Daniela Binatti of Pismo joins Nick to discuss Overcoming the Odds: Pismo’s Journey to Build API-First Banking, Fixing Finance’s Broken Core, and the Future of Payments. In this episode we cover:
- Challenges in Banking and Pismo’s Solution
- Target Market and Client Base
- Overcoming Objections and Sales Cycles
- Innovation and Cultural Transformation
- Trends and Opportunities in Banking
- Geographic Challenges and Market Expansion
- Future Opportunities and Blockchain
- Founding and Building Pismo
- Building in the Brazilian Ecosystem
- Culture and Employee Support
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0:18
Daniela Binatti joins us today from São Paulo, Brazil. She is the Co-Founder and Chief Technology Officer at unicorn company Pismo, a cloud-native platform for banking and payments. Prior to Pismo, she spent over 25 years in banking and technology. Daniela, welcome to the show!
0:34
Thanks, Nick for having me. Yeah. So tell
0:37
us a bit about your journey. I know you took a trip to Silicon Valley in 2016 and you know, you’re struck with some inspiration. What’s, what’s the back story on the founding of peacema? Yeah, actually,
0:48
I started my career as a software engineer and worked in a couple of companies, but the last one I was there for 16 years, where I helped to build a payments processing platform from scratch here in Brazil, and I started again developing systems, but went like all over the places. My last position there, I was in charge of infrastructure, taking care of like operating systems architecture and literally infrastructure where in a moment in time where there was no cloud computing and I could, and actually I had to take care of servers and physical computers and other stuff. So I had two girls. I have two girls at that point. They were six and five years old, and I decided that I would leave instead to do something more flexible, like consulting or something like this, and then started looking at cloud computing, big data, and everything that was going on in the world, in other industries, and I was all the time, oh, my God. What? How many problems I could solve in the industry if I was looking to the outside and having access to those tools. So why not build something again, like a payments and banking processing platform, like 100% on cloud computing, SaaS model and everything that everybody was talking about at that time, you know that financial services industry is still today, operates pretty much in legacy systems, some of them, most of them developed in COBOL. And so going to something that was cloud native SaaS model was something that I really believe it could change the game for for players in the industry. Then I started convincing my co founders, the four of us, and then I decided to launch the company in 16 amazing
2:39
so tell us what is the main problem that’s being solved in banking? You know, what’s I know that these cores are old, and a lot of their technology is old, but, you know, if you had to stack rank, sort of the issues that are being addressed by Pismo, you know? What are those? Well,
2:58
a lot of challenges, actually, when you think about mainframe systems, you’ll need, like, usually financial institutions, they spend, like, millions of dollars in mainframes and machines, and they are developed in kind of a programming language that there is not so there are not so many Human resources available to manage them, and they are extremely limited because they were built in a time where we didn’t have chip storage or enriched data and high speed networks. So not only it’s hard to maintain, but also you are limited in what you can create to the end user. So when you go to something that is API based, that is running in a kind of infrastructure that you can it can be dimensioned based on peak times, like elastic infrastructure. It’s something that, like usually in the past, we had to keep servers up and running to make sure we could handle Christmas or Black Friday or some specific days, and usually they were not enough. So being able to do something that you can just pay for what you’re using is one of the things, but also be able to access everything that smartphones can generate, and everything that is around make using to be able to leverage all that technology is
4:26
payments. The tip of the spear is that the primary sort of workflow being addressed in the primary application at the beginning,
4:34
yes, we started with payments, but then we realized that in the way that we built the system, like usually when you go to this was one of the challenges that we had in the past, like when we started, because usually when you go to financial services, they are usually the question is around build versus buy, so should I buy a solution and be attached to a black box when my where my product roadmap, it would be. The same as the other players, so no differentiation, because I can use pretty much what they are offering. Or do I build in house, which it’s something that is not that easy, because although even at Pismo, although we are building Pismo platform on top of like bleeding edge technologies, we still have to handle very old rails, so all the credit card industry is still relying on ISO 8583 which is a protocol that the last version was launched in 1987 so it’s based on TCPIP it’s not HTTP. So there are no APIs that now there’s a movement to change those things, but it’s hard, and what we are offering is an intermediate path between build versus buy. What I’m saying is I am a infrastructure platform for financial services, where, instead of giving you a black box system with screens pretty defined, that you’ll be this very pretty much using the same resources that any other bank. I give you a set of APIs where you can build and you can be in control of your product roadmap. So the way that we built the system, we have a single source code deployed all over the globe, so every client doesn’t matter who the public is, if it’s a low income or high income, or if it’s corporate or consumer, they are using pretty much the same system, and they can build differentiation on their side by leveraging the tools and the infrastructure that we can provide to them. So
6:34
financial the financial institutions, is a very broad bucket, like walk us through who you primarily serve, what? How would you describe the ICP, and is this, you know, exclusively on the commercial banking side, or is it an investment banking as well,
6:51
