Welcome to Breaking Banks, the number one global fintech radio show and podcast. I’m Brett King. And I’m Jason Henricks.

Every week since 2013, we explore the personalities, startups, innovators, and industry players driving disruption in financial services. From incumbents to unicorns and from cutting edge technology to the people using it to help create a more innovative, inclusive, and healthy financial future. I’m J.P. Nichols, and this is Breaking Banks.

Welcome to Breaking Banks. I’m your host, Brett King, and you are, of course, on the number one fintech podcast globally. We are happy to have you back.

This week, we have our returning friends from Plaid. We’re going to talk about what’s happening with essentially the world of payments, particularly the momentum being gained by pay-by-bank, not just FedNow in the United States, but what’s happening in India with UPI, with PIXPAY in Brazil. We want to get into all of that and how that sort of modality shift is really changing the way we think about real-time payments, the architecture such as wallet architecture that’s expanding and so forth.

So let’s get into it. Welcome to the show, the Chief Operating Officer of Plaid, Eric Sager. Eric, welcome to Breaking Banks.

Thank you for having me. Thank you. So, of course, Plaid is the technology company powering the fintech ecosystem at Plaid.

Eric leads the company’s business strategy and operations as well as the go-to-market teams. Prior to Plaid, Eric served as Chief Risk Officer at BlueVine. He led teams across there, ensuring end-to-end client experience.

Before that, he held multiple positions at Square, including Head of Sales, also led Square’s efforts to optimize the end-to-end customer lifecycle as Head of Growth and Retention. So he knows network effect and how this works in these payments arenas, and also did a stint in San Francisco, London and Joburg for Bain. So Eric, welcome to the show.

Trevor Neece is a payments and risk professional with 20 years of e-commerce experience. He’s coming to us as the Senior VP Global Head of Digital at RDN. Trevor, welcome to Breaking Banks.

Excited to be here. Yeah. So you’ve got a ton of experience, apart from global strategy and for digital merchants, which driving the product roadmap and go-to-market strategy.

You worked on Microsoft’s global payment strategy. So great reference points. We’re grateful for both of you coming on the show today.

First of all, Trevor, what’s happening with you guys in Europe right now? Can you give us just a bit of a status of the business and how things are going, just well, globally, actually? Yeah, absolutely. Yeah. I mean, I think first off, we’ve seen quite a change in merchant behaviors coming out of the pandemic.

Right. There’s been a tremendous amount of focus on performance, approval rates, a lot of focus on local payment methods and how we think about that. But now costs, costs have become really a big focus area for our merchants and prospects and how to reduce that total cost of payments has really become top of mind for merchants globally.

And no doubt we’ve seen probably more pressure in the U.S. than perhaps some other countries, but it definitely is a worldwide phenomenon. But what we’re seeing, though, is the world is it’s not getting simpler. It’s actually getting much more complex in the payment space.

And the U.S. is probably the best example of that, where it used to be used to be easy back in the day. It was just process card and you had everything you needed and just send a big truck with a truckload of money to different ATMs around the place. That’s that was kind of it.

Right. And things have changed quite a bit. And, you know, we’re fortunate that and I think we’re we’re built to deal with complexities and and make that really simple for our merchants.

And so we’re seeing a lot of opportunity for us to continue to add new innovation and new customer experiences for existing customers, but also enable some some new customers and new scenarios out there in the industry as well. Absolutely. Eric, how’s things going over at Plaid? Going well as well.

I mean, we’ve obviously had a number of years, as you said, kind of building up the kind of the overall infrastructure across the broader Fintech ecosystem, really just allowing consumers to, you know, both more safely, but also more effectively connect their accounts. And that’s not just bank accounts, but that’s liability accounts, investment accounts. And that has powered a whole host of use cases and payments is one of them.

But it also powers identity based use cases of our powers, personal financial management use cases. It powers lending use cases. And so it’s it’s really been the foundation for, I think, a lot of innovation in the space that, you know, drives not just financial inclusion, but that gives any consumer more options, better, better prices.

And that applies to obviously businesses, customers, customers as well in the way that Trevor just mentioned. So of course, Plaid has been best known in the U.S. as the closest thing we have to open banking in the U.S. through the aggregation layer and so forth. But of course, for Aiden’s business in Europe, you guys have been directly involved in payments architecture as well, right, Trevor? Oh, absolutely, absolutely.

Yeah. And quite deep, actually. And, you know, and just to be clear, too, is we have a very large business in the U.S. as well.

We have, you know, really about a quarter of our employees are there. It’s the fastest growing market for us. So we are very, very focused in the U.S. When we think about architecture, one of the things that I think we’ve been able to really invest a lot of really great resources in is the fact that we have banking licenses in the U.S., in the U.K. and in Europe.

And so our ability to connect directly with the central banks and provide these open banking capabilities at just a just a phenomenal rate and with innovation has been really, really helpful. And then hence, you know, partnering with Plaid to help us create even a new scenario here in the space, especially in the U.S. and beyond, is just a great opportunity for for us and for the industry, I think. Now, you know, we’ve been watching this space, obviously, FedNow has released in the U.S., it is starting to gain some momentum, but the real action appears to be happening offshore.

