Jun 20, 2024 · 25m · a16z
Zach Perret (Plaid) & Simon Khalaf (Marqeta): New Applications in Fintech
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Industry leaders Zach Perret of Plaid and Simon Khalaf of Marqeta join moderator Angela Strange at an a16z event to discuss how generative AI, embedded finance, open banking regulations, and evolving payment rails are reshaping the future of financial services. Together, they analyze how traditional financial categories are blurring as consumer brands, digital wallets, and technology platforms take center stage.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 4.0 Guest teaching 4.4 Guest disagreement 2.0 The host pushing back 1.6
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 20:27 Zach challenges Simon on merchant capabilities
Zach directly rejects Simon's claim that settlement innovation will only happen in the wallet, arguing that Simon is massively underselling large merchants who are actively building point-of-sale financing products.
Hardest push from the host ▶ 17:56 Host presses for speculation after guest deflectionWhen Zach tries to bow out of commenting on the Visa and Mastercard settlement by declaring himself unqualified, Angela holds her ground and prompts him to speculate.
Biggest teaching moment ▶ 16:45 Simon reframes interchange fees vs ad acquisition taxSimon educates the room by reframing interchange fees against ad tech customer acquisition costs, showing that merchants paying 20% to Google and Facebook are misplacing their outrage over 120 basis points.
The host holds their own ▶ 17:56 Host details Visa/Mastercard settlement nuancesAngela demonstrates specific knowledge of payment network regulation by citing exact numbers from the settlement, including the four basis point reduction, $30 billion savings, and merchant discrimination mechanics.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Impact of Generative AI on Financial Services | 4 | 4 | 1 | 1 | Host Angela Strange frames the discussion on AI platform shifts and cites specific metrics on consumer fraud losses ($10B) along with emerging defense startups. Zach Perret and Simon Khalaf explain technical vectors around Sora-generated selfie liveness spoofing and payment cards as digital engagement media. | |
| The Evolution of Embedded Finance and Brand Distribution | 4 | 4 | 1 | 2 | Angela references Zach's previous industry quotes on pay-by-bank and highlights existing card network infrastructure like chargebacks. Zach educates on why low-ticket everyday purchases won't move to bank transfers, while high-ticket purchases like cars are prime candidates. | |
| Dynamic Wallets, Top-of-Wallet Selection, and Ad Tech Analogies | 3 | 6 | 3 | 1 | Simon reframes interchange debates using ad tech analogies, pointing out that merchants willingly pay a 20% acquisition tax to Google/Facebook while arguing over 120 basis points in interchange. Zach adds insights into how cards remain non-digitally native due to legacy 16-digit PANs. | |
| Implications of the Visa and Mastercard Settlement | 5 | 3 | 4 | 3 | Angela demonstrates strong knowledge of the Visa/Mastercard settlement, citing specific terms like the 4 bps reduction, $30B industry savings, and merchant steering rules. After initially claiming to be unqualified, Zach directly challenges Simon's premise that merchants will not innovate at the point of sale. | |
| Open Banking Regulations and CFPB Section 1033 | 4 | 5 | 1 | 1 | Angela sets the historical context of US open banking lagging Europe while noting Plaid created the ecosystem without initial regulatory tailwinds. Zach gives an educational deep dive into Dodd-Frank Section 1033, CFPB regulatory authority, and consumer financial data ownership. |
Statements from this episode (18)
a16z advises its portfolio companies to purchase .ai domain names
“We've been telling a lot of our portfolio companies to buy the .ai domain”
Khalaf: Payment cards have wider reach than Google, Facebook, and clean water
“Because if you think about a payment card, it's the most adopted technological product ever invented. More distribution than Google and Facebook combined. More distribution than clean water. And it's still a piece of plastic for many.”
Khalaf: Average US adults use payment cards more daily than TikTok
“I'll give you a stat. So right now the most addictive product, well, according to the Senate and the Congress, right, is, ah, TikTok. And if you look at its usage, adjusted for the U.S. Population reach, adult population, is 2.1 times a day. But a payment card…”
Khalaf: Target makes more money from financial services than retail
“Look at Target. I mean, ah, they make more money from financial services than retail.”
Khalaf: Macy's gets 47% of operating margin from store card
“Look at Macy's. They make 47% of their operating margin from the Macy's card, and that's not a very successful program.”
Khalaf: Embedded finance will replace the term 'fintech' within two years
“That's why I hope in the next two years the word fintech will disappear and it will be embedded finance because they've got distributions. They've got the consumer, right?”
Khalaf: Cash App is sole financial app in App Store top 25 for three years
“You look at Cash App as an example. It's the only financial services product that's been in the top 25 on the App Store the last three years.”
Plaid CEO: Pay-by-bank will almost never succeed for in-person retail purchases
“No one's gonna walk into a Starbucks and say, I would like to pay for my three dollar coffee with my bank account. That's basically never gonna happen. Or any small merchant for that matter. Frankly, in my opinion, like, very few in-person transactions are eve…”
Plaid CEO: Pay-by-bank market shift will accelerate over the next 12 months
“I do think the next 12 months will show kind of a bigger shift in the market, but again, I think it's gonna be mostly concentrated to those parts of the market where pay by bank just makes sense and it's currently digital one point or not digital at all.”
Khalaf: Payment cards will transition to dynamic, real-time programmatic selection
“And that's what's gonna happen to a payment vehicle. It is gonna be a just-in-time selection. I'm not saying it's, you're gonna have infinite amount of cards. You can, because digitally you can. So, but there is gonna be one wallet or card that looks like a wa…”
Perret: Payment cards remain non-digitally native relics of an analog era
“One of the most interesting things to me in, in the card landscape is that cards are not a fundamentally digital product. They were built for an analog world. The form factor to a consumer is still really hard. We talk about cards, though most of us don't have…”
Khalaf: Merchants complaining about card interchange fees ignore massive ad tech costs
“So regarding the payment rails, I agree with Zach. It's a yes, but the but is bigger than the yes, because if you look at, ah, all the folks that are honestly complaining about the interchange. Okay, let's talk about it. These are the same people who are payin…”
Khalaf: Visa and Mastercard emerge as the ultimate winners of settlement
“It's been like a nice debate, and then at the end, Visa and MasterCard win. So but so I think that's what I read into the settlement”
Khalaf: Payments innovation will center on digital wallets, not merchants
“So I think the innovation is not going to be on the merchant side, ah, because why? The innovation is going to be in the wallet side, because if you look at what Apple Pay has done, it is a personal, individual checkout that works in every country, in every me…”
Khalaf: 17% of observed Whole Foods shoppers were Instacart or DoorDash couriers
“I went to Whole Foods, and I tried to see what percentage of the people coming are paid shoppers versus individual shoppers. How many are holding an Instacart badge or a DoorDash? It was actually 17% over a period of two hours. That was zero two years ago.”
Perret: Large merchants will build their own payment and POS financing products
“I actually think you're underselling the merchants massively though. The level of the merchants are active in trying to build differentiated payments products, point of sale like point of sale financing products, like loans, so on and so forth. Not the small o…”
Plaid CEO: CFPB's open banking rules will face widespread lawsuits
“I'm certain it's gonna be sued by, like, I don't know, a gajillion different companies. I know the banks, the big banks want to sue it, the small banks want to sue it, like a bunch of fintechs want to, it's all, all, all over.”
Perret: Regulators will force non-compliant banks and fintechs to share consumer data
“There are certain banks that still block access to consumers' data. Those banks are gonna have to give access, and there are certain fintech apps that don't give access to a consumer's transaction data, that don't give access to a consumer's account routing nu…”