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The a16z Show
The Rise, Fall & Reset of The Fintech Industry
00:45:14
Fintech went from a full-blown surge to a near standstill in just two years. At its peak, about 25 percent of all venture dollars were pouring into the category. By late 2022, that number had collapsed to almost zero. In this conversation, a16z General Partner David Haber and Plaid cofounder and CEO Zach Perret unpack what actually happened during that cycle and why the market is heating up again. We explore how the industry moved from the explosive growth of 2020 and 2021 into a deep freeze, and why we are now seeing real momentum return. We also dig into the forces reshaping fintech today: AI’s outsized impact on fraud and underwriting, incumbents finally embracing external software, the renewed importance of deposits, and the rise of embedded finance across entirely new categories. Zach shares how Plaid has navigated these shifts, what the company is building now, and how he sees the next phase of fintech taking shape.
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- [00:00]
Zach Perret
2018, 2019 in fintech was late spring. You get into 2020 and Covid and that was utter insanity of a story.
- [00:10]
David Haber
Like 25% of all venture dollars in that period went into fintech.
- [00:13]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
Bridget. Wow, 25%.
- [00:14]
Zach Perret
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 to Fintech route maybe. Yeah, yeah. As 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 spring. It turns out the biggest is fraudsters committing fraud against financial services companies. Financial fraud is growing at like 18 to 20% 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.
- [00:46]
Podcast Narrator/Producer
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 a 16Z, 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 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.
- [01:29]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
Zach. David, we did this podcast I believe seven years ago and it's great to have the gang back together. Thanks for joining.
- [01:36]
Zach Perret
Thank you for having us.
- [01:37]
David Haber
Great to be here.
- [01:38]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
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 the last time we spoke to now would have been some of the major themes in fintech. Catch us off if someone was in a coma after listening to the episode and just woke up and said, hey, what's changed in fintech? What would we say?
- [02:08]
Zach Perret
Let's see. So last time we talked was call 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, but no one will give you credit. But I will give you credit. I think you created the name and 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 submarke. Those were 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 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 and things that we had to build were going so rapidly.
- [04:07]
David Haber
I think like 25% of all venture dollars in that period went into fin.
- [04:10]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
Wow, 25%.
- [04:12]
Zach Perret
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 fintech 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.
- [04:44]
David Haber
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 zero. 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 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, buy banks, Lending Club, 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.
- [05:38]
Zach Perret
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. 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 Horace also likes to say is that every company is fintech company and that one was kind of quite common from 2018 onward. Now you see the emergence of embedded finance. So some apply 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 the startup industry now become mainstream and the firmament of financial services, but also powering experiences well beyond financial services.
- [06:41]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
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 babe.
- [06:54]
Zach Perret
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 like, 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 subset, basically 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, 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. And 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 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 in all the places they might want to go. And the future horizons are always looking at the next few things that are happening. Like we look at AI and agentic financial services and right now it'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 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.
- [09:34]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
So lots more to come on that note. Is crypto basically just fintech or you know, people said this is the new version of new Internet maybe, hopefully it still happens. But in terms of where it is right now, is it mostly just a subset of fintech?
- [09:47]
Zach Perret
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 know, 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 you know, in the past you might make a bet with some friends. Now you might go on Cal State or Polymarket and you know, enter prediction markets or you might do that via Robinhood or whatever it is. Other things that consumers like to do are like, you know, spend money, save, invest, so on and so forth. And in as Much as consumer behavior doesn't change, it's a question of like, 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, like they're roughly tailored to what consumers want. Consumers want to save money, invest, get loans, so on and so forth. And I think the wisest product development strategy is to kind of like take, take the things that consumers already do and just like 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 bounce on innovation and like, I'm not sure that that's necessarily going to end up merging with banks, but who knows?
- [11:37]
David Haber
Totally. 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, 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, you know, crypto colleagues who are much deeper in this space than I am. A lot of the enthusiasm I would say here is about the existing kind of financial system adopting things like stablecoins or maybe even tokenizing kind of real world assets. And I think that's different 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 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 at Plaid have done, you know, for, you know, the last 14 years, 13 years, is, is remarkable. I mean, you know, you, 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, and to your point, now bringing kind of this whole ecosystem of kind of value added services and analytics to make financial products better. And I think while we saw different seasons kind of over that period, hay fever and long winters and euphoria, in some moments, many of these companies are now bigger than ever. I mean, Robinhood is now, I don't know, $100 billion public company. I looked up SOFI stock price. You know, they're a $35 billion public company. A firm is a $20 billion company. Like these are, these are outcomes that you couldn't even imagine.
- [13:38]
Zach Perret
Revolut.
