, big tech, they're embedding functionality into their own ecosystems because they want to control the user experience. They want to have the relationship and to create their own ecosystems that they can monetize and serve different services and products accordingly. In that world, How does Plaid remain indispensable? Not just another API call as part of someone else's stack, but a really important enabler to the embedded experiences that everyone is now rushing to try to develop inside of their own ecosystems.

Zach Perret: 9:49

That's a great question. We think of our products as kind of having multiple layers. So at the lowest level, you could say that Plaid provides data on behalf of the consumer, and we do. So a user wants to sign up for a budgeting application, we provide the data that makes up the budget. So we provide the kind of transaction data. Every time you swipe your card, we then update your data for you in that budgeting app. On top of that, though, we also provide what we think of as an analytics layer. So we've increasingly built more and more products that are kind of derivative analytics to sit on top of it. So maybe it's the smart categorization that we build on top of that budgeting tool. And then kind of on top of that, there's a set of actions that you can start to take. And we when you start to take actions, then you need kind of more complex analytics as well. So let's say on top of your budgeting application, they say, hey, do you want to move money from this account to that account? Or do you want to invest, you know, round up all your transactions and invest that into the stock market? Okay, as soon as you're starting to do rounds up funds, funds, transfers, investing in the stock market, you need to understand the user at a great deal more depth. And because that is an instance of potential fraud, you need to check for money laundering to apply all these checks. And so we think of providing our our products in multiple layers. So yes, the data, yes, the insights that sit on top of that. And then yes, kind of the analytics in order to enable actions. And so as we've built more and more, we've moved further and further up the stack. And in this embedded world, it's a question as to what our partners want to build and what our customers want to build. A lot of our customers rely on us for data, increasingly more and more of them rely on us for insights and kind of those analytics that enable actions. And so kind of as we continue to move up the stack, I think the breadth of our platform continues to expand.

Karen Webster: 11:33

And are developers still your primary audience?

Zach Perret: 11:39

For a long time, developers were our primary audience and frankly, our only audience. We had this thesis that we wanted to sell through developers. Our goal was to get developers promoted. So if we built a tool that a developer could bring to their boss and say, hey, this will help me solve our problem a lot faster. And if we enabled them to do that and we did it really well, then that developer would get promoted or at least they would get a gold star on the performance review. Did

Karen Webster: 12:03

that work? It did

Zach Perret: 12:05

work. It worked very well. A lot of developers, you know, yes, got promoted, but also like went off and started companies. And, you know, increasingly we've started to sell more and more into the product management organizations, more and more into the business, to the lines of business. And that shift happened over the last five years or so. The last two years, we started to sell much more directly into the chief risk officer organizations or the chief credit officer And then more and more into the very large enterprises where the concept of a product owner, maybe you have the concept, maybe you don't, but you certainly have a business line owner. So I'd say we've broadened in the applicability. I will say learning to sell to chief risk officers and chief credit officers, man, that's a totally different game than what I'm used to. They think about things in a totally different way. They are very forward thinking, but in a different framework and a different mindset. It's been really fun and very rewarding for us to learn to bring in that new audience and and to expand all the audiences that we talk to.

Karen Webster: 13:03

Well, their KPIs are very different.

Zach Perret: 13:06

Exactly. Yeah, yeah.

Karen Webster: 13:08

Going back to the embedded concept a little bit, do you view Plaid as horizontal or do you see the ability to tailor within these embedded stocks some of the personalization and the very specific capabilities that these product owners that are launching new products really require? Yes, there's a fundamental data element, but it's how it gets served to those consumers or businesses who are getting the ultimate product from those from those other platforms? How do you see that as an evolution to what Plaid is doing today?

Zach Perret: 13:43

It's a great question. So at the base level where we build data-oriented APIs, data-oriented products, we are very much horizontal. And that's the intention. We want everyone to be able to build fintech products on top of it. And we think that there are a wide variety of companies that could be using them. As we have kind of gone up the stack and done more analytics and more insights, we're becoming a little bit narrower in how we build those things, or certainly the audience for whom we are building the products has become narrower. So let's take our credit products, for example. We build a basket of products that are focused on verifying data in a credit underwriting decision, and then also analyzing the likelihood of defaults in a credit underwriting decision. As we build those products, we're very focused on chief credit officers, chief risk officers who are informing credit and underwriting decisions, and And as such, we've gotten much more vertical to just focus on credit. Another example of that is a suite of products that we built around anti-fraud, where we are very focused on chief risk officers and anyone else that is focused on fighting fraud. And the suite of products that we build are applicable across a lot of industries, but they're very narrowly focused on the people that are actually doing the fraud fighting. So we've really narrowed in there as well. Payments, similarly, we built a suite of tools that have helped people that are doing bill pay, better execute bill pay. and then better understand the risk and potential failures in a given bill payment. And so there we've again narrowed. So as we launch these more analytics-oriented solutions, they are, yes, more vertical. Though over time, we will move from one vertical to the next to the next.