We have in Brazil with Pixpay, Brazil is effectively now at about 100 percent of the adult population, about 75 percent of the total population in Brazil is using Pixpay. It’s the fastest growing payments network in the world today. We have the UPI rails out of India, the Unified Payments Interface, I think it stands for UPI.

And we are looking at by 2027, 80 percent of retail commerce going over the UPI rails. And this is driving adoption of wallet technology as well. So in 2025, about 55 percent of all retail commerce transactions will go through wallet architectures.

And if we’re starting to talk about autonomous payments in the future, AI based payments, it makes sense that bank pay is going to be a very big part of that sort of agency based payments layer. But certainly the trend looking at Brazil, looking at India, you know, two of obviously the largest emerging markets, part of the BRIC alliance. We have, you know, UnionPay 2.0 in China, enabling not only real time payments from bank to bank, but also the fintech platforms like WeChat Pay and Alipay co-opted into that.

So it seems like just like everywhere in what we would have traditionally called the developing world now is is really shifting to these real time payments very rapidly. But, you know, we have a lot of legacy payments behavior in places like the US and the UK. And yes, we’ve got a lot more contactless payments happening and so forth.

And obviously the bank pay is heating up. But what do you think we can learn from these other markets? Because we would have considered in the past the European markets, the US markets where you guys are both operating, we would have considered them the most sophisticated markets for things like payments architecture. But right now, with the massive growth we’re seeing in bank pay, that tends to be offshore.

So, Trevor, what can we take away from that? Is that sort of telescoping the future of the US and European markets? It’s kind of it’s kind of ironic, as you mentioned, the developing countries are actually the leaders in the payment space. Yeah. You think about APAC and in general, I mean, wallets have been around for years in these particular markets, right? You know, the Alipay is that WeChat pays, especially in China.

But then you get into Southeast Asia and everything is wallets at the end of the day. And then, as you mentioned, India and Brazil specifically, we have never seen payment types grow this fast in our lives. And to be fair, they’re solving for something slightly different than the US to some degree, right? I mean, India is all about how to get cash out of the ecosystem.

And so UPI was really the answer that the RBI and regulation bodies came up with to help drive that. But they’re also spending a lot of time and effort with regulation to help enforce it and make sure that it’s adopted, you know, across the entire country. And it certainly certainly is for merchants to play in that space and process locally in India.

There’s a lot of UPI requirements that are mandated. Brazil is also fascinating, no doubt, still trying to get cash out of the ecosystem. But, you know, they’re solving for a couple of other things, too, which is providing a much cheaper payment type that exists in the country.

But the central bank has been super involved and engaged on ensuring that every bank app has picks available. It’s got the same logo in the same position. It’s just right in front of the face of every consumer.

And customers are adopting it at light speed, in essence. They got work to do still to get recurring to work on that, to get advancements to work. But that’s all coming, it looks like, you know, this this year.

So that’ll be fascinating to watch. But then if you bring that back to the U.S., yeah, we’re slow to adopt these things. You know, I think methods have certainly been around in Europe for many, many years, whether it’s more of a wallet or just with SEPA in general, things of that nature.

Oh, right. Yeah. But but we’re picking up speed, I would say.

Right. And no doubt the pandemic was kind of a good thing, frankly, for us. Right.

I mean, now tap to pay is prevalence. Like I’m almost shocked now when I go to a point of sale and I can’t use without my phone to just tap it. Right.

And so we’ve seen some good progress there. While it’s now it’s not just PayPal, which was really the sole wallet for so many years online, they, of course, never were able to really bust into the point of sale. But but now you got cash out the Google pays, the Apple pays, you know, Venmo, only Apple Pay and Google Pay have really tapped into that point of sell, too.

I think what’s going to be fun to watch here is, you know, how do we at some point also get bank pay methods, not only online, but even point of sale? Perhaps we can talk about that later. But that’s going to be that’s going to be a fun one to see what happens. Eric, from an operational perspective, obviously, there’s a lot of technology integration elements here in markets like Brazil and India implementing real time payments just because labor costs are significantly lower, tends to be a lot cheaper.

But we see a lot of sticker shock for Fed now in the United States. Do you expect that that’s going to get more accessible for banks and merchants over time? Is that part of the reason that’s a little slower here? Yeah, I definitely think it will become more accessible over time. I mean, big picture, I see all of this as kind of an inevitable kind of digital evolution of how people pay.

You start with cash, you go to check, you go to debit cards. And over time, you go to fully digital kind of debit, which is what we call pay by bank. And so there’s a lot of pay by bank uses cases that exist in the U.S. today.

If you were funding a new brokerage account or a new bank account, a lot of the subscription payments, if you were trying to buy a car, for example, many of those are happening via bank payments today already in the U.S. And so we power actually a lot of those use cases. And I think one of the trends that we’ve seen there and one of the reasons we’re so excited to work with Adyen is, you know, we’ve got a lot of merchants that came to us that said, hey, we really now want to integrate this pay by bank capability into our broader payment stack. And we’ll want to optimize what a consumer ultimately sees because there’s so many benefits from a consumer’s perspective, paying with a bank account, you can help reduce your costs.