- [13:39]
David Haber
Yeah, I mean revolute $75 billion, you know, for new investors. And that phenomenon is not just us centric to that point, it's become a global one. I mean Nubank $100 billion company in Brazil. My good friend Pier Paulo who runs Wala in Argentina, Colombia, Mexico, um, you know, so these, these companies have worked and they've kind of proliferated and brought access of financial products, you know, everywhere. And I think that 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, for their customers, whether that's their 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 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 to fintech and technology broadly. I saw this kind of firsthand certainly 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.
- [15:20]
Zach Perret
Don't they still use like SECDB internally? Like they have their own database that they built that.
- [15:24]
David Haber
That makes more sense to me because it was like a centralized risk system for managing all their trades. But outlook equivalence 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, and others followed suit. I think there's a bit of a humbling that has happened. You know, 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 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. Many of these institutions are beginning to adopt products like Cursor or 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, do I need to be in the cloud? 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.
- [17:19]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
Yeah, and David, say more about sort of that, that change around when, you know, it went from 25% to, you know, significantly less than that. What was changing in these businesses that that caused that? You mentioned sort of the macro environment, but is there anything else we could learn from it and, and more around now? Where are you particularly excited to invest or what are, what are the sort of different, you know, sort of subspaces that you're, you know, looking at or excited to?
- [17:48]
David Haber
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, have continued to succeed. But I think it, there was probably too much euphoria going into that space relative to the amount of dollars.
- [18:19]
Zach Perret
No, no, I think it was the exact right amount of euphoria. Just the pullback afterwards that was the issue.
- [18:24]
David Haber
Exactly, 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 shrinks. And there's a natural ceiling on, on borrowing that people, both from a regulatory perspective and a kind of consumer appetite perspective. So the business model on the lending side, I think kind of compressed.
- [18:49]
Zach Perret
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 signing up to invest or signing up to take a loan or signing up to buy bitcoin or whatever. It was totally. We just looked at the charts and 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.
- [19:16]
David Haber
Totally. Yeah, totally. I mean, and this was like stimulus and there was, there was a lot.
- [19:21]
Zach Perret
Of helicopter money everywhere. Yeah, there were a lot of reasons.
- [19:24]
David Haber
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.
- [19:36]
Zach Perret
The great ones. There was a washout and there were a lot of fintech companies that died or shut down in 2H22 and 1H23. There were a lot that, you know, kind of went sideways for, for quite a while. And the, a lot of lenders especially who just like basically closed off shop or merged 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 neo bank 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.
- [20:31]
David Haber
Totally.
- [20:32]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
David, I'm curious how we look at the sort of investable universe or sort of divide. Is it that there's a certain type of form factors and it's you know, each region is going to have their, their, their new banks, so to speak. Or is it, you know, by sort of, sort of form factor or value prop to, to the, how do we think about the, the, the universe and how do we map it?
- [20:54]
David Haber
You know it's been interesting. I mean I would say from our, 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, it's more expensive to acquire customers and, and hit the kind of scale you need to really be, you know, 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, 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, you know, literally gave them access to, you know, E commerce and things like Netflix and Spotify and Amazon for the, you know, for the very first time. Credit doesn't exist, you know, equally in every market around the world, nor do credit bureaus and credit data. So there's I think still, you know, 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, you know, 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.
- [22:29]
Zach Perret
Yeah, you know, it's funny when we think about prospective apps, like, you know, the app that I wish that existed, you know, I wish that there was a self driving money app that I could just say, hey, you know, my paycheck goes in here. Like you know, sweep enough money into my checking account so that I can pay my daily expenses but put all the rest into this like high yield savings account and you know, invest this percent of it in the market and you know, 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. Like, I understand all the actions that the agent would take and I have, you know, enough background in the space that like the actions seem logical to me. But if I gave that to my mom, she'd be like, ah, where's my body? 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, 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, 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 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 have a team that's just constantly looking at 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 like, if you build it, they will come. You just don't know who will come and what they'll look like and like what exactly is going to be the next big thing. But we have to be very Prepared to react when we see it.
- [24:35]
David Haber
Yeah. And I think as a result like we've, we've been focused on maybe more known problems. Like there's so many, there's so much work that happens inside of all these large financial institutions that it's 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. 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 JP Morgan today, building a bond ladder is still a manual process. You're picking individual securities one by one. That's insane. It hasn't existed for at least a decade in equities. And so there's a ton of opportunity to solve kind of basic problems like that and I would argue build very large kind of software and kind of platform style businesses on the back of that. And so whether it's things like a company like Salient which is bringing voice agents to loan servicing and collections. Right. The idea that a voice agent can speak in 50 languages, fully compliantly track UDEP, do welcome calls and payment reminders and actually deliver on a better customer experience because it can speak their native language and get better results, it's infinitely patient. That is a really interesting opportunity for the moment in large part because it's unlocking markets that were never particularly interesting to software into because IT budgets were small and now 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 financial product led companies largely to software led businesses and kind of financial services writ large.
