Transcription:
Ian Macallister: (
Thanks everyone for joining. You have joined time here with few Plaid folks. Talk a little bit about open finance here, maybe a little bit broadly, thanks for joining. There's a couple faces actually out there that are non-Plaid, but I haven't seen for a few years, so it's kind of nice to see some folks. So I'm gonna do a quick intro of what, who Plaid is what we do. I'll pass, I'll introduce myself, pass it off to Roger and we'll jump into it. So we have about 30 minutes and hopefully we'll be able to fill that time. We have questions if we have time for the end and we'll have some questions. So plaid is a technology company, based headquarter here in the US. We are a technology company that allows consumers to connect their financial data to the financial apps and banks that they love to use day in day out.
Ian Macallister: (
We help hundreds of millions of consumers. Actually with that transaction, the company's been in service for close to 10 years. Now we're about a thousand people and growing, I think actually I latest I heard was like 1200. We're based headquartered at San Francisco, but we have offices across the us and in Europe. And so we're here to talk a little bit about what Raj and I do for plaid, but also some of the things that we have learned during our adventures here. So my name is Ian Macallister, I oversee the north American financial institution partnerships organization. If there's a little feedback, just let me know. I'll talk a little quieter, but also, so my team, so what I do at plaid is I've been here for about a year. I manage an organization that works. I feel like it's in and out, by the way. Is it, how about now? Should I just talk slow,
Raj Chakravorti: (
Just talk with more emphasis exactly.
Ian Macallister: (
And fastest, I can just stand up and start young. Yeah, So I oversee an organization that manages a lot of the bank relationships in the us and in Canada, effectively ensuring that we have high quality data access, consumers have high quality data access with their, they Don's like get away from you a little bit. Yeah, how about that?
Raj Chakravorti: (
It's not COVID.
Ian Macallister: (
Exactly, not yet. So, but my organization manages a lot of the financial institution partnerships we have in the US and Canada and Raj stand Over to you.
Raj Chakravorti: (
Hey everybody, Raj Chakravorti. I am the head of our universal access partnerships team at plaid. And thanks for introducing plaid, so when we think about, I'm actually gonna make a little bit of a Delta here, so this is the open banking track, right? We at plaid have really focused on a concept that is a little broader and it's really oriented around open finance. I'm gonna try to make a little bit of a differential here between what open banking is and open finance is. And so when I think about open banking, it tends to be this concept of data flowing from a consumer's primary financial institution, which traditionally has been a bank to the ecosystem and then is tapped into, by fintechs. And that is the model that we see certainly in Europe oriented around the PST two framework, but in the us, I think one of the big deltas for us is really considering that an open finance ecosystem should actually be a multi-directional network of data, wherever consumers, financial lives sit, and that the consumer should be able to own that data to build better and better and bigger and bigger products.
Raj Chakravorti: (
And so the universal access initiative is really focused on how do we partner with all of the non-banks. So basically the counterpoint to Ian.
(
and partnering with them to ensure that that data connectivity also flows in the ecosystem so we can build better things for consumers at the end. I'm really excited to be here with Ian. We're gonna do this a little differently than most sessions. We're gonna try to chop it up a little and maybe have a little bit of fun with it at the same time. Ian's gonna tell some bad jokes and I'm gonna tell some good jokes and we'll see, you know, what one you like better that's alright, yeah.
Ian Macallister: (
So I think that's right. So again I feel like it's so what we're gonna do is we're actually do so again, Raja and I both have kind of traditional backgrounds. When you think about banking, I worked at a large financial institution, RA worked at a large financial institution. And so we've been here for a little, I've been here for almost a year Raja's about a year and a half. There's a lot of myths out there in the system of like what open finances and what aggregation and entities like plaid do in the ecosystem. And so we're gonna like talk through some of those myths. So we can start with the first one. So just from again, I worked at a bank, I worked very closely to the banks. I think there's a lot of perspective out there that open finance actually weakens the relationship with consumers and their financial institutions. I think that's a large concern that we've, that has been proliferated out for a long time. And the reason is because it, what people think about is it reduces the friction between a consumer being able to shift who they actually bank with. What I would actually argue is that it strengthens and for a few different reasons. Let me turn off the mic first.
Raj Chakravorti: (
This is one of those bad jokes.