It’s also a way to more maturity, I think, manage your finances. And you see that reflected again in the U.S. with like a lot of the younger demographic actually really prefer to pay with their bank account. Like some of the I’ve seen already, it’s like 60, 70 percent of young people in the U.S., they actually want to pay with a bank account because they’ve seen all the horror stories of what happens, right? If you are on the credit path too much.

They’re just not excited about things like cashback and airline miles. They’re much more concerned about they don’t want to take on credit load. They saw their parents having excess credit.

And then, you know, what happened during the financial crisis and what happened during the pandemic. And there definitely seems to be sort of a generational shift to more of the, you know, value store sort of debit account rather than taking credit. Right.

Would you agree, Eric? Yeah, exactly. And I think those trends will continue. Right.

I mean, that’s I think that’s here to stay. So as that generation kind of matures and as others fall behind, I think you’re going to see more and more demand for those types of solutions as well in the U.S. and other markets that have traditionally had like a really strong culture of like rewards, credit cards and other things that will continue to evolve. Yeah.

Now, Trevor, when we sort of look at the sort of technical aspects of this and sort of an infrastructure play, how much of this depends on your agility and your tech stack to be able to incorporate bank pay stuff as a bank and as a fintech? Yeah, and I think I think it kind of depends on which which lens you’re taking here. But certainly, you know, from an adding perspective, just another local payment method, frankly, right. Like we’ve we built our tech stack to be super agile, super flexible to just add anything.

Agnostic. Yeah, exactly. Yeah.

Whether it’s convenience store payment method in Japan, whether it’s a, you know, a wallet in China or whether it’s a bank payment method, it’s quite simple. And certainly our intent, our goal is to make this just absolutely simple and easy for any merchant to want to consume. Right.

Again, going back to a lot of complexities, that’s I think one of the real opportunities we have here between us and Plaid, the solution that we’re building here is how to make sure that we just make it simple. We make it easy for merchants to plug into and take advantage of a payment type that will add to their selection of payment types for their customers who want to use it at the end of the day. So there is there’s some complexity certainly behind the scenes.

But I think I think we’re able to really do a nice job to kind of mask that a bit and take care of that for for merchants. I mean, you’re talking about these different countries and so forth. So just to give people a bit more of a picture for Adyen’s sort of merchant profile, how many sort of merchants and what sort of diversity of merchant business do you guys have? Yeah.

And, you know, so we focus entirely on large enterprise merchants. And and what that really means is, you know, those that are well north of, you know, 100 million, 500 million, well in the billions of revenue a year, we really focus on kind of a white glove service with respect to that, you know, we’ve we’ve never made an acquisition. So we have a single integration, a single platform, single reporting.

And again, just to make that easy, subscription merchants are a big part of what we do online retail, but we also have point of sale and we also have platforms and marketplaces that we that we support. And so there’s definitely a wide gamut, but it’s very much a very global company. Yeah, we started out, you know, in Europe and greatly expanded into LATAM, North America and Asia-Pacific.

You know, we have certainly some of the most local partner licenses than than anybody out there as well to provide that really nice local experience. Eric, you mentioned some of the use cases that are already getting traction in terms of pay by bank, what are some of those where consumers are already comfortable with this modality? The biggest ones are obviously account funding, right? So let’s say you want to set up a new account, you want to transfer funds into it. That’s that’s very active.

Bill pay is another one that’s very mature. You think about how you might pay your cell phone bill or your electric bill or anything like that. Subscription payments is another area that’s very beneficial and it means it ensures that from a consumer’s perspective, like that service is never interrupted.

It’s very attractive from a merchant perspective, not just because of the potential cost benefits. But again, if I switch my credit card, if I switch my debit card, if the number changes, any of those things don’t apply once it’s kind of secured into an account. And then, you know, large ticket purchases.

I mentioned earlier, we have Tesla, Rivian, John Deere, all customers of ours already who use pay by bank for really large dollar amounts. So where the average selling price is very high, the cost piece of this becomes a huge portion of it and oftentimes can lead to merchants would be willing to kind of provide meaningful incentives to the customers as well to kind of make that make that switch. But again, in the context of, as Trevor said, you want to meet customers where they are and you want to make sure that you have all payments methods available.

So this is one more payment method. I think it’s a really powerful one. It’s one that is only going to get better and better and better.

But I think you will see for many other use cases, this kind of becomes one of the suite of things as opposed to the only thing. Trevor, you know, what are some of the core benefits for merchants in using bank pay versus, say, other other methods we see? And Eric commented on one of the most important ones, which no doubt is cost. I mean, especially in the US, one of the most costly places in the world to process cards.

It provides a nice cost alternative. The second thing is churn and subscription churn or customer churn. And what I mean by that is, you know, the average American holds on to their bank account for about 17 years.

I looked at my account, turns out about 17 years since I’ve had it. But the average card is only around for two or three years. Right.

So you can naturally intuitively see that that chance for success on that bank account that’s been there forever versus a card is going to be certainly much greater. And then the third thing is you can now reach a population that you may not have been able to reach in the past. I mean, there’s even today, so there’s a population that has maybe a bank account, but doesn’t have a debit card, you know, that’s right.

It’s your MasterCard. And so now you have access to that population to increase your sphere of opportunities to sell your products. And so those are really the three big reasons.

