Ripple Labs CFO Bret Allenbach Photo: Vahe Hovannisyan
As Ripple Labs continues to grow, we’ve expanded our executive team this year, adding a deep well of experience and expertise. In April, Yahoo alum Brad Garlinghouse joined as COO. And last week, we welcomed Bret Allenbach as our new CFO.
Bret’s a 20-year industry veteran, having spent time on the regulatory end of the spectrum, while also serving stints at both Visa and Paypal, where he held leadership positions.
At Paypal, Bret built risk models and processes that would help catapult Paypal from a US-based multi-million dollar company to a multi-billion dollar corporation with a global footprint.
Ripple Labs: There probably aren’t too many people more deserving of the label ‘industry veteran’ in the space. Can you walk us through the early days of your career?
Bret: My career started in classic financial services. During my formative years, I spent time both on the regulatory side—working for the Federal Home Loan Bank in San Francisco—as well as in the private sector, where I worked on everything from audits to mergers and acquisitions to more vanilla finance like forecasting, annual planning, and asset liability management.
I realized that I enjoyed financial services, but I wanted to find and focus on a growth area in the space. That’s when Visa recruited me.
What was it like working at Visa?
It was great. I spent about seven years at Visa, well before the company’s IPO. For about half the time, I was in a group called Business Research & Reporting, which was basically this external and internal consulting group. We were sort of the gatekeepers for large initiatives within the organization that Visa was thinking of launching. Our job was to vet those initiatives and assess the financial dynamics and implications for both the company and our stakeholders.
And so a big chunk of my time was actually spent building out the company’s first econometric models around all the rich data that Visa had. We then used these models to forecast and project economic scenarios such as future revenues. We’d leverage these projections in dialogues with our large members and issuers, essentially providing insight as to the trajectory of the business and the industry at large.
So I did that for half the time. The second half of my tenure at Visa was spent in finance, where I managed monthly and quarterly forecasting and enterprise—basically long term financial planning for Visa as a whole.
And then you moved on…
After about seven years, I started to get that nagging feeling, that it was time to find another organization—maybe one that was earlier in its growth stage while still being in payments. By then, Visa was relatively mature. Meanwhile, Paypal was starting to get a little traction. After doing some research on the company, it felt like the right fit. Coincidentally, I was recruited by Paypal soon after and joined the company in 2005.
What did you work on at Paypal?
I was hired into a group called the Financial Services Group. It’s basically the group that managed Paypal’s payment pipes for Paypal so it was composed mainly of business development folks along with payment experts. The goal for us was to figure out how to scale the infrastructure of Paypal and make sure we had all the right relationships and connections to do so, especially as we expanded into new geographies.
At the time, Paypal was mostly focused on the domestic U.S. market. It was still very Ebay-centric. The question then was how we’d grow into Europe and Asia and what relationships we’d need to build out. As a payment service entering different markets, you need support from different banks and different card brands and different private label brands. So as the business grew internationally, we needed to make sure that people had the ability to get money into their Paypal wallet locally as well as get money out and make transactions.
This was the problem from a very high level. At a more granular level, one of the first things I noticed was that the group wasn’t really thinking about the economics and cost structure of the operation. They weren’t necessarily focused on transaction costs and margins.
So I made it my priority to try and optimize the cost structure. We built out a small team in the first couple years, partnering with our financial systems team and our accounting team. Our mission was to leverage our vast amount of data so that we could do the right analytics to close the books, validate processor costs and develop strategies to optimize our cost structure.
Ultimately, we were trying to figure out how we could optimize our systems and routing as Paypal got bigger and more sophisticated. Of course, all of that has to be done in a secure and compliant manner. And so what we were really doing was building out Paypal’s financial processes and structures related to transaction expenses.
And eventually, perhaps naturally, you moved into Risk.