Ian Macallister: (
Exactly, and then turn it on. I just turned it off. How about now? There we go. Chuck it up to a good one. All right. So point is here. I think that historically there's always been this concern that an open banking infrastructure actually reduces the consumer's ability or the bank's ability to work with the consumers and provide them like high value services. What we've learned is that the organizations and the interactions we have with a lot of the organizations is that when they listen to their consumers, consumers want the flexibility and ownership and transparency to be able to share their data and understand who they're sharing their data with. And they look to trusted organizations like banks to actually help them facilitate that. Um, additionally, what I would say is banks who think about when consumers leave their own walls of a financial institution, they're actually helping them in better lives.
Ian Macallister: (
They're looking for consumers to actually take control of their consumer and their finances and their ability to actually leverage that bank and leverage their partnership with the bank actually facilitates that. There's actually what you start seeing in. And what Roger mentioned earlier was banks are starting to cons be not only just data providers, but their collaborators they're co-developers with organizations like PLA. And what they're doing is actually consuming a lot of the financial transactions that exist outside of their own walls. So if they are building their own personal financial management app, like any of the large financial institutions in the us, they wanna think about consumers where they have balances or transactions outside of even their own eco, their own individual bank. So they leverage organizations like plaid, like RA's organization to ensure that when consumers have balances at wallets or crypto balances or transactions at different lenders that are outside of their traditional bank, that they can actually receive that data back so they can provide a better full financial view of their financial lives.
Raj Chakravorti: (
Yeah, I totally agree with that comment, Ian, I think one of the big initiatives around universal access is exactly that concept, that better products are being built for consumers because of open finance. If you think about the traditional ways in which banks offered products for consumers, there was this kind of view that, Hey, look, the data that I obtain on this consumer is my proprietary data. I'm gonna know them the best and therefore I'm gonna create a curated set of products and that's gonna solve all the financial problems that they have. And that's not true. Right? We've seen that, consumers are overwhelmingly choosing FinTech because they haven't actually been able to solve all of the financial problems that we have. In fact, I think there is a stat that we had in conjunction with the Harris poll that plaid did last year, which actually stated that approximately nine out of 10 consumers are actually utilizing FinTech today.
Raj Chakravorti: (
So that's dramatic to contextualize that's more people than are using social media. It's more people that are using streaming services like Netflix, it's a higher percentage of people than are dentists recommending Trident for after dinner. So like it's a lot of people that are doing this right. And so, the concept is that if people are already choosing this then, well, how do we ensure that we're taking advantage of the same things that consumers are doing and how do we start building better and better products into Ian's point? What we've seen as we've started to actually facilitate data sharing back from FinTech and the ecosystem is that the PFM tools that traditional financial institutions are building are actually much more akin to what you used to see in FinTech, except it has this augmented value of being built within the walls of the bank.
Raj Chakravorti: (
And that's actually created an even better primary relationship between banks and consumers. Should we move on? Let's move on. All right, myth number two, open finance threatens consumer privacy. So, I think this is actually a multi-tiered concept. And the reality is that we just talked about how consumers are overwhelmingly choosing FinTech. The traditional manner in which consumer data flowed into the ecosystem was through a process. And I think most people colloquially understand it as screens scraping. And the reason that process was built was because it was very difficult, otherwise for consumer financial data to go into the ecosystem for the reasons that oftentimes financial institutions didn't wanna let that information go. And there were certain practices that made it get in the ecosystem. Ultimately it's just a technology, but where I think the biggest concern was, was oriented around this idea that, okay, well then that means that consumer credentials are sitting free in the ecosystem.
Raj Chakravorti: (
What happens then in the event of a data breach or in the event of somebody going and hacking it? Now, my consumer credentials are available to be used. Well, this has actually been the entire concept and really the move towards an API based ecosystem. And so within an API based ecosystem, there is significant control in terms of the type of consumer data that just kept flowing through, but notably it actually obfuscates consumer credentials and using tokenization, you can actually remove that. And then on top of that, there's actually been a tremendous move to remove credentials directly from the ecosystem as we migrate to APIs. Now, one of the things IPO that plat has been on the winning side of is we are an API first company, and we've actually been able to see that the majority of our data now flows via API.
Raj Chakravorti: (
And so that's actually a net benefit to consumers in terms of its privacy. The last thing I'd actually add on to this is that there's an incrementality around consumer control. And so when you think about consumer trust and safety, yes, those are important elements, but control is a critical element here which is as a consumer knowing that my data's safe is one thing, but then being able to actually go in and say well what I want to turn on more sharingor I want to turn off sharing that I may have provisioned to one app but I no longer use. Those are the types of tools that I think an open finance leader and PO it that plat. And I'd, poit that plaid is one of those but, take that with a grain of salt because we're sitting right here, those are the types of things that we enable to ensure that consumers are actually able to have the, of that control
Ian Macallister: (
Agreed, now for the more fun ones.
