00:00hi everyone welcome to the a6 Cinzia
00:02podcast i'm sonal and today we have
00:04Angela strange a partner on the deal and
00:06investing team MA during a podcast on
00:09thin tech trends including our general
00:12partner who's an expert on all things
00:13fin tech Alex ramp oh and special guest
00:16Charlie where's el senior technology
00:18writer at BuzzFeed who recently wrote a
00:20deep feature on the topic so let's just
00:22hello everyone so maybe we could kick
00:25this off charlie you just finished a
00:26month-long experiment of going cashless
00:29which actually landed you in a quasi
00:32surgery office getting a microchip
00:35implanted in your hand in Sweden you can
00:38tell us what what led you along this
00:40sure so it started really with a very
00:43simple question which is what is the
00:46future of money and with regard to you
00:50know all the buzz about mobile payments
00:51and the death of the wallet and a
00:54cashless society how far along on that
00:56timeline are we actually and and in sort
00:59of what is what is that future look like
01:00and who you know who wins who loses all
01:03these sort of vague or hard to answer
01:05questions and so we thought that a fun
01:07way to approach that rather than you
01:09know the traditional talking about
01:11finance can be can be dry sometimes and
01:13also very interesting so I decided to do
01:16an experiment where I lived for 30 days
01:18only using electronic money or I got rid
01:22of my wallet left it at home and only
01:24used you know mobile apps and the
01:27internet and started kind of going
01:29deeper and deeper into crypto currencies
01:32like Bitcoin and eventually I went to
01:35Sweden and got a chip implanted in my
01:37hand so I mean it kind of how did you
01:40pay for that you know what actually the
01:42the fine people at calm body
01:45modification in Stockholm did it for
01:48free because they are real evangelist
01:52for this biohacking movement and they're
01:54really excited to just have somebody who
01:56was gonna you know push the experiment
01:59to the furthest loss that would have
02:00been a great first test transact would
02:02have been really hard right like you go
02:04pay them with your hand after you after
02:06they've implanted the thing in your hand
02:07yeah and it was it was really hard to
02:09find somebody who could help me you know
02:13and there are a lot of people who do it
02:14and you know like we can hook this up to
02:17you know this experimental
02:19cryptocurrency that you know isn't
02:23really in use anywhere that's you know
02:24we're just trying to like play around
02:25with and it was very hard to find
02:27someone who could who could sort of find
02:30a practical application for it
02:31alex has already trademarked this human
02:33pay versus Apple pay or Samsung's coming
02:35there you go perfect one of the things I
02:38thought was interesting is you you
02:39decide to leave your wallet at home and
02:41it's not like you can just pick up your
02:43phone and use Apple pay there's a huge
02:45startup cost in terms of all the apps
02:48that you need to download can you talk
02:49about the wide variety of things that
02:51you had to install on your phone so that
02:52you could actually shop but what turned
02:54out to be a fairly limited number of
02:56places after all yeah is really
02:58interesting it's basically the the first
03:01thing I noticed was the the limitations
03:02of Apple pay though that was really the
03:05first thing it really sort of pushes you
03:08to two ends of the spectrum you either
03:11have sort of the big-box retailers the
03:13you know Best Buy or you know like a big
03:17supermarket Whole Foods things like that
03:19and then you have the other side which
03:21is you know a coffee shop that has a $6
03:23latte that you know that only accepts
03:26square or Apple pay and and there's
03:28really not a lot in the middle there
03:30like what most people are where most
03:33people are going and and so I thought
03:35that was interesting sort of being
03:37pushed to that extreme and then it's
03:39really such a fragmented marketplace out
03:42there everyone started trying to it it
03:44felt get a piece of that and so I
03:47created a folder on my phone called
03:49cashless and it was every time I saw
03:51something an opportunity I would
03:54download an app and it ended up being I
03:56think like 64 apps and you know just
03:59scrolling through like okay I need to
04:00use I need to you know get somewhere I
04:03use a new jersey transit app it was it
04:06was difficult and and you're inputting
04:08so much credit card information then I
04:11mean I'm like I ended up memorizing my
04:13credit card number for the experiment so
04:15I actually could leave my wallet at home
04:16but I just felt this sort of sinking
04:18feeling of you know I keep taking all my
04:21my very you know sensitive payment
04:24information and just sending it
04:26different corners of the internet again
04:28and again and and well that may be more
04:30of a maybe something that I worry about
04:32and it's not actually a huge concern it
04:35it feels like you know average people
04:38who don't know a lot about this space I
04:40mean they're gonna be intimidated by
04:41that it's funny I had a you talk about
04:43the broken end-user experience I always
04:46order ahead my coffee and so I can be
04:48cashless but if I show up in the coffee
04:51store like I did the other day and I
04:52wanted to buy breakfast there's no way
04:54that I can be cashless while in the
04:56coffee store but I can be cashless
04:58before I get to the coffee store so I
04:59end up using this order ahead and
05:01showing it to them and saying like hey I
05:02paid this way like please give me my
05:04because they don't accept Apple pay and
05:06it's just from a consumer standpoint can
05:08still be kind of a pain in the ass yeah
05:09I think it speaks to how how far we
05:12really have to go and I and how much of
05:14the mobile payment or the the contact
05:17lists revolution or whatever you're
05:19gonna call it how much of it so far is
05:21just experimental it's just a lot of
05:22these places saying okay we want to be
05:24in this space we want to try it but we
05:26maybe it was funny when I went to Sweden
05:28you know it's a cashless society this is
05:31supposedly the only place that didn't
05:33accept the mobile app with Starbucks and
