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 back to Breaking Banks. Today, Jason Henricks and I are connected with our guest, previous guest, John Pitts. You might recall he’s the global head of policy over at Plaid and Christy Sunkist and Cameron Taylor joined us as well.

Christy is the head of Open Finance Partnerships at Plaid and Cameron Taylor is the chief product officer of Ninth Wave. Our conversation with John and Christy and Cameron covers a wide range of topics from international open banking and the standards that we can expect out of open banking in the United States to how they are partnering together to assist financial institutions ahead of the rule making changes on open banking in the United States. Their expertise on all things open banking, digital finance, this lent itself to a conversation that was really far reaching.

And it was expertise that was impetus for why they joined us. Plaid recently announced their Gateway Partner Program, which gives financial institutions a way to streamline their integrations ahead of open banking requirements. The program makes it easier for financial institutions to choose an approach that works for their unique needs as they enable open banking.

Ninth Wave is Plaid’s inaugural partner for the Gateway Program and will support financial institutions who want to simplify their API integrations while ensuring their customers have access to the thousands of apps and services in the Plaid ecosystem and network. Together, Plaid and Ninth Wave are solving open banking requirements for financial institutions who may be at varying stages of preparedness. We’re very grateful for Plaid’s ongoing support of breaking banks.

Now, here we go. Let’s jump into it. So we are now six years in for Europe, which I think we can safely say is the cradle of open banking and open data.

And I’d like to kick us off. What have we learned in six years? We have impending deadline in the U.S. and the rest of the world has kind of pulled ahead. But what have we learned? What went well? What have the outcomes been? What should we expect as open banking finally hits the shores in the U.S.? I think the biggest thing that we can expect is a massive scramble on implementation and compliance.

And frankly, it’s an area where we’ve learned from the EU that it is very hard to do that implementation and compliance well. Outside of the U.K., there are still entire European countries where their banks don’t have APIs and are like scrambling to do it. Some of them are, in fact, begging to just be allowed to let screen scraping persist in perpetuity because they have had such a hard time building APIs.

In the U.S., there’s a very short timeline for everyone to get into open banking compliance. And I think the next three years are going to be a mad dash to figure out the how of open banking in the U.S. in a regulatory framework. Yeah, John, correct me if I’m wrong or Cameron, you might have more technical insight here.

Wasn’t the EU also a lot more prescriptive in the first place versus in the U.S.? We’ve been the typical regulatory. Oh, we want it to be industry led. Yeah, I was going to add to that.

I mean, I think, you know, when you think about the comparison, is it how much is it government led versus how much of it is industry led? And I think, you know, in the U.S. in the last five years, I think there’s been a lot more momentum and change to actually work together from an industry perspective kind of across the board, you know, whether it’s banks, providers, you know, fintechs, you know, just a lot more collaboration among them. I think we also have a pretty strong industry setting, you know, organization as well, industry settings organization. So the financial data exchange has been very important to kind of, you know, pull people together and move them forward.

And so I think on the U.S. side, it’s been a little bit more industry led versus more prescriptive by the government. And I think now the government’s coming in and giving us a little bit more encouragement to move things along. But I think, you know, that’s just one perspective that I think it’s a little bit more balanced on our side and, you know, have liked seeing it be more industry led.

Can I jump in? I think, you know, if we look at the European model, we’ve certainly seen some successes, particularly out of the U.K., but we have seen some success in France and Germany. But what’s, I think, really interesting here is that let’s not fool ourselves. There’s no real way you get to AI based banking without a very open framework for, you know, communication.

So we know that’s coming. So this is one of the times where I think like the U.S. could do with some sort of mandating from time to time on this stuff, you know? Yeah, I think that’s exactly right, Brett. And I think what’s exciting about the open banking rule is it’s going to mandate, OK, build these solid connections.

But it’s worth really looking at what is the current state of the U.S. market right now. Around 10 of the largest FIs already have APIs. They’re not compliant with this rule yet.

They’re not fully aligned with FDX, which is the standard setting that Cameron mentioned that I think everyone is expecting to be a U.S. standard, hopefully the U.S. standard. In addition to those 10 large FIs, there’s probably 4,000 to 7,000 smaller FIs whose cores are supporting them by building API connections. But that leaves a really substantial donut hole in the middle of community banks, credit unions, particularly ones of like the regional or super regional side, who are going to have to figure out how to get into compliance.

And depending on their size, they’re going to have, as of right now, 12 months to two and a half years to go from zero to one. And that, to me, is where the real implementation challenge is going to happen. My experience, and Christy, you’ve got much more firsthand contact with some of these banks than even I do, is that they haven’t really started to think about open banking compliance and aren’t going to until the final rule comes out in October, which means this is not going to be a like finishing the race in a sprint.

This is going to be starting at the marathon start point and needing to sprint all the way through the entire thing. Yeah, I think that’s right. I mean, a couple of things, you know, just thinking about, you know, whether it’s CDR in Australia or open banking in the UK, you know, you don’t, a couple of things that, you know, also Cameron touched on is we have one, we’ve been in a market driven industry here for like a decade.