Raj Chakravorti: (
This is a very controversial one, Austin has the best barbecue in the us.
Ian Macallister: (
So this is, Raj's like, I don't agree with it. Like, we're gonna go to stubs in like two hours. And like, have you been to Coopers like down the street too? Like it, the place is solid.
Raj Chakravorti: (
I understand we're in Texas right now. And what I'm about to say may get me in a lot of trouble, but if you think about like the totality of barbecue, okay. I live in New York. If I go into a grocery store, the type of barbecue sauce I'm most commonly seeing is KC barbecue sauce. Like it's just standard. That's just, what's being sold by the way. Do you like mustard? If you like mustard, you're gonna go with a Carolina barbecue. I'm just saying there's options. It's more of like an interoperable open finance ecosystem for barbecue sauce.
Ian Macallister: (
There you go. All right.
Raj Chakravorti: (
All right, the next one, financial institutions particularly smaller banks don't have the tech infrastructure to support open finance. I think we'll both have something to say here, but this has been a really important concept, I think, as we've thought through the evolution of open finance. And so what is really important from our perspective is that we're ensuring that consumers have the ability to utilize their financial data no matter where they bank. And that means that working with financial institutions to be able to adopt API based data sharing is critical, but also recognizing that not everyone has the ability to build out their own curated API infrastructure, understanding those elements is really important. And so I think from, from our perspective, what we've realized is that, well, hey, look, if you're a smaller financial institution, maybe you don't have the, the digital team to build out and curate what that looks like that perhaps working with an organization that can help you build one time and allow that to be used and believe with confidence that it allows your consumers to connect in the ecosystem, hit as many of the applications that a consumer wants to be able to use.
Raj Chakravorti: (
But also importantly, understand that, hey, look, if there's a regulation that comes down the pipe oriented around data sharing that API built is future proof. And so how do you work in a way that allows you to build an API with really explicit directions that allows you to do those things? And I think that's actually been one of the fundamental reasons that we've been partnering so deeply with the financial data exchange. And I see Don in the room here, but plaid is a board member of FDX. And one of the significant investments that we've been making over the past year has been oriented around this API that we have built this API instruction manual which is called core exchange, which actually is the DX specification, but oriented towards being really specific and really helpful for institutions to help them understand how to be able to build, build that API out. And also ensure that it is opening up the most important end points, such that they can share their data into the applications that we see on plaid side as being the most commonly used ones.
Ian Macallister: (
So another aspect of what Roger is speaking to, like when you think about new technologies, especially in the us there's PLA works with, we have connectivity to over 12,000 financial institutions, those financial institutions, especially in the us, they range from very large, to very small, the very large, some of them represented in this room today actually had the foresight, had the technology capabilities and had the budget to actually be leaders in this development of open banking in the us. As you move down, it very quickly, precipitously drops off for the smaller institutions. And so they look to organizations like plaid, like industry standards, like FDX, like their processors to help them think through how to innovate. That's kind of core of how we think our role is as like a leader in the industry. We don't think it's a collaborative engagement across so many different industry players such that the small community banks are not left behind.
Ian Macallister: (
That's a key thing is to ensure that consumers, they have the choice to actually bank with who they wanna bank with. May it be a multinational or a small community, regardless that they have the, the capability to engage with financial applications, like the Venmos, like the Robin hoods, like the coin bases, regardless of what type of institution they partner with. But the key thing is being able to, to stitch that together with our partners, either directly through our own specs, working with industry standards or working with some platforms. So you work with some platforms your team does. So how do you think about that?
Raj Chakravorti: (
Yeah, and I think this is certainly key. So, we have some announced partnerships with Q2, with Jack Henry. We continue to work with more platforms that enable some institutions to be able to tie directly into the same sort of API oriented data sharing. So, absolutely, I think it is one of the most important things that we're doing to ensure that institutions of all sizes are able to effectively operate in an open finance ecosystem. Ultimately, when I think about Plaid's goal, our goal is oriented around this idea that all consumers, regardless of where they bank are able to connect into the ecosystem. And if we're gonna do that, the only way for us to confidently say we're doing that is ensuring that we're helping institutions no matter what type of core banking sort of way in which they're operating or no matter where they are in terms of their digital roadmap, that we can meet them where they are.