- [26:27]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
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.
- [26:37]
Zach Perret
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, sadly. And so we're at point, this, this point in the ecosystem where AI has so much potential to change things and he was 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. Because, you know, it's a, it's a cat and mouse game, but the mouse is winning right now. I mean the cat, the cattle win long term, but the mouse is winning right now. And so it's kind of a depressing prediction, but I think likely.
- [28:03]
David Haber
What, what are you guys doing about it?
- [28:05]
Zach Perret
Well, so we, we, we build an anti fraud product suite. Um, this, I promise this was not me teeing up, bragging about what, but I, I, I will go, I brag about. It's a hard, it's a hard problem.
- [28:14]
David Haber
To solve, but if anybody can kind of try to figure it out.
- [28:17]
Zach Perret
Well, we, we can't solve it all. We can solve pieces of it. 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, this account, this user action that they're taking. And we, 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, that, that we match it all with. And so it's the first kind of network linked, like 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 like one of very many solutions that need to exist. We're starting to get good at fighting deepfakes 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 is basically when you get a text messages 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, like, find some complex way to, like, 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. Like, that's that. That is like in 100% of cases, what happens. That used to be done based on these, like, like human factories in Malaysia where they would have these people 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 AI is just getting better and better and better. And 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. But it is fraud. But it's very hard to fight that kind of fraud. I mean, there are so many more tools that we need to build as an industry collectively and of course, as Plaid specifically. Totally.
- [30:23]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
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 sort of acquisition that didn't go through with Visa, sort of the ups and downs that you guys have had alongside the macro. And obviously you're an incredible position right now. Talk more about the different eras of Plaid or how the Plaid vision has evolved or stayed. Choose the original.
- [30:48]
Zach Perret
So started Plaid, started working on a thing that wasn't plaid, but pivoted into Plaid. In the very end of 2012, we. 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. It's been a good 11 to 13 years, depending on how you. You count that series of bad products that we built first. David actually was a friend and knew us then, but I'm 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 sourced the deal. As you were 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 Platter over the years. So if we owe a lot to David and a huge amount of. Thank you. And he also creates all the important industry terms terms. So, you know, the fintech industry owes a lot to David. I don't know. Anyway, so Plaid started. Started. Call it, 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 lending club. That was kind of phase one, kind of 2019, 2020, you know, we called this what, like, like late. Like late spring, like blooming spring, continuing to grow. In that vein, in 2020, January 2020, we signed paperwork to sell the company to Visa. And, you know, still late spring. We didn't know that Covid was coming. We didn't know that the EDM music would turn on.
- [32:38]
David Haber
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.
- [32:52]
Zach Perret
Yeah.
- [32:52]
David Haber
You know, on the business. And so walking away from that is pretty.
- [32:55]
Zach Perret
In an acquisition, like, at least in our acquisition, you sign paperwork that says we're in exclusivity. And as soon as everything is cleared, like all the check boxes are checked, then the deal will close. And so we had a year of exclusivity and it started in January of 2020. And yeah, like in. In call it like 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 fixed price. Visa stock price goes, is going down. So, like 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 they have these things called material adverse event, so you can get out of a deal if something crazy happens. And there was a provision in there that says you can knock it out of the deal even in the case of a global pandemic and some lawyer Somewhere in some room had come up with, oh, let's just add this in. And I don't know, we were like, oh, man, this is great. We got everything set. They can't get out of it. In case of Pandemic, we're going to get a huge truck. Visa, we're going to be off to the races. And then like, the deal took forever to close because the DOJ was investigating Visa for being a monopolist. And like, all this ever had and like, kind of for 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 live their financial lives. 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, and we'll go our own way. We'll keep running Plaid as an independent. Envy. 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're not going to get all that cash that you thought you were going to get. 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 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 fintech winter, and that's another. We gotta all come together. Our customers are growing more slowly. Yes, we're producing great products. Yes, Plaid is growing, but it's not the growth that we're used to because we're in fintech winter. Um, 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 re. Founding or like multiple crucible moments along the way. Was.
- [35:41]
David Haber
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.
- [35:54]
Zach Perret
Yeah, yeah, it has. I mean, I shifted my role Quite significantly. So, like, I'm, I'm our chief Product officer. Like, I, 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 with ways. Um, 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 I 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. I think I was happier in that winter period. So I'm like, oh, man, this is where we become an amazing company long term. 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.