So the banks are looking at this in a way of like, our customers are already here. They’ve been here for a long time. And so the standards are also going to start to follow what those customers have been demanding in terms of how fresh their data is, in terms of the kind of applications they want to provide their data to.

So I think that’s a really exciting things for bank is there’s already kind of a roadmap ahead of them that makes sense because they see where their customers are. And I think on the other side of it, they’re also coming to the table saying we want to use open banking. We want to actually consume this data, right? We’re seeing the playing field even out with 1033, and we’re going to have a lot of other players providing this data that could also really help our own products and services.

So I think that the bank conversation has been a lot more holistic, but to John’s point earlier, there’s a time crunch, right? These compliance deadlines are really, really soon. And when you’re working in these like really complex organizations that have legacy tech stacks, they’re not cloud native, maybe they’re moving to the cloud, but it’s not right there. They really do need to rely on a lot of other industry players who have been working in this space for a while to help them navigate the transition.

Chris, I want to build on one of your points and ask you show for the big banks, the global ones that have feet on both sides of ponds, right? Used to be resistant to this idea of open banking and data sharing. Are they the ones leaning in that now see the benefit to them? Like now that they’ve been forced to regulatorily, like how is that playing out as a dynamic? Totally. I mean, I think to be honest, a lot of the hesitation in the beginning was just the cost and the unknown of like, how are we going to do this in a way that’s going to really protect consumer data in earnest to make sure that it’s secure and that all of the players are operating at the same level of technical competence, which by the way, was not always the case 10 years ago.

And so I think they really came at this the way that a lot of banks do, which is risk first and risk management first. And through, I think the years, they started to see the opportunity in their own mobile applications, in their own lending services. And they did start to knock on the doors of Plaid and say, we’d love to actually also buy these products from you as we think about heightening these.

So for sure, we’re seeing them in the top 10 or 20 banks. They’re definitely the ones who are starting to be some of the biggest consumers of open banking. But I will say we’re seeing it a lot on the regional bank side as well, because they’re doing this transformation at once.

They’re just saying, we may as well look at this holistically and think about how we both can use these APIs both to consume as well as to expose this data, which I think is a huge opportunity. We do a lot of work with regional banks as well. And I think they also look at it from a competitive standpoint.

And the conversations we’re having with them, because they might be a little bit late to the game, it’s almost that the starting point is 10 to 33 versus open finance. But we’re quick to kind of take them back to actually, let’s talk about still the benefits of open finance. And I think on the competitive side, they could be losing out, right? Because we know the value that this delivers to consumers.

Consumers see some of the fraud that’s happening in the marketplace, and they’re reaching out to their banks, and they want this. Plus, they’re working with a whole set of fintechs that desire this kind of high-level quality of data. And so I think the regional banks need it.

They need it now. And I think it’s not just to comply with 1033, but it’s to continue to compete with the big banks. And so I don’t want that to get lost, that let’s not think of this as just a regulatory deal.

They need it. Their consumers need it. And the insights they can gather from it are super important to the bank as well.

Yeah. Cameron, just building on that, that really aligns with something that we’ve seen in the market. And I’m interested if you’ve seen it as well.

Maybe we can go a little bit deeper here. It’s not just as Christy said, the sort of, we want to think about the data in strategy as part of open banking. Even the data out can be a strategy and not just a compliance mandate.

And one of the things we’ve seen specifically is when a consumer has multiple bank accounts, which a lot of consumers do, we are seeing a trend where whichever account the consumer chooses to be the primary account for linking fintech apps, the transactions on that account actually increase as well. So that starts becoming more like a top of wallet account in the same way that you’d have a top of wallet card, where if you are not thinking about giving your customer the best experience and the most reliable experience for linking to fintech apps, you’re actually missing an opportunity to cement your bank account and your bank as the primary digital account for that consumer. Cameron, it sounds like that’s what you were talking about, but I wonder if you’re seeing the same thing in the market as we are.

Yeah, absolutely. I think it has to go back to that customer user experience. And I think 10 years ago when banks thought about open finance, at times it was like, oh, well, this is going to make people, it’s going to make it easier to switch banks.

And I think that is the mindset that you want to avoid versus going in at it as, how can I deliver the best user experience? How can I reduce fraud, reduce any security risks that my consumers might be experiencing with legacy screen scraping and focus on that end customer? And I think all the work that we do on the bank side, and we’re primarily more directed working closely with banks across consumer, commercial, retail, and tax, I think it’s that mindset. And I think it’s, again, not just a regulatory issue, but it’s a competitive issue, and you need to drive that end customer experience home. Until you both mentioned it, I hadn’t thought about it in this way.

It’s a little bit like getting the direct deposit because it’s such a pain to go change your direct deposit, you keep that bank account, it’s the primary bank account. If you are my digital hub that everything else is feeding off of, well, one, naturally, you also do get my direct deposit. But also, I’m going to be very loath to actually go reestablish all of those relationships and that level of connectivity.