usually at this point in consumer banking. So actually, and this is interesting, because when we decided to build this company. Our previous experience were much more on retail, so we decided that we could build something that would democratize how retailers would offer payments and financial instruments to the end users. So we were thinking about micro issuers and how they could build something on their own to offer to the clients. But right after we signed the first term sheet for the state investment red point inventures Here in Brazil, at the end of late 16 they said, Oh, that’s amazing, but this is something that it’s going to be much more interesting for enterprise. So let’s talk to the big guys and to the big banks, and then right right after that. So Italo, which is the biggest bank here in Latin America, was our first client, and they decided to move on with us to migrate the whole credit card portfolio. And then we started kind of shifting a little bit from micro issuers to big banks. So now we have clients as Italo, as BTG, Citibank, be treated the stock exchange in Brazil, in a couple of others. There’s also a couple of smaller ones, startups that started from scratch here and now they are a little bigger, but usually the Focus, focus is much more on clients that what usually we say it’s it doesn’t matter that much the size of the client, but they must have kind of some expertise in tech, because not every bank is willing to just hire a set of buy a set of APIs and build front ends and internet banking on their side. So it must have, they must be willing to build the product to the end users. On their side, you’re a headless system, as you say. So
8:45
do you need partners and customers that have established development teams, or do you run a sort of managed services team as well? No,
8:53
usually we provide the platform software as a service backend, and we don’t operate the system. So we just heavy, I think about Salesforce, or even AWS, like usually, the one investor told me was so you are like AWS for financial services industry. I said I like that. So a set of APIs where you can create accounts, move money, do the very basic things, and with all those tools, the clients can can build the product on their side. And so there are many, many different examples. So in some cases the banks, they have developers on their side that are usually excited and happy to build something on top of modern technology, a modern stack, let’s say. But some of them hire other companies, like ISVs to to just help them to build the front end perfect.
9:44
And, you know, I know in in banking and in financial institutions, especially anytime that you touch payments, or you touch credits, credits and debits, you know, there’s risk and there’s hesitation, and. Sales cycles can be quite long. And so, how is an early stage company, you know, headquartered out of Brazil? How did you overcome, you know, easy objections, like, you know what, we’re just going to stick with something else, or work with some US company, or what? How did you overcome those objections and manage you know, this, this very long sales cycle process,
10:23
yeah, I have to tell it. Then this is, was one of the most challenging things to do. So the first thing is that we are four people at the founding team. The four of us had, like, prior receptive careers, and we were in our 40s when we launched the company. So it was a bootstrap, like it was our money we were trying. I invested the very last penny that I could save while working for 20 years to build that. So when we signed it, the first investment, we already had something running in production, but then moving to banks, and it was challenging, not only because everything you just described it, but also because it was a moment in time where there was, there were no, there was no regulation in Brazil telling banks that they could store account holders data and public cloud. So it was another thing. So I used to say that most of my meetings at the beginning, it was with lawyers, then actually with tech people like as the CTO so I could present a solution to other to CIOs and CTOs, but then spend months with lawyers and legal counselors to walk through what could become like, how we could be storing data in public cloud. But I think that that being said, the challenges are there so many of the banks, they are struggling with human resources, and they knew that they like they would have to shift to something more modern. But what happens, usually, is that they start with a system that was built like 1960 and then the way that those companies find to kind of innovate is building up things and stack piling up systems, one on top of the other, which becomes something that it’s impossible to maintain. So I think the problem was there. It was much more question of timing. So there were many challenges. There were questions around regulatory and then there were questions around how to handle volumes and how we could, just like a startup, like 10 people, provide services to a huge bank, like millions of account holders. So one of the things that were extremely important was partnering with the cloud provider to show and demonstrate that we were capable of processing volumes. And I think also what happened was the approach that we decided to take was, I’m not asking you to migrate your whole portfolio here. Just pick five or 10 accounts of your team. Launch here. Build a full credit or debit or a digital product, and go out to see how it works. So we build, like a very complete set of features like Apple Pay, Google Pay, Samsung Pay, and everything that end users were asking for. And so when they started comparing how long it takes to launch Apple Pay here how long it takes to build Apple Pay on top of mainframe or so. So I think they could have a sense of how hard and the differences between a flexible and modern system versus a legacy one. And I think that was those were the things that helped us go through the process, was
13:41
there a certain org type or profile characteristics that that you could see from afar that would indicate to you that this bank or financial institution was going to be more innovative and more willing to try something in the cloud? And then the second part of that question is, at the decision maker level, did you have to find, you know, decision makers and or committees that that were really bullish on adopting new technology? I’m sure, to some degree, the answer is yes, but I’m more interested in, how do you figure that out early in, kind of the qualification process?