05:36Starbucks in the United States is you
05:39know has a wonderful mobile payment
05:41solution so I think you know there's the
05:43the continuity is not really there so
05:47it's actually talked about Starbucks
05:49Alex's is something that you talk about
05:50often in the the motivation on the
05:52retailer side like it's not necessarily
05:55that consumers pay faster because
05:57sometimes it takes them longer to get
05:58out their app they don't necessarily
06:00it's not necessarily cheaper because to
06:03get somebody to use your app you
06:04probably have to offer a lot of loyalty
06:06points and free coffees but that the
06:09real values and the data that they're
06:11collecting and being able to influence
06:13well sometimes so so two interesting
06:15anecdotes so right now the number two
06:16app in the App Store as of June 15th is
06:20the chick-fil-a app which was kind of
06:22brilliant because it's very very
06:23expensive to get millions of people to
06:25download an app I mean Facebook has a
06:26multi billion dollar a year revenue
06:28stream from cost per install ads so
06:30chick-fil-a said okay we'll solve that
06:32problem I mean how much what are their
06:34cogs for a chicken sandwich is probably
06:35like 50 cents 99 cents of something in
06:39so we'll give you the chicken sandwich
06:41for free if you down with the
06:42chick-fil-a app so that was like their
06:44solution to hack that particular problem
06:45and now it's the number to download that
06:47from the app store so the main thing is
06:50that all of the retailers do not like
06:52the credit card companies so the credit
06:54card company complex because especially
06:56if you are in if you're a resale company
06:59like Target target has some private
07:01label stuff but by and large they're
07:02selling other people's things and their
07:04net margin like so their net income
07:06after tax income as a percentage of
07:08total revenue is probably between one
07:10and two percent so very very low their
07:12credit card fees are between one and two
07:14percent so if their credit card fees
07:16went to zero they would double their
07:17after-tax profit which is very very
07:19significant because that's what
07:20shareholders care about so they want
07:23people not to pay with credit cards but
07:25then to your point Angela how do they
07:26get people to not pay with credit cards
07:28oh we'll make our own payment system so
07:31this was the mcx currency experiment
07:33which just basically got shut down
07:34because it doesn't solve a problem for
07:35people people like paying with their
07:37credit card or even if they're using
07:38contactless if they're spending five
07:40hundred dollars on something they want
07:41the miles they want the points they want
07:43whatever kind of comes with that and if
07:45Walmart wants to displace that and
07:47they're saying hey you're not gonna get
07:48one percent cash back anymore and you
07:50have to go switch and we're gonna give
07:52you a chicken sandwich they can't give
07:53you a chicken sandwich like what's
07:54actually worked for Walmart and others
07:56is giving you five percent back or seven
07:59percent back which guess what is
08:00dramatically more expensive than the two
08:02percent that they're paying right now so
08:04it's why the credit card companies are
08:06so valuable because they have a very
08:08very defensible position in this
08:11ecosystem you touched on they're in the
08:15middle of that of that thing that I did
08:17I really even truly felt this entire
08:19time which is that so little of what's
08:22out there has has a consumer and in mind
08:26really and and so you know it's all
08:28marketed that way but I think that's one
08:30of one of the big hurdles here that you
08:33know it's not really that the UX of the
08:36specific app looks bad or is hard to use
08:38but it's this idea you know it's being
08:40built for the lifestyle of a person that
08:42maybe you know doesn't exist I mean a
08:44but I sort of learned throughout this
08:46entire time a wallet is a really
08:48efficient piece of low
08:50and a credit card works wonderfully it's
08:54an amazing battery life yeah you know
08:56you can't you can't scratch you you know
08:59you can't drop and scratch the screen of
09:01your credit card you can't you know if
09:02it gets wet it's probably gonna be okay
09:04all these things it it feels like we
09:07haven't you know so much of it is just
09:09this abstraction layer on top of
09:12technology that's you know really tried
09:15and true and experiment the things that
09:18in many cases when you when you switch
09:20modality you often end up emulating the
09:23old modality so they think about the
09:25what is the second word in webpage it's
09:28page so you have eight-and-a-half by
09:30eleven piece of paper and then when the
09:32web came out it basically was taking
09:34like the piece of paper and putting it
09:35on the web or you know apps initially
09:38look like bookmarks you can actually do
09:40better than that so I mean I actually
09:42think it's funny if you look at Apple
09:43pay and how it works right now when you
09:45bring it up it tries to emulate what
09:47your old fashioned wallet looks like so
09:49it is this abstraction layer but it
09:51keeps that form factor so it is this
09:55skeuomorphism for the physical wallet
09:57which seems like we're in v-point oh one
10:01beta of what actually it should be
10:03because if you have a phone you could do
10:06a lot more with it I mean like the phone
10:07already has the five I imagine that you
10:09have the five different payment types
10:11that are in your wallet on your phone
10:12you shouldn't even have to choose your
10:14payment type at the type of purchase at
10:16the time of purchase you should be able
10:17to choose after the fact there are so
10:19many things that you can do when you
10:20electronic I and you have this kind of
10:23master pointer in your phone whereas
10:26when you have this old-fashioned wallet
10:27I mean the old-fashioned wallet to your
10:29point works great great battery life
10:30great all of these different things it's
10:31waterproof like I I use my credit card
10:33for everything I haven't yet found a
10:35situation where using my phone is
10:38actually better except in the order
10:40ahead situation but that's saving me
10:41time and the time is not the card swipe
