Inside Mercury's $650M Revenue Machine, with CEO Immad Akhund

Hi, this is Lex, and welcome to the FinTech Blueprint. It's your podcast about FinTech, decentralized finance, digital banking, investing, robo-advice, artificial intelligence, and all the other frontier technology that is transforming financial services. To get more content, like an illustrated transcript of this conversation in your inbox, subscribe at fintechblueprint.com. So without further delay, let's jump into today's episode. Hi everybody, and welcome to today's FinTech Blueprint conversation. We are extremely fortunate to have with us Imad, who is the CEO and founder of Mercury. Mercury is one of the largest neobanks for businesses and also now individuals that has been created over the last decade. It's a huge success story, and I'm super excited to chat with him about how he's done it. Welcome to the conversation.

Thanks, Lex. Excited to be here.

My pleasure. So let's jump into your early career and your first introduction to the beautiful world of financial services and software development. How did it happen to you? What was your first kind of step in this direction?

You know, funnily, I guess the first step is like the first bank accounts you get as a customer, right? So I remember, I mean, I always had like a tiny bank account that my parents had set up where they'd like, you know, put some money into it. And then when I went to university, there was a bunch of deals that the banks were doing. Like if you're a university graduate, if you sign up to the bank, you get like $500 or something. I think you were only supposed to sign up for like one bank and I signed up for like 6 of them because I was like, oh yeah, if there's a deal, let's get all of them. The only job I've really had was after college. I worked one year at Bloomberg, which is obviously like an old-school fintech company. Yeah, after that point, I wasn't necessarily into fintech, but I started doing startups. So I did one startup in 2006, and I did another one in 2007, basically. And I did the third startup in 2009. So, you know, there was like kind of 2 relatively quick failures slash talent acquisitions. And then my third startup, I did For a long time, from 2009 to 2016 when we sold it. And during that startup is when I had this idea for Mercury. And it really started from something simple. I was, we were obviously using banking as entrepreneurs. That previous company would receive a lot of money from advertisers and pay out publishers at the end of the month. And it was super frustrating to do that with kind of these incumbent banks. We would literally hire someone to go log into the bank every day, see who had paid us, copy paste that number into our backend. And then it took like 3 or 4 days of 3 or 4 people working to do manual payouts to hundreds of publishers. And I thought that was ridiculous. So, you know, I went to our bank and I was like, hey, can we get an API? And they were, I mean, really honestly, they didn't know what I meant.

Did the police come to your house?

They were just like mostly confused. And like, eventually they dug someone up and they sent me some SFTP thing. It was just so like, they just didn't know what I wanted. And like, how to enable it. And it was just pretty obvious that, you know, in the years I was doing startups from, you know, 2006 to 2016, literally nothing had changed in banking, right? They had a mobile app and that was it. But everything, every other aspect of entrepreneurship and B2B software had changed, right? There was like Slack and Stripe and Gusto and yeah, and just, just like so much innovation where, you know, we have much better software to run businesses and much better software for entrepreneurs. So it seemed obvious that someone would do it in banking. But so I had this idea in 2013, but it was very much on the mindset that someone else would do it because I knew nothing about banking or fintech.

Yeah. If you kind of go to that moment in fintech, right, which is you're talking about kind of this '14 to '17 moment where we're out of the first wave of fintechs, right? So Mint.com, has happened. Investnet has happened.

And PayPal.

PayPal certainly happened. Yeah. But you've also got sort of like the second generation of stuff like Plaid. You've got the robo-advisors. And so people are playing with and making progress on these concepts, but all of it is like read-only, right? Like nobody can actually write into a core banking platform. You can consume data, but if you consume data, you have to steal it from the banks. You have to crowbar out of it. with some sort of screen scraping, like offshore password farm. And that's like best in class, right, at the moment. So do you remember these companies like Finicity? How did you navigate this and say, okay, that's not enough, I want to build from scratch?