Is that an accurate way to think about it? Yeah, Jason, I think you’ve got it exactly right. This is the new direct deposit for digital financial services. And I think we’re going to see a moment, the CFPB talks a lot about switching as one of the outcomes of this rule.

And I do think we are going to see some switching over the first couple of years where consumers are going to be saying, which is the most digital-friendly bank? I want to move most of my business there because that’s the one that reflects the reality of my life today. But once that initial set of transitions is done, I think this is my primary bank account, it has my direct deposit, it has all of my apps connected to it, I am enjoying that experience, is going to be a powerful relationship management anchor point for FIs and their customers. And I think missing out on that strategic point of view now is basically missing the future of digital finance and setting yourself up for a, I’m going to do the bare minimum and then watch my customers trickle out the door future.

So this is where it gets really interesting, because if you look at the Chinese experience, this is exactly what happened with Alipay and WeChat Pay. And so then the banks turned that into an opportunity. They put pressure back on the regulator for open banking to work both ways so that they could get access to the wallet, data, and so forth.

And that really changed the competitiveness landscape there for both the banks and the fintechs. And there’s elements of they had to learn to work together as well, which emerged out of that because there was some codependencies as well. Chris, I’m curious from your point of view, do you think the banks, especially in that kind of regional that can view the fintechs as their competitor, are they going to dig into that same kind of partnership once they realize where the benefit lies? You know, I haven’t seen a lot of resistance around that.

I actually am seeing more partnerships start to spring up between some of the regional banks and fintechs in various capacities, like across business units in the bank. But I think in general, this makes it feel like an opportunity to compete meaningfully. And a lot of these fintechs are now data providers under the rule.

That’s a pretty big shift, right? They’re not just building products using bank data because screen scraping was kind of the baseline for the last decade. But now you have pretty major fintechs in the game who are also going to be covered under this rule. And the banks are excited about that.

They want to use that as an input to some of the products that they’re shipping. And I think that that’s super exciting. One thing I might just, and I don’t know if you guys want to go here, but one thing I do want to comment on some of the conversation that we’ve just been having is these experiences, both in providing on the data in and data outside, the amount of complexity that is under that for the consumer to actually have a consistent experience is part of, I think, in this implementation process what’s going to come to light.

And so some of the big rocks that we’ve talked about with standard setting bodies are, you know, the bigger things like how like API uptime, you know, John can speak to a little bit of that and working on some of the standard setting body boards. But some of it’s actually just in the minutiae, right, of things like error handling and, you know, how are you managing the communication between a fintech application and maybe an aggregator and a bank and all of those things that have been largely bespoke to date. And I think that’s an area where Ninth Wave and Plaid are really partnering in the industry to make sure that that transition feels really good for consumers and is smooth across the market.

And again, like John was saying earlier, the top 10, top 20 banks, I mean, they’ve built, some of them have had APIs for a long time. They’ve been doing this forever, right? So when there’s a, this is just like a random example, but we might get like a vague error response from a bank about an application and a consumer who’s trying to connect. Maybe that consumer is actually a supplemental account.

So they’re a secondary account, like a college student, or maybe it’s a spouse who’s not the primary. And we might get an error back with that interaction. And if we don’t have a good way for the bank or somebody else to help them classify that error so that next time we can catch it and next time the consumer can go through the experience and have something that says, hey, you’re a supplemental account holder.

This is what that means. Then it just becomes really messy. So there’s a really important piece here.

And I’d love to hear from Cameron on how you guys think about this when you start working with banks in this capacity, but like error handling is an area that’s kind of unsexy, but like really important in open finance as it scales that I think, you know, partnerships like this need to really lean into. Yeah, I love that take because, you know, when I think about the experience, consistency is huge, right? And, and, you know, consumers, how many FinTechs do they deal with? Five, 10, you know, 15. And to have a consistent experience around all of those financial account connection, you know, experiences is huge.

And I think that only adds to the level of trust and they trust their FinTech, but importantly, they’re going to trust their bank, right? Because ultimately they’re getting the data from the bank. And so when we talk to, you know, all the banks that we serve, it comes down to making sure that they know that, you know, open finance is going to build trust with their, with their customers. And the number one reason why customers move, move a bank is because lack of trust.

And so I think I just love where Christy was going with the consistency experience, because I think that comes back to some core messaging about making sure that these consumers, you know, have, have, have trust in their, in their FIs. Actually, John, we’ve talked about this on a previous show, I’m pretty sure, but it’s worthwhile us talking about, again, the fact that if you look at what happened with GDPR in Europe in particular, it sort of became a default for much of the world in terms of data regulations. But the more we’re looking at the success of open source LLM models and so forth, and, you know, sort of this mashup that’s occurring with many different players coming in needing access to the data and the potential for data to be commercialized.

