The a16z Show - The Rise, Fall & Reset of The Fintech Industry

Episode Date: December 19, 2025

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. Resources:Find Zach on X: https://x.com/zachperretFind David on X: https://x.com/dhaber Stay Updated:If you enjoyed this episode, be sure to like, subscribe, and share with your friends!Find a16z on X: https://twitter.com/a16zFind a16z on LinkedIn: https://www.linkedin.com/company/a16zListen to the a16z Podcast on Spotify: https://open.spotify.com/show/5bC65RDvs3oxnLyqqvkUYXListen to the a16z Podcast on Apple Podcasts: https://podcasts.apple.com/us/podcast/a16z-podcast/id842818711Please note that 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 in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see http://a16z.com/disclosures. Stay Updated:Find a16z on YouTube: YouTubeFind a16z on XFind a16z on LinkedInListen to the a16z Show on SpotifyListen to the a16z Show on Apple PodcastsFollow our host: https://twitter.com/eriktorenberg Please note that 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 in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

2018, 2019 in FinTech was late spring. You get into 2020 and COVID, and that was utter insanity of a story. Like 25% of all venture dollars in that period went into Fintech, Richard. Wow, 25%. The stat after that is not a good stat, which is starting in like the second half of 2022, like basically zero percent of venture dollars.

That's the drought maybe. Yeah, yeah. 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 the spring. It turns out the biggest use case for AI is fraudsters committing fraud against financial services companies. Financial fraud is growing at like 18 to 20 percent 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. At the peak of the boom, roughly 25% of all venture dollars were flowing into fintem. Two years later, that number was close to zero. Today, with A16Z general partner David Haber and Zach Perrae, 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 how the industry moved through its boom and bus 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-sack financial products, incumbents finally adopting outside software and embedded finance showing up far beyond traditional banking. Zach, David, we did. this podcast, I believe, seven years ago. And it's great to have the gang back together. Thanks for joining.

Thank you for having us. Great to be here. 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 up. If someone was in a coma after listening to the last episode and just woke up and said, hey, what's changed in FinTech? What would we say? Let's see. So last time we talked to was called it 2018, 2019. Is that right? Yes.

Yeah. So let's see. A lot. There's 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. created the name. But no one will give you credit, but I will give you credit. I think you created the name in 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 an application. Like Robin Hood come up and grow incredibly well. You see all sorts of neobank, neobank for X or Y or Z submarket. 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 big EDM pumping summer really fast.

Like the edm 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, the things that we had to build were going so rapidly. I think like 25% of all venture dollars in that period went into fintech, which is insane. 25%. 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 2020, like basically zero percent of venture dollars.

That was the drought maybe. Yeah, yeah. So summer went into a very, very short fall. So that was kind of like mid-2020. 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 in the spring.

Yep. Different format, but it's been a fun cycle of the seasons. Totally. 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 ZERP, 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 thought 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 fintic companies like, So-Fi, you know, buy banks, lending club. I think Square got an ILC charter, Robin Hood, 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. 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. I agree. 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 Indrease and Horvist also likes to say is that

every company's fintech company. And that 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 this startup industry now become mainstream and the firmament of financial services, but also powering experiences well beyond financial services. Let's go deeper into where we are today and where we're going, given that we're kind of in an 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 perspective. Platt 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 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 a border a little bit more easily? And apply that across kind of every subsection, 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 where 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 and so forth. The second 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 and all the places they might want to go. And the future horizons are always looking at the next few things that are happening. We look at AI and agentic financial services. And right now that's mostly hype in 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 your 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. So lots more to come. On that note, is crypto basically just Pintech? Or, you know, people said that this is the new version of the new internet. Maybe hopefully it still happens. But in terms of where it is right now, is it mostly just a subset of FinTech? 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 CalShita Polymarket and, you know, enter prediction markets or you might do that via Robin Hood or whatever it is. Other things that consumers like to do are like, you know, spend money, save, invest, so and so forth.

And inasmuch 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, they're roughly tailored to what consumers want. Consumers want to save money, invest, get loans, so and so forth. And I think the wisest product development strategy is to kind of like 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 USC 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 balance on innovation. And like, I'm not sure that that's necessarily going to end up merging with banks, but who knows. 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, 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'd 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, you know, the existing kind of financial system adopting, you know, things like stable coins or maybe even tokenizing kind of real world, world assets. And I think that's different, you know,

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, you know, for crypto to go very mainstream, it kind of plug into the broader financial system, that probably is and will continue to happen. What Zach and the team had planned done, you know, over, you know, the last 14 years, 13 years, 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 to your point, now bringing kind of this whole ecosystem of kind of value-added services in analytics, you know, to make financial products better. And I think while we saw different seasons kind of over that period, you know, hay fever and long winters and, you know, euphoria in some moments, you know, many of these companies are now bigger than ever. I mean, Robin Hood is now, I don't know, $100 billion public company. You know, I looked up so-fi stock price. You know, there are $35 billion public company. A firm is a $20 billion company. Like these are outcomes that you couldn't even imagine. Revolut.