Yeah. So if you think a little bit about what is a bank and what are financial services, they're actually like a bundle of different things, right? There's like Lending, there's payments and the different kind of payment rails you could integrate with. There's infrastructure you can provide to banking, obviously. And then there's depository banking. And if you think about kind of 2017, when Mercury started, a lot of innovation had happened on a lot of the other pieces, but depository banking was the least innovated on. I think there was a few reasons for that. Number one, there was no way to really do depository banking without working with a bank or being chartered as a bank. Whereas most of the other things, you could get lending licenses, you could do money transmitter license for payments. So another part of it was it was probably the most regulated space. Like, depository banking just has like a, you know, you're dealing with the FDIC, you're dealing with people's real money. So it's like a heavily regulated kind of part of it. So really came down to working with partner banks. Even to access the card networks, you have to work with partner banks. So this idea of fintechs working with partner banks has been around since like 1980s or something. with the original kind of store cards, but it hadn't been done too much on the depository side. Like, Chime was like one example, but Chime in some ways, especially back in 2017, was a relatively simple neobank. It was just a debit card with a wallet, basically. One of the enabling factors for Mercury was this kind of rise of BaaS. And at that point, like, BaaS stands for banking as a service. At that point, the BaaS providers were kind of other fintechs that would Go integrate to the bank core, would provide you payment systems and things like that.

So let me stop you for the definitions because this is always wonderful. How would you describe banking as a service versus open banking versus embedded finance? And then maybe also like, what is a banking core?

So one of the funny things is when I started like thinking about Mercury and like investigating fintech, I was like, wow, there's just so many acronyms and so many terms. And there's like, for some reason, fintech loves its terms. It's not that complicated. So, BaaS stands for banking as a service. There's actually 2 forms of BaaS. The original form that I'm talking about from 2017-ish, where there was like Synapse and Unit and Bond, and there's like 2 or 3 other ones, was like fintech providers that would sit in between people like Mercury and other people that want to integrate to a bank and the banks. And the idea was they would do all the hard work of integrating into the bank, They would provide you nice kind of, you know, REST APIs that would help you bypass the tricky work of like figuring out how to do bank integration. And they actually went a little further. They provide you kind of the compliance rails. They would really take care of a lot of things for you. And they were like an enabler to kind of 1,000 flowers booming in fintech. You know, in 2021, there was this idea that everyone could be a bank, and that was really enabled by these fintech PaaS providers that would like provide the connection, but really actually give you a path to do it. Before these kind of fintech PaaS providers came along, to integrate with a bank partner, you would have to not only figure out their weird backend, but you'd also just have to persuade them that it was worth doing the integration. And from a partner bank perspective, integrating with the tiny fintech was just too much work. Whereas if they integrated with a PaaS fintech, they could get 100 programs live. At least that was the idea.

Surely no risk in that.

Yes, exactly. And unfortunately, in 2022 and 2023, that kind of idea of like having 100 programs kind of done by this BaaS fintech kind of crashed against the fact that like it was very hard to regulate that many— regulate slash do compliance and everything across that many programs. And there was a lot of problems with it. And so that as a category has kind of declined, maybe even disappeared, the fintech BaaS. The new BaaS is banks themselves Now that time has gone on, they've learned how to build some of those technologies. Some really well-known Silicon Valley people have gone and acquired banks and they've exposed kind of modern APIs to their banking stacks. The 2 big ones there are Column Bank, which we work with, which Mercury works with, and then Lead Bank, which is another bank done by someone who started or helped start the Square Bank. So BaaS as a category still exists, but now it's like the sponsor banks themselves exposing APIs for fintechs to integrate with. All right. So that's BAS. Open banking is mostly, I would say you have existing bank accounts and you, you know, before banks would not really create good APIs. I mean, I was talking about this earlier about how it was so hard to get an API into our bank. Open banking is this kind of initiative. It's actually like a regulated thing that Congress passed where it would force banks to open APIs for fintechs to integrate into. And, you know, if you think about what you get from Plaid, which is a connection to a bank and authentication, and then a bunch of mostly read-only data, you could get that from open banking. Some other countries like the EU has gone much deeper with open banking and they force banks to not only expose read APIs, but also write APIs through open banking. So you can do things like, you know, send payments and things like that. Yeah. Which would enable some use cases in fintech. But I don't, you know, it doesn't enable necessarily a full neobank. You said, okay, another term, banking core. There's these 2 big companies, I mean, 3 actually, FIS, Fiserv, and Jack Henry, that almost every bank in the US uses for what is called the banking core, which is the banking core itself is kind of the, it's basically the database that holds the accounts for all of the customers. So account numbers, routing numbers, things like that. But then once you have that, You have the accounts, the money in the account, then you have transactions, then you have payments. So these banking cores actually go all fairly full stack. So if you're a small bank, you know, there's 6,000 banks in the US and a bunch of credit unions, they are not building their own mobile app. All of the mobile app, the website, all of that's coming from these banking core providers that started off with just like the ledger for where the money was. And in some ways, I mean, these are big companies, I think.