Is it not time that we start moving towards a slightly different posture around the data here? You know, because we talk about moving the data out of the bank and so forth, where I think, you know, I personally think that the way AI is going to push this into more of a form of data ownership for the consumer rather than data portability as such is that you’re going to be able to trade your data in return for better experience. I think that’s sort of a logical way, but it’s not the way the regulations are sort of framed right now in terms of open banking, right? So it’s not quite framed, Brett, as like an ownership structure. But I agree with you that that’s directionally correct, is that that consumer control and ownership of data and the consumer having the right to choose how their data gets used and to give themselves a better experience of it is the core of where we’re going.

Just two quick points on that that I think are important. One, building on what Christy and Cameron said, I’ve talked with some people recently about the upcoming 1033 rule, and the reaction has been like, well, I don’t understand why this is a big deal at all. We already have open banking in the US.

All these apps work today. Why is it a big deal to make this transition? And I think the critical thing that’s missing from that point of view is it works today largely because companies like Plaid have built integrations unilaterally and do all that work to maintain them, right? We’re now moving into a model where the FI needs to build that developer interface. And a lot of them are going to need help doing that.

And that’s where what Cameron and Ninth Wave are doing is so critical, because if you build that wrong, right, or if you don’t have a reliable partner in building that, the consumer experience may actually degrade from where it is today, because it’s now a partnership of maintaining that connection instead of just one company being able to sort of like unilaterally have excellent engineers and make sure that everything works all the time. We’re now moving into that different model of partnership work. And Brett, to your point on sort of the what does that ownership look like, once you’ve got that reliable connection in place, you’re actually going to be judged by your customer about whether you’re delivering to that expectation of like, hey, I own this data.

I should be able to share it. Why isn’t this working right now? Why can’t I get what I want out of it? And the U.S. regulations do point in that direction. They say very clearly the consumer’s in control of this data.

The use cases are limited to what the consumer wants. There is a real sort of quid pro quo framework in place. But once you’ve established that, consumers are going to have expectations that you better be ready to meet with whoever you partner with to deliver it.

Yeah. And I think, you know, the concept of open data and whether it’s ownership or whether it’s control, I agree with John, like much of the regulation is built more around control. But I think that’s what the, that’s how the consumer thinks about it.

And so I think it’s fine to go in with a mindset of control, but as long as they have the control of the data, you know, that is a requirement for open finance. And once they have that, to John’s point, they will expect that across all experiences. And so, you know, the banks put a lot of trust in us.

You know, a lot of what we’re doing from a partnership perspective with Plaid is to build that consistent experience where the consumer has that feeling of control throughout the entire process, from consenting to accounts, from consenting to certain applications. But it comes back to making sure that control is really, you know, in favor of the consumer. So I often look at it as less about who owns it, but making sure that the consumer does definitely feel like they’re in control of it.

From a privacy point of view, as long as you’ve opened up the control aspect, one of the concerns, one is it’s difficult to really protect this data. And we’re now creating front door, side doors, back doors available. And what we’ve already seen is the ability for, you know, the bad people to leverage AI and data in, you know, deep fakes and better scams and fraud.

Does this open up yet another fraud vector that, you know, banks and consumers might be opening themselves up to? I think, you know, what comes with open finance, as we know, is much stronger authentication. And so I think that immediately reduces, you know, what you’re kind of calling the fraud vector. I think that helps.

I think a lot of what’s in 1033 as well is making sure that at any point consumers have the right and the control to also revoke, you know, consent and connectivity with applications and making sure that wherever the data was stored downstream, that is, you know, deleted based on the revocation of that consent. A lot of it is also making it super transparent in terms of what they have consented to across all aggregation sources, across all direct connectivity. And so that’s a lot of what we’re working with Platon is making sure that that transparency is fully available to the bank and also the consumer.

So, you know, are the fraudsters going to find ways in here? I’m sure there’ll be, you know, different avenues they’ll go after. But in general, I think this only improves the security of the ecosystem. Yeah.

And one more point on that is I think, you know, we would be fooling no one to say that this is anywhere close to, you know, final. We’re going to have to constantly be evolving in partnership with banks and with fintechs and other industry players, how we make sure that consumer data is safeguarded and handled, right? A consumer data right is a privacy, right? And I think as open finance continues to grow and proliferate, that has to be something that is top of mind. The Aspen Institute recently formed, you know, a task force around this that’s got some of the major banks.

Platt is also on there and some other big industry players to just focus on this, right? What are some of these ongoing fighting fraud initiatives? How do we think about controlling and managing risk in the ecosystem? So I think there’s a ton of focus on it. And I think it’s going to continue to be a really hot topic over the next couple of years that every player at the table is going to be invested in and making a priority. Yeah.

I mean, I think that’s pretty clear what’s happening now is that the rate of change requires that sort of collaborative approach. And the big challenge with that is that particularly with AI and the way AI agency and so forth is going to go, and we’re going to get into that after the break, but that’s going to accelerate the rate of change. And so if you handle policy setting and lawmaking in the traditional way of doing that, the response is just going to be too slow.