Yeah, I mean, Revolut, $75 billion. You know. or for new investors. And that phenomenon is not just U.S. centric to that point. It's become a global one. I mean, New Bank, you know, $100 billion, you know, company, you know, in Brazil, you know, my good friend, Pierre Paulo, who runs Walla in Argentina, you know, Colombia, Mexico. You know, so these companies have worked and they've kind of proliferated and it brought

access of financial products, you know, everywhere. And I think that trend will continue. You know, I think while they started often with point. solutions and they kind of perfected whatever their wedge product was, you know, many of them have now re-bundled, right? They want to become kind of the full, you know, financial picture 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, you know, 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, you know, to fintech and technology broadly. You know, I saw this kind of firsthand, certainly, you know, 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. Don't they still use, like, SECDB internally? Like, they have their own database that they built. That makes more sense to me because it was like a centralized risk system for managing all their trades. But Outlook equivalence 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 Goldman went very aggressively into Marcus and others followed suit. I think there's a bit of a humbling that has happened. 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 are building everything in-house. And so a lot of, where I've been spending time the past several years has been in, you know, fintech companies that lead with software that, you know, ideally have the potential for a network effect and are selling into these financial, you know, larger financial institutions

and solving, you know, real workflow challenges for them. And I think we're at this interesting moment where because the software itself can actually do the work, you know, 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. You know, many of these institutions are beginning to adopt products like cursor or, you know,

even GitHub co-pilot 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, you know, do I need to begin the cloud? Like that was sort of an esoteric question. Now it's like any CEO, any board member can play. 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 advantage

point, of what fintech is. And it's really, I think, to your point, just financial services and I think software in large parts hold into financial services as well. Yeah. And David, see more about sort of that change around when, you know, it went from 25% to, you know, is significantly less than that. What was changing in these businesses that caused that? You mentioned sort of the macro environment, but is there anything else we could learn from it? And more around now,

where are you particularly excited to invest? Or what are the sort of different, you know, sort of subspaces that you're, you know, looking at are excited to? 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 often get over-excited 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 continued to succeed.

But I think it was probably too much euphoria going into that space relative to the amount of dollars. No, no, I think it was the exact right amount of euphoria, just the pullback afterwards. 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, you know, shrinks. And there's a natural ceiling on borrowing that people, you know, both from a regulatory perspective and a kind of consumer appetite perspective. So the business model on the lending side, I think, you know, kind of compressed.

But you also have to look at the underlying growth rates of these apps were insane. Totally. Like, you look at the number of consumers that were, you know, signing up to invest or signing up to take a loan or signing up to buy a Bitcoin or whatever it was. Totally. Like, we just looked at the charts and, like, you know, if the app was growing at, what, 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's growth is insane. Totally. Yeah, totally.

I mean, yeah, and this was like stimulus and there was a lot of... Helicopter money everywhere. Yeah, there were a lot of reasons 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.

The great ones. There was a washout. And there were a lot of fintech companies that died or shut down in the second half of 22, in the first half of 23. There were a lot that, you know, kind of went sideways for quite a while. and a lot of lenders especially who just like basically closed up shop or merch or things like that.

But the ones that succeeded coming out of it across all of the fintech, they were much, much stronger for it. So as you said, if you started off with a neobank 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, like, 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. Totally. David, I'm curious how you, or how we look at the sort of investable universe or sort of divide. Is it, you know, that there's a certain type of form factors and each region is going to have their new banks, so to speak, or is it, you know, by sort of form factor or value prop to the,