10:44versus the card tab versus the the phone
10:46tap the time is waiting in line at
10:48Phil's coffee in your case for half an
10:51hour to go order coffee like that that's
10:52the big benefit and I think the you're
10:55not going to be just because it takes so
10:57little time to tap in your case your
10:59hand or in my case by phone or in
11:01Angela's case her her visa or master
11:04I think the main thing is actually on
11:06the back end how do you make that back
11:07end payment experience better simply
11:10because the front end of the payment is
11:11so easy and takes a fraction of a second
11:13somebody said in my reporting something
11:17that really stuck with me which is that
11:18you know for all of the buzz of these
11:21mobile payment apps and and the idea of
11:24when they're purchasing something people
11:27care about the thing that they're
11:28purchasing or the experience that
11:30they're about to go into they don't
11:31really care how they pay they just want
11:33it to be efficient and just be done and
11:36so I think that that's and I think that
11:38that will go away with you know when the
11:40when the idea of waving your phone
11:42across you know a terminal becomes a
11:45little more standard that that's sort of
11:47look what we did look what we did will
11:49will go away and there'll be more of an
11:51emphasis you know on that hopefully on
11:53that that back in the real example is
11:56like you know what can a piece of
11:58plastic that does not have a battery
12:00that does not have a screen not do well
12:02I can't keep all of your receipts with
12:04itemized information on them so the fact
12:06that whenever I do my expense report I
12:09have to find all these crumpled up
12:10receipts and I lost one oh damn I don't
12:12get paid back for that thing I mean that
12:14that is an anachronism and yet I'm
12:16paying with a credit card and even if I
12:18pay with my phone my phone can't receive
12:21the itemized information of what I just
12:23purchased and that would be a big game
12:25changer I mean for the entire business
12:27traveler segment that like people would
12:29use it just for that as opposed to right
12:31now like the best innovation that we
12:33have is hey the phone also has a camera
12:35so you can take a picture of the receipt
12:37and then make it into a PDF and then use
12:40that for your expense report so there
12:41are things that I think will improve
12:43this quite a bit but you have to take
12:45advantage you can't just make this
12:46skeuomorphic experience you have to take
12:48advantage of the fact that the phone is
12:50now a two-way communication device and
12:52not just a holder of a 16 digit account
12:55number I want to come back to the the
12:57user experience point I think we agree
12:58that offline is still pretty clunky
13:01there's a pretty interesting
13:02announcement this week around Apple pay
13:04coming online that I think is going to
13:06make a really big difference
13:08prior to andreessen horowitz I worked at
13:10Google on the chrome side and we spent a
13:12lot of time wondering how we could make
13:15the user experience of paying for
13:17like right now whether you're in an app
13:19or you're in a webpage you're you're
13:21typing out your credit card number and
13:23and really the best that we ended up
13:24with was a turbocharged system of
13:27autofill really that could save across
13:28your profile and that improved it but it
13:31wasn't a massive step function whereas
13:34what Apple pay just announced maybe you
13:35guys can talk about what you think that
13:37the implications will be there but I
13:38imagine will make things much smoother
13:40across apps and across across the web
13:42eventually online well I think part of
13:44the reason why Google got there and
13:46obviously I'm talking to the the Masters
13:48correct me if I'm wrong on this but you
13:50you didn't have to get merchants
13:52participation to do autofill and Google
13:55had struck out a number of times doing
13:56at first he was called Google Checkout
13:58then it remarked his Google Wallet and
14:00then Google Wallet didn't work because
14:02that was entirely focused offline but
14:04then this little thing called Android
14:05took off and then the reason why Google
14:07Wallet now I think has not just a
14:09fighting chance but a very very good
14:10chance is because Android brought Google
14:13to I mean it's probably nearing in on a
14:14billion credit card credentials they
14:16don't disclose it but my guess is it's
14:18going to get there eventually so now you
14:20can have a predefined format and here's
14:23here's an API if we're actually
14:25accepting Google Wallet and if you do it
14:27it means that the person enters one set
14:30of credentials and then boom they're
14:31done as opposed to like with
14:34I'll I use Chrome for everything with
14:36form filling I'd say the hit rate is
14:37maybe 50 percent and then I forget my
14:40cbv I'm sure you've memorized a lot more
14:42than that but it's like is it this is
14:43that that I forgot what it is I still
14:45have to go back and actually reference
14:46the original document but I think Apple
14:48pay online is going to be a really big
14:50deal because whereas offline the problem
14:52the order ahead stuff that would solve a
14:55problem the two-way communication with
14:56your phone for for example itemized
14:58receipt information that would solve a
15:00big problem but the whole I'm tapping my
15:02phone to the terminal to pay and then
15:03sometimes it doesn't work and it takes
15:05me three times more and then the person
15:07behind me in line gets angry at me that
15:08I'm holding up the line like that
15:09doesn't solve a problem in my opinion
15:11for the offline world but the online
15:13world part of the reason why Amazon is
15:15dominating part of it is logistics and
15:17that they can deliver anything in one
15:18day and anybody else takes a week so
15:20that that's very very powerful but the
15:21other part is friction for the order
15:23experience and a big part of the order
15:24experience friction is entering your
15:26payment credentials and if Apple pay
15:28eliminates that for everybody that is
15:31not very frequent use case you're not
15:33going to go download the I don't know
15:35what's a very infrequent purchase random
15:40shirt company app like you're not going
15:42to go download the Brooks Brothers app