So we need this sort of collaborative, sort of almost working group approach to these problems in real time. I think that’s pretty clear. Everyone’s nodding, but let’s take a quick break.

You’re listening to Breaking Banks with Plaid and Ninth Wave, hosted by myself and Jason Hendricks. We’ll be right back after these words from our kind sponsors. This show is brought to you by Alloy Labs.

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Welcome back, everyone, as we’re talking with our friends at Plaid and Ninth Wave about open banking and open finance. As we entered the break, we were talking about collaboration, the power of collaboration. I know John personally and his representative at Plaid works with dozens of organizations that is part of his job description to work on these collaborations.

I would love, John, to hear, is it working? Which models are working best? What can we take from this? So I think it is working and working pretty well in the U.S. with one big asterisk on it. So let me explain what I think is working. We are board members of FDX, the Financial Data Exchange.

They’ve submitted an application to the CFPB to be the standard setting organization for 1033 APIs. Knock on wood, hopefully the CFPB will select them because right now something like 90 million consumer accounts are already connected on the FDX API, give or take. So I think it would be foolish to miss that opportunity.

Here’s the asterisk part. The part that’s going well is that the handful of organizations in FDX, it’s Plaid and some of the largest banks and a few other data aggregators, they’ve been working together sort of week by week for almost five years at this point, hammering out the details of this. And I think one of the big challenges is a lot of the regional and super regional banks have not been that directly involved.

Some of them have not been involved at all in that process. And so the degree of sort of informal knowledge that exists right now, as you both know, like there’s a huge delta between what is actually on paper for an API specification versus how do you go out and build it. And if someone is starting just today on I want to build the FDX API or I want to build some sort of API for data out, they don’t necessarily have that context of five years of back and forth sort of hard hammer and tongs work.

And they’re going to need to figure out some way to basically jumpstart that knowledge. And my guess is it’s going to come through selecting a really good implementation partner who knows the market well, understands that context, and is able to catch them up to speed really quickly and frankly, just give them the value of that five years of expertise without them having to go build it themselves. What was the trigger for you guys coming together? Ninth Wave and Plaid, you know, how did that happen? Yeah, I mean, I can start.

I mean, I think, you know, we’ve had a relationship for a while. It’s evolved to, you know, a great spot of kind of where we are today. You know, if I look back in the past, it was very kind of tactical, right? I think today, it’s obviously a true partnership.

And I think it ties back to exactly what John was just saying is, there are a bunch of regional, super regional banks that are now kind of getting into the game, right? And, you know, looking for ways to get tied into Plaid and get that connectivity. But there’s a lift there, right? And so if you look at the partnership and the integration that we’ve done with Plaid, that exists. So where we play is as long as we can get connectivity to data on the FI side, across, you know, basic kind of data sets, then we can translate that into a 1033 interface, which is then automatically linked over into the Plaid network.

So I think it’s, you know, for us in this partnership, it’s about, you know, time to market, time to compliance. And I think that’s kind of where we’re very kind of focused on. Yeah.

And I think just to add on there, you know, we’ve obviously, we’ve been doing this with banks across the market for a long time. And it’s exactly what Cameron said, where you have also kind of a specific, you know, group of banks or cohort of banks who have very tight timelines here and who really just haven’t done a lot to prepare maybe some of the ways that the larger ones have. And what that means is in this crunch, like you need to optimize for speed and you need to optimize for ongoing support.

And some of the areas that I had mentioned earlier, right, kind of the minutiae of these things that really make it an excellent ongoing open finance experience for their customers. And there are just not a lot of players in the market who can implement that well. And I think Plaid in particular, you know, in our conversations with some of these banks, we represent like a lot of the times the majority of the open banking traffic that’s coming to them.

And so in that there’s a pretty high bar in terms of the ability to like kind of handle that, right, on these bank systems to make sure that optimizing in a way that’s going to be, you know, lower cost and in general, going to have like good support infrastructure as they’ve got thousands and thousands of applications that their customers are connecting to. And Ninth Wave is just one of those players, you know, who can really help with that implementation from the speed and ongoing support side. So I think that was another piece of this is just as we’re approaching towards regulation and you have these cohort of banks who they just don’t have years and years to work on this, you know, who can they partner with that’s really going to kind of rise to the occasion here and work with them on this.

Just to pull it back, Jason, to your original question of like, how is this like industry led stuff going? Like Ninth Wave has been an FDX, I think, as long as we have, Cameron. I’m not sure like the exact join times for both of our organizations, but like having been in the trenches with Cameron and his team in that leading industry sort of development, it really is clear who knows what they’re doing and who can execute this well. And especially post-rule, like, I don’t know, it’s crazy.

I get emails in my inbox every day from people who are like, hey, John, do you need help with 1033 compliance? I’m like, first of all, thank you for emailing like the head of policy of Plaid. I think I know what I’m doing. But like, secondly, like, it just means that there’s like an army of consultants out there who the day after this rule becomes final are going to try and sell you a solution if you’re an FI.