But, you know, as Eric also mentioned, like the idea is give choice, give payment methods that your customers want. And this is another opportunity, another option for those customers. And again, the younger generation is going to be probably much more susceptible to wanting to use this today and in the future as well.

That’s a great place to target here. All right, well, let’s talk about that, because it does tend to be, you know, a generational shift. Like I remember my grandma used to, you know, give me the dollar bills in with the cards and stuff, you know, when I was younger.

Of course, you know, checks were common back in those days, but there is a big generational shift here. But I still have people that I meet, for example, in the US that are like, well, I’m never going to give up my cash back or I’m never going to give up my airline miles and so forth. But that seems a little bit anachronist now, you know, like seems a little bit sort of outdated.

You know, when we start thinking about the payments activities of millennials, Gen Z’s, alphas, you know, as that’s changing. Eric, what sort of changes are happening behaviorally from a payments perspective from generational, you know, segment? Well, I think I think the first thing actually to consider is like even in the US, you know, 40, 45 percent of people do not have access to a reward card. So it feels that way sometimes as it feels like almost everybody has one.

But in fact, that actually isn’t true. There’s a huge part of the population that doesn’t have access to it for whom, you know, suddenly getting an incentive on a pay by bank transaction actually is way more attractive than the no rewards card they would otherwise have. Beyond that, you know, I think it’s kind of akin to what we already touched on, but I think the younger generation has seen, right, like in some cases, their parents, people around them grow up with debt and feel the burden of that.

And so I think many young people now are more cautious, not all, right, but many are more cautious about how they how they live their financial lives. And so you see that in terms of them wanting to use their data to build, you know, to use leverage, personal financial management tools and other things from a much earlier age. But that also then applies to the payments.

And it’s just fundamentally true that if I’m the kind of consumer that pays with my bank account, I’m a much lower credit risk. I’m much more financially mature than the kinds of folks that are using kind of mainly credit vehicles to do that. And so that’s a that’s a that’s a huge positive.

And then finally, it’s about making this easy. Right. There’s ultimately two things that matter in terms of pay by bank.

The first is the percentage of people that actually choose it as an option. So if I show you five different payment types, what percentage of people actually choose pay my bank versus choosing a credit card or choosing something else? And then the second is for those people that choose it, like at what rate can they convert? Right. And that’s important for both the merchant and the consumer, because you don’t want to click on something only then to not be able to go through it.

And I think that’s an area where, again, like in working with Adyen, like we’ve really innovated quite a bit. And so what we’ve seen, for example, is we just had a use case that we implemented where we offered a one percent incentive and that that drove the adoption from about 16, 17 percent to 60 percent. So suddenly that menu, you have 60 percent of people saying, no, no, I actually want to go pay by bank.

And then the second thing we’ve seen is with how we’ve architected Platt and PlattLink specifically and all the experience that we have on many of the use cases, like account funding and bill pay that I spoke about earlier, is we’ve really managed to make the conversion much better. And so we’ve had a customer just in the travel space where they were seeing conversion of around 20 percent. So quite low.

Right. You have 15 percent of people choosing it, but then only two out of 10 people actually go through with the transaction. And we were able to get that above 70 percent simply by implementing our solution.

And so that’s fantastic. Suddenly you see consumer and that’s the foundation. So it’s consumers may want it, but if you don’t make it easy and secure for them, you’re not going to see the actual adoption and you’re not going to see the conversion that you need to really scale it.

And we’re right at that inflection point where we have the capabilities to deliver that for consumers and merchants alike. Trevor, in your experience, just before we got a break, is there any significant benefit on the fraud side with with pay by bank versus other payments methods? Yeah, no, we really believe there is. And this is where Plaid really brings a ton of value to this partnership that we have here.

The ability to really authenticate the customer that they have access to that account is huge. You almost eliminated fraud in that case, because if that customer fraudster rather has access to somebody’s bank account, let’s be honest, they got bigger problems probably than trying to buy something that we’re hoping to protect. That is going to eliminate the vast majority of fraud.

And I think the other really nice thing is with Plaid’s solution with adding here, we’re also able to really validate like, how long has that account been around for? Do we have confidence that the customer can pay their bill? So you not only eliminates fraud for the vast majority, but you also can significantly reduce, not eliminate even insufficient funds. So, yeah, we see this as a really nice opportunity to help squeeze out and get rid of a lot of fraud in the whole ecosystem. Yeah, I mean, it’s interesting that the UPI rails and the success they’ve had in India, part of this is also because they’ve also created new identity infrastructure with their dark card.

So we’ve seen significant advantages there in China with facial recognition. I know there’s social implications for that in the West, but, you know, they have much, much lower fraud because of biometric identification systems on those payments rails. So if you look at Alipay, for example, it’s like sixty point zero zero zero six basis points of fraud.

So sixty, sixty four cents of fraud for every ten million in transactions, whereas for card not present in the US, it’s like eleven thousand two hundred. So ten thousand times higher, effectively. So bank pay does give you, you know, from a KYC and identity perspective, some advantages because you can lock it into, you know, mobile banking apps and stuff like that.

And, you know, the secure infrastructure. But anyway, let’s have a quick break. What I want to talk about when we come back from the break, tell us a bit more about the partnership and then let’s do a bit of future gazing.