Karen Webster: 15:23

You've spoken a lot about the shortcomings of FICO and the ability for underwriting to be based on the ability to repay versus the ability to have done something in the past. As you As you build that capability out across your platform, do you see creating a different credit bureau because you have so much data, you see so many consumers, and you see so many different dimensions of how consumers are managing risk?

Zach Perret: 15:55

It's a good question. It's hard for me to say what exactly the future will hold here, but I think some of the problems and opportunities for us in this space are very clear. So one of the problems that many people will cite when talking to lenders is that a lender gets data that is oftentimes very old with which to make a lending decision. They get a score, be it a FICO score or a Ventus score or whatever score they get, that is generally built off of fairly laggy data. And yet there may be actions that are happening in real time that would actually affect that borrower's credit worthiness or their likelihood to default. So for example, if tomorrow, Karen, you got a new job, don't get a new job. You're in a very good job. But if you did get a new job and that new job paid you three times as much as-

Karen Webster: 16:46

Maybe I take that new job back.

Zach Perret: 16:48

Well, there you go. Well, anyway, so let's say you got this theoretical new job or you got to raise the triple of your salary. Then, you know, if you applied for a loan next week, you'd be a much better credit risk because it turns out you have a lot more free cashflow in order to pay down that loan. Similarly, if today you went and applied for five mortgages, you would be actually a worse credit risk. And those mortgages were issued. You'd be a worse credit risk because you have much more commitments now on your financial income. And so pulling all of that data in real time into a credit and underwriting decision, we think is a really important step. So pulling in a broader picture of who you are based on the actions that you take, pulling in a broader picture of who you are based on the income levels or the spend that you have. If you got on a new budget plan and you started spending less every day, you'd actually be a better credit risk. And those are the nuances that are hard to tell in the existing credit model. Whether that means it's a fundamentally new way of lending, or it just means that we're bringing in a set of alternative data sources, kind of built into a new set of scoring and analytics capabilities that sits alongside the existing model. I'm still not quite sure. There's a lot of benefits to what exists now, but there are definitely gaps. And we're focused on filling those gaps and helping lenders to evolve to go from kind of a relatively historical laggy look at a consumer to a real-time look at a consumer's creditworthiness.

Karen Webster: 18:12

Yeah. I mean, we're seeing that in the buy now, pay later space where it's really provided access to credit for a lot of consumers for whom just looking at a FICO score would shut them out. So I take the point. I mean, it's also a requirement to have a FICO score to get a mortgage today. So there's that. There are a lot of things that have to change in order to displace what we have today. But your point to complement things is a good one. Let's talk about the elephant in the room, and that is 1033. Who is to know where 1033 will land? There's a lot of puts and calls there with the CFPB saying that they're going to vacate the rule. They haven't yet. We see banks filing suit to eliminate it. You said publicly that you'd like clarity, but we don't have that yet. So take us inside the war room. How relevant is 1033 to your business, especially given that there are so many banks now connected to the platform? You've done your deals with banks, you satisfied their data security requirements, but they still have issues about business model and liability and risk more generally. Where do you think 1033 is going to go and how relevant again, that to your business one way or the other?