15:44I'm sure they have one however you go to
15:46the Brooks Brothers website and now you
15:48can pay with Apple pay that solves a
15:49massive problem it's not waiting in line
15:50there is no line on line there is a line
15:52there's a friction that's imposed upon
15:54consumers for checkout and Apple pay
15:56eliminates that it was funny I was in
15:59the audience at the developer conference
16:01when this was announced and these events
16:04are just like these rapid-fire check out
16:06our new thing and you look around and
16:08you see and you the developers are there
16:10cheering it was a really sort of low-key
16:13moment and as I you know I could tell
16:15that you know this isn't going to get a
16:16lot of outside of the FinTech blogs in
16:19the FinTech world like really get a lot
16:21of buzz but it's huge I mean to that
16:23point it's just the staggering amount of
16:26data to be collected and I feel that is
16:30the way Millennials are people you know
16:33there abouts that I know are not
16:35necessarily that interested in signing
16:37up for Apple pay outside of that
16:38experience of oh cool you know I waved
16:40my phone and I think that having having
16:44something like this that really actually
16:45truly becomes a utility instead of a
16:47gimmick I think you know then you start
16:50building up this as kind of trust with
16:53with the consumers and you start you
16:55know you really be cut it really becomes
16:56this this financial passport I think
16:59just even from the opportunity of the
17:00data that they can gather this it's
17:02gonna be Toria Slee anti data that's the
17:05funny thing about Apple versus Google is
17:07that Apple says we don't collect any
17:08data we don't use any data
17:10we'll never store any data this was part
17:12of the reason why their average housing
17:13efforts have not been successful and
17:14Google is the opposite there so it will
17:17be interesting to see how they do that I
17:18just think that their platform advantage
17:20is very significant and they have what
17:23Google didn't have ten years ago and
17:25launching checkout which is they have
17:27also probably about a billion
17:29credentials so very very relevant all of
17:32the execs that work at the William
17:33sonomas of the world they probably all
17:35use iPhones so this is going to be
17:37priority number one and normally
17:39whenever a new payment method has
17:40launched in the past the amount of time
17:43that it took to diffuse through the
17:45it could be ten years I mean Bill Me
17:46Later was around for a very very long
17:48time and they got up to a pretty small
17:50percentage of the market that used it I
17:51think what's gonna be really interesting
17:53is who is the biggest merchant online
17:56well its Amazon will Amazon use Apple
17:58pay will some of the others use Apple
18:01pay because there is an advantage like
18:02think of it from not the consumer
18:04perspective but from the retailer
18:05perspective so I want you I can't
18:08control what my competitors do but I
18:10want you to have your card number stored
18:13with me as opposed to a tokenized
18:15variant of it there are a lot of
18:17advantages to actually having like the
18:19true card numbers so it's gonna be
18:21interesting to see how it proliferates
18:22but I think the adoption by December
18:25time I can imagine like normally what
18:27retailers do is they will freeze all
18:29development maybe August September
18:31because it's called Black Friday for a
18:33reason that's when they go into black
18:34right so so much of their effort is
18:37really maximizing sales in November in
18:39December and typically they'll cut off
18:41all development of new features for
18:42their website in at the very latest
18:45September so I would imagine that right
18:47now June July August
18:49whatever September remains for them it's
18:51all going to be about implementing Apple
18:53pay it feels like another example to me
18:54of this world of ecosystems with you
18:58know big technology companies and you
19:00know you buy it you buy into a specific
19:02ecosystem and you just keep drilling
19:04down okay you know I have my Android
19:06phone and now you know it makes sense
19:08for me to be part of all the Google for
19:10suite of products or you know the Apple
19:11suite as these companies build out and
19:14the you know their tentacles of their
19:17system you know go move into finance and
19:20move into any other realm that the
19:23consumer is left with this situation
19:25where you know they have to sort of pick
19:28a lane and choose it I don't know it to
19:30me that feels like if if Amazon chooses
19:33not to go through that's a big thing
19:36sticking out there and I and I'm curious
19:37what it makes you guys think about you
19:39know this idea of ecosystems and
19:41everyone having you know trying to make
19:43a land grab the nice thing from Amazon's
19:45perspective is that they don't have to
19:47they already have enough people the
19:49Amazon probably has more cards on file
19:50than PayPal has cards on files so Amazon
19:52is very very big and the number of
19:55people it just because you can buy
19:56everything from Amazon it's not a
19:58one-off type of purge
19:59they probably don't need Apple pay as
20:01much but they should be internally
20:04rooting for it to fail because if it
20:06fails it actually helps Amazon sell more
20:09things at a higher markup visa via the
20:10competition so I think the answer to
20:12your question is kind of what is the
20:14platform and what is the product because
20:16everybody wants to have the platform and
20:18when Amazon was got a lot of pressure
20:21for failing with their fire phone their
20:24fire phone actually made a lot of sense
20:25because the problem is that well what do
20:27they sell they sell books in media
20:29that's like that's where they started
20:30they started off selling books then they
20:31eventually went to other forms of media
20:32and they are banned from doing that on
20:35this thing called the Apple device and
20:37there they have that similar problem not
20:40quite as bad with Google devices as well
20:41with Android devices so it makes a lot
20:44of sense for them to control the
20:45platform but it's very very hard for
20:47them like the guys that I think are the
20:48hardest hit are the guys like PayPal
20:51where can you imagine the PayPal phone