Let’s see what’s going to happen over the next few years as we start using more AI and payments and things like that. I’d love to sort of riff with you guys on where that’s going to go. Sound OK? Sounds great.

That’s great. Great. All right.

So let’s take a quick break. You’re listening to Breaking Banks. We are talking pay by bank with Plaid and at the end, Eric Saga, who is the chief operating officer for Plaid and Trevor Nice, who is the global head of digital at ADN.

So we’ll be right back. You’re listening to Breaking Banks. This show is brought to you by Alloy Labs.

As much as we love talking on the show, we believe that action is more valuable than talk. Alloy Labs is the industry leader in helping fearless bankers drive exponential growth through collaboration, exclusive partnerships and powerful network effects that give them an unfair advantage. Learn more at AlloyLabs.com, Alloy Labs, banking unbound.

Welcome back to Breaking Banks. I’m your host, Brett King. And we have in the studio, virtually, of course, the team from Plaid and ADN.

We have Eric Saga, who’s the chief operating officer and Trevor Nice, who’s global head of digital for ADN. Where are you guys both coming to us from? Where are you connecting from today, Trevor? Yeah, I’m actually based in Seattle. I live in Seattle, but office technically, I would say, is San Francisco, but on the West Coast.

OK, good. Eric? I’m from San Diego, so I’ve come a long way from where I grew up in Germany in terms of weather quality. Yeah.

Where in Germany are you from? Frankfurt. OK, so well known. A lot of us listening to the show have, of course, been through Frankfurt, wonderful town, but great.

So you guys obviously have experience in the U.S. market. So one of the things we’ve noticed in terms of and I want to talk about the partnership in a second, but just before we get on that, just to sort of tie in and not neatly the discussion we’re having on demographics. One of the things we see, you know, certainly in Europe, but certainly in Asia, also in Africa, we’re seeing in terms of wallet adoption and this flows into the pay by bank, you know, but also sort of the value store process is we see very strong adoption for, you know, the Gen Z’s and the alphas, like we’re talking about 80 percent adoption rates.

But in the U.S., those rates tend to be somewhat lower. So about half of that. Now, we can assume that young the younger demographics are going to use wallets more.

But how much of that is sort of like POS dependent or culture and network effect dependent in the U.S. versus what we’ve seen happening in the U.S., Trevor? Yeah, I think I think a lot of it is culture, frankly, I mean, I think we talked briefly about some of the incentives, right, for for cards in general, and no doubt I fit the demographic of the older generation who loves my miles, loves my point. You know, you can change behavior, though. That’s the great thing about Americans.

You can kind of buy them to do anything you want. Right. And in all reality.

So you provide incentives. You can change behavior. You can change the culture.

And I think as we’ve seen in the U.S., it takes time to change culture and change behaviors, whether it’s payments or anything, frankly, for that matter. And, you know, I think I think you need something to happen to help shift that. And, you know, not to keep keep reiterating the pandemic, but I do think that was just an amazing thing that happened from the payments world to really expedite digital transformation and to really drive people to wallets, to touchless, you know, tap and pay to try different pay methods for, you know, buying and having something delivered to your door for groceries, as an example.

Right. Like there’s so many just new scenarios that came up that required a different type of payment type that really opened the doors for wallets specifically, but it’s also opening the doors for other new payment type behaviors as well, such as pay by bank. So I think it’s a it is a cultural thing.

It takes time. I think you need some events to help expedite those. And I think, you know, it’s the one time I say we’re fortunate we had a pandemic, but I think we were, frankly, in the payment space.

I mean, you do have that behavior in the States, like, can you cash up it to me or can you Venmo it to me? But, you know, the fact is there is sort of a little there’s a social network element to that. And what we have seen with PixPay and UPI in particular is you do see families sort of like, you know, the parents saying their kids, you know, money and, you know, in China, the red packets, you know, and people sending gifts with the red packets that creating network effect. So it’s sort of like the fragmentation of the free market model in the US versus these sort of combined models, which tend to be pushed by all the banks, tends to, I think, create more rapid network effect.

But that’s just my theory. So I actually really I really like that point, though, because you’re absolutely right. If I, you know, buy something from a friend or, you know, want to split a meal with somebody, it’s like, oh, what do you have? Oh, you have Cash App.

OK, I better get Cash App, right, or Venmo or whatever it might be. And so your circle of friends continues to expand to their circle of friends. And next thing you know, you’re 100 percent right.

Like that is how these things take off. So tell us, Eric, maybe tell us about the partnership between Plaid and ADIEN and why at this time and what does it mean for you guys? I mean, we’re very excited about it. One of the things that we noticed, as I said earlier, we had a lot of customers that have always come to us to try to implement pay-by-bank cases.

We applied for, you know, account funding and basic bill pay use cases, et cetera. But over the last probably 12 to 18 months, what we noticed was more and more merchants coming to us that you would traditionally think of like e-commerce and other kind of retail or interplayers who they’re not going to just do only pay-by-bank. I mean, you can actually do an account funding use case.

You could do a bill pay use case where it’s only pay-by-bank. That’s the only option, right? You can pay with a check or you can pay with your bank account. That’s it.

