Rajan Annadurai, CTO at Deserve - The Credit Card Stack of the Future

(Joel Beasley at 00:00:04) Hello, my friends. Today we're talking to Rajan, the CTO at Deserve. And we discuss the advantages of having a modern cloud-based infrastructure for credit cards, innovative credit card rewards programs enabled by Deserve's technology, and how cryptocurrencies are set to completely change the way the financial system works. All of this right here, right now on the Modern CTO podcast.

(Joel Beasley at 00:00:29) Here we go. This is the Modern CTO podcast. Podcast. Here we go.

(Joel Beasley at 00:00:33) This is the Modern CTO podcast.

(Rajan at 00:00:44) I first got to use a computer in my ninth grade. That's very early. I got introduced by somebody to a language called BASIC, and you could use that to—and this was before even you had 386 and, you know. So I started computers in a very early time, and I got hooked on programming. And my college was—I did computer engineering at that time. Computer engineering wasn't that prevalent, but I did a lot of programming during my days and got a job as a software engineer. And within six months, me and another friend decided to start our own company, and we grew it for a while. This was in '96, '97, '98, time period before the dot-com boom. Grew it pretty rapidly. And then after the dot-com boom, again went back to working in startups.

(Rajan at 00:01:45) I've worked in a series of startups. Some of them didn't go very far. Some of them made really good exits. The good ones, the ones who made it with, was Vonage. When I was at Vonage, the voice-over-IP company, when it was private. I was with Apigee, which is now part of Google Cloud, when it was a private company. And I've tried different kinds of startups. And now here I'm at Deserve. It's a fintech company. This is the first time being in fintech. It's an amazing learning experience. What we built in the last three years is really making an impact in the industry. And that's my journey.

(Joel Beasley at 00:02:32) That's really cool. What has been a major challenge of switching over to the fintech industry for the first time?

(Rajan at 00:02:40) If I look at it, I actually think about it as it's given me a lot more advantage by not being in the fintech industry because the fintech industry has lagged the general software industry. Where on the consumer side, if you think about it, consumer-side technology is a lot more rapid adoption. So I've worked on many consumer startups where cloud, mobile, everything is, you know, that's your baseline. You need to have these tools for you to effectively build software. In fintech, it's still—the big players are still in legacy software, and they can't move as fast. So which basically means from a sheer execution, the background I have before coming to fintech helped me execute. So it's more of understanding the domain. And the thing about software is you can always pick up domains. Elon Musk didn't come from a car company, nor fintech startups which are doing really well didn't come from bankers. So domain is something which you always try to understand and then apply what you know and try to—many times the industry people sometimes forget that certain rules and regulations or the way you're doing stuff is based on either technology limitations or nobody asked why we need to do it this way.

(Joel Beasley at 00:04:13) Right. So how did you meet the team at Deserve and become CTO there?

(Rajan at 00:04:19) It's interesting. The founder CEO, Kalpesh Kapadia, he started Deserve. And when he started Deserve, his daughter and my daughter, they go to school together. So we were kindergarten parents, and that's how we got to know each other. And he was trying to bootstrap and bring this up. He pitched it to me. At that time, it was too early. I connected him with some of my friends, but we always stayed in touch. And, you know, Deserve grew. Deserve was a direct-to-consumer credit card. They got funding. And then again, we spoke, and I'm like, you know what, it's probably a good time for me to join. And that's how I joined Deserve.

(Joel Beasley at 00:05:10) That's awesome. Yeah. You never know where you're gonna meet your future business partner, employer. Always gotta be on the lookout for expanding your network, for sure. So can you give me a brief overview of what Deserve does?

(Rajan at 00:05:26) Yeah. So Deserve is a modern credit card platform. And before explaining what modern credit card platform means, let's say you want to do a credit card. And when I say you, I'm talking about a company wants to do a credit card. Usually you have to go to Chase or Capital One or there are companies like First Data, Synchrony. So United Airlines, when it has to do a credit card, they went to Chase. Similarly, JetBlue went to Barclays. Macy's went to Synchrony. You know, these are the companies who have the platform to build you a credit card. And then there are companies like First Data who will provide you the technology, and you can build on top of it. Now all of these companies, their software, their stack, is still in a legacy infrastructure. And that's one of the reasons, if you think about it, every industry has changed drastically in the last, let's say, twenty years or at least the last ten years. Credit card is still pretty much the same from a consumer point of view.