Yeah.

They vary between like $20 billion and $100 billion in valuation. But in some ways, they both provide all this infrastructure to banks, but they also hold back the banks in terms of innovation, just because most banks are not building their own mobile apps. So it's not really the case that there's thousands of banks building, with amazing engineering teams building modern infrastructure. It's actually only the top banks are building their own kind of customer-facing experiences. A lot of it is coming from these banking core providers. Then the last term you said is embedded banking, embedded finance. And this is just the idea that, you know, any non-fintech company could provide some fintech products via APIs in an embedded way. So there is like an overlap between BaaS. The big difference is often the company providing the fintech-like services is not really a fintech company. It's like a Shopify has payments that they provide via Stripe. You could call Stripe an embedded finance player in that case for Shopify. There's a lot of like these vertical SaaS companies that want to provide something like, you know, either payments that like I just described, or lending, or sometimes depository functions, and they want to embed it within their service. So yeah, all of these things have a little bit of overlap in them, but they are like kind of distinctly used.

Okay, so Now we know the basics. Super straightforward. So there you are, 2017, right? You're thinking about building out this new experience. We actually had the former CEO of Synapse on, so I'm interested in some of that, although it's a painful topic. But before kind of getting into that, like when you're thinking of doing the sort of like de novo company, right? An enormous existing market. Like, there's infinite revenue in business banking, and at the same time, it's really saturated. And famously, customer acquisition costs are high. And so you at the same time have the revenue, but you also have to find ways to beat Bank of America and JP Morgan, which obviously you found a way to do. In 2017, you don't have the clients, you don't have the infrastructure. How did you take the first step? And then connected to that, was Mercury really the go-to-market and distribution motion, or was it the core engine? Which of those parts of the barbell did you lean into?

I always thought about There's kind of 2 types of startups. There's the startups where it's a new category and you're entering the new category and there's no incumbents, but also there's no customers potentially, right? Like you're trying to invent a category where most of crypto fits that bill, right? At least the initial wave of crypto, right? Like when Bitcoin existed, there wasn't a category and it was inventing a category. You could say by the time Solana came in, it was actually the second kind of startup, which is like a category exists, but you think And there's like really big popular incumbents in that category, but you think there's like a flaw in it, or there's some reason that's not innovative, or you have some new angle in that category, and you feel like you can build that second kind of startup. And actually, like, if you look at a lot of successes, they fit that second one, right? Even something like Facebook, right? There was a lot of social networks that had existed before then, and they, you know, they had this new angle around like using real names and things like that. So I wasn't particularly intimidated by the fact that there was all of these incumbents that in theory had business banking, right? It was actually For me, when you think about that second kind of category, it was the best kind of circumstances for the second category, which is you have a lot of incumbents, the market is freaking huge, but these incumbents are very much old school. They're not innovative. They haven't been disrupted for a long time. From my perspective, I was like, this is the best kind of competitors I could have. And every day today, I'm still like, oh my God, this is amazing. Give me these competitors any day, right? I would wish these competitors on my Of my friends. So yeah, I wasn't like intimidated by that. And I really thought the reason the market didn't have much innovation was really a regulatory problem, right? There was, it was, it's just very hard to become a chartered bank. You have to, you know, probably if you wanted to do it day one, and there has people who've tried it, like you kind of have to raise like $30 million to $100 million, like day one before you even could serve customers to be a chartered bank. And alternatively, you could obviously do this pass thing, but In 2017, PaaS was like super new. So we were very early to it. And what we felt was if you own the customer experience, then you'd have to figure out distribution and what is that customer experience. And there's a lot to figure out actually to own the customer experience around banking. It's not— especially depository banking for businesses. It's not just like, here's your money. You have to have like 5 different payment types, right? We had debit cards, wires, international wires, check, and all of those have both input and output kind of modes to them. So it did take us a year and a half to launch. And a lot of things we did when we launched, we were the first people to do it. We were the first people to have wires. We were the first people to do kind of international onboarding for US businesses. So you could live in France and have a US business. And, you know, for us, I'm an immigrant. A lot of other entrepreneurs are immigrants. So I thought it was an important feature for us to support. So, you know, having like a fully featured banking service that had wires and all these things was actually like, it doesn't sound like it's super innovative, but being the first to it and obviously kind of having an amazing design, having an experience that people really loved, being able to do it online. I mean, that also doesn't sound like it should be a big deal, but the main alternative to using Mercury even today is actually you have to walk to a Chase branch or Wells Fargo branch, right? To me, getting out of my house to do something when I'm in the middle of coding or whatever is not something that I'll be easily persuaded to do. So all these little things ended up being like these kind of big innovations in the space.