Ian Macallister: (
Which kind of leads to the next one which is for banks to think through, what's a tangible value of actually working in open banking ecosystem. It kind of ties many of these together, which is it breaks apart their relationship with consumers. They don't have the capabilities either cost wise or budget wise or technology wise. So what are like the tangible economic value? So, I'm just gonna like highlight a couple of dimensions here cuz we've thought through this as kind of our roles, as we work with the ecosystem to ensure that when we work with our data partners, that they think of it as a partnership, not just a one way street. So one way is the traditional way is around data sharing. It is really just ensuring consumers have the seamless capability to have access and share their data with any of the 6,000 plus developer apps that plaid has plus many others in the ecosystem.
Ian Macallister: (
So it's like that's core and there's actually studies out there. Roger mentioned the Harris poll where 70% of consumers would actually look to change their banking relationship if they couldn't do that. So if they're not able to actually change their actually share their data, they'd actually look somewhere. So it's a little bit of a ensuring that you can support the regulatory framework to be allow consumers to share their data. But also it's a bit of a retention to ensure that you have the best services and the, the banks that we talk to who listen to their cons, their customer comments, it's core to how they think about their relationship with their customers in open banking. So that's like one dimension. Second is from just building cool products around it. So many of our clients, many banks out there build personal financial management apps themselves.
Ian Macallister: (
They think about how do they use the data in inside the large institution to provide recommendations services around personal financial management? The issue is that another you always like reference these surveys. Another survey say that consumers look 40% of consumers look to non-bank for PFM apps. So that's like a lot, that's 40% of your consumers who wanna use a PF, personal financial management app look somewhere else than the bank. So how do you think about ensuring that you have the services that want your consumers to stay within your own digital assets and leverage those service, those products and services that you've built? So that's like a key thing. And when I re reiterate it plot's not only just thinking about traditional bank sharing data, but it's the alternate data, it's the equal access. So consumers can actually pull data back in from those fintechs such that the banks can actually build pretty slick experiences.
Ian Macallister: (
So it's like two, three is if they think about lending. So I think again, stats here you go, 10% are of the us. Consumers are non banked. 25% are underbanked. So in traditional lending models for banks of which I've worked at one you ed bureaus, you leverage historical credit data, header data from your credit usage. The issue is that consumers have a higher percentage of their assets sitting outside of the banks in non-traditional banking wallets, also in banking accounts, dispersed across multiple financial institutions, which is tougher to make a lending decision. So that's why open banking actually enhances the lending capabilities for those institutions thinking outside of the traditional credit bureau kind of underwriting processes. So it's like three. So it's like one retain your customer two build and cool like services on top of how they manage their own money to get financial freedom, three lend more too.
Ian Macallister: (
And then four is, we actually been so many of the future payments capabilities that banks are thinking through are non card based. So you have Z out there, you have guaranteed ACH out there of which we just launched own product. So, you have these like non-traditional payments capabilities where banks want to provide those payments, not only to their consumers, but to their corporate organizations. And so how do you ensure that you have the tie between the consumer bank and the corporate bank where they're talking together around their open banking strategy, where we're seeing a lot of traction is where banks can start thinking about it. So this is just, just a consumer capability, but this is actually building services such that they can sell to their corporates. And so I know that that doesn't really transcend to all the 12,000 financial institutions we work with, but the ones that have large issuing organizations, it really matters. And so there is real economic value for sure. And you just have to think broadly outside of just data sharing.
Raj Chakravorti: (
Yeah, and I might pause it, there's a fifth one. When you think about the technology layer itself, which is actually oriented around reducing the net infrastructure costs for an organization as they're working through all of this, because we already see this dramatic investment across all these organizations into building out their own digital infrastructures. So there's ways in which to improve that entire movement towards it in a way that creates a tremendous amount of incremental value, but agreed with everything that you said I don't think so.
Ian Macallister: (
This was just like, does anybody know there's a picture like Willie Nelson down the street, like on a bunch of different like brick walls. So does anybody know if why Willie Nelson was why this is false? Anybody know everyone's flying into Austin? All right. So it was actually found in 1974, three PBS executives launched Austin city limits. They actually had a performer the night before record their first pilot that failed. And Willie Nelson stepped in. No one really knew who he was. So he didn't really like TV, but this was a TV series. And this was like his launch into actually being on TV. So it's just like one of those, like everyone, I think ties will Nelson to the launch of it. He was a pilot perent.