(Rajan at 00:06:31) Apple Card is definitely making a difference there, but apart from Apple Card, everything's the same. So that's basically where we come into play. We built a modern infrastructure entirely in the cloud. It's digital-first. And then one important insight in which we built our platform is we believe customers are always using their smartphone. So our platform is built with a smartphone in mind to be best in mobile. That's why—and of course, then everything else. Because we are in the cloud, we can move data much faster. It's rapid development, and all these things come into play. And there's a bunch of feature capabilities which we are bringing to market which nobody else has.

(Joel Beasley at 00:07:17) That's really cool. So is your main client base large companies that are trying to launch their own white-labeled card, or do you also do direct-to-consumer? Could I go out and get a Deserve card? Or what's the business model?

(Rajan at 00:07:34) A very good question. So we are primarily a platform company, which means the customer base for us, they could be banks who want to issue a card, or there could be other brands who want to issue a card. For example, if you are in the crypto space, you would have heard of BlockFi. BlockFi recently launched a credit card, and they are on our platform.

(Joel Beasley at 00:08:04) Oh, really?

(Rajan at 00:08:05) Yeah. Their credit card is totally powered by us. And that can be any—just like Macy's and Starbucks and all these things are brands—there are a lot of newer brands who are engaging with us, and they would launch the credit cards. And I could tell you, because we are all API and we give you a toolkit, you can have a very seamless embedded experience. For example, let's say you get a credit—in the older days, when I say older days, I'm talking about traditional brands—as in you can get a credit card from a Disney-branded credit card or a Southwest credit card or a United credit card or a Starbucks credit card. End of the day, even though you will go to Disney and sign up for a card, you will end up in a Chase app.

(Rajan at 00:08:57) So it's kind of a broken experience. Now with us, if you're getting a BlockFi credit card, we are behind the scenes. It's seamlessly embedded. You are managing it within BlockFi. And similarly, we are working with a lot more interesting partners who are gonna soon launch credit cards which you'll be seeing in the market, where it's a great customer experience. We are behind the scenes. Now the second question you had is, is there a Deserve credit card? Yes, there is a Deserve credit card. The Deserve credit card is more like a reference implementation to show the world what is possible in our platform.

(Rajan at 00:09:34) So think about it as Google has a Pixel phone where they keep on innovating to show that, you know, what is possible in Android. But they are making Android as a platform for every phone manufacturer to go ahead and build great phones.

(Joel Beasley at 00:09:48) That makes sense. That's a really good analogy. So what are some of the tools or perks that are enabled by being a modern credit card rather than some of the legacy cards out there?

(Rajan at 00:10:01) Okay. Very good question. So now if you think there are—let's say from a customer point of view. So usually in the credit card, you have to apply for a credit card, right? We make the entire application process such a way that you can apply, get approved, get a digital card. When a plastic card is in the mail, we'll immediately issue a digital card which you can add it to your wallet, an Apple Pay or a Google Pay, and start spending. All of this you can do in less than five minutes. Okay. So it's not traditionally you apply for a card and you wait for a few days to get it in the mail. Okay? That's just from an overall customer experience. And then the fact that we underwrite a loan—and traditionally, underwriting a loan is usually on FICO and your credit scores, credit score and credit report. There are a lot of younger people who do not actually use credit, who do not have established credit scores. So we also do cash-flow-based underwriting, which means we look at your bank balance, we look at your deposits going in and out, and then we make a decision based on whether we can give you a loan. So everything in this happens real-time. And we significantly reduce fraud, even though it's real-time and even though we immediately give you a card. Because mobile is our primary way of doing business, we'll ask you to upload your driver's license and do a selfie.

(Rajan at 00:11:35) And immediately, our software will match and say, yes, this is Adam, and it's not somebody else who's masquerading as Adam. So I can give you a card, and you can go about doing whatever you want to do.

(Joel Beasley at 00:11:47) That's really smart. I mean, I think it totally makes sense that just having higher tech is going to make it more secure. I feel like there might be a propensity for some people to think, oh, it's happening so fast, how is this secure? But I don't know. It makes sense in my mind that the faster it's working, I guess the more I trust that the holistic technology behind it, including security, is there. Because, I mean, you have to have really smart people to make something that works seamlessly like that, and smart people are gonna make it secure.