- [37:09]
David Haber
I think I felt similarly, to be honest, having done fintech since, I don't know, 2011. People 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. Every, everybody became a fintech investor from, you know, 2019 to, you know, 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.
- [37:32]
Zach Perret
Yeah, I'm like, fintech is dead. Everyone should go home except for people that are building fintech, making amazing, all the people that use it.
- [37:39]
David Haber
You guys can leave and just stop investing in FinTech. We, we will continue. The FinTech team is still here, you know, despite the, the naming convention, the.
- [37:45]
Zach Perret
Rebrand, the rebrand, the brand.
- [37:48]
David Haber
And I think that's, that's actually benefited us, you know, and I mean selfishly, but, but I think it's, it's tested the people, like the true believers. And you know, in some ways it's brought the community together, I would argue.
- [37:59]
Zach Perret
Yeah. And, and, you know, the tourists go home, like the, like. And we saw it on our team even, like, there were people that joined plaid in 2020 when the, the music was loud and it seemed like the industry to be in. And, you know, then they, then they, they, 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 they're in it in the way that we all want to be in it totally feels great.
- [38:29]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
Where are we now in the cycle? How should we think about this moment?
- [38:35]
Zach Perret
Early to mid spring, I would say we see green shoots, 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, and 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, 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 profitability and growth. And you're also seeing 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 fintech AI products start to come. So I would say spring, lots of green shoots, lots of exciting stuff. Still some snow in the background. That's snowmelt is still happening, but looking pretty optimistic right now. Awesome.
- [39:43]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
Okay, so let's wrap on just what does 2026 in the near term future look like, David? How we're approaching as.
- [39:50]
David Haber
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 again, largely software companies selling into financial institutions. That's kind of been our orientation in the fintech ecosystem. Again, I sat on the board of a company called Moment, which we described earlier that is now bringing some Largest wealth management platforms online. You'll see them. They announced lpl. We have a number of other large institutions that we'll be announcing early next year. Companies like ModernFi, which have built bank to bank deposit marketplaces that are really starting to grow and see significant volume in that network work. 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.
- [40:50]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
And are we excited, David, because they're such great customers or because they're so underserved, because they're finally transitioning? Or why have we narrowed in on that focus as one that we're particularly excited about?
- [41:01]
David Haber
I mean, look, the industry is still massive, right? Like if you, if I look back at even just Goldman Sachs and I now 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, you know, compliance to payments to treasury management to again, all of the kind of, you know, 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 again, I think the appetite for adopting new products and new software to solve some of those problems is more real than ever because again, the most senior people at these institutions 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 earliest stage companies happen a lot faster than I've seen in my experience investing in this space.
- [42:17]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
Zach, how about you and how you think about things? At Plaid and more broadly, we this.
- [42:23]
Zach Perret
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 Lens Score. We launched that last year. Like these two things are going to be major drivers for us in the coming year. So distributing this, this, this new version of a credit score into all the lenders and then of course on the protect side like, like helping fight this, this AI driven financial fraud that we're seeing. And then for us, like you know we're, we're, we're back to, back to like hiring and recruiting and, and, and growing. And so you know, despite the fact that fintech has been through these waves, like I still think that Platt is like one of the most amazing places to work. Please tell, tell, tell all your friends if you want to work with big data, if you want to have, have, have a huge impact on consumers lives. Again, financial freedom is the, the, the core focus of, of what we do and then you want to have an opportunity. We try to think of ourselves as like the most consumer, sorry, the most customer centric employer where you know, we put engineers in the customer so that they're actually talking to them. Like we think it's an incredibly fun way to work. So like not for deployed engineering but for deployed company. So you know, tell all your fans we're hiring lots of people and I think it's going to be a great 2026.
- [43:48]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
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, how the space has evolved. Thanks so much.
- [43:58]
Zach Perret
Let's do it sooner.
- [43:59]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
Yeah, it's so far away.
- [44:01]
David Haber
Exactly. We don't want you to wait. You know, that's true.
- [44:03]
Podcast Host (possibly a16z host like Sonal Chokshi or another a16z team member)
We don't have to wait every five years. Zach David, thanks so much for coming on the podcast. Great.
- [44:10]
Podcast Narrator/Producer
Thanks for listening to this episode of the A16Z podcast. If you like this episode, be sure to like, comment, subscribe, leave us a rating or review and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts and Spotify. Follow us on X16Z and subscribe to our substack@a16z.substack.com thanks again for listening and I'll see you in the next episode. As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax or investment advice or be used to evaluate any investment or security and is not directed at any investors or potential investors. Investors in any A16Z fund, please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see a16z.com disclosures.