How do we think about the universe and how do we map it? You know, it's been interesting. I mean, I would say from our vantage point, we haven't made as many consumer fintech investments in recent years as we have historic. I think part of that is just it's more expensive to acquire customers and hit the kind of scale you need to really be in a 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 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 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. 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 accounts so that I can pay my daily expenses, but put all the rest into this, like, high-yield savings account. and 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, oh, I always my body. What's going on? Like, I don't trust this thing. like, wait, why did it move buddy over there? I have all these questions. And so, you know, I'm not sure that I'm necessarily the best of this. Like, so I have all these visions of like the, the prospective apps that should exist out there. But then, you know, for us as Plaid, and in a lot of sense, for you as an investor, like, certainly for us as Plaid, like, our job is like, 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, as new interesting companies start to emerge. And so, that's how we think of our job. So, like, our job, as it relates to AI, is, like, 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, like, have a team that's just, like, constantly looking at, like, the emergent behavior and figuring out, or is that a good thing? do we want to optimize for that? Oh, like, 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. Yeah. And I think as a result, like 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 is 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, you know, solve many of those problems. And so that's, I think, you know, largely where we've been spending time, you know, companies like, you know, moment that had built, you know, fixed income trading infrastructure. If you're a wealth management client of JP Morgan today, you know, building a bond ladder is still a manual process. You're picking, you know, individual securities one by one. That's insane. Like, that hasn't existed for, you know, at least a decade in equities. And so, you know, there's a ton of opportunity to solve, you know,

kind of basic problems like that. And I would argue build, you know, very large, you know, kind of software and kind of platform-style businesses on the back of that. And so whether it's, you know, things like, you know, a company like Salient, which is doing, you know, bringing voice agents to loan servicing and collections, right? the idea that a voice agent can speak in 50 languages, you know, fully compliantly, track UDEP, you know, do welcome calls and payment reminders,

you know, and actually deliver on a better customer experience because it can speak their native language and get better results. It's infinitely patient, right? You know, that is a really interesting opportunity for the moment, you know, in large part because it's unlocking markets that were never particularly interesting to suffer into because IT budgets were small,

and now, you know, 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 kind of financial product-led companies largely to, you know, software-led businesses and kind of financial services were at large. Zach, you wrote about your predictions for 2026. Maybe you share one we haven't gotten to yet around where things are going, where you're particularly excited. 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 I 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, like, as I was saying, oh, no, this is actually the correct answer. The entire table was like, yeah, okay, that's the correct answer, sadly. And so, you know, we're at 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 percent 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 yet. Because, you know, it's a cat and mouse game, but the mouse is winning right now. I mean, the cat will win long term, but the mouse is winning right now. And so it's kind of a depressing prediction, but I think likely.

What are you guys doing about it? Well, so we build an anti-fraud product suite. I promise this would not me teeing up bragging about one. But I will go back to brag about five. because it's a hard problem to solve, but if anybody can kind of try to figure it out. Well, we can't solve it all. We can solve pieces of it.

So we build an anti-fraud product suite that'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 account, this user action that they're taking. And 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 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 deep fakes as well.

I mean, like, as an industry and plot 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's basically when you get a text message that says, hey, how you doing? And 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 find some complex way to 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. that is like in 100% of cases what happens. That used to be done based on these like human factories in like Malaysia where they would like have these people like locked in rooms sending text messages to unassuming people in the U.S. 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 the AI is just getting better and better and better. And like 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 fight.

And so, I mean, there are so many more tools that we need to build as an industry collectively, and of course, as Plaid specifically, totally. We were talking about the different eras of FinTech. I'm curious what have been sort of the different eras of Platt. Of course, there was the, you know, sort of the acquisition that didn't go through with Visa, sort of the ups and downs that you guys have had, you know, alongside the macro and obviously you're in an incredible position right now, is the, Talk more about the different areas of Plaid

or how the Plaid vision has evolved or stayed true to the original. So started Plad, started working on a thing that wasn't Plaid, but pivoted into Plaid in the very end of 2012, we launched into what we were doing in kind of mid-late 2013 and launched to the world in 2014.

So, you know, it's been a good 11 to 13 years depending on how you count that series of bad products that we built first. David actually was a friend and knew us then. But I'm going to 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, like, sourced the deal as like, you were an associate, I think, at Spark at the time. Then he went to Goldman, around the time that Goldman invested it. You weren't involved in the investment specifically, but you were at Goldman at that time

and probably helpful in the background. Then Andreessen invested. And there's been like a huge friend in supporter of Platt over the year. So we owe a lot to David and a huge amount of thinking. And he also creates all the important industry terms. So the fintech industry owes a lot to David. I don't know.

Anyway, so Plaid started, started, let's say 2014, we launched. And then 2014 to like 2019, that was all about linking bank accounts. Like, how do we label 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 Venham. 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 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. 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 the business starts ripping. And it was like, oh, that's a very expensive free call option. Yeah. You know, on the business. And so walking away from that is pretty. 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 checkboxes 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, 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 a fixed price. Visa stock price 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 don't know a large chunk of visa. That seems interesting.