(Rajan at 00:12:24) Exactly. And this is where the iPhone and Android, both these systems, they are the platforms which is making it secure for consumers. In a way, in the early days of iPhones, iPhones were the primary devices which would get stolen. You have an iPhone, if you're in—if you're on the subway, somebody might steal it, and then you know it's getting sold in Russia. You know? Apple went ahead and did this whole overall iCloud and locking your device. Then they started Touch ID. Now they have Face ID. Now if somebody steals your iPhone, they can't get into it. They can't wipe it. They can't do anything with it. So it's practically a brick for somebody who steals your phone. Right? So they've taken out of the equation, a professional thief does not plan to steal an iPhone. It's not worth the effort.

(Joel Beasley at 00:13:26) Right.

(Rajan at 00:13:27) Right? So they've kind of made all the technology and made it seamless for the consumer to still be easy to use, but you don't have to be worried about your data stolen.

(Joel Beasley at 00:13:39) That's really cool. So one thing that I'm thinking about when you're partnering with a brand to help them launch a card, if they have way higher adoption than they anticipate, or they start scaling really rapidly, do you have systems in place to scale with them to make sure you can support that?

(Rajan at 00:13:59) Yes. So we are built in the cloud. Okay? One of the big differences between software built in the data center world and data center in the cloud, you could program how to scale your software. In the data center world, you need to add additional compute. You need to bring an additional server. You need to bring additional storage. And if something fails, you need to build redundancy. And many of them is pseudo-manual, and you can't just automate the whole thing. Now in cloud, cloud went through many evolutions of cloud software. The modern evolution of cloud software is infrastructure as code, which means your entire infrastructure is something which you program. And according to your needs, they have to scale. So yes, doesn't mean that it is not complex. You need amazingly good engineers, but it's not a problem as big as it used to be. It's a solvable problem.

(Joel Beasley at 00:15:07) That makes sense.

(Rajan at 00:15:08) Now one of the things which I—apart from approving you, getting you a card, once you get the card, we make it a lot more easier for you to manage your credit card. For example, anytime you make a transaction, if you are—typically credit card statements are hard to read. So for us, if you go to Starbucks, it will say Starbucks. It won't have Starbucks something cryptic and the amount. It will have the brand logo. If you go to a gas station, 76 gas station of Valero, it will give you the actual address of where you went. So all the information which we present to you is, again, having mobile in mind wherein we want to give you the information the way you like to consume rather than, hey, this is the credit card world, you need to adapt yourself to understand how we talk about things.

(Joel Beasley at 00:16:03) That sounds awesome. Yeah. Because my current credit card, which will remain unnamed, sometimes I'm looking through my recent activity trying to just, you know, detect any fraud myself. And I have no idea what some of the transactions are, even if I made them, just because they're listed in a way that doesn't relate at all to what I bought with the card that day or what that transaction was. And I have, yeah, just not really any way of verifying that I was the one that made that purchase just because I can't remember.

(Rajan at 00:16:40) Exactly.

(Joel Beasley at 00:16:42) So that's really cool. That's an awesome feature to hear about. Consider me interested. So I pulled up a couple of the companies that you have cards with. Since you mentioned BlockFi, I was just interested. I see you also have this a card with Notre Dame University and Seneca Woman. Can you tell me about that one?

(Rajan at 00:17:06) Yeah, absolutely. Seneca Women is a soon-to-be-launched credit card. It's in private beta right now. So Seneca empowers women. So they have made a rewards plan where you shop in women-owned business, you get additional rewards.

(Joel Beasley at 00:17:27) Oh, that's awesome.

(Rajan at 00:17:29) And since it's in our digital-first platform, we have made them our app and everything where you can apply, get approved, immediately get the card, and, you know, you can go and we will recognize it's a women-owned business and give you additional rewards. Now BlockFi, on the other hand, is your rewards get converted to crypto.

(Joel Beasley at 00:17:54) Oh, really cool.

(Rajan at 00:17:56) So just like a United card, as you spend, converts to United miles, which you can use for flying with United, BlockFi card, instead of giving you a cashback, the rewards which you earn, they get converted to Bitcoin. So this is a great way of you passively accruing Bitcoin.