I'm curious actually how that works, right? Because if you're a large bank, you're often gluing these interfaces together, even if they're fully on the web, you might have wires and all this stuff that's available through a web interface, but then different elements will look different. So if you're in the credit area of the site versus the ad recipient element of the site, or if you're looking at treasury management, you will feel yourself kind of clinking between different third-party systems that have just been skinned with brand colors. And there's different authentication issues and all this stuff. But that's partly because, end of the day, they are different infrastructures. People don't know this intuitively, but whether you're trading or paying or lending or depositing, they are going to sit inside of often different entities and different ledgers and so on. How did you get around, or how did you build around that challenge in terms of your product development process and product management and sort of architecture? How did you actually get that done in the beginning?

Initially, we didn't have that many features to begin with, right? But every feature we did have, we kind of handcrafted. And the backend is APIs, or actually, even calling them APIs is sometimes generous, but the frontend is a fully crafted experience where every element of it we own. And we were very specific about this. I completely agree with you that this kind of experience you get at most banks where you log in and every click you do sends you somewhere else and sometimes it doesn't work. And if you ever call them and say, hey, I noticed a bug and this screen, they're like, it's just obvious they have nothing. They don't know what to do with that. We were really very deliberate about not having infinite features. Like a bank has like a ton of features, having these kind of core features that you really needed to run your business, which is like, give me online signup, give me an account, let me do the basic kind of payments, and then give me good user management around it and controls. So we started with that basic set. And then obviously, 8 years later, we've actually added a a lot of software and financial features to the product, but we always wanted to kind of own that user experience element. And it's not that it's not possible. I mean, to go back to these kind of banking calls, a lot of the time the banking call is, can you imagine this like super enterprise sales process where the banking call comes to the regional bank? It's like, hey, do you want to include some feature like investment or something like that? And the bank CEO is like, oh yeah, I'd love that feature. And then the banking core has kind of stitched together this feature sometimes from an acquisition. And, you know, they're like, yeah, they've sold the feature. But like, no one in that process is really like, okay, what does that customer experience look like? How are we going to make this an amazing fluid and intuitive process? It's very much like a kind of checkbox. Yes, I have this feature. And like, you know, then you kind of leave it to some product manager to figure out like how to theme it and put it into the interface. It's just a super different experience to like something like Mercury, where when we think about a new feature, we're going, okay, how do we interlace this with the rest of Mercury and make it smooth and seamless and all of this kind of stuff?

Got it. When you look at your product development organization, what percent of the team is dedicated to the sort of things related to keeping integrations live, the ledger reconciliation, that kind of stuff? And what percent of the team is really building out the consumer experience?

All of the team is thinking customer first. So it's not, I've tried to avoid having this idea of, we do have some of these, but the general idea of a team that only does some backend process and doesn't care about the customer experience, I don't love that because at the end of the day, even if it's something core like wires, how do you deliver an amazing wires experience is not just someone, one team is continuously like thinking about the backend of the wires and then there's a separate team that like deals with the frontend because when it comes to changes, if you want to say, oh, now we want to collect addresses, if there's like 2 separate teams that have to coordinate, that's when you end up with kind of disjoint experiences and it works on every level. So I do think about every team as like, yes, they're going to touch customers and they have to think about that. We have split up the EPD, engineering product design team into what we call the banking and risk team and then the experiences team. And the banking and risk team are much more kind of working on the core. And I'd say it's like, it's not quite 50/50. I think the banking and risk team is a little bigger, but they work on kind of the core banking, onboarding, wires, all of the pieces that enable like this kind of core banking. And the experiences team often does the more software-related pieces. Like we have bill pay and invoicing and personal banking as some of our kind of newer software products. And in the banking and risk teams, yeah, there's some dedicated, there's one dedicated to kind of the ledger. There's a separate team kind of dedicated to payments. So just to enable the experience, yes, there's a bunch of it, but we do think about these teams as like, hey, you know, how are you delivering the best value to the customers? So even the, you know, the wires team is trying to push to like make sure that the wire cutoff is like as long as possible. And, you know, if we do something like a undo feature where maybe you send a wire and you want like 5 minutes kind of time to be able to undo it, like the wires team would build that end-to-end. It's not going to be kind of a separate experiences team.