20:53seriously this is what they would need
20:55to have like to beat Apple pay they
20:56would have to build their own phone and
20:58I find it really interesting it's like
21:00the the kids story of the the old lady
21:02that small swallow the spider too small
21:04to fly and that ends up swallowing an
21:05elephant at the end of like swallow the
21:06the other animals that she swallowed to
21:08eventually get that fly and Google
21:11initially like the iPhone was an iPod
21:14with a radio transmitter that's what the
21:16iPhone was initially and Google said hey
21:19we're gonna go build this Android phone
21:21they're not gonna build it but they're
21:22gonna get all these manufacturers to do
21:23it oh wait nobody wants Android because
21:25it doesn't have music okay we're gonna
21:26have to build a music player you build
21:28all these other forms of functionality
21:30and it's just this it's this search that
21:33never ends and each one of these things
21:35it's a feature and you're doing it to
21:38kind of make sure that you have control
21:40of the platform and then once you have
21:42the platform like now and how many
21:44things does Google have they have their
21:46own browser because well what if they
21:48had a phone that they made and they
21:50didn't have a browser for well that
21:51wouldn't work out so well but all of
21:53these things that you have to do to
21:55basically exert control as a platform
21:56and then everybody else who doesn't have
21:58that capability and and/or doesn't
22:00really meet a consumer need like hence
22:02the the PayPal phone which wouldn't work
22:04but that would be their only way of
22:05really playing here the fire phone would
22:06be the only way of Amazon really being
22:08able to control the platform and hence
22:10you know so I think it's really
22:11interesting I think like Google with
22:13Android Apple with Apple pay like if you
22:15have a phone but you have such an
22:17advantage in the payment space and
22:19looking at how are how are other people
22:22creating advantages take uber for
22:24instance right which is probably one of
22:26the larger apps with the larger payment
22:28systems to drivers and users across the
22:30board and they're trying to create like
22:33a platform within themselves and
22:35releasing their API to create more apps
22:37on top of that I think it's a an
22:38interesting but pretty challenging game
22:41to create the platform on top of the
22:42platform to not completely cede control
22:44to the apples and Google's right
22:46depending on how aggressive that initial
22:48that foundational platform is because
22:50there's nothing really more foundational
22:52you could argue that Amazon if Amazon
22:53had a if this were like the Soviet Union
22:56and they were the only store there was a
22:57lot to sell anything then they would
22:59have the ultimate platform because the
23:00only way that you could get a phone
23:01whether it's an Apple phone or a Samsung
23:04phone would be from like the ultimate
23:05buying platform which would be Amazon so
23:08they would actually be a step up in the
23:09chain but fortunately for us there are
23:12many many places to buy place by things
23:14such as phones so yeah I agree I think
23:16the the amount of control that we have
23:18it's like for the PC ecosystem that
23:20existed for a long time you know
23:22Microsoft was obviously the the the big
23:24gorilla and the only game in town
23:25but Microsoft in my opinion never really
23:28they never did the same amount of
23:31control like they never said hey this
23:33software product cannot be downloaded
23:35onto your Windows PC they did a lot of
23:37things that were anti-competitive and
23:39monopolistic and they drove WordPerfect
23:41out of business and they drove Netscape
23:43out of Italy they did a lot of things
23:44that were very very aggressive but they
23:46never said that you can't download
23:48Netscape and an Apple is saying hey you
23:51want to go buy this streaming video from
23:54Amazon I can't do it on an Apple phone
23:57the Amazon app will not let you buy
23:59certain types of things because
24:00otherwise Apple would remove it from the
24:02App Store so the degree to which the
24:04platform owners are being amazingly
24:07anti-competitive and controlling
24:08everything within their ecosystem is
24:10strong but in all fairness it's not like
24:13Microsoft with Windows like there are
24:14multiple there are multiple parties that
24:16you can use I mean social is probably
24:18the most closed and that there is not
24:20really an alternative to Facebook but
24:22for everything else there is an
24:23it's interesting we're talking a lot
24:24about Apple Google Facebook ooh BRR
24:27who's gonna win and mobile payments
24:28absent in this discussion are any of the
24:31banks and they're probably pretty
24:35worried right now about being distant
24:37repeated in all sorts of ways like
24:38number one just in the offline space if
24:40you're if you're using your phone then
24:42you're not looking at your credit card
24:44Alex you've written about this like the
24:46mobile wallet decides to order your
24:48cards alphabetically and all of a sudden
24:49the card used to use all the time it's
24:51now the card you don't because it's at
24:53the bottom how do you guys think about
24:54what the relevancy of their more
24:56traditional players here what are some
24:58of the things that that they can do to
25:00stay at the forefront of about this
25:01change going on well I I know what they
25:03think they're doing which is you know
25:06Chase has chase pay everybody is trying
25:09to come up with their own little walled
25:10garden as well and I've often found that
25:13big companies do things that make a lot
25:15of sense strategically but don't
25:16actually address the consumer need at
25:18the end if they're not solving a
25:19fundamental consumer problem and they
25:21don't have widespread adoption then it's
25:24just not gonna work my issue with the
25:26the banks is that I mean the nice thing
25:29is that they have this regulatory
25:30position where it is very very hard to
25:32become a bank so there there have been
25:34precisely I think one new Bank in the
25:36last six years and that's it so if you
25:39want to become a bank very very
25:40challenging in order to actually charge
25:43interest and do a lot of other
25:44complicated things you need to be a bank