14:20
I think it’s much more looking what they are doing, especially when you think about big banks. If you look to like you go to an AWS conference and you see Capital One announcing they are shut down, shutting down data centers, you see JP Morgan. You see the same way we could look to Brazil and to the market at that point and see who are the dudes. Some of them were also replacing executives, like bringing people from cloud providers or technology companies. I think there’s also some external movement that where you can look and see all those people they can be willing to migrate. But you know what? Like? One of the things that we say is that. But the transformation is much more cultural than technological, and usually even when the leaders, they are bullish, to move. The hardest part, the hardest part is making the team on boarded, because think not only you are most of the cases migrating something that was built internally to outsource, but also using technology that not necessarily is what they are specialists. And so people are concerned about losing their jobs, and so there’s a lot of resistance during the process. And now migration and not only the sales cycle is long. But also the building in the implementation phase is because, again, there’s a lot of things that were built there. They were there forever that not, not necessarily, should be used in the new version. And this is something that we’ve been insisting in every single migration. So we used to say that we are not we need to reimagine some of the things. So when moving from legacy systems to this one, because some things just don’t make sense anymore, right?
16:07
So Daniella, aside from migration to the cloud, what are some of the other major trends that are that are shaping banking and finance?
16:16
I think there’s a lot of like now everybody’s talking about AI, and there’s, like many of the institutions they are using, and I think it brings a lot of benefits when you look to especially cost reduction and optimization and developing customer servicing and other stuff. But the thing is, the foundation must be ready to leverage every new technology. So when from there’s no point in plugging a very sophisticated model in a data layer that is extremely old, not enriched have every information that you need. So I think when you look to the very core operations, everybody now is understanding that they need to kind of prepare the foundation, make the data ready to leverage some of the things that comes next like that are, of course, very initiatives in risk and fraud detection and credit scoring and other stuff like that are leveraged By the AI and other things, but I think most of them are still struggling with very basic
17:27
things. Where do you see the best opportunities for applied AI and banking, and where do you think it will face the most resistance? I
17:34
think what I see, especially with companies that we are working that there’s a lot of leverage in in in the technology side, like, how do I code using some tools? How do I automate tests? How I can generate test cases that are more, that are closer to what is happening in production. So there’s lots of benefits in leveraging those things to try to predict what we are launching, what can happen in production when you go to actually the core models, again, fraud detection, risk management. And one of the things that we will be trying to do here, and I think it’s one of the benefits, the same way that you have when you look to infrastructure, for example, there’s a lot of algorithms that we use to for anomaly detection, how we understand that something is wrong where there’s not necessarily an error or something like this, applying that to business integrity behavior is something that it’s being also extremely powerful. When you look to like, maybe something’s not It’s not okay here, like it’s easy to detect something when there’s a narrow cold, but when something is not is only like misbehaving is or it’s generating, potentially integrity problems is harder to detect. So again, but I think things are happening much more on the edges, while the foundation of the core systems are being prepared for to use those tools.