Super interesting. What is your product development philosophy as it gets applied to the organization? Like, do you have the Amazon 2-pizza team, keep things small and focused on specific use cases approach? Or do you have more of a matrix organization? What do you think is the right way to be fast in shipping software and be customer-aligned from setting up the product organization?

My general philosophy and advice that I give to entrepreneurs is you have to do what makes sense for you and your product, which doesn't make sense for everyone, right? For Mercury, one of our core tenets is it has to be like a very unified, very smooth experience between all of our products. Yeah, the design team has to be like one design team and the engineering team has to be one engineering team. So in that sense, it is matrix, but I'm also a big believer in giving people broad responsibility and giving small teams kind of the ability to go execute things without collaborating with a bunch of people. So we have these, what I call autonomous product teams, that something like 8 people, 1 PM, 1 designer, 6 engineers that own some remits. They might own invoicing or they might own wires or something like that. And they can run their own roadmap, they can fix their own bugs. And the designer on that team still has to work within their design team and we have design grid and design standards and things like that. And same with engineers, but they do have a broad remit. When it comes to big projects, often multiple teams have to collaborate together and we have some function of figuring out who collaborates and how. But even within the collaboration, each team as they're collaborating will own some chunk of it. And I kind of think about it as like, you know, what is the most fast and functional unit in the world, which is like, I think a startup, right? Like a 10-person startup can do amazing things. And, you know, to some extent, I've just been doing startups for such a long time that I have this like model where I'm like, okay, how do we, even in a, like our engineering plus product and design org is about 300 people. So even in a 300-person org, how do we have like enough kind of startup units that can go do things and do them without like too much coordination headache and like execute really fast.

Yeah, a lot of that resonates. We mentioned before Synapse, so I want to just take a moment to learn your takeaways in navigating that with the company. The background is that Synapse was the ledger between, I think it was Jack Henry on top of Evolve Bank that you guys were plugged into. They had a whole ledgering issue between Evolve and Jack Henry, and a whole bunch of files didn't end up making it to their engine. And as a result of that, something like $50 million was unaccounted because it disappeared in the fog of war, which was like payments and so on. And there was obviously a lot of blame and difficulty that went around. I'm interested in how you as a leader and an organization dealt with that, right? So you have this thing that is in your infrastructure, and it's effectively starting to throw off smoke and catch fire. How do you troubleshoot that? What was the situation like, and how did you navigate it?

In many ways, we weren't at the heart of that situation because we'd actually left Synapse much earlier. So the final— I just looked it up— the final failure for Synapse was April 2024. And we'd actually moved entirely off them around September 2023. So at least 6 or 7 months before then. So yeah, we were not in the middle of like, oh, where are, where are customer funds and things like that? We, we had moved entirely off and we were confident in kind of the ledger for our customers and things like that. So the rough history goes, we started working with them in 2018 and we launched our platform in 2019, it was with Synapse as our kind of software provider to our partner bank. And then in 2022, we stopped onboarding customers to them. And then 2023, we kind of moved off entirely and they've then, yeah, 2024, it failed. So firstly, I'm kind of grateful for Synapse, right? Like there was a, when we launched, there wasn't that many ways to work with banks that Synapse had built, you know, the most sophisticated system that did allow us to kind of launch with that. full feature set that we really needed and made that possible. And this is true for many other fintechs. I think towards the end, Synapse kind of got complicated. They started working with multiple partner banks on their side. We actually kind of stuck with just one partner bank, but I think a lot of the kind of confusion that came from their ledger came from fintechs that they distributed across many partner banks and keeping all of that kind of clean and seamless is non-trivial. We only ever worked with one of their partner banks, Evolve, and we would, you know, talk to them directly. We could kind of keep an idea of the ledger between us and Synapse and Evolve. And it was just like, you know, one system rather than lots of partner banks with like money going between them in the background. And yeah, so we moved completely off them in, you know, before their failure. And, you know, during that process, we'd spent a lot of time going through every single transaction that we'd ever done with Evolve and Synapse and making sure that was all reconciled. You know, how reconciliation works is the fintech has an idea of how much money is in each account. And then, yeah, the partner bank also has an idea of like, what's the total level of money in the program. And you kind of want to make those numbers match, which sounds simple, but there's so many edge cases when it comes to every payment type, right? It's like, just to give you an example, it's a debit card and you go in a hotel and they put like a $2,000 hold on your account, but then they release that hold after 2 weeks. Like all of those things come in as like separate transactions. And you have to make sure that you release the right amount of money in each person's funds at the right time and that all these systems kind of match up with each other.