Zach Perret: 19:29

We're at a unique point in time where a lot of the assumptions that have been built for the last four years or longer are starting to be questioned. And the clarity that we thought we might have had on the regulations coming out of the last administration is now shifting quite rapidly. From our point of view, I think there are a few fundamental truths that we always turn back to. The first is that, could Consumers own their financial data and consumers need to use that financial data to take actions in their life. The actions they could take could be to sign up for new financial products. They could be to apply for loans. They could be to analyze their data in one way or another, or they could be for some newfangled thing that we haven't even thought about yet. Consumers need to be able to access that data, take action, move it where they need to go. Second is that financial applications and financial institutions, including the banks, need to allow consumers to move data both out and in to their their systems. So let's take a wealth management advisor. If you worked with a wealth management advisor at a big bank, let's say, you would want to be able to pull in a view of your portfolio. You'd want to be able to say, hey, wealth management advisor, I don't hold all my assets with you. I own some stock in my company. Can you pull in the stock in my company so that you can actually give me advice that's not just based on what I hold with you, but based on my entire picture? So those kinds of things are fundamentally very important. I think the implementation details of all that are what's up in the air. So Dodd-Frank makes it very clear that consumers are allowed to access their financial data, that they can assign that right, or they can use agents or representatives to collect the data and take actions on their behalf. How that is implemented, though, is a big question mark. In the UK, we have a set of laws that make it very clear that banks have to have specific APIs. They need to do things in a certain way. And out of that came a large open banking presence. And for a Uh, the UK acted fast in the U S and FinTech in the UK was far ahead of what it is in the U S and the U S. Then we started to build out our own version of open banking, largely through one-to-one industry collaboration. So a lot of the partnerships that we've done directly with the banks, um, and that works very well plot existed for, you know, almost a decade before 10 33 was, was, uh, the, the rule was first written. Um, I think the level of clarity that 1033 provided or that the previous draft of 1033 provided was helpful in a lot of senses, even though there were a lot of frustrations about what was in the role, the clarity on what was to come allowed the industry to start to act with a set of assumptions. Now, the lack of clarity will make for a period of chaos. It's something that, as I said, from Plaid's perspective, we've worked through before. I think for many other players in the space, it's going to be a lot harder because they don't have the scale that we do. And I think for consumers it could create a lot of confusion and a lot of consternation, uh, if it's not handled properly. Um, that said, uh, the statute continues to be clear about the fact that consumers own their data and, and, uh, I should be able to use it. Um, and the demand from consumers continues to be very clear. Um, it's just going to be a question of implementation details. You know, I can't say that what the previous rule said about exactly how a bank should build an API and exactly the deadline that they should comply with. I can't say that that was necessarily good. Um, but I can say clarity on who should build what, um, was very helpful. And so now we're in a point of having to rethink all that.

Karen Webster: 22:56

Do you worry that the banks have just checked the box and that this is now an opening for banks to want to do something different as their own data consortia sort of built for banks by the banks? Is that something that you think about? Think about strongly worry could happen? Yeah.

Zach Perret: 23:15

I think from a data consortia standpoint, it's definitely something that we look at and think about. From my perspective, I think creating a bank monopolist data consortia that boxes everybody else out, that would seem to be anti-competitive and that would seem to be anti-consumer. And so I would be surprised if things went in that direction. I think some of the bigger concerns that I have would be inconsistencies among amongst the banks on data availability. So if bank one made certain data points available, but bank two didn't make those same data points available, the customers of bank two who wanted to say, use a budgeting application might not be able to use that budgeting application more fully. I think that's a loss for the consumer in a lot of senses. And I think interestingly, the consumers will put pressure on the banks to make the right type of data available so that their applications are and are operable. One thing that we saw over the last few years is that some of the banks chose to, from time to time, block access to cryptocurrency applications. And that was kind of a unilateral decision that the financial institutions were making. Other banks chose not to block access to cryptocurrency applications. And in doing so, consumers voted with their feet. Oftentimes, they would change banks because cryptocurrency was so important to their actions. I would say the union of all of fintech is similar. Each consumer will have a different FinTech application that really matters to them, but it will continue to be very important for those consumers to be able to access the things that they really, really deeply care about.

Karen Webster: 24:54

If you had to, if you could decide how 1033, whether we call it 1033 or something else, should be deployed in the financial services ecosystem, what would you change? What would you say is really necessary and how should we go about doing it?