19:06
So is fraud detection a part of the product offering at Pismo? No, actually,
19:11
Pismo has only the core processing. So what we do is we are the last mile when you think about the payments chain. So we are connected to issuers to acquire. So receive the transaction, we control the ledgers and the balances of the client. So we are, we authorize the transactions, but then we one of the decisions that we made in the past was we are building a very powerful core processing so we are the center of the ecosystems, and we plug fraud systems in. But again, we have all the information. Everything that the clients do is here, so making that information available and having everything that we need is what the fraud systems need to use their capability. So that’s. I what I’m saying, it’s powerful when you plug one of those systems in a cord that is have plenty of information to be explored. You
20:09
spoke a bit before about the challenges of doing or having customer data in the cloud in Brazil, specifically, what were some of the other geographic differences and challenges. Because, you know, I understand that you serve customers in the States and in Brazil and across the world. So like, how have you navigated, you know, all these different challenges and kind of what? What are those as you enter these different markets? Yeah,
20:36
regulation is who I think it’s the most challenging of them. Because what happened was, along the eight years that we’ve been working here, like when we launched it, maybe there were some geographies where, like, five years ago, there was no cloud, local cloud zone, and then the government would allow banks to launch storing data in other countries. But now there’s a cloud region available within the country, and they are asking to kind of bring back data. So when you look to GDPR and all the things about data protection, PII protection, and also making sure the data is there. And so those are the kind of challenges that we have when you go to Asia, for example, in India, that we have problems around seismic regions. So when you think about cloud regions, we need to like products. There must be multi region running different places at the same time because of seismic regions. This is something that comes from the regulator. So there’s a bunch of things, and this is one of the, actually one of the areas where we’ve been investing a lot in having local people to understand the market and the rails and their regulations to make sure we can be ready as soon as we start like expanding footprint to a new specific region.
21:57
What do you think are sort of the remaining under addressed or unaddressed areas in banking that will be solved in the next 10 years. Today,
22:08
even today, when you look to different countries, like, things are extremely like, it’s, it’s impressive how, like, for example, when you look to Brazil, so there’s a there’s pics, which is something close to UPI, like online transferring money from like account to account, trust for transfer. When you go to even the US, things are not exactly there. So there’s a lot to do to come to a place where actually you’re leveraging like online transfers and other stuff. So I think there’s a lot to evolve in some specific regions, but one of the things that it’s a problem that I think everybody will need to solve is like cross border transfers is something that is not it’s not easy to transfer money from one region to the other. So those kind of things, I think that as soon as we have, like the legacy systems ready, we can accelerate the pace this kind of solving, this kind of problem. How
23:07
much of a role do you think blockchain plays in that? And you know, how, how does it play a role in what you’re doing at Pismo?
23:13
At Pismo, we are not touching exactly that, especially when you look to, like, to the ledger and the infrastructure for blockchain. What we had some conversations in the past, like Brenna, is something that could be kind of a crypto wallet, like pretty much, to communicate with with the blockchain. I think when you look to the technologies, something that we could leverage to run distributed systems like the very on the very core. But again, all those discussions around taxation, things that goes like the volatility, I think it’s something that still to to we should wait a little bit more to see how, actually which role this is going to play. Perfect. I want
23:56
to get back to your founding story here. You know, I know that you, you founded the business with your husband and sister. You know, what’s that been like? I’m sure there’s a huge trust component, but it’s also a great challenge working with, you know, family members. So talk us through your decision to start a business, you know, with your husband and sister. Yeah,
24:18
actually, I think the difference, although it looks like it’s a kind of a familiar endeavor. Actually, I met Marcelo, my husband, working 27 years ago. So we met at work. We worked together for almost 20 years before founding Pismo. So it’s not that we were married and then we decided to launch the company. We know exactly how to work together. And Julie, my sister, also started working with us like we had worked together, like 13 or 15 years before launching peace mode and we started our careers as software developers, but we in. Like many, like, different paths. So I was more on architectural infrastructure. Marcelo was a developer. Julie was in charge of products. So I think there were, like, many forces going on the same direction, not only we, as you said, like there’s a trust component, but also we could handle and launch the company and build the MVP pretty much without having any other people working with us, which was something that was extremely important. Of course, the risks were higher, especially for me and Marcelo. We had like the girls, they were six and four years old. But yeah, at the end, everything, I think we learned how to work together, which is something that it’s, it’s one of the special powers that we had
25:49
amazing. I know that it was not an easy journey. And I’ve read about you selling your car at one point to continue paying the bills. You know, talk to us about your lowest point and like, what advice would you have for founders, you know, that go through this cycle of ups and downs and, you know, really take their lumps. Yeah, it’s
26:08
a roller coaster. I used to say that we go from hell to heaven many times a day, all across the journey. But I think that one of the most important things, especially for me, that helped me to cope with the hard times was like, I always, I was always play, thinking about the plan, like, what would be, what’s going to happen if everything goes wrong. So how can I leverage the experience that I have here, all the technology that I’m learning, all the things that I’m doing, to do something different, maybe find another job or something like this. So we were all the time setting up some some limits and some milestones. Let’s say, so let’s push until, you know, it’s very hard when you are there, very hard because you say, oh, let’s keep some save some money. But then we ended up like not only investing everything that we had, but also selling the car. And you know what? I was considering selling my apartment at that point, because I believe it’s so badly on what we were doing that I said it’s not a matter of if, it’s a matter of when this is going to happen, because those legacy systems must be replaced. But there’s also, of course, a component of being in the right place in the right time, because we raise it like the series B fundraising round was in 2021 when, like the market was completely different than it is now. So but again, I think looking at setting some limits, but always looking and thinking about a big plan is something that it’s it’s extremely important to to cope with the hard times. How
27:50
was it building in the Brazilian ecosystem? You know, especially as a woman founder, yeah,
27:56
you know, I think Today things are much better. When we started, we had like, the first communities being launched and being created in the region. But I think one of the things that was important for us was when we decided to fundraise for the first time, we were looking to investment funds that were like had prior experience outside of Brazil in the venture capital. Our previous experience was with private equity firms, which is a different way of doing things. But then, like we were lucky enough to sign with red point ventures, which were a JV between red point and the ventures like currently headline, but they were based out of California, and had lots of experiences, and also helped us a lot, not only navigate and but also talk to people outside of Brazil who were working, had experience in building companies perfect.