25:46but exactly to your point and this is
25:48the article that we worked on which is I
25:50think of this as a pointer where the
25:53wallet the old-fashioned dead cow skin
25:55wallet is not a pointer you just open it
25:57up and then your brain decides you pull
25:59this thing out and samuel l.jackson was
26:01on a commercial last night for Capital
26:02One I like him okay I'm gonna go pay
26:04with my Capital One card and then
26:06tomorrow I just had to pay with my Bank
26:07of America card because I saw I was I
26:09was impressed by other some other form
26:10of marketing whereas in the in the
26:13strictly online world if Apple pay works
26:16really really well if Google pay or
26:17Google Wallet works very very well they
26:19have more flexibility in assigning which
26:22payment type you're using and then I
26:24think which what's even a bigger deal is
26:25how the whole interest stream works so
26:27there's a trillion dollars of credit
26:29card debt in the United States and this
26:31is on average yielding between 15 and 18
26:34percent for the banks so that's that's a
26:35lot of money for them so every year
26:38150 to 180 billion dollars in interest
26:41on these revolving credit card lines and
26:43many of them charged too much and I'm
26:46not saying this from a like usury is bad
26:48kind of perspective it's more of like
26:49there are much lower rates in town how
26:52do you find them as a consumer and this
26:54is what the smart wallet should be able
26:55to do is it saying okay you're taking
26:57out a loan or you're not paying your
26:59credit card bill and on time
27:01Apple pay should say hey just like
27:02you're adding five cards to your wallet
27:04you can also add five funding sources to
27:06your wallet and all of them happen to be
27:08at a third of the cost of Chase or Wells
27:09Fargo that's a really big deal because
27:12then the banks make money in two
27:14different forums they make money from
27:15the interchange themselves and that
27:17mainly goes to the issuing bank so about
27:181% of the credit card fee so maybe the
27:21credit card fee is 2%
27:23yeah half of that 1% typically goes to
27:25the issuing bank and the rest is split
27:26up between different parties and then
27:28they make a lot of money on interest
27:29income and the interchange is already
27:31under pressure in different parts of the
27:33world like Australia and Europe where
27:34it's it's regulated by law and then the
27:36interest part I don't think that you
27:38already have regulation on the high end
27:39so you can't charge more than 36%
27:41interest but for many customers that are
27:44prime or near prime their rates can fall
27:46a lot if they have a wallet that helps
27:47them assign them to a lower rate one
27:50thing to know normal person also has
27:52like has an affinity for their bank and
27:55and in fact negative affinity yeah I
27:57mean you know it's really fascinating
28:00and I think Apple pay for the web got a
28:02demo of it yesterday and in switching
28:05your cards through that inner interface
28:07that they have unlike Apple pay on your
28:09phone they've even taken that it's just
28:11a drop-down menu with words you know
28:13chase freedom this that the other it's
28:15not you know oh you know the sleek blue
28:18metallic background of your card that
28:20you know might make you think oh this is
28:22gonna win this is a progressive way Bank
28:24yeah this is a progressive card because
28:26it looks like stainless steel you know
28:28like it has sort of become we keep
28:31looping back in all this to this I just
28:33sort of that like the consumer is just
28:35like the afterthought and I think that
28:37that's easy so indicative of my
28:39experience if you're gonna innovate you
28:42might as well try to get some people on
28:43on board you know you mentioned uber and
28:46however they are portrayed in in you
28:49the press at certain times like you feel
28:52some kind of affinity it's it's an
28:54experience that makes you feel like
28:55you're living in the future a little bit
28:56there's something there's something
28:57there doesn't exist with banks I wonder
29:00I think a large part also of why the
29:02consumer experience in payments is so
29:05crappy in the u.s. is in part just the
29:07complexity of how the payments ecosystem
29:09is growing out the rails that take three
29:11days you can't do real-time payments so
29:14I want to come back to your experience
29:15in Sweden and one of the things that
29:18stats that I thought was pretty
29:20interesting was that only 20% of the
29:24payments in Sweden are cash or is if you
29:27look in the US that's actually 90
29:28percent and one of the ways it's
29:31credited with accomplishing that is that
29:32the Swedish actually created new
29:34real-time banking rails and so you can
29:37pay somebody electronically and have
29:39those funds deposited instantly the same
29:41way it's just handing over a 20 whereas
29:43in the u.s. it's not really that way and
29:45so I wonder to the extent like if we
29:47want a real leap forward in the u.s. in
29:50payment is it also gonna require new
29:53infrastructure the problem is that
29:54cashless payments end up being a very
29:56very regressive tax for a lot of people
29:59so if you can get a credit card than
30:01great you've got 30 days of float if you
30:03can't get a credit card well maybe you
30:04have a debit card and then you have to
30:06pay in real time but what if you can't
30:08even get a bank account so banks don't
30:10just give you check writing privileges
30:11if you have no credit score or if you're
30:14on a particular list and this is not
30:15like the no-fly lists like a lot of
30:16people are on this particular list if
30:17you've if you've bounced three checks
30:19before you're placed on this I forgot
30:20what it's called it's called the cheque
30:22systems list you can't get a bank
30:24account so your only option is to go get
30:26one of those prepaid cards from Green
30:28Dot and guess what they charge you three
30:30dollars a month just to have the card so
30:32if you have $100 on your card or $50 on
30:35your card I mean you're paying you know
30:37crazy this is not interest this is just
30:39it's a highly regressive tax for people
30:42to use something that is digital and not
30:45use cash so cash ends up being the
30:47cheapest form of payment for people at