And knowing who is in the army of like Johnny-come-latelys versus who are the folks like Cameron who have been doing this for five years and actually know all of the inside details is probably the most important distinction between success or failure in hiring a partner right now. ED HARRISON Indeed. Now, I have a question related to that, though.

For those who are behind right now will likely, I think, hang around until the final rule does come out to really kick up, and they’re going to be in crunch time. What would you recommend for FIs and fintechs that are going to suddenly have to think through this? What can they be doing now even before the rule is finalized? ANDREW MCAFEE Yeah, I think, you know, we play educator as well. And so, you know, part of it is on us to educate them on, you know, some options and some paths to achieve, you know, 1033 compliance.

I think what they should be doing now is, you know, taking a good look kind of across the enterprise of how they want to source the data to serve up, you know, for this type of interface. And I think, you know, we do a lot of work also, you know, with the commercial divisions, the wealth divisions. And so some of these conversations are expanding to not just, all right, yes, we need to expose it for consumer, but how are we going to think about it for the other divisions? And so I think it’s just getting to that level of analysis of how they want to think about open finance, not just for retail, but across all of their divisions.

So that’s one thing they could be, you know, focused on. Authentication is always kind of, you know, a sticking point, but it’s something that, you know, there’s various models out there that we can support. So that should not be a concern, you know, for them, but I kind of bring it back to data and just making sure they know exactly, you know, how they want to source the data out to the ecosystem.

Can I ask Christy then, you know, if we’re looking at this from a data problem, taking into account what Cameron said, how much of this is sort of really focused on retail versus sort of the commercial banking? The reason being is that, you know, that’s where it would seem to be a lot more interesting, you know, scale potential, you know, when we look at the impact of AI, or even if we just, we look at, you know, merchant funding and things like that, that have been massively successful for players like, you know, Alibaba in China, for example. Yeah, I mean, I think back to our conversation earlier about this being, you know, in the U.S. being largely market-driven for about a decade. I think we just naturally have seen that to be at the forefront by on the consumer banking side, but we are starting to see more demand on the commercial side.

And I think when you look under the hood at a lot of these banks in the super and regional sectors, like they do actually have commercial APIs often before they have their retail API. So I think we’re going to see these things come together a lot more. It’s just been that the market demand has been much more leaning in one side versus the other for the last decade.

So I think that that’s going to be really exciting. In general, though, I think one of the things that we’re going to need to see more, and we’re starting to see, the big banks have already adopted it. I think some of the other regionals and super regionals are starting to do it, is establishing these open banking championship teams or champions within the bank.

You’re talking about working across like sometimes dozens of lines of business that have various different, you know, tech stacks and data lakes, and they actually have to have a lot of coordination in terms of like, how are we going to get certain things on the roadmap? Which are the data elements that are required? Where do they exist inside the bank? And to do that, you know, kind of democratically is just, it’s not fast enough. And so I think we’re seeing is that more and more of these banks are bringing together these kind of open banking centers of excellence or championship teams who can do that. And again, that’s an area where, you know, Ninth Wave has obviously been doing it for a long time because they work in different parts of the bank and can kind of be relied on as a really important partner in that process.

That commercial aspect is so important because, you know, with the smaller banks we work with at Alloy Labs, a lot of them are like, well, we’re more of a, you know, commercial or small business bank and open banking feels so retail. Forgetting they’re also dependent on those retail deposits, you know, to feed the other side of the balance sheet. But there is real value.

The members that are the furthest ahead in building API integrations with their largest customers on the commercial side are really seeing the benefits of that. For sure. I just don’t think it’s a one versus the other anymore.

I think they’re coming together a lot more quickly. Obviously, small banking has a lot of these kind of small business banking services have looked like consumer for a long time. So those two came together a lot more quickly and those use cases were more clear.

But I think that’s another thing that we’re going to see in the next year to 18 months is like really commercial APIs, you know, be built more quickly and those use cases come to light. One of the really interesting parts of this and John put this in the chat when we were working through the conversation earlier about cash flow, right, is if you look at small business financing, the use of cash flow, particularly for players like, you know, Alibaba’s 310 product in China, they’ve had astonishing success with limiting, you know, delinquency and default rates because of cash flow data. And this is one of the areas where the wallet ecosystems coming into this is very critical.

So John, in terms of like sort of cash flow data, what is it that is interesting for you in respect to the potential for that? Yeah, so Brett, it’s great that you’ve teed this up, because I also want to make this discussion a little bit practical for some folks. And sometimes it can feel a little bit philosophical on things. So let me like actually try and do some like real practical brass tacks on this.

If you want to do a cash flow loan, you need two things, right? Depth of data and freshness of data. Those are really the things that matter and you need to have them consistency. So the 1033 rule helps with both of those things in the US.

It is two years of transactional information and pretty up-to-date access, right? Plaid likes to try and get fresh data every six hours for transactions information so that we can deliver that to market. Now, talking about these centers of excellence that Christie has talked about, what we saw a couple of years ago are some FIs saying, well, you know, on the data outside, we really want to minimize traffic and costs. So what if we just update transactions like every three days, right? Because that really is a lower burden on our systems and we don’t want to have to do more than that.