Like they don’t like a lot of those players wouldn’t accept credit cards, et cetera, before. But what’s now actually happened is a lot of merchants that up until now hadn’t been using pay-by-bank started approaching us, started asking about pay-by-bank. But in order to make pay-by-bank a success, as Trevor hinted at before, it’s not just making pay-by-bank standalone better.

It’s also about how do you integrate pay-by-bank into the suite of payment options that are available to the merchant and the consumer. And that is not something that we ever were going to go build on our own. So, you know, I think Adyen obviously is world class when it comes to building payment solutions for their merchant base.

We had a lot of merchants specifically ask us about Adyen and whether we would consider working together. And then those two things combined really kind of led us to have the conversation. And here we are.

And we’re very excited to be working on solutions together that will benefit both consumers and merchants alike. Excellent. How much is this a sort of melding of the tech stacks or is it more like protocols or, you know, like just how is that, you know, operationally, how is this partnership coming together? I think to start with, it’s as Trevor said, it’s more of an it’s another payment option.

I think that Adyen is kind of integrating into their set of solutions. It’s also, though, how we go to market together, how we think through incentives, how we engage kind of merchants and everything else. And so all those things combined, I think, is where the opportunity is at.

Again, from a merchant’s perspective, it’s really valuable to have pay-by-bank as part of your option set. It helps you bring down costs. It can be, you know, 40 percent plus cheaper than some of the other options.

And that that ultimately has an impact then on your blended payments costs. And so if you reduce if you reduce your cost by 40 percent on 1 percent, that maybe is not that big of a deal. But if you start reducing your cost by 40 percent on 10 percent and then 15 percent and then 20 percent and then 30 percent of your volume, it suddenly becomes a very big deal.

And then it has the added benefits of stickiness that that Trevor highlighted as well. You know, if you if you have a subscription based business and you have your consumers on a bank account, you know, much less likely that they fall off when inevitably they change out their credit card or their debit card or whatever it might be. And then from the consumer side, you have all the benefits that we touched on earlier.

Right. Lots of consumers want to do that because, again, their services are uninterrupted. They don’t have to constantly update it.

It allows them to manage their finances more effectively and ultimately the lower cost associated with it will benefit them as well. It seems like that seems like an interesting opportunity as people as their cards expire, you know, having them adopt these alternative methods. And, you know, you can you could see a time when we just don’t issue plastic cards anymore.

I joke about this when I do my talking head stuff on the road and I ask banks in the audience, you know, how many of you are still issuing plastic cards to your customers? Right. And the arms, the hands will go up. And I’m like 1970s tech in a 21st century world, like while it’s clearly the future.

So, Trevor, when we talk about this sort of ecosystem of payments, we we’ve often talked about on this show the cost of implementing FedNow for banks, you know, a million, two million. We’re hearing sort of price price tags around that that price point. But, you know, we we don’t talk about the merchant cost of adopting a pay by bank.

So is that, you know, I mean, specifically what you guys have been working on, lowering the cost of adoption of bank pay as sort of part of the option set? Yeah, it’s exactly right. And that’s and that is the beautiful thing about the Plaid add-in solution we’re building here is for us at add-in, it’s just about as easy as check a box and this implementation will be almost seamless to the merchant at the end of the day. Right.

Plaid and add-in and all the heavy lifting, you know, managing the UX, managing all the reporting reconciliation, all that comes through that same integration the merchant already has with add-in and the same integration provides everything back to them in their back office exactly the way they need and expect, just like a card. So we’ve really done, I think, a nice job on really minimizing what that what that integration looks like. Now, you know, the one thing I would caveat there is if incentives are going to be provided, then there’s going to be a little work there.

Right. The merchant would need to figure out how to accomplish in partnership with us. But other than that, yeah, we’ve we found a really nice way to to greatly simplify that.

And it’s one of the big benefits that we offer. Are you talking merchant incentives or customer incentives? Oh yeah, thanks for clarifying. No, the end user.

Yeah, yeah, exactly. Back to the point, I’ll use me as an example, I’ll probably keep using my miles card, but if you give me an incentive, happy to switch, you know, and it comes down to as long as the consumer sees value and that value may differ. The younger generation, the value may be, hey, it’s a debit to bank instruments.

And that experience that that plan I have created is so frictionless. It’s as good as a card, in essence, from a low friction perspective, that’s enough. But for somebody who has a credit card, a premium card, it might take a little more incentive, right, to convince them.

Yeah, I mean, I do think part of this is sort of just a generational shift, honestly. But at the same time, you know, on the embedded banking, the embedded payments arena, we have seen, you know, Buy Now, Pay Later, which has is sort of the best example we have a contextualized credit right now. But there’s there’s opportunities for contextual credit, contextual bill management, contextual savings.

And all of that sort of comes with this sort of real time approach. It’s not just real time payments. It’s real time access to credit.

It’s streamlined KYC. So you can do stuff in the moment. And obviously, you know, Plaid’s architecture is a key element of that, Eric.

But let’s talk about, you know, how do we make it easier for consumers to use and not, you know, get over this this thing with previously when we’ve ever talked about bank to bank payments, you know, you’ve got to have a sort code or a swift code or these sort of complexities, which, you know, it’s easier just to just to put a card number and expiry expiry date in. But how are we attacking sort of the consumer experience when it comes to pay by bank? Yeah, I’m happy to chime in here. I think I think the way we’ve approached that is as simple as logging into your bank.