And then we looked it through the docs and, like, they have this thing is called like material adverse event. So you can get out of a deal with something crazy happens. And there was a provision there that says you cannot get out of the deal, even in the case of a global pandemic. And like some lawyer somewhere in some room had like come up with like, oh, let's just like add this in. And I don't know, we were like, oh, man, this is great. We got everything said. They can't get out of it in a case of a pandemic. Like 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 DAJ was investing in a visa. for being a monopolist and like all of this overhead. And like kind of for the next, 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 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 we'll go our own way. We'll keep running pot as an independent entity. And then we raised a big upround. and, you know, off to the races. But, you know, 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 know, you're not going to get all that cash that you thought you're going to get.

Like, 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, like, really change the culture. It's like almost a refounding moment. moment at that point. Then you go through the rest of the summer and that was great, lots of growth, but then into like FinTech Winter and that's another like, we got all come together. Like our customers are growing more slowly. Yes, we're producing great products. Yes, like Platt

is growing. But like, you know, it's not the growth that we're used to because we're in, in FinTech winter. And 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 refounding or like multiple crucible moments along the way. 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. Yeah, yeah, it has. I mean, I shifted my role quite significantly.

So like I'm my chief product officer. Like 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 would be. And so that's been, like, one of the most fun things for me. Actually, weirdly, like,

I think I was, 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 it 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 into the right. Like I think I was like happier in that like winter period.

So I'm like, oh man, like this is this is where we become an amazing company along the time. Like this is where like, you know, we prove ourselves and we really step up and help our customers. We launch the next next wave of products that really matter. but I think I felt similarly, to be honest, like, you know, having done FinTech since, I don't know, 2011, like people, you know, 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. 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.

Yeah. I'm like, I... Fintech is dead. Everyone should go home except for people better building fintech. Right. Making amazing things. You guys can leave and just stop investing in fintech. We will continue.

The fintech team is still here, you know, despite the naming conventions. The rebrand. The brand. And I think that's actually benefited us, you know, and I mean, selfishly. But I think it's tested the people like the troop relievers. And in some ways it's brought the community together, I would argue. Yeah. And, you know, the tourist go home.

Like the, and we saw it on our team even. Like there were people that joined Plaid in 2020 when the music was loud and it seemed like the industry to be in. And, you know, then 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, you know, they're in it in the way that we all want to be in.

It feels great. Where are we now in the cycle? How should we think about this moment? early to mid-spring. I would say we see green shoots like 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, 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, you know, profitability and growth. And you're also seeing, like, 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, like, FinTech product short to come. So I would say spring, like lots of green shoots, lots of exciting

stuff. Still some, you know, still some snow in the background. That's snow melt is still happening. But looking pretty optimistic right now. Also, okay. So let's wrap on just what does 2026 and the near future look like? David, how we're approaching agency. 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. You know, again, I said on the board of a company called Moment, which we, you know, described earlier that is now bringing some largest wealth management platforms online. You'll see them, you know, they announced LPL.

We have another, a number of other large institutions that will be announcing early next year. you know, companies like modern which have built, you know, bank to bank deposit marketplaces that are really starting to grow and see significant volume in that network. And again, just more, more broadly, you know, really excited

by the opportunity for AI to actually do the work, you know, within these institutions and momentum and excitement, you know, there to adopt, you know, new products. And I know, are you excited, David, because they're such great customers or because they're so undeserved

because they're, or they're going to finally transitioning or why have we narrowed in on that focus is one that we're particularly excited about? 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, 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, you know, build software companies that couldn't have existed years ago. And again, I think the appetite, you know, 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, you know, 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 early stage companies happen a lot faster than, than I've seen in, you know, my experience, you know, investing in this space. Zach, how about you and how you think about things that Plaid and more broadly? We, this past year launched, as they 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 Lenscore. We launched that last year. These two things are going to be major drivers for us in the coming year. So distributing this new version of a credit score into all the lenders. and then, of course, on the protect side, like helping fight this, this AI-driven financial fraud that we're seeing.

And then for us, like, we're back to, back to, like, hiring and recruiting and growing. And so, you know, despite the fact that fintech has been through these waves, like, I still think that plot is, like, one of the most amazing places to work. Please tell all your friends. If you want to work with big data, if you want to have a huge impact on consumers' lives, again, financial freedom is the core focus 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 forward-deployed engineering, but forward-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 26. Zach, David, you guys are pioneers in the space in the category. And I can't wait to have you both back in 20.

30 and we can talk about how the how the space is evolved. Thanks so much. Let's do it sooner. Yeah. That's like so far away. Exactly. We don't even wait. You know, that's true. We don't have to wait every five years. Zach David, thanks so much for coming to the podcast. Great. Thanks for both. 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 Podcast, and Spotify. Follow us on X at A6. and subscribe to our substack at 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.

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