28:58
Talk a bit about culture. You know what? What is the culture of Pismo? And what do you what cultural touch points do you do on a frequent basis to to make sure that, you know, everyone’s living it?
29:11
We used to say that we were like a people centric company, because we were looking like in a moment in time where you are starting something from scratch and you don’t have enough money to pay the best compensation possible. In order to attract good talent, you need to take care of people you know, so not only look at them, but we had a very strong HR system since the very beginning. And also we had, like, dozens of people with stock options that we were like, sharing, it’s it’s a it’s a different game when people feel that they are part of something. It’s very different when they are just an employee. So you we had to be like, all the time, kind of selling the big dream and but also sharing some stocks and also taking care of people. So and I think one important moment for us, it’s it’s kind of a little sad states to talk about this, but when the pandemic started, people were struggling a lot with like not leaving home, or with mothers and parents, with kids at home and people getting sick that I think that was a moment in time where we could prove the value of having a strong HR team, looking to people, taking care of them, helping with, you know, psychological support, emotional support for the ones who are struggling with people getting sick, family members getting sick. So I think we could build a very strong culture, and people are really excited of working with us.
30:45
Very nice. Daniella, if we could feature anyone here on the show, who do you think we should interview and what topic would you like to hear them speak about? You should
30:52
talk to Carl strobo, which she was part of red point ventures, one of our early stage investors here, and now she’s the founding partner of antler here in Brazil, and they are making an incredible job in the in the ecosystem here with very early stage founders and companies. So I’d love to hear her talk about this
31:16
amazing Daniela, is there a book, article or video that you would recommend the listeners,
31:21
I love Clayton Christensen, how you measure your life, because I’m a very I’m a technical and technical person, and I think that when you bring some tools to measure, not only what we are doing at work, but also to try to look at your personal life, it’s important for you to have, you know, to kind of baseline, especially When you are founding a company who have so many challenges, so many decisions to make between personal and professional life, which is something that there’s a separation that I don’t believe exists. But I think it’s very interesting the way that he explains how you look to both things at the same time. Perfect.
31:59
Daniela, do you have any habits, tactics or behaviors that are a force multiplier?
32:05
I think questioning and looking and diving into details is one of the things that I can’t work. I can do some even having many people, many layers, working for me, I like to go to the very last detail, and ask questions that usually challenges people that are working with me. And I think it brings us, like kind of a sense of responsibility and understanding of what we are doing that it kinds of, it’s, it’s it spreads, you know, people just start working that way. And I think it, it’s one of the most important things, especially in the technical teams, when it’s very easy to pile lots of developers doing things that not necessarily are productive. So questioning everything and looking paying attention to details, I think it’s an important one.
32:55
Very good. And Daniela, what’s the best way for listeners to to connect with you and follow along with Pismo
33:00
LinkedIn, probably Danielle, adopt perfect
33:04
Well, congratulations on all the success and the progress so far you’ve taken on something super ambitious, and I just applaud you know how far Pismo has come and what you’ve been able to build. So thanks for sharing it with us today. Thank you.
33:17
Thank you so much for having me. Thanks, Danielle, you Alright,
33:22
that’ll
33:26
wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot them an email. Let them know what particularly resonated with you. I can’t tell you how much I appreciate that some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently. Thanks so much for listening.