Zach Perret: 25:13

It's a good question. And I'd have to give it a lot more thought. But the things that jumped out off the top of my head, one is really cementing the concept that consumers own and have the ability to access their data. I think that the vast majority of financial institutions would agree with that concept. However, that's not to say that every single one would. So I think just saying, hey, look, consumers own their data, should have access to it and can work with applications or parties like Plaid to enable that access to work very well. So that's part one. Part two is I would have some minimum viable data expectations and some minimum viable latency expectations. And the uptime and latency expectations could vary based on the size of the bank. But I think there's some minimum viable saying like, hey, transaction data needs to exist for this length of time for all banks. That's a fairly straightforward one to make sure that a consumer has a sufficient look back window to actually gain value out of the applications. And then having at least some basic level of uptime expectations so that it doesn't go down. I think there's a big question on liability that the regulators could step in and answer. And that is something that I've spoken about publicly before. I would love a clear answer. I would love to partner with the banks in order to figure out what the clear answer is. Maybe there's a bank plus platter, a bank plus industry relationship that we can build to come up with a prospective answer. So that's one of the big questions. And then I think we need to be, the rule would need to be very thoughtful about how it applies to the small and medium-sized banks. So the largest banks in the US, they all have APIs. We're integrated with their APIs. Data's running through the APIs and they work really well. The smallest banks in the US, they don't have the technical capabilities to build an API or they don't have the financial capabilities to pay someone to build it for them. And so how do we ensure that they're still a part of the system, but they're not gaining kind of undue financial burden or undue technical burden? And I don't yet have a solution for that. It's something I think that Plaid has API builder tools and we want to partner with the small banks to get out there and we're working with all the platforms to do it, but it will still take meaningful time for us to get to 100% of them.

Karen Webster: 27:21

I think you hit the nail on the head with the liability question. I think that is one of the issues that needs to be resolved. We won't do that today, but it is something on the checklist. You mentioned open banking and open banking payments in the UK. Yes, there was a mandate in 2018, but data that that was just reported kind of suggest it's been a little bit of a lackluster adoption. Open banking payments has been a minuscule fraction of payments that have accrued mostly to cards. I'm curious to get your thoughts on why you think that is and how your deal with Visa to power open banking payments may change the trajectory of open banking in UK and the EU.

Zach Perret: 28:10

That's a good question. So in In Europe, particularly the UK, there was a mandate to enable open banking payments. However, there were a lot of gaps in terms of how those payments could be executed. So let's take, for example, variable recurring payments. So I have, let's say, a cell phone bill. And my cell phone bill might be higher one month, it might be lower one month based on how much data I use. Setting a variable recurring payment was not something that was originally contemplated when they rolled out the first set of rules. So variable recurring payments are something that were kind of like hacked around. And then eventually they came out with an update to say, all right, this is how VRPs are going to work. Now, all of a sudden, open banking payments are much more relevant to more types of industries in the UK. So I think one of the challenges of the way that open banking was implemented in the UK is that it was very prescriptive on certain things and very silent on other things, as opposed opposed to finding a middle ground of saying like, here's the base level of what we expect. And upon that industry can be built or upon that industry can now negotiate. Instead, what happened was the UK regulators ended up being very involved in how kind of the industry players and the banks would actually interoperate. And so that slowed down innovation in my opinion. And so again, like requiring this regulatory check-in at every step made it hard. In the US, I think they're like, to the great benefit regulators, they actually didn't come in prescriptively saying this is exactly how the industry should work. They allowed the industry to evolve under the concept of the statute, and then they started to put the rules in place later. And I like that style of letting the industry drive and then using regulation to cement the key important things. Our deal with Visa in the UK, we're excited to continue to expand access to open banking payments. I think there are a handful of opportunities that this partnership affords. So one is like bringing the banks into open banking payments as an excited participant, as opposed to a kind of third party that is doing the things that they must do according to the regulation, but may or may not actually be excited about it on the other side. So we're looking forward to seeing how that scales out. Whether or not this goes further than the UK is an open question. But for now, we're very focused on trying to make it a success there.

Karen Webster: 30:39

I want to talk about competition though. the obvious question would be for me to ask you who you regard as competition and the most important, but I want to turn that a little bit on its side. Who do you think considers Plaid to be their most formidable competitor? And are they right in their thinking?