(Joel Beasley at 00:18:22) That's really cool.

(Rajan at 00:18:24) So within the very first month, the numbers which we see on the BlockFi card are amazing. There is a real hunger for a product like BlockFi. And we see both the approval numbers and, you know, the number of people interested in the card, the amount of spend in the card because they get Bitcoin as rewards has made it very interesting.

(Joel Beasley at 00:18:52) Yeah. So when you're spending with the BlockFi card, are you spending from your crypto wallet or in dollars or whatever local currency?

(Rajan at 00:19:02) Your card is just like your regular card.

(Joel Beasley at 00:19:06) Okay, cool.

(Rajan at 00:19:07) You're not spending from your crypto wallet. Just like you have your current credit card, it's the same. You are spending in dollars. You get approved based on your overall credit, and we do some additional things for BlockFi customers. But at a higher level, it's still the same.

(Rajan at 00:19:29) And you spend and you pay back your credit card in dollars. Okay? It's the rewards, which, because in the crypto space, people don't want to spend their Bitcoin. They want to earn Bitcoin but not spend it.

(Rajan at 00:19:45) Now, we do some additional things for BlockFi customers wherein if it's a BlockFi customer who, these are works in the way, if you have enough crypto holdings and let's say your credit history is not that good, we might still give you a credit card. And pretty soon, we are gonna allow BlockFi customers to make payments through stablecoins, which will be a huge value for them. So you should think about, when you make payments to your credit card, it takes like five days for it to clear.

(Joel Beasley at 00:20:22) Right, yeah.

(Rajan at 00:20:23) There is a payment hold and everything. The reason for that is all of this happens on the ACH, and ACH clearance is anywhere between three to five days. So if you make a payment and I'm your credit card company and you make a payment, for me to get the funds, it can take anywhere from three to five days. And you also have a window where you can reverse the transaction. So which means you pay $2,000 to pay off your bill, and I can't give you back the $2,000 till this whole money is cleared. Otherwise, I'm taking a risk. With stablecoins, it's instant. So if you make a payment, immediately the balance will get clear.

(Joel Beasley at 00:21:11) Yeah. So would it just be like a specific stablecoin like USDC, or would you partner with someone like the Stellar network or just take stablecoins in general?

(Rajan at 00:21:24) So we are building the infrastructure such a way BlockFi customers can decide. Oh, cool. Because we convert, yeah, we convert the stablecoins immediately to real dollars. So that our balance sheet doesn't carry stablecoins, but we have dollars, and we allow you to, we release the fund, release your balance.

(Joel Beasley at 00:21:47) That's awesome. So I wanna take a little bit of a more higher level look at the whole fintech industry. What are some major trends you've been seeing in the past year or so?

(Rajan at 00:22:00) We look at fintech industry as, one is mobile as a huge disruptor, mobile and everything digital and real time. That's one angle in which you need to play the industry, look at every products through that lens. The second thing is movement of money. Right now in the US is predominantly in ACH and wire, and both work only during banking hours. They have, one can take one to three days. One can take, as you've said, three to five days. Now moving money is not programmable, and it's not twenty-four seven in real time. So that change will happen with stablecoins, and also the US government would launch its own CBDC, you know, central bank digital currency. So that's gonna significantly change the way financial products are built because money is programmable now.

(Joel Beasley at 00:22:59) That's crazy.

(Rajan at 00:23:00) Yes. And third, between these two, the entire financial stack has to get redone because every layer which we assumed has to be built was built because there was a batch process which happens end of a day. There is a process of T plus three. I need to hold funds. You know, there were so many intermediaries which had to make things moving, and they all will get realigned. And many of those layers will get, will disappear. So that's why for us, the next ten to fifteen years in this space is gonna be really, really interesting.

(Joel Beasley at 00:23:43) Yeah. That sounds amazing and really, really positive for all the people that are trying to move money around. But the place where my head is going is that, do you anticipate there being like a lot of pushback from people trying to hold onto the old system? Because cutting out the middleman is great for everyone except the middleman. And I feel like right now, especially because they're in the financial industry, the middleman has a lot of power to try and, you know, hold on to the old way of doing things.