Raj Chakravorti: (
So yeah, I had no idea about this one. The one thing I was gonna change the question, which was ACL the best music festival. And I looked at the lineup and you got Lil NAS X, you got red, hot chili peppers, and you got Diplo. And if you gave me a Peloton with those three artists, you see me hitting some PRS. So, I believe in that as well. All right. Are we about to listen to some,
Ian Macallister: (
I know it sounds like walkout music. Let's get going there.
Raj Chakravorti: (
We go. I think this is our last minute. So, this question is, should wait for the regulatory framework to be established in Europe. Like in Europe, I think there's a word missing, but it's like in Europe. So, I think what's been really interesting from our purview and I referenced this earlier when we were first getting started here was in Europe. We see a effectively an open banking scenario that was led by regulators to define how data will be shared and thus open banking kind of landscape evolved. Whereas what we're seeing here is actually that turned on its head where it's actually been oriented around what are the use cases that people are looking for. And it's actually a market version of how we're moving towards open finance.
Raj Chakravorti: (
And I pause it from our purview is that it's actually opening up a tremendous amount of opportunities for consumers to be able to utilize their data in unique ways so that they can actually get incremental value. Now, we've talked a lot today here about kind of this blurring of the line between financial institution and FinTech and how you are starting to see a lot more kind of fintechy products that are now generated at banks because they've seen these kind of advances happening at the FinTech level. And I have actually realized that like to actually serve their consumers in the best possible manner that they should actually adopt a lot more of those product. And I think vice versa, you're actually starting to see some really great learnings from FinTech as they step through each of the different iterations, so that they're also building products that help to, I think create more innovation in the industry.
Raj Chakravorti: (
And what we have seen certainly is that the regulatory bodies that matter and that are really focused on what does that data sharing arrangement look like and how should regulation be involved are really, I think, noticing and spending a lot of time talking to organizations like plaid, certainly organizations like FDX, certainly organizations who are really in the know to ensure that that construct will be oriented towards the best possible outcome for the consumer. And so this for us is certainly well from my perspective, I think Ian, my purview, this is a myth because we actually are really big proponents of this idea that the market can lead what that looks like. Now, importantly, though, I think a true partnership between regulatory bodies and those in the industry is actually, what's going to create the best possible experience because ensuring there is regulation around open finance is critically important to ensure that consumers believe strongly in those privacy, safety, security, and trust elements that we talked about before. And that we're ensuring that as more organizations step into this mix, that there is a bar by which they're building and constructing their products towards such that, we're optimizing for the consumer narrative.
Ian Macallister: (
Yeah, I think somebody, so I worked in an organization prior to plaid that leveraged that was kind of a deep player in Europe in PST two. And what it just a couple of like narratives that I observed then, and then now was then it was when I was working with that organization, the number of data fields, the flexibility of the specs were extremely limited. And it was because it was a very low bar because it started from a mandate standpoint. And so they, like, when it comes from a mandate standpoint, it comes from like a point of view of like, let's get the bare minimum. So everyone agrees in the us, you've seen just that higher level of desire to have better data, more robust data, such that the us can innovate like Roger mentioned.
Ian Macallister: (
And so there's a lot of things. And when it's led by a regulatory body versus kind of an industry group, what you see is, again that bare minimum, what we've seen at plaid is we've actually built some of our more innovative products around open banking, because we actually worked directly with financial institutions. So we've, co-developed with many large institutions where we think about ensuring consumers have control authorization and ability to revoke that authorization in real time. And so we work with some very large financial institutions, such that when the institution themselves has a consumer's, we call control panel where they know where they've shared their data, and they toggle those things on and off just like a credit card, you can do that with data that we know in real time. And that in our plaid portal, which is our own control portal, has the exact same look and feel. So consumers one it's clear, transparent and also up to date in real time. That's kind of core to how we think about that. Absent of the ability for us to think about this as a industry cohesive push forward. I think we would've been missing out on a lot of these actually innovative open banking products.
Raj Chakravorti: (
So I think that we have appropriately busted all of the myths.
Ian Macallister: (
Exactly.
Raj Chakravorti: (
Yes, and I think we are right on time.
Ian Macallister: (
But the good thing is we're handing it off to, yeah. I think a few folks, like literally in 30 seconds that are coming from plaid and one of, and some of the institutions that we always appreciate input from. So yeah. Please stick around.
Raj Chakravorti: (
Yes, absolutely. And if you guys want any additional information, feel free to shoot us a note at data connectivity, plaid.com, and we're happy to chat with you, or certainly chat with you after the.