That’s it. And it turns out more Americans know their bank account login credentials and their credit card. Right.

And so it’s actually even simpler, like you no longer have to, you know, the US back in the day, you find your paper check, you get your routing number, your checking account number, you actually typed it in correctly and you didn’t actually, you know, it’s somebody else’s account in essence. Or how many times I’ve Google search my routing number for my bank? I can’t tell you. Right.

Exactly. Or the micro deposits. Right.

I mean, I haven’t seen that in a little while, which is good. But, you know, you wait two or three days and you drop in or three. And some banks, like it’s just a mess.

Right. And so, yeah, yeah. And this is where Plagg is bringing so much power here to make this experience easy and frictionless.

But but that’s it. Log into your account. You’re done.

Yeah. Eric, I mean, you almost forget how painful it used to be. You know, it’s not that long ago that it was just an incredibly painful process to do all of this.

And I think these days it’s much easier for consumers to kind of go through that flow. It’s also increasingly something that consumers have experienced, you know. And so once you experience it once or twice, suddenly you realize there’s a better way of doing this.

And then the third, fourth, fifth time, it’s much more likely that you’ll do it again. And that is something that we’ve seen, too. So we see, you know, consumers that are returning kind of Plagg consumers and that have used Plagg before, we see those folks adopt and then convert at much higher rates as well.

That’s again, this network effect really at play, where the fact that somebody’s kind of seen it before, it’s used to successfully really enjoyed the experience from a consumer perspective. Now they see it pop up in a different context. Maybe to go make a payment at an e-commerce checkout, suddenly they’re more likely to choose that as an option and they’re more likely to go through, which is then what drives all the value that’s being created here for both the merchant and the consumer.

Yeah, I mean, you know, to the point where it’s sort of getting like now Facebook login, right? Where you’re just verifying, is this a browser you want to use or is this a merchant you want to use for pay by bank? But, you know, one of the things that has occurred to me just as we’re talking, I’d love to get your thoughts on this is, you know, if you were to ask the average Brazilian what PixPay was, they’d probably be able to tell you, right? If you were to ask the average Indian what the UPI rails were, they’d probably be able to tell you. But if you ask the average American what FedNow was. So do we need like specific branding around this sort of bank pay capability to make it more consumer accessible, do you think? What do you guys think? I mean, I actually think this is going to take time and you’re spot on with your observation, right? Like if I talk to my friends, my circle of friends, I guarantee they don’t know what FedNow is, right? And and I think, you know, what’s going to happen is it’s going to take time.

And the network effect that we’ve been talking about almost this whole time now is real, meaning that once you talk to your friend, have you tried this thing? This is pretty amazing. And they’re like, well, let me go try it. And here you go.

And, you know, and all it’s going to take is a couple of really large merchants that exist out there to really accept it, get customers to try it. And I think it’ll blow up. I think it’ll it’ll really become mass adopted at some point.

But you’re right for now. It’s very nascent and the Americans aren’t familiar with what it is. They haven’t really seen it or felt that or used it.

FedNow in itself is still so much in its infancy. Like, you know, you can do payouts in FedNow, but you still can’t collect payments on it yet. You know, there’s RTP, the conglomerate by the by several issuers in the U.S. that have now been accepting payments a little bit still nascent.

But it’s going to take time. I also think that’s where we’re also excited to see the solution we’re building is going to be also agnostic, like ACH runs on for some, you know, some period of time. But we’ll also be able to pull in the FedNow and RTP and make that a seamless banking experience.

But just so happens that FedNow will be, you know, real time and be more of a push payment versus, you know, the ACH rails, which is beautiful for subscriptions, which is more of a pull payment method, but also as a, you know, a day or two for for settlement. What does this look like in three to five years? You know, Trevor? Yeah, I think I think Brett, when the three of us sit down again three to five years from now and talk about this and say, hey, we’re right on what we’re expecting. I think I think we’re pleasantly surprised.

I think we’re going to see a bit of a, you know, a slow, a slow roll for a little bit here. And I think it’s going to take off. I think this network effect will be real.

I think it’s we’re going to see a lot of these solutions that exist in the marketplace. We’re going to see, you know, we already today see a tremendous amount of demand from the merchants. We see that there is willingness, especially from that younger generation, to want to use and adapt and move to banking methods.

We already see globally where this is headed. The Americans tend to follow, you know, the other markets. So, I mean, I’m incredibly bullish and confident.

What was it that Winston Churchill said that Americans can absolutely be depended depended upon to do the right thing after they’ve exhausted all other options? And that’s the same with this sort of real time payment stuff. But now, so, all right, let’s talk about artificial intelligence in the mix, because, you know, we haven’t really got into that a little bit. But how, you know, it occurs to me that AI based automation of payments, so particularly for merchants and e-commerce platforms and so forth, more and more automation coming in this as a merchant, you having some of the supply chain automated as a consumer, me having my personal AI that’s managing my bills for me and only telling me when it needs my intervention in things.