An inevitable point of view that I've come to is around the benefits of large-scale blockchain ledgers as a solution to reconciliation and finality in financial holdings. What's your view on the recent rise in stablecoins as an alternative to embedded finance? I feel like a lot of the excitement that people had about embedding banking product into consumer interfaces are now getting repeated, but with kind of a stablecoin-first pitch. And one of the benefits is that you get to avoid Synapse types of outcomes. Is that area something that you're thinking about? You know, is it demand-led by your customers? Is it infrastructure-led? How do you consider it?

Yeah, I mean, we do think about it, but for our customers that are mostly kind of dealing with USD systems, it's easier for them to kind of just have US dollars and like send ACH and wires and things like that. So we do have some customers that are more global, and for them it matters a little bit more to access kind of the US dollar system and maybe be able to send money easier than SWIFT and things like that. So a lot of these kind of global stablecoin banks have been really focused on people that cannot get US bank accounts at all. Yeah, that's an important service, but different. I would say, I don't think this like magically solves the idea of recon and ledgering and things like that. In a world where if you really own your keys and own the wallet and you have like full understanding of where the money's at, yes. But, you know, a lot of the time when you're dealing with these providers, they don't give you access to the key and the wallet. And, you know, they are running their own kind of abstraction layer on top of the blockchain, which is fine. I think that's often you have to do that to provide like a seamless service and make it cheaper. If you think about Coinbase, right, like most of the time, they're grouping together customer funds across lots of customers in the same wallet and things like that, and they're keeping their own ledger. So I don't think this is like a magic solution in this scenario where it is really just an interface layer to the blockchain and you have your own wallet and you have your own keys. Yes. it is like kind of solving this core ledgering and a wallet problem. But in most of the cases, if you think of most of the fintechs that I think of that are in this space, they are doing some ledgering and recon work on their side. Doesn't mean they're not doing it correctly. I'm just saying it's not like a magic solution to it.

Yep, of course. Let's go back to your vision for what the bank of the future looks like in terms of Scale and product suite. Your starting point is with businesses, with this very regulated and difficult product of deposits. Tell us about the scale of the company today. I mean, you've recently raised a very large round, and based on that, how you're thinking about the places where the company is going to go.

Sure. So we're about 1,100 people today. We have about 300,000 customers growing 50% per year. Number we announced in August was we were making $650 million per year, and we've been profitable for 3.5 years. That's a rough scale. One thing that when I was thinking about what company to do next, this was my— Mercury was my 4th company. So I really wanted to do something that I felt I could do for 20-plus years. And as I was saying earlier, I'm a very startup person, so I get bored of things if it's not like kind of, continuous product innovation. And one of the things that got me really excited about Mercury is banking is both so simple, right? Every single business needs a bank. Every single customer needs a bank. It's, you know, it's got this kind of core money and payments, but it's also universal. It's where your money is. And then there's so much kind of financial software that is provided to businesses and consumers that has been built on top of the bank account, right? on the business side, whether it's like bill pay or invoicing or credit card or spend management or payroll, like it just keeps going on and on. And if you kind of imagine a world that there's this like true software company that's at scale, that's built on top of banking, it's just hard to believe if there's a Google service that is built, what is the Gmail, YouTube, Google Calendar, Google Maps equivalent of banking is kind of how I thought about it when I was starting Mercury. And there's just so much to build. So That's what really got me excited about Mercury, which wasn't just like, hey, let's build this kind of core neobank that replaces, I don't know, JPMC or something like that. I really wanted to build a new type of service where, yes, banking is the core feature and that's how people will think about it. They'll be like, oh, I'm signing up for getting a bank account, but there's just so much more we can build on top of that. I feel like we're still just getting started. Like, you know, we've been doing this for 8 years and it's only just now that we launched some of these features, like invoicing and bill pay. But there's just so much more to build here. We only just in December launched Mercury Personal, which gives the same kind of features around kind of collaboration and core payments and wires and holding your money and automation and APIs, all of that kind of stuff we built on business for personal. So that went live in December. So yeah, I get really excited about all the things we're building. And I really think what people, you know, in 10 years from now, if we do a good job, what people will think is banking will be very different. It won't be like, oh, this is kind of this stodgy institution where I get my auto loan and my mortgage and kind of a bank account and the software barely works, which is, I think, how people think about banking today. But I think we can redefine that as like, oh, this is like a core part of running my business where I do all my finances and I really, it helps me understand my business and make good decisions. And yeah, to me, there's like infinite potential here, which is kind of the fun part.