Zach Perret: 31:00

Let me answer it first in terms of who I think our competition is. And then I'll circle back to, I think, might think that we are their competition. So the way that we think about our competition is mostly that we're competing with paper and old process. So So, um, uh, when I, when my parents applied for a mortgage, um, actually remember this, uh, I can't remember if they were refinancing a mortgage or getting a first time mortgage. Um, but, uh, they printed off all their paperwork. They put it into a shoe box. Um, they took it into the bank branch. I actually went with them to the bank branch that day and they like put it on the desk of the mortgage broker. Um, and the mortgage broker, I have a visual of this in my head. Yeah. I think it was like five or something. Um, and, uh, they have a shoe box full of data and And this is the way that mortgages used to get issued in the US. Today, you can now go online. You can apply for a mortgage. You don't have to walk into a bank branch. You can type in your data or you can use Plaid to connect your data so that it's really easy and fast. And the mortgage issuing process is a lot quicker. You don't have to have the humans that are typing data into spreadsheets and then waiting weeks to come back with an answer. And so in that sense, like that shoebox, that is our competitor. That is what we're trying to still get rid of. And in so many parts of financial services, the physical typing in of data or these really slow processes, that is a lot of what we fight. We, of course, have other styles of competitors. So we have more direct competitors in terms of what we do. You know the other aggregators that are out there that we compete with. We appreciate the competition in all of those senses. And then as we build products on top of these analytics products on top of the data set that we have, we run into new and different types of competitors. in our anti-fraud team, there are a lot of anti-fraud products that are out there. And, you know, in a lot of senses, we sell into a chief risk officer and they install us alongside many other anti-fraud products. And in essence, we are a substitute for the other anti-fraud products. Now fraud is unique because that's a collaborative game where most chief risk officers will take any signal that adds lift. So they'll buy multiple things. So it's not necessarily a zero sum type of competition. And credit is the same thing where a lot of chief credit officers or or lenders generally, are adding Platin to say, hey, this is a new interesting data point. I can make better loans on this and I can actually make more revenue because I'm making better loans. Thus, I will buy not just one product, but two products. And then in payments, we're doing a lot of payments authorization. So we're helping people set up ACH payments a lot better. And that is, again, transferring off of checks and cash and in-person payments and wire transfers and so on and so forth and putting them onto the ACH system, eventually the RTP system or the FedNow system And so in that sense, again, it's a lot of net nucleation. Now, in the inverse, who would think of us as a competitor or maybe a thorn in their side? I mean, we talk a lot about anti-fraud. So fraudsters in that sense, I think would probably see us as the competition.

Karen Webster: 33:57

Well, that's good. Well, that's a good one.

Zach Perret: 33:59

Yeah, exactly. And there are, of course, like direct competitors that are building things that look at alternative data in lending. There's a lot of folks that would look at, you know, how do we build alternative credit scores and so on and so forth. So there's There's a large bucket of those things as well.

Karen Webster: 34:14

But the big vision, the big platform, if you think about the 2030 conversation about where Plaid will be and the infrastructure that you have created, I mean, when you think about that as the competitive landscape, does something come to mind? Does someone in their war room say, wow, that's... That's definitely a company, a platform, a network we need to recognize because it could potentially be quite disruptive to our business.

Zach Perret: 34:51

I think to a small extent, yes, in a lot of places and to a large extent, no, in a lot of places. So Plaid is a unique business where we're very focused on creating a category. We're very focused on building products that no one else can build or no one else has built yet. There's one style of building a company, which is I'm going to go modernize an industry. I'm going to build modern payments and I'm going to go eat the lunch of all the legacy payments players. We don't think of ourselves in that concept. We think of ourselves in the concept of how can we take the data points that we have and the unique abilities that we have and how can we create analytics or tools or products that solve these deep problems in financial services that couldn't have been solved before, leveraging the unique assets that we have. So we do a lot of new product creation, new analytics creation, new category creation, Again, we're talking about here not going in and building a new credit bureau, not going in and building the next FICO. We're talking about building a new type of analytic that helps augment the way that we make loans in the US. And yes, over time, that will absolutely create substitution effects and will hinge on kind of other companies. But for the most part, it is market expansive what we're thinking of building. And so I'm sure there are a lot of war rooms where people say, oh my gosh, Plaid could do this or Plaid could do that or have we considered Plaid or have we thought about Plaid? Our view is that we want to make almost every one of those people that says it into a partner, into a customer or into kind of a collaborator in some way. And we like to have very few direct competitors and we would much rather make everybody a partner. But that's just a different philosophy on company building perhaps for us.

Karen Webster: 36:25

Quick question about IPO since everyone asks you, but I want to ask a different question. You've said it's in the offing. It's just a matter of when, not if. But you also say that there's a lot of work to be done in order to get ready. Is there a triggering thing that signals, yes, we're ready, that would turn this TBD timeframe into the day that you actually file the S-1?