30:49the low end of the spectrum at the high
30:50end of the spectrum sure people are you
30:52know using their Amex black cards and
30:53whatnot but at the at the low end it's
30:55really unfair one company a visited in
30:57Stockholm or it's a it's a publication
31:00it's called the situation Stockholm and
31:03that is that is sold by by the homeless
31:07on the street and they experimented
31:09probably seven or eight years ago with
31:12you know being able to have people like
31:14SMS text something but they have
31:17actually been able now to set up
31:18accounts using this service swish which
31:21is sort of like a bank inspired venmo
31:23type situation and it feels like a
31:26little of that friction I mean these are
31:28often people who you know who don't have
31:30a permanent address plenty who probably
31:33have never had a bank account or not in
31:35in a while and there there seems to be a
31:38little more of that friction doesn't
31:40seem to exist there and I think that
31:41that is HUGE I think that there's so
31:43many things people I talked to you know
31:45there's just sort of an embrace of of
31:47technology that is kind of moving into
31:50the culture a little bit and it's it's
31:53also a smaller country nine million
31:54people a massive portion of the
31:59population if if we just decided to go
32:01completely cashless but there are other
32:03solutions you know Sweden Kenya within
32:05pay so like it would require a pretty
32:07massive infrastructure change to have an
32:09inclusive cash also remember that Sweden
32:12has what nine million people and there
32:14are small in the Canada well it's also
32:15even smaller than the number of
32:17undocumented immigrants in the United
32:18States you have 11 million people where
32:20they don't have social security numbers
32:22like what do they do for payments so and
32:25you have many other people where they're
32:27just it's um so you probably have tens
32:28of millions of people all in that really
32:31can't use the banking system they use
32:33check cashing services like if they get
32:36paid a check they just go to someplace
32:37and they charge massive fees for that so
32:40I don't think it's about the real time
32:42stuff because that's probably not the
32:43biggest problem for people I mean there
32:45is the irreversibility of cash which is
32:48kind of nice so if you're buying
32:49something on Craigslist and the person
32:52pays you with the credit card well the
32:54whole chargeback system is little
32:56bonkers so they can take back their
32:57money in 60 days or 90 day actually you
33:00have six months really to file a charge
33:01back so that's really problematic where
33:03is there is this nice permanence to cash
33:05so there are a lot of things where I
33:07mean getting back to where credit cards
33:09really emerged from like the whole
33:10system of having like an embossed
33:11plastic card that has a primary account
33:14number on it which is
33:16in the clear it's like your password
33:17doesn't have asterisks on it it's just
33:19like in the clear and anybody can charge
33:21just based on that card number and
33:22that's been around for 50-plus years so
33:24it hasn't really evolved at the times
33:26because initially you would take a
33:28carbon copy of that that's why I was
33:29embossed so you could figure out what
33:31the 16 digit card number was from that
33:33embossed you know imprint when the
33:35little knuckle cruncher went over it
33:37but then mail order came out and then
33:39you were just reading your number over
33:40the phone and now the internet came out
33:42and the other thing that's actually not
33:44mice's not really a consumer reason to
33:46use Apple pay but the fact that your
33:48card number is not passed in the clear
33:50and instead there's a tokenized variant
33:53that's also very good for for fraud
33:55screen because there is a consumers only
33:57have this problem when it happens to
33:59them but it's really annoying this is
34:00happened to me a number of times
34:01probably five or six times where I see
34:03bogus charges show up on my credit card
34:05and then I called my credit card company
34:06like oh yeah that was fraud it's like
34:08okay well I wish you would block that
34:09but you haven't because I'm clearly not
34:11flying to Egypt on Egypt here once I
34:12there was a $5,000 ticket purchased on
34:14Egypt air and it's like really like
34:15who's gonna die no so um I then have to
34:19get a new card they mail me a new card I
34:21get that five days later can't use my
34:22card in that five day period and then I
34:24have to go change my Netflix I have to
34:26go change my like every everywhere that
34:28I AT&T account everywhere that I have
34:30this card numbers stored I have to
34:31change it and that could all be fixed
34:34under a better paradigm than using this
34:37like the credit card number is in the
34:38clear and if I just have that 60 like
34:40you've memorized your number if you told
34:41it's me and then I could go use it for
34:43whatever I wanted right until you
34:44decided to block it which is crazy okay
34:46we never invent that today if you were
34:48inventing this whole idea of like a
34:49payment system no and we've seen this
34:51way lately a journalist wrote about your
34:54their routing number and I've given up
34:56my routing number and the last for my
34:58social security to my employer to my
35:00landlord for every time I write a check
35:02and all you need is is that you know out
35:06in the open credential and you know
35:08people can make massive withdrawals from
35:10your checking I've already bought my
35:12EgyptAir ticket on your account thank
35:14you well I hope you have fun coming back
35:16to the the walled gardens we talked
35:17about about how now consumers feel like
35:20they need to choose the Apple ecosystem
35:21or the Google ecosystem do you think
35:24there's a possibility that you know
35:25either Google while it goes
35:26cross-platform or Apple pay goes
35:30they're gonna try and be an attempt to
35:32take it all by one of the larger players
35:34well google already is in as much as
35:36they can so they can't really get into
35:38the hardware or the operating system of
35:40Apple devices but Google Wallet is much
35:43more of a cloud layer and it has support
35:45at an operating system level and
35:47potentially at a hardware level except