You then go talk to the data inside of that same bank and they’re like, no, no, no, we want the freshest data. We want the deepest data. Like how can you get us much higher transaction refresh rates? Because that’s what we need to do a cash flow loan.

As those sides start coming together and as they start working with API experts that can talk to them about how to lower the cost of higher transaction frequency, what we’re starting to see is an alignment of understanding that it’s actually in everyone’s interest to have that depth of transaction history and freshness of transaction information. And suddenly the conversation turns, Brett, into this, oh, if we can get really fresh, reliable data from every place a consumer might have their transaction history, and we can get two years of it, the opportunity for us to launch new business lines or new cash flow products has gone from, you know, this is a marginal product to this is a core product. Our plaid cash flow product that we sell into the market is actually one of our fastest growing products right now, because the perception of this is what’s going to make a difference in our book for a lender is that this is the new frontier and that there’s now enough confidence in the reliability of that data and consistent reliability of that data that you can make a bet as a long-term bet on it.

That’s, that’s good news. Well, back to Christie’s point in terms of where the banks feel the biggest benefit, what they’re used to, so many of these banks, because net interest margin is how they think about profitability, what you just described is a very easy use case and doesn’t feel like the expense that is a regulatory mandate. Yeah, I think so, Jason.

I mean, like, and I think this is something where the transition of how FIs are thinking about this is happening really, really rapidly right now. Now, on the other hand, happening even more rapidly is the selection of like, how are we, are we going to bill? Are we going to build or buy? How are we going to come into compliance? And one of the things that worries me is because that’s moving a little bit faster than that mind shift of what’s the business case for this is that people might make short-sighted decisions right now about building out their compliant APIs rather than strategic decisions. And I think the more you are able to focus on this as a strategic call that you’re making right now and making with real intentionality, the better you’re going to be set up for those business opportunities in a few years.

All right, so let me ask Cameron and Christie a quick question on this then. Let’s play this out a little bit. So, you know, I want you guys to sort of think about what it looks like in 10 years time, you know, what is the nature of the partnership between you guys, who else is playing in that space, but what does really open banking mean for the industry in 10 years? Maybe Cameron, you kick us off and then Christie.

Yeah, I mean, I think ideally it becomes more of an afterthought, right? And it’s just embedded into the entire, you know, industry. And so it’s no more open finance, it’s just a much more trusted relationship. It’s just the DNA.

It’s just exactly. And so the trust that, you know, spans from consumer to fintech to partner to bank, it’s just there because the security is much higher, the fraud’s been, you know, reduced, they have access to the data, they have control over the data. And so it’s just more, you know, built in.

And so I, you know, if I were to look back and, you know, from 10 years, I think that’s what we’re going for, right? Is to have that much more of an afterthought than just a focus. Yeah. Yeah, I agree.

I think, well, a couple things. One, I do think that the lines between like a fintech and a bank and some of these other players are blurring in a positive way, right? Some of the fintechs are banks. I think that like, we’re just seeing that evolution be positive and those partnerships then being more natural.

So I think that’s one thing. And also on the fintech side, you know, it used to be that banks were doing compliance and fintechs were the ones that had to be the reason they were doing compliance. And that’s just not true, right? I mean, we see some of the biggest fintechs or players like Plaid who have been building compliance tools for years now and have some of the market-leading, you know, 1033 compliance open finance suites for these data partners.

But I think at the crux where we’re really going to see this be important is we have to meet banks where they are in their open banking journey. This is not the UK or, you know, CDR in Australia, where there’s just a pretty small number of institutions where you have to coordinate this around. We’re talking about, you know, 10,000 financial institutions in this country.

And so what it looks like to meet these banks where they are in this compliance transition is to partner, you know, with some of these different players in the industry who are just focused on this, you know, pretty full time. And so Ninth Wave is a great example. They really can provide this kind of ongoing support, you know, and adaptive work in this transition with the banks who are on these timelines and have to do this quickly across the enterprise.

So I think that’s an area that we’re going to see, you know, just more focused around, again, for a specific cohort of banks where that’s going to be a priority. And just on the subject of that priority, where do I start? You know, John, I liked your point of don’t just be compliant, start with the strategy. Do I start or do I start with Ninth Wave if I’m trying to get, you know, on this treadmill that’s already going at such a fast clip? Oh, gosh.

Like, you’re asking me to choose two favorite children here. But I mean, I think- Or do I bring both of you? Is that the right answer? Yeah, I think it’s both, right? Like, I think if you have not talked to Christy yet, and you are a bank, you need to get in touch with her and get in touch with her team because you at least need to know, like, what is it that cloud is going to do? You should also reach out to Cameron, because the reality is, there are multiple aspects of this relationship, and no one is going to solve every aspect of it. I’ll just give like a very basic division as I see it, which is there’s the technical aspects of actually building out the connectivity, and then maintaining it.