I mean, we could see these things happening over the next five to seven years potentially. Right. So do you think is bank pay the, you know, the key to success of there? Or is it just, is ADN and Plaid going to be building more intelligent bridges, more intelligent, you know, traffic capability so that the AI will choose the right payment at the right time? How do you guys think, see that developing? Maybe, Eric, you start and then Trevor, you can jump in on the merchant side.

I think there’s many ways that over time, right, like AI can benefit consumers and merchants. It’s not just going to be limited to payments. It’s even things like an AI that gives you advice on should you be taking out a new type of loan to pay off a higher interest loan? Should you be doing that today or tomorrow, like all those types of things.

Right. And so can I afford to go out with my friends for my birthday party tonight? Yeah, exactly. But then how should you pay? And then not just how should you pay for it, but you’re going to have a big party tonight.

You deserve it. And so how ultimately over time do you do that in a way that’s good from a financial perspective as well? And so I think one of the things that I’ve always been really excited about is like the potential of the infrastructure that we’re building and coupling that with AI to just give people the tools that today really only the very wealthy have. Right.

If you’re really rich today, you have a whole army of accountants and financial advisors and everybody else that does this stuff for you. But there comes a world where, hey, anybody can have access to these types of tools and can get the right advice to live like a better financial life at the end of the day for themselves, their family, et cetera. I think the key to all of that, and it goes back to the question you just asked a little bit earlier around brand, I think it’s deeper than brand.

At the end of the day, this comes all comes back to consumer trust. Right. Like me sharing my username or my password for my bank account is a scary experience.

Right. And so I have to go through it a couple of times to really kind of trust that the system is there to protect me. And I think we all have a role to play in that, Plaid, Adyen, but also kind of the regulators and policymakers, the FedNow folks.

Everybody else, like if you really want it to take off and create the value that it can for people, like the trust component is the most crucial piece of that. And I think that’s the methods that have gotten that right. Even internationally speaking, they’ve built that on a foundation of trust with the consumer.

And once you have that, then you can kind of add more and more features that, you know, again, improve consumers’ financial life, improve their choice, et cetera. But the trust piece is really the foundation point. Trevor, I mean, you deal with some of the biggest merchants on the planet.

How are they thinking about AI in terms of their platforms when it comes to this stuff? Yeah, I think for them it’s about providing or steering the customer to the right payment method that makes the most sense for them. So, for example, if somebody is going to sign up for a subscription, what is going to have the lowest churn? Make sure that that’s, you know, bank account or payment method, whatever it might be, just works every time. If it’s going to be a large purchase, a single large purchase, that might be a different payment method that should be the one that is actually presented or provided to that particular customer.

So I think it’s two things. I think one is just providing the right payment type at the right time. And the second thing is removing friction and finding a way to just make it easy where it just works.

I mean, you know, I love going back to the Uber example, like they’ve mastered this, right? Like I walk in my ride, I walk out and I don’t have to pull out my payment type. You know, how do merchants do that? They’ve, of course, been doing card on file and things of that same nature to some degree. But how do they continue to leverage AI, automation, ML, et cetera, just to make that just the best easy experience possible for their customers? I think that’s the two opportunities for sure with AI.

And this is why it’s got to get easier. It’s got to get frictionless and pay by bank is one of those things that from an architecture perspective allows you to do a lot of that simplicity of the experience and streamlining those payments. So that’s great to have you guys both on the show.

Trevor, how to, you know, obviously people can go to RDN.com, but, you know, where can if I’m a merchant interested in looking at these services, where would I go to find that out and how can I find out more, you know, how can I follow what you’re doing in the space? Yeah, absolutely. Yeah, RDN.com is a great spot of your existing customer. Reach out to your account manager, of course.

We’re at all the large conferences that you would expect. If you want to reach out to me, please hit me up on LinkedIn. But yeah, love to hear from everybody.

Great. And Eric, same for you. Obviously, Plaid.com is sort of a household name these days.

You guys have done very well. But how can people find out about this partnership in particular and more information about what Plaid’s working on right now? I mean, very similar to Trevor. And of course, like anybody can reach out to either RDN or Plaid to kind of learn more about the partnership and we’ll make sure they get to the right folks.

OK, great. And just finally, you know, what are you guys what are you guys excited about for the rest of the year when it comes to RDN and Plaid individually? So, Trevor, what are you excited about this year? Yeah, I think individually for us, I mean, this is one of the things I’m most excited about, frankly, this this project that we have with Plaid. You know, we’re in the process of releasing it right now.

So we’re early stages of it. But excited to see where we get this by the year. Excited to see the adoption and the excitement that exists in the ecosystem.

This is very much for me one of the most exciting things we’re working on. Good. And Eric? I was excited to come to your birthday tonight.

But if it’s added to Plaid specific, I don’t know if you can make it. I’m in Bangkok, so that might be that might be difficult. I’m just excited to see some of the large merchants that we both have already really kind of bringing these use cases to life and see value for them and their consumers.

Like that’s I think we’re kind of like at that inflection point. And I think as we go throughout the year, we’re going to continue to see those pop up and that will drive this whole thing forward for everybody. Fantastic.

Trevenise, Eric Saga, thanks for joining us on Breaking Banks. This week and have a great week. What’s left of it? Wonderful.

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