“We are, by far, the earliest company here”. This how Zach Perret, CEO of Plaid, started his talk at his first appearance at Data Driven NYC, back in February 2013. “We are basically three guys, coding 24 hours a day, and building developer tools…”.
Fast forward to today: the company was valued at $2.7B (“allegedly”, says Zach) in its most recent $250M round; Plaid has integrated with 15,000 banks in the U.S. and Canada and 4,000 fintech applications. One in four people in the U.S. have linked an account using Plaid. And they have just acquired New York based competitor Quovo for $200M (“reportedly” as well).
Not bad for a self-described “data plumbing” company. As today’s consumers expect to live fully digital financial lives, with their phone at the core, Plaid provides the financial infrastructure that enables developers in fintech companies to build great applications, and have consumers connect those to their bank accounts – basically Plaid is the connective tissue between the app and the bank, and takes care of moving all the data back and forth in the background.
It was a lot of fun having Zach back at the event 6 years later. Here’s the video of our fireside chat, and my notes are below the fold.
On the Plaid journey:
- Early pivot. Like many other successful startups, Plaid had an early pivot: “We started as a consumer app… our first product was a places recommendation app that was linked to your financial data… that was a bad product! We built a series of 5 or 6 consumer apps and it became apparent we knew nothing about building consumer apps”
- Building the tools that we needed: “While building the consumer apps, we realized we had difficult getting the financial data from the banks… we tried various existing solutions… but in the end we decided to build the infrastructure we needed ourselves”
- The name Plaid comes from an algorithm, that did cross-user comparison pattern matching.
- Catching the big fintech wave: “We got lucky.. we couldn’t have predicted how large fintech would be, or how fast it would grow… I like to think that Plaid had 1% to do with that growth… but we got lucky to be at the right place at the right time.”
On the Plaid product:
- The bank account is evolving from being the “vault” of your financial life to being the “hub”… “Big box” banks provide everything to everyone, but when you look at people’s bank statements, especially millenials, it’s really a series of transactions in and out of the bank account… we had this mindset shift where we realized the bank account is really the hub for your financial life, which needs to be highly interconnected. So we focused on creating easy connectivity for your bank account to interact with all the applications you’d want to be connected with.
- At the core, we are a data plumbing company, moving the data from where it is to where it needs to be. We do a lot of enrichment along the way.
- The scale has gotten immense. We have more data engineering challenges than we have data science challenges. One challenge has been to integrate with 15,000 banks which all have different integration methodologies. Data processing on our end was pretty intense. We had crazy challenges around batch updates, and how to do them to get the most fresh data from the banks without bringing their systems down.
- On top of our original transaction layer, we’ve built a lot of functionality: with Plaid you can monitor transactions, set up ACH payments, check balances in real time, do identity validation… we’re working on some lending specific products (understand free cash flows)…
- We’re building more analytics on top of data (more fraud analysis, simple onboarding). Initially, one of the big hooks for us was around data enrichment and categorization, but then we had to focus on data engineering and scaling for the next few years of the company. Now we can switch our focus back to doing more on the data science front and thinking through how to leverage all the data we sit on top of.
- Security: consumer connects via their credentials. We have built of lot of infrastructure around security, a little bit like OAuth in spirit. It has been a major focus for the company from Day One, a lot of the early engineers at Plaid were security employees. Security is my biggest fear for the company, you can never be too paranoid.
On selling to developers:
- Our company was entirely made of developers, so it was never a stretch
- It is really about doing the basics: build great infrastructure, write really good documentation because you know your documentation is going to be your marketing page, etc.
- Distribution was a bit difficult at first: we went to a lot of meetups, refined use cases, figured out how to showcase those use cases (Venmo was a great early customer for us)
- You need to be truly genuine to the developer community.
- We integrate our Go To Market motion with our recruiting: we think of every developer that we are interviewing for a job as a potential champion for the product, so we focus on their experience.
- Developer “sales” are completely inbound: they come to your site, they sign up, they’re rather not talk to anyone… respecting how they want to buy was very important.
- We “sell through the basement”. Can we get developers to build on Plaid for fun during their free time, then when they have a challenge at work, will they use Plaid for that as well. We sell from the bottom of the organization. We’ll have a PM on our end help developers sell to their boss, and then their boss’ boss.
On working with banks:
- There’s a provision in Dodd Frank that says that consumer must have access to a digital copy of their financial data, so banks couldn’t say no… but they didn’t have to make it easy
- Now we have a really good relationship with banks… but it was alway tenuous. On the one hand, they have to provide the data, on the other hand they want to be the one provide those apps to consumers.
- We’ve been going top down, focusing on the largest financial institutions. Our deepest partnership has been with Chase.
On the future of fintech:
- Massive growth ahead
- Banks are launching digital versions of themselves
- We’re seeing banks and fintech startups partner (meaning, the bank will distribute the fintech’s product) and compete (meaning, the bank will clone the fintech’s product)
- Historically bundling in banking was geographic (a regional bank would offer all products to customers in a specific geography). Today fintech startups are clustering around specific demographics (e.g., millenials)