Then there’s also the, like, do we have a data access agreement? How do we handle issues like fraud alerts or other things? Those are things that work best in a direct relationship between cloud and the bank. And so I think, Jason, it’s almost always going to be a yes and in these relationships. You’re going to need both in order to make it work and make it work at the level that your customers expect.

I just wanted to know where I started. So it sounds like I start with Christy with a fast call to Cameron afterwards. Yeah, the only thing you really need to know is don’t start with me.

Listen, I think it’s a funny question. It’s kind of like, it’s a weird question, but it does, it makes sense, right? And the reality is the banks will often hit multiple of us up at the same time, right? You know, Cameron was mentioning earlier, they’ve been working in tax and other areas of the bank for a long time. And so there’s a world where someone gets in touch with them first and is like, hey, we need to do this, how we’re thinking about it.

And sometimes Cameron will just have us join in the conversation really early. But I would say the majority of the time, a lot of these banks are coming to us directly. We’re working on what our roadmaps together are going to look like.

And there’s often a natural place for a ninth wave to come in and accelerate some of the work that they want to do with Plaid and the complexity of our business. Yeah. And I know it sounded like a quirky question, but I’m just trying to spare people asking me who listen to this and they want to know where, how do I get started? And when they come into those conversations, what should they have prepared in advance to make it productive? Yeah, it’s a good question.

I think what we’ve found is in the early stages is coming to the table with like basic qualifying pieces of information. So, you know, how much do you understand about what is, what 1033 is, where you guys sit in terms of your compliance timelines, what APIs have you built, if anything, what part of the bank do those exist in, you know, in what capacity have you been working with some of these other industry players like aggregators? Do you have external vendors that you’re already using or have signed contracts with and in what capacity? So again, kind of like just the admin qualifying layer, I’m like, what have you already been doing? What exists today? And some of them are starting from total blank slates. And oftentimes that’s a lot easier.

And some are coming to the table and been like, hey, we’re like 50% of the way there, but we have some major hurdles here that are going to be, you know, difficult for us to achieve the speed that we need to. So these are kind of natural transition points for us to bring in some of these offerings. Perfect.

You know, I come back a little bit to the data, but making it super transparent on, you know, this isn’t a universe of data we’re looking for. Right. And so, you know, making it super clear on what the data sets are needed to comply to 1033.

And just one note on the build versus buy. I mean, someone can probably make the case to build to a certain partner or a certain, you know, interface, but it’s much broader than that. Right.

And so it’s difficult to make the case to build versus many, many different data recipients. And so I think that’s where this partnership helps. And then also to maintain that, right.

So, you know, FDX is on FDX six now, right. When they go to seven, what does that mean? And so it’s that ongoing maintenance and kind of, you know, future proofing that connection that we have back to the bank. I assume, you know, I think it’s super important from a build versus buy perspective.

For those that are listening, I just want to make sure that we understand the difference between FDX and FTX. Yeah, sorry. That’s a little bit of a fintech joke there.

It’s a great fintech joke. I’ve actively suggested that maybe FDX needs to change its name or branding for exactly that reason. All right.

Well, so first of all, just so we get this clear, this is the gateway partner program that Plaid and Ninth Wave are working on. Christy, I’m assuming, where are you going to send us if people are interested in the gateway partner program specifically? We’re going to send you to our new landing page. We’re going to have more information about it.

Or you can go directly to John Cameron or I. We’ll put it out on the socials so we can reach out to, again, so you’ve been listening to John Pitts, the Global Head of Policy for Plaid. Christy Sunkist, Head of Open Finance Partnerships at Plaid. And Cameron Taylor, who’s the Chief Product Officer at Ninth Wave.

So thank you, guys and gals all for joining us. I should just say folks now. That’s sort of the politically correct term, right? Thank you.

All y’all. Just do y’all. All y’all.

And John, we definitely got to talk about the potential of having you back on doing a little bit more than just being a guest this time. I think you punched your cards enough time. All right.

I want that free t-shirt to go along with the hosting goodies, but looking forward to it, Brett and Jason. But yeah, if you’re looking in the Gateway Partner Program specifically, head to Christy or Cameron’s LinkedIn profile. Check with them.

John is deep, deep in the policy stuff. So you don’t want to get involved in any of that. Anyway, thank you both for Plaid and Ninth Wave for joining the show this week.

That’s obviously, Plaid’s been a great supporter of the show as well. So we thank them for their ongoing participation and bringing some really interesting guests to the show. If you like the series on this, come back to us, tell us what else you’d like to find out about this.

If you’re looking at the open data stuff, if you’ve got questions specifically about that or 1033 or whatever, let us know on social, engage us on that stuff. We’ll try and get into a bit more detail on that. But I guess the only thing left to say is that thank you to the team at Provoke for helping us put the show together and for Plaid for their ongoing support.

And Jason, you got anything else you want to say before we close out? That’s a wrap. Thank you all y’all for being here. Thank you.

That’s it. Thank you. See you guys on Breaking Banks again next week.

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