Blockchain is completely useless for core banking: Bhavin Turakhia of Zeta

Serial entrepreneur dwells on banking software, blockchain and Zeta's technology roadmap in a conversation with Business Standard

Zeta, a start-up that provides core banking software to banks and fintech companies, recently raised $30 million in a strategic investment from MasterCard and other investors at a $1.5 billion valuation. Founded in 2015, the company’s platform processes 30 million

transactions a month. Zeta co-founder Bhavin Turakhia, a serial entrepreneur who earlier started companies like Directi, Flock and Radix, spoke with Deepsekhar Choudhury about Zeta’s tech, banking software and more. Edited excerpts:

In a nutshell, what does Zeta do?

We've built a completely modern credit card processing solution and core banking platform for banks and fintechs. There are roughly about 15 million cards that have been issued through our platform and are currently processing 30 million transactions a month.

Our pitch to banks is––legacy systems slow down launch of new products and features which may take 6-18 months. Once our platform is deployed, a bank can launch new services every two weeks. Also, we help banks to provide their customers a much more modern digital banking experience than that is typically offered.

It is said that there is a huge cost of migration in B2B software. With banks being legacy entities that may have millions of customers, how are you dealing with this challenge?

That is a valid point. It is a very involved process to migrate from one software to another. It is not so much of a problem with our fintech customers as their systems are relatively new. The approach we have taken with banks is that we set up our parallel stack so that they can start hosting new customers on our platform while old customers remain on the legacy platform.

And then once things are properly stabilised, we bring the bank’s old customers to our system in a batch by batch manner. This way, a bank doesn't need to discard their platform. They get the benefits of a modern platform from the first day and then they realise those benefits of a modern platform over the course of a few years.

Is your banking tech stack plug and play or customised to particular needs?

The tech stack itself is very heavily configurable. Without writing any code, you can launch retail credit cards, commercial cards, charge cards, buy now pay later credit cards et al. We have 100 per cent API coverage, and so on and so forth. 

But there are two things that have to be done specific and personalised to each bank. One is  developing the full digital banking experience like mobile app, net banking, web banking etc – all of which is done using our APIs on top of our stack. And the second is that when we deploy this, we have to integrate with a lot of systems that the bank already might have such as fraud systems, credit decisioning systems, application processing systems which have to be custom coded on a per bank basis.

Nowadays, there is a lot of chatter about using blockchain for financial services. Do you have any such plans?

To be honest, blockchain is extremely slow and completely useless for core banking, even though people seem to be touting it as such. It's intended much more for decentralised finance, but not really the ideal solution for creating core banking platforms that require extremely low latency and high micro transaction throughput. But we do use some elements of linkless, link chain and immutable transactions.

Mastercard’s funding took Zeta’s valuation to $1.5 billion. What is the strategic angle in this deal?

We had earlier raised a total of over $250 million. And now, we have raised another $30 million from MasterCard and a few other investors, bringing the total fundraise to 280 million and bringing the total valuation to $1.5 billion. 

The strategic view is that MasterCard will be recommending Zetas credit card processing stack as a digital native credit card processing platform for their customers. And we will be preferring MasterCard as a network for all of the programs that are launched on our stack across the globe. 

B2C fintech is seen to be quite capital intensive. Is B2B fintech different?

It's extremely capital intensive. Right now, for instance, we have a team of more than 800 engineers and product managers who are working on developing this platform. 

What are your expansion plans?

Our platform is live in multiple countries – India, the US, UK, Italy, Spain, Brazil, Vietnam, Philippines.  In these geographies, we've got more than nine banks and roughly about 30 fintechs on our platform. We are growing pretty rapidly and the goal is to get to 150 million accounts in the next five years.

As of now, our primary focus is credit cards, but we are also launching a buy now pay later loan solution in North America. We already have done it in India.