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I sat down with Jean-Denis Greze, CTO at Plaid, a data network and one of the foundational fintech companies that works with thousands of companies, including several Fortune 500 and some of the largest global banks.
Founded in 2013 by Zach Perret and William Hockey, Plaid’s network covers 12,000+ financial institutions across the US, Canada, UK and Europe. They’ve raised over $700 million from Felicis, Homebrew, NEA, Spark Capital, Citi, Goldman, AmEx, Ribbit, and a long list of great investors.
In this episode, we discuss:
How Plaid stays at the forefront of security and privacy
“All financial services, at the end of the day, the real industry is trust… And from a technical perspective, for us trust is privacy... And then on security, it's the exact same thing where you're only as strong as your weakest link.”
Jean-Denis recognizes the criticality of Plaid's services and the importance of maintaining uptime, especially for real-time user actions, but he considers security and privacy to be more crucial than uptime. The fundamental building block of financial services is trust, so ensuring data security and safeguarding user privacy are front-and-center top priorities for Plaid. The strength of a platform is determined by its weakest link, so addressing all potential vulnerabilities is vital. It also means ensuring that user data is handled appropriately and that apps built on Plaid's platform also respect user privacy.
For company leaders thinking about privacy and security, establishing clear and firm principles on how user data is handled is paramount. Decisions on data usage, such as sharing with ad networks, should be definitive. Additionally, these principles have to align with the company's values and should be confidently shared company-wide. Privacy decisions should be guided by these established principles, preventing ad hoc decisions that might be swayed by business pressures. CTOs and CEOs should be wary of justifying actions that push against established principles for short-term business gains. Frequently adjusting these principles for business purposes can erode the foundational values of a company.
Thriving in a competitive market and how the only way to win is to play a different game than your competitors
“The trick about competition is you need to fundamentally be playing a different game than the competition. It can look competitive from the outside, because there's a lot of folks doing similar features, but, if your customers think of you differently, it might not matter.”
When talking about the competitive landscape, Plaid seeks to play a "different game" than competitors. Jean-Denis emphasizes that external similarities in features don't equate to true competitive equivalence. Beyond basic services, Plaid offers additional products that competitors might not provide. Plaid leverages its economies of scale, which leads to better connections with banks, improved data quality, and higher margins, allowing it to offer better products overall. An example is their 'signal product' that aids in fraud prevention. Plaid's strength lies in its network effects, with its data trained on tens of millions of financial connections across thousands of apps. This rich database helps refine their fraud model, leading to a self-enhancing cycle of better product quality as more users contribute data.
The future of Open Finance in the US and some regulatory predictions
“The feedback from people, once the experience got too easy, is that it was scary. And the feedback was like, ‘this is my finances. And I expect there to be friction, and I expect it to feel like it has weight.’ And if you make the UX instantaneous - like scans your face, connect your bank account, click once. It's jarring for people.”
Historically speaking, the US financial system has allowed competition to spur innovation and produce beneficial products and companies. Regulators often step in after some time to codify what they deem are best practices from the competition, shaping the market based on observed practices. Whereas countries like Brazil and India have taken a more directive approach to financial regulations. In Brazil's case, they've explicitly defined how the PIX user experience should function, leading to significant growth in digital payments and financial system access. However, Jean-Denis Greze doesn't anticipate the US adopting such a hands-on strategy.
In the context of open finance, Greze predicts that an upcoming rule in mid-October 2023 will reinforce consumers' rights to access and share their financial information. This rule will likely urge financial institutions to enhance data sharing, but the specific implementation will be left to companies. Once established, regulators will continue to adapt the framework to accommodate new financial products and market developments.
How AI LLMs are revolutionizing user interfaces… and a lot more!
“You could imagine a world where LLM 's are pulling on UX and UI from a bunch of different apps to put in front of you what you're supposed to do. And then you would probably build front end software pretty differently than we do now.”
The AI Language Model (LLM) space is at its nascent stage, with unpredictable long-term implications. While current uses of LLMs focus on tasks like summarizing, the bigger question revolves around their broader impacts, especially on platform shifts. One compelling area of exploration is how LLMs might revolutionize user interfaces (UI). AI-driven UI might deviate from the current paradigm of clicking through different apps or functionalities. Instead, users could communicate their needs (e.g., setting reminders or pulling reports), and the interface might pull together components from various apps seamlessly. Existing LLM applications, often integrated within platforms like Slack, hint at this trend by customizing the UI based on users' requests. This potential transformation could significantly alter how front-end software is designed and developed.
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Miguel Armaza is Co-Founder & Managing General Partner of Gilgamesh Ventures, a seed-stage investment fund focused on fintech in the Americas. He also hosts and writes the Fintech Leaders podcast and newsletter.
Jean-Denis Greze, Plaid CTO – At the Cutting Edge of Privacy and Security, Powerful Network Effects, How LLMs Will Reshape Our Digital Experience