In an interview with PaymentsJournal at the 2021 Money20/20 event, Bhavin Turakhia, CEO and Co-Founder of Zeta, spoke about how Zeta, the world’s first and only Omni Stack for banks and fintechs, is rethinking payments with the vision of augmenting the purpose of money and banking with technology. The following transcript was edited and condensed for clarity.
What is Zeta’s Omni Stack for credit cards?
Zeta is a banking tech company. Our customers are banks and fintechs, and what we have done is rewritten the entire credit processing stack from scratch. If you think about all the credit processors out there, all the banks are using legacy tech that was written decades ago before the cloud [or] smartphones even existed. Banks typically must deal with 15-20 different vendors, origination, credit processing, mobile apps, loan management, etc., to put together a credit program. You cannot really give your customers the experience they deserve with these ten plus legacy vendors. It is like the analogy that you cannot take the parts of a Toyota and build a Tesla, and your customers are demanding a Tesla.
Back in 2015, we felt like the only way to provide a modern experience, to provide a cloud-native scalable platform, is to rewrite the whole stack from scratch. We have a full stack platform comprising credit processing, credit score loan management, fraud and risk, rewards, credit decisioning. You can optionally choose to bring some of those pieces of your own, but [it is] a modern stack that is fully cloud native, has 100% API coverage, has a white labeled reference implementation mobile app that you can use out of the box to build your own fully elastic, cloud agnostic and built on microservices architecture fully modern tech.
Our fundamental benefits are that as a bank, if you implement us, we can provide a much more modern experience for your customers. We can improve your cost to income ratio and we can increase NPS and improve speed and agility for banks to launch new features and functionality and capabilities. A typical bank can launch new products and programs in a matter of days or weeks and new features in the matter of hours or days on our platform, compared to what can actually take 6-12 months or 18 months on any other legacy platform.
That is what we have, a fully integrated credit processing stack for banks to be able to launch retail or commercial credit cards, charge cards, Buy Now Pay Later loans, secured credit cards, etc.
What do Zeta Tachyon Credit and Fusion Credit offer?
We have two offerings. Zeta Tachyon Credit is our credit processing platform, a SaaS platform for banks to launch next generation credit cards. Zeta Fusion Credit is our platform for fintechs where we provide both the platform and an underlying sponsor bank that can underwrite your loans and hold them on their balance sheet for whatever duration you want to. So, if you are a fintech in the retail commercial lending space or want to provide credit cards or loans to your customers but do not have a bank charter, with Fusion, we can give you both a bank charter and the processing platform on which you can run those products and services.
As a bank, if you want to run a credit card program, we have the full stack platform. We are connected to Visa and Mastercard with our own map… And we do everything from origination processing, that is the full transaction lifecycle, to fraud and risk, collections, compliance, [and more] on a modern platform. That is what Zeta Tachyon Credit offers, which is a full stack credit processing platform for banks and Fusion Credit is a credit processing platform and a sponsor bank, a charter bank for fintechs.
Tell us about Zeta’s growth journey.
As Zeta was co-founded by me and Ramki [Gaddipati] in 2015, we started out with the fundamental belief that the banking and payments industry needs to be disrupted. Our perspective was should we become a bank ourselves, or should we…focus on [our core competency of technology?] We really figured out the biggest pain point that exists out there is legacy tech. Every other industry, consumer or commercial, has gone to a full revamp when it comes to software, infrastructure, and platforms in the last 10-15 years while banks still run on technology introduced 20-30 years ago.
We started out by building out an architecture for revamping the entire banking stack. Our focus here right now is credit cards, but Zeta has a deposit score, credit processing, debit processing, prepaid processing, and the whole nine yards. We are live in six countries with about nine different issuers and 30+ fintechs and we recently launched in North America. The company was originally capitalized by myself and my-cofounder, so we capitalized it with about $40 million when we started out. Recently, three months ago, we raised our first external rounds. SoftBank invested $250 million at a $1.5 billion valuation in our company.
We currently have ten million cards issued on our platform, we have sixteen million more contracted on our platform, and we just landed in North America six months ago. We have two banks and two fintechs that have signed up with us, so we are in the process of making life.
Any upcoming partnerships you want to share?
Currently, the only one that is public is a company called Aura identity protection company. They have a couple of million customers and are looking at launching a secure credit card offering for their customers, the world’s most secure card with various protections built in and privacy built in. That is their take on it, and they are launching it on top of the Fusion platform. The other three contracts will be public over the course of the next two to three months, and we are still at the stage of formalizing those agreements.
Tell us about your entrepreneurial journey and how Zeta came into existence.
I have been an entrepreneur all my life. This is all I have done. I found my passion early on. I started coding when I was 10 years old, started coding when I was seventeen in the hosting and domain name space called Directi. My younger brother co-founded that and ran that for about 14-15 years and then sold that. Since then, I have started three companies: radix, a domain registry provider. We own .online, .tech, .store, .space, .website and a few other top-level extensions, so anybody who registers a domain name is actually registered with our register. That is roughly half a billion-dollar enterprise and I have a CEO and team that runs that show.
The second company I started was in 2014. I started a company called Nova, and Nova competes with Google, Outlook, Slack and Microsoft Teams. It is a collaboration software for SMBs and WordPress recently invested–their largest ever external investment–$30 million at a $3 billion valuation just a few months ago in Nova. Then Zeta is my latest company. It is the one that I am spending most of my time on. I co-founded that with Ramki [Gaddipati] in 2015 and the goal objective is to become the de facto banking technology provider for banks and fintechs.
What was the moment you knew what Zeta needed to be?
There were a few. Our perspective was we wanted to start banking and provide an outstanding experience to end consumers. What we realized is [there are] a couple of hurdles when it comes to doing that as a financial institution or bank. Firstly, banks are heavily regulated. To try to stay away from heavy regulation, you must get licensed in every single country. If you want to expand geographically as a technology software, I can operate in every single market without significant impediments in terms of licensing. Banks have a limited return on equity. You have to keep pumping up the equity to increase your loan book, and our perspective was that we want to have an uncapped return on equity.
We also felt that we could make the maximum difference if we enable thousands of legacy players out there, hundreds of banks, which need the right technology partner. Our perspective was that if we enable them, it will make a far larger impact over time as opposed to chugging at it ourselves with consumers. Those were the fundamental drivers and philosophy of the path that we chose.