Zach Perret: 36:52

Yeah. So there's a few things on our side that I talk to our team about quite a lot. One is around preparations, accounting systems, forecasting predictability. And there is work that we're doing to get ready for that. We have not completed that. that work yet, which would mean that if the ideal environment or the ideal IPO window were tomorrow, we still wouldn't be ready to hit that. We're working towards doing that. Once we've done that work, then it's just a question of timing. So when is it best for us to IPO from a kind of market availability and excitement standpoint? When is it best for our customers? And then when is it, of course, best for our team? We're aware that a lot of companies are going to IPO later this year. Again, we haven't done the internal work to be prepared for that. Thinking kind of 12 or 24 months into the future, hopefully that work is done by then. And if all of the opportunities align for us, then maybe we'll think about it then.

Karen Webster: 37:54

All right, a few quick hits before we go. It's been a fascinating conversation, Zach. Thank you for being so open about your responses. But I want to get a sense of what's the one business decision that you've made that you wish you could take back? We all have them. Does one come to mind? I

Zach Perret: 38:15

wish I could have put a breakup fee into the visa acquisition such that if the deal did not go through, we would have gotten a big breakup fee.

Karen Webster: 38:25

All right. Well, that's a good one. What's the most important business decision you've made in the last year and what made it so important?

Zach Perret: 38:34

It's always people decisions. Really? It's who you hire. It's who you promote. It's who you put into what role. There's a lot of those. We made a... Yeah, without violating competition, I'm not sure I could go into it, but a lot of it was saying like, hey, this leader should take on that role and go run at that thing. And if you get those right, it's just, it's amazing how much value can be created for the company. And if you get this wrong, it's amazing how frustrated everybody around it gets. The nice thing is oftentimes you have another chance. Like you can, if something's not working, you can make a change there. But I can think of one specific instance where I asked one leader to go take on a huge challenge and they really stepped up and did a great job. And I'm really proud of that.

Karen Webster: 39:21

That's awesome. Is there something that you think would surprise people most about what they've heard today about Plaid's direction over the next five years? I mean, is there something that people might pull back and say, I didn't realize that, and that's a different perspective than I've had about the business?

Zach Perret: 39:47

You know, I think the framing of... Us viewing ourselves as having very few competitors is maybe a unique one. And that's not to say we're not in competitive spaces. It's not to say we don't have any competitors. We certainly do. And they're important and provide challenge to us. But we would like to find a way to collaborate with almost everyone out there. We would like to find a way to create win-wins. And we are really focused on market expansion, kind of solving these fundamental problems that couldn't be solved before, as opposed to going in and trying to play a zero-sum game. aim in any one given industry.

Karen Webster: 40:24

Interesting. Final question, most important one. So how did someone with an undergraduate degree in biology end up building a data analytics platform that, as you point out, now counts one in every two U.S. consumers as users? Tell us about that. You

Zach Perret: 40:41

know, my background in getting deployed was not as obvious that I would be doing financial services. From my perspective, I've always loved computers and software. I spent a lot of time programming in college. I did a lot of work in a physics lab and, uh, you know, learn to program writing C to, to the, to build these laser system controllers. And from there, that kind of like took me into more and more thoughts about how can I use computers to do interesting things? Um, you know, financial services was. A bit of an accident. We, um, my co-founder and I started working on plaid in 2012 at a time when, uh, you know, in New York, there were still these occupy wall street protests, um, across the country, people were frustrated with the banking system. And we had this idea to say, hey, let's build a side project that'll help people do better budgeting. So we built this little app that helped people analyze their finances. And that then took us to, oh my gosh, how do we get the data into the app? That led to the pivot that actually led to Plaid. And I think pulling up a year or two into what we were building, I realized that I just loved it. It was something that was doing good for the world. It was helping consumers have access to more financial products. It was helping consumers live a better and easier financial life. It was incredibly challenging. I had all the elements of big data problems that I really liked. And yeah, it was super far away from biology. But the reality is I think that like your undergraduate education prepares you and allows you to learn how to think. And yet your passions may lie somewhere else. And to me, my passions lay in building great financial services products. And so I'm fortunate that I got to follow that.

Karen Webster: 42:15

And here I thought it was because they were both complicated ecosystems.

Zach Perret: 42:19

Yeah, there we go. We'll use the word ecosystem a lot.

Karen Webster: 42:23

Zach, thanks so much for your time. I enjoyed the conversation. Really appreciate it.

Zach Perret: 42:28

Of course. Thank you, Karen.