You mentioned being profitable now for the last 3 years. What is the— I mean, it's sort of a naive question, but what is the business model to get to that $650 million of revenue? Is it interchange, net interest? And what licenses do you need to be able to do these things?

Yeah, one fun thing about fintech is you can provide a lot of free services and still make money. So we make money on float where, you know, when we have money in checking accounts, you know, those accounts don't give yield to customers, our treasury accounts. And from the personal side, our high yield savings accounts give interest rates and yield. So on the checking account, we make money on the float, give both credit cards and debit card, and we make money on the interchange. So every time someone swipes, we make some money. We have FX fees when you're doing currency transfers. We have AUM fees on the treasury side. And we also have a subscription fee for some of the advanced features in invoicing and a few other software pieces. And yeah, I really like being profitable. It's super annoying to go and go kind of go begging to VCs every year. So I love just having that kind of independence as a company, but I think it's also good for our customers to know that we're set up for the long term and we've been profitable for 3 years and we have almost twice as much money as we've ever raised from investors and the bank.

That's beautiful. There is a big difference between being in the hole and being free. Yeah. So congratulations. When did that diversification of revenue start? Was there like one that started to snowball and you're like, okay, now I can reinvest and build these other paths? Or did you try to do it as a portfolio from the start?

So we had both the float revenue and interchange on the initially just a debit card from the start. And then in the last few years, we've kind of spun up more of these revenue streams and diversified more. But, you know, we try to do it in ways that are very natural to customers, you know, things that they already pay for other places. In general, we don't want to be, you know, I think one of the problems that I would have said most SMB banking has, there's tons of fees. You don't know when you're going to get charged a fee and it's going to, you're going to be surprised about it. So we wanted to make that much more kind of seamless and easy to understand. So we have fewer fees and we try to be more seamless about it, but we, you know, there's still things people are used to paying for and there's some things that people are used to paying for that we don't charge for. So for example, wires are free, but yeah, other places we charge and make it seamless, like something like FX.

So when Mercury is a $10 billion revenue company, right? Like, and you've got everything you've talked about, you're a huge competitor in personal accounts. Now you're maybe in underwriting. What do you think that full business looks like? And maybe also, what does the rest of the field look like? Do you think the traditional banks sort of catch up, or do you think the industry will segment between high-quality neobanks? Like, take us forward into the future a bit.