(Rajan at 00:24:16) Oh, yeah. Yes. It's always the case until something comes through. If it's just a small variation, the middleman will still keep on surviving. Suddenly, a technology break will be so profound that it would not even make sense to go through the middleman.

(Joel Beasley at 00:24:34) Right.

(Rajan at 00:24:35) And so that's where you gotta keep on pushing the boundary. And that would be a break. That would be a break in the way consumers behave. That would be a product fit which fits the market such a way it's a forcing change.

(Joel Beasley at 00:24:52) For sure. Yeah. So in this case, that huge catalyst could be like the US releasing their digital currency. Right?

(Rajan at 00:25:02) Yes. US will release a digital currency. And the good thing about the US releasing a digital currency is the stablecoin industry is growing very rapidly. And it's programmable. It works twenty-four seven. Now because stablecoin industry is not regulated by the government, the government will look at, they will learn from the stablecoin industry. They will take the programming aspect of it, moving money aspect of it, and launch the digital currency. And that would be competition. People would able to pick and choose which, or they will support multiple payment rails.

(Joel Beasley at 00:25:43) That seems like a big challenge for the US government, I think, to try and create a coin that people are going to be as willing to adopt as like a USD coin that already exists that isn't necessarily tied to the government. Because I don't know, that's not always viewed as a positive thing by the masses, you know, to have your cryptos tied to a government. That's kind of, I feel like that's a little bit contradictory and especially in the crypto community, right?

(Rajan at 00:26:17) Yes. Yeah, it would. So we'll have to wait and see. So the way we look at it is, we don't know who's gonna win, who's gonna be a major player. What we think is money is gonna, we just have to think that money is gonna become real time and programmable. And you start working with every layer which allows you to do that.

(Joel Beasley at 00:26:39) That makes sense. Yeah. I guess whoever's gonna win is gonna be the one that just makes it the easiest and most seamless way to program money. Yes. Man, that's crazy. Well, so how do you keep up with industry news? How do you stay on top of all of this?

(Rajan at 00:26:55) Great. So before coming to fintech, crypto was my passion. Even though I was in other technology, I was always involved with the crypto community from reasonably early on. And I was, so that's one angle which allows me to look at. So I understood the crypto ecosystem before I came into the traditional banking and financial system. So that's one aspect of it. Now that we are here, we see so many new patterns. We see, we talk to customers who tell us their pain points, what they look for. Not only we talk to traditional banks, we also talk to startup-led fintechs who want to get into the credit card space, and they are enterprising. They have new ideas, which, you know, sometimes which we might not even have thought of. So now it's slowly becoming like, you don't really have to do any effort. It's like there are so much of inbound information which is coming to you, including companies who want to pitch and be part of our stack. So I think it's, and it's part of your overall job to know what's happening.

(Joel Beasley at 00:28:11) For sure. Yeah. Especially when you're dictating like the higher level strategy of a company from the C-suite. So I actually want to ask you a couple like leadership questions as you are steering the business. So first, some context. How many people are at Deserve right now?

(Rajan at 00:28:30) Deserve right now, we are at close to 200, of which 70 would be engineering and product.

(Joel Beasley at 00:28:39) Wow. Yeah. That's a pretty high ratio there. That's really cool. So how would you describe your personal approach to leadership at Deserve?

(Rajan at 00:28:48) So I think in many ways, it's overall being clear where we are going as a company, the North Star of how we are building out our product and our platform. That higher level, we get clarity across the organization, across all teams, and give enough freedom within the teams and the across the entire structure of our organization to work out the details and make it happen. So if you start concentrating on the details on the higher level, then you start micromanaging and, you know, people don't understand the bigger vision. And that's always has been the guidance in which how teams and, you know, how organization needs to be built.

(Joel Beasley at 00:29:38) Yeah. So I imagine when you're working with lots of different brands, you have teams that are working on specific features for different cards. Right? And these teams probably are learning like pretty specific things from their experiences with each brand. How do you encourage your teams to communicate and share their learning so that the whole company can grow as a result of each client interaction?