Right, the role I played was effectively a finance role, but after a couple years, our head of payments moved over to the risk team, where they worked on financial risk, credit risk, and compliance. I ended up moving over with her and what we did was apply to risk everything we’d already worked on with payments.
The first step was to build out the analytics and forecasting team, which was responsible for loss reserves, understanding monthly results, and forecasting losses. This meant that we were also managing resourcing, budgeting, and providing strategy support.
Over time, my responsibilities expanded into risk analytics and business analytics. Risk analytics allowed us to monitor our portfolios and be aware very early of emerging threats through unusual volume patterns or signs of fraud. Typically, my team would identify potential fraud or attacks and hand off that information to the risk policy folks who could then deal with the situation.
We also provided business analytics to the risk and policy teams. For instance, if we were going to expand into a new region or territory, we’d want to understand the likely loss rates, both short and long term such that we can optimize for those variables. If you’re getting into new merchant segments like digital goods or gaming, all of those sectors have unique loss profiles. Having these high level analytics allowed us to monitor our portfolios in order to help the business grow in a controlled and profitable manner.
Towards the end of my tenure at PayPal, the CFO, who I’d always had a dotted line relationship with, asked me to formally move into the finance division while keeping the risk function that I had and taking back managing the finances for the payments organization. It was a year-long project in which we built and revamped many of Paypal’s internal financial tools and processes related to managing transaction expense and optimizing the natural synergies and trade-offs between transaction losses and expense. In that role, I was CFO of Risk and Payments.
And that got me to around the summer of last year. Looking back at what I’d already done, I was starting to feel like the learning curve at Paypal was starting to level off. I was getting that itch again—to get back into a smaller company and ride a new growth wave. It’s never easy moving on after nine years with one company, but by late last year, I served the hand off and formally finished my time at Paypal.
Which, at some point, leads you to Ripple.
I spent a few months on holiday and earlier this year, started to explore. I knew I wanted to stay in financial services but ideally with a younger company—one that was mature enough, with the structure to do what they wanted to, but also the potential for real growth. That’s how Ripple got on my radar.
When I start to look at and chat with younger companies, there’s two things I focus on. First, what’s the value proposition? Do I feel like they can differentiate themselves. For me, what Ripple is doing with distributed ledgers is incredibly interesting, by tackling the core infrastructure that powers the global system—not from the consumer side but from the foundational settlement aspect of bank to bank value transfer. To me, that was incredibly compelling.
The second piece was to just look at the strength of the organization. The people at Ripple are quality folks, incredibly talented with a diverse background and deeply experienced. I spent a lot of time with the leadership team, especially [CEO and co-founder] Chris Larsen and [COO] Brad Garlinghouse. These guys are experienced industry folks who have worked at large, successful corporations and bring to the table deep management skills. So Ripple met the second check box with flying colors. That’s why I’m so excited to be here.
Do you have any ideas or initiatives for the near term now that you’ve started?
Besides just learning and absorbing as much as I can, in my own mind, I always create a 30-day roadmap for myself. I tend to be fairly structured. This is in no particular order, but one priority is to just get a good sense of expectations from the leadership and the organization as a whole so I can better understand what everyone wants from a CFO. That’s a big short term goal for me—reaching a healthy alignment with the team and the company so I can figure out what my key objectives are and meet the needs of my key stakeholders.
The next step will be to figure out what finance is already delivering today, which will inform me of what might be missing. So I’ll be doing my own review to develop some sort of short term gap analysis, which will allow us to tactically focus on the next 90 and 180 days.
Anything you want to tell us about the real Bret Allenbach?
I’ve always been pretty passionate about work so along those lines, I can be pretty boring. Work is what I’m really focused on, and I’m not necessarily the adventurous type. Then, of course, the free time I do have is spent with family. And I’d always like to play a little more golf and tennis.
In less than two sentences, how would you describe the role of a CFO?
I’d say the role of the CFO is to be very visible in helping the company grow and expand—while being very effective and invisible in controlling its exposure to risk and uncertainty.