The only place where we have a large market share is in startups, so 40% or a little more than 35% of early-stage startups use Mercury. Outside that, we're still super early, right? Like the broader small business banking is huge. It's like 30% of all banking revenue, which is a $2 trillion kind of banking space. Obviously consumer, we only just launched. So even if you look at just the basics of what we do, they could easily scale to being kind of multi-$10 billion plus revenue. And then We're very early to lending. We just applied for a bank charter in December. Once we do all the things and that's approved, there's a big potential for us to get into lending. And that's obviously actually one of the main ways that kind of traditional banks make money. And then on the software and subscription side, there's a ton of financial software out there that makes a ton of money. That's actually like a whole separate TAM for us, which is different and distinct from banking. And again, we're early. Intuit is a $130 billion company that just makes money from kind of software. And yeah, there's lots of other examples there. So I guess like overall, I think it'll be doing the same things we're doing, which have a lot of ways to scale. And then like some of these kinds of new revenue streams around lending and subscription that'll scale up to get to $10 billion. In terms of what does the space look like, I think it's really hard to predict the future. You know, how I've thought about it is, you know, if you think about the last kind of 15, 20 years of banking, there's been a ton of consolidation where I think there was like 12,000 banks or something pre-2008 crisis. And now there's 4,500 banks and then another 2,000 credit unions. Don't quote me on those numbers. I think that's like roughly right. So there's been a ton of consolidation. I think that will continue and the bigger banks will get bigger. But at the same time, there'll be kind of this wave of fintechs and neobanks that will capture more and more of the market share, especially on the kind of what does the user see and what You know, what is the main kind of distribution and interaction with users? So I think the, you know, if you look at like, what are the top 10 kind of places people get financial services, there'll probably still be like the big, big banks that will be part of that. But then there'll be people like kind of Mercury and other players in the neobanking and fintech space that'll be like pretty dominant players there. And banking is just so huge and so diverse. I don't think it's like a full winner-take-all. Obviously in some segments of it, there will be. The kind of fierce competition, there'll be one or two kind of big winners, but overall, I think most of these things will exist in parallel. I think the skew will be moved towards more fintechs that are like scaled up. I think the biggest fintechs today are, I guess Visa and Mastercard are the biggest, but if you ignore those two, since they're pretty old, the biggest are still like sub $150 billion, whereas the biggest banks go way bigger than that.

The last place I want to take us to is you mentioned the license and the regulatory environment in the US, of course, has gotten much more favorable towards startups and fintechs and all of this over the last few years. That's come with its own associated costs, but at the same time, it's really exciting to see new types of licenses and sort of access to the window. And so being granted to— Young companies and young companies, you know, there is financial innovation, there's technology innovation. So when you have banks with technology innovation in them, I mean, it makes all the sense in the world to make them into national champions. If you were to have a wish list for how regulators would look at our industry, how would you like them to think about this sector? I think there's just a lot of change and updating of prior assumptions. What do you think are the right ways to move forward?

You know, in general, I would say fintech and most innovators, like we want to operate within a regulatory framework. I think, you know, obviously when we're talking to customers or we're talking to investors, being able to say, hey, we're licensed and this is how it works is really important to us. And one thing that, you know, especially in crypto was tricky is there wasn't really a good framework to operate within, which I think the Genius Act and the other stuff being worked on helps with a lot. It's nice to see the OCC especially, but these other banking regulators are open to work with fintechs. And I still think it's actually hard if you're a tiny fintech, like if you're a 5-person team and you've raised $3 million, I think being directly regulated is still probably out of reach. But at least when you've scaled up and you're at Mercury size or some of these other people applying for the national charter, It makes sense. And that's like a good, you know, if you think about what might be the ideal framework for the US, maybe there's kind of fintechs that can innovate in the small side working with partner banks and some of them reach enough scale. Obviously when they're innovating, even on the small side, they have to obey the laws. But when enough of them reach a scale, there's kind of this path to being chartered. So I think that's like very healthy. Obviously it would be nice if the kind of cost of being regulated and working was cheaper. I actually think AI will potentially help with this where, you know, a lot of the things that are expensive are things that require humans to create reports and review reports and like all these things that are very AI-able and kind of actually hopeful that the cost of doing compliance, actually you can be way more compliant as well, right? Like you don't have to decide which customers to review. You could review them all, just have an AI do it kind of thing. So I think there's a lot of potential that AI can bring to That actually improves compliance and regulation as well. So, yeah, that's kind of how I see this kind of future playing out. And I'm hopeful that we can continue on this and make it easier to get chartered and work in this way.

I think the dream is all the compliance documents are AI-generated, and then on the other side, all of those AI-generated documents are AI-read, and people can have their life back.

Yeah. And then actually, I still think there's a world for humans there, right? You're still going to need someone to review the AI, set policies, and Things like that, that just the human does even more leverage work. And I think that's a much better system for everyone.

Absolutely. Imad, thank you so much for joining us today. If our audience wants to learn more about you or about Mercury, where should they go?

Yeah, of course. Check out mercury.com. It's all online and you can sign up easily. I'm on X, just @imad, and that's probably the main place I'm active.

Fantastic. Thank you for joining today.

Yeah, thanks for having me.

Hi everyone, that's it for this week's episode of the FinTech Blueprint. For more technical deep dives into all things fintech and decentralized finance, check out fintechblueprint.com and grab a free subscription to the newsletter. This is Lex, and I'll see you next time.