(Rajan at 00:30:10) Very good question. So and this is actually complex for every enterprise company. Because on one hand, you're building a platform which has to get reused. And the learnings of what you understand in each customer implementation or customer needs, you want to make it available to multiple people. This way, you make your software more efficient. You also get economies of scale and make the product better. On the other hand, the teams have, how do you set up your teams so that this happens and still your customer gets the best? So we have organized our product and engineering teams across functional areas not tied to a actual customer. So for example, that would be a team for rewards. There would be a team for payments. There would team for underwriting. Okay? And they would start looking at all the customer requirements and make it incorporated to our platform. So that if, end result, BlockFi might have crypto rewards or somebody else would have a traditional statement credit rewards, or we are talking to somebody who's trying to bring in fitness data wherein we give you additional boost if you work out thirty minutes at least ten days a month. So as a product manager in the rewards team, I'm looking at the rewards infrastructure as something which has to cater to all these different needs. I built a software such a way it can be configured to handle these scenarios rather than make one now for each customer wherein it doesn't have the quality and the unnecessary structure for it to succeed.

(Joel Beasley at 00:32:04) Man, that's really cool hearing you mention all the different types of reward infrastructures that are possible. Like, I mean, obviously with BlockFi giving crypto, that's super cool because you're investing with your rewards to an extent. And then, man, I hadn't even thought of the prospect of having a rewards based on like motivating you to stay healthy. That's really cool. You can really provide some awesome financial incentives for like whatever community wants to launch a card.

(Rajan at 00:32:37) Exactly. So that's where we tell our partners, we call them partners. Think about rewards model which fits your audience. Don't worry about, you know, what's possible, what's not possible in our platform. Any data points and anything we could stitch together and have a model.

(Joel Beasley at 00:32:55) For sure. So I wanna ask a little bit about like your personal approach to your career. So how do you structure long term goals for yourself? Do you plan in like quarters, weeks, or months or years?

(Rajan at 00:33:12) Until I was later in my career, I didn't think I really planned much. It was more of I was interested in technology and, you know, anything new came, you start understanding and then start working on it. That's how it progressed. Now as you become more, let's say, in the valley for a longer time and everything, you start thinking of how do you approach this in a structural way? And this is going back to some of the things which I told you earlier is, the way software is going, it's becoming building software is the specialty. The domain is not the specialty. So you apply software principles. And software principles are also continuously changing. So it's like if you're somebody who plays tennis, the tennis, when you are playing with a wooden racket, you have to have these big swings. And, you know, if you're from the baseline, you can never hit a winner. And you need to have this full motion to get a certain amount of power. Now with modern tennis, you can just flick your wrist and get the same amount of power. So now your game has entirely changed. So software, also, the stack changes so rapidly that whatever you thought as best practices is out of the window, and you need to think of, you know, with the new stack, it's a new set of best practices. So if you keep on understanding what are the software tools available, what is possible, then you can go and apply it into whichever domain it is good to solve. And that's why, if you think about it, self driving car was never a possibility before. Then the software tooling, including the ability to move data at speed and able to crunch it and able to do machine learning became a possibility, then self driving car becomes a possibility. Right? Similarly, with Face ID. Face ID wasn't possible till you have the sensors in place. And Apple has a hardware chip which allows you to protect your ID. So as the technology evolves, there are different use cases in which you can solve. So as somebody in the space, my whole goal is to make sure every new technology trends and what's possible, you're always on top of it. You'll understand what is possible with it.

(Joel Beasley at 00:35:48) That makes sense. It's hard to plan ahead when you're in an area that's moving so fast. So the best way to stay on pace is just to keep up with your passion as long as tech is what you're passionate about.

(Rajan at 00:36:03) All right.

(Joel Beasley at 00:36:04) All right, man. Well, do we have anything else we want to get out there before we wrap up? Like anything specific you want to plug for Deserve? Are you guys hiring? What do you wanna talk about?

(Rajan at 00:36:17) Yeah. At Deserve, we are growing very rapidly. Pretty much have openings in all areas in our company. And we are also getting a lot of inbound requests for partners, and the business is booming. It's, we get a ton of interest. And overall, I think the overall fintech space, not just for us, for different companies in different areas of the fintech space, things are growing pretty rapidly. It's a good time to be in this space.

(Joel Beasley at 00:36:54) Thank you so much for listening. And if you found this episode useful, please share it with a friend or colleague who you think would get value from it. And if you have topics that you'd like to hear discussed on the podcast, either add me on LinkedIn, or send me an email [email protected]. Every time I get an email or LinkedIn message, it absolutely makes my day and inspires me to keep going.