35:48for the fact that Google doesn't make
35:49the hardware so it makes it a little bit
35:50harder for them or they did but they
35:52didn't that's a complicated story for
35:54Apple I think the question is what is
35:55the platform and what is the support
35:57products and I think that the best way
35:58of thinking about this is really the
35:59iPod when the iPod came out Apple also
36:02came out with iTunes and iTunes only
36:05worked on the Mac and the iPod was
36:07designed to sell more Mac's so therefore
36:09why are they going to bother making a
36:11Windows version of iTunes but then the
36:13iPod actually started dramatically
36:14outselling the Mac and it became this
36:17cultural icon with the white headphones
36:19and like the dancing like people in the
36:21the background screen and everybody
36:22wanted one and you saw everybody on the
36:24subway in New York wearing the white
36:25headphones so they decided you know what
36:27this is actually no longer a support
36:29thing for our Mac this is actually our
36:32biggest business so we're gonna make
36:33this cross-platform at this point and
36:35you can see the analogy potentially with
36:37Apple pay I think right now Apple pay is
36:40yet another reason to buy an Apple phone
36:41versus somebody else's phone because it
36:43has all these great things and one of
36:44the great things is Apple pay or the
36:46same reason if you're using a Mac and
36:48you have Safari it's another reason like
36:49use their ecosystem but you could
36:52imagine that changing if Apple pay
36:53became a big enough deal and or if Apple
36:55wanted the show massive massive volume
36:58to the Nordstrom's and the Neiman Marcus
36:59is and the Brooks Brothers and all these
37:01other guys that now implement Apple pay
37:03by December the best way of doing that
37:05is saying it doesn't just work on Safari
37:06it doesn't just work on an iPhone it
37:08works anywhere but then they have to
37:10make this conclusion that it is a
37:12product as a product just like the iPod
37:14was a product just like iTunes became a
37:15product and not a support vector for
37:17their profit that further for their main
37:19moneymaker the one thing though that I
37:21it seems like there's difficulty there
37:22is when you mentioned you know the iPod
37:24like it's sexy and it's like a stat like
37:28the white headphones are a status symbol
37:30and it's a thing that you can sort of
37:32like get swept up in the idea of like
37:34all my music is on this device now and
37:36it's just like you feel some kind of
37:38affinity for it again I'm going back to
37:40it like payments is like like I can't
37:43a generation of people who really can
37:46move the dial you know like a younger
37:48generation of people having any affinity
37:51for for any company like that which i
37:53think is a big barrier to it like I
37:55don't know if anyone in that audience on
37:58Monday at the Worldwide Developers
38:00Conference if anyone was like this sells
38:03me on I think it's more internally from
38:06the Apple perspective I'm sure there are
38:08many heated arguments for whether or not
38:10to make iTunes available for Windows
38:12back when they did sure and it really it
38:14probably just was more of an internal
38:16classification which is what is the
38:18platform and what is the support product
38:20and they realized wow the iPod is the
38:22platform and we need to make sure that
38:24as many people use the platform as
38:26possible yeah whatever dumb pcs who
38:28cares about that in fact if the iPod
38:30does well people use the PC initially
38:32they'll be infected with iPod virus and
38:34then they'll go buy a Mac and that's the
38:36halo effect that Apple was really going
38:37for and you could imagine the same thing
38:39internally going for payments but I
38:40agree with you I don't think people
38:41really care about how they pay they just
38:44want to be done with it they want the
38:45object that they're buying right and
38:47they want that as quickly and
38:48effortlessly as possible
38:49Apple makes that easier Google makes
38:51that easier what's the best way of
38:53achieving that and then internally from
38:54Apple's perspective if they gave I'm
38:56sure because I'm sure if you asked the
38:58Apple pay team and they were totally
38:59divorced from the iPhone team and
39:01everybody else like do you want more
39:02people to use Apple pay or less people
39:04to use Apple pay they'd probably go for
39:05more people but they're not working
39:07independently they're part of a larger
39:09company that has an objective it's
39:11actually a good segue into when I close
39:12Charlie you brought up a good kind of
39:14summary of your article talking about
39:15how a lot of the innovation that's gone
39:17on in the last little while has been
39:19more evolutionary versus revolutionary
39:22like even even Apple pay like yes you
39:24can touch your phone it makes it a
39:25little bit easier or some subset of
39:27consumers use it payments is not
39:29something in of itself that really
39:31motivates and gets people excited it's
39:33kind of frustrating when it's broken but
39:35what do you see like do you see the
39:37evolvement being slow step functions
39:39till 10 to 15 years from now or like hey
39:42this is a lot easier it's a better
39:43consumer experience or is there going to
39:45be some revel something more
39:47revolutionary or but your step function
39:48that comes along to really drive this up
39:50I think that there's a real generational
39:54component to this especially with the
39:57you know if you want to talk about
39:58cashless or wallet less and I think that
40:01it has to be sort of motivated by a
40:03group of people who grow up
40:05understanding and feeling comfortable
40:07with contactless payments and mobile
40:10payments as not just a gimmick but as as
40:11the entry point to their commerce
40:14experience and I think that that's gonna
40:15take some time my parents just see it
40:18either as a gimmick or as something
40:20that's a little bit inaccessible I know
40:21that an older generation might feel that
40:23way so I think that's gonna just gonna
40:26take some time it was one thing that I
40:28wanted to ask you guys about and get
40:30your take on is it seems like this is
40:32like this conversation is we're all kind
40:35of an agreement but it's it's a little
40:37pessimistic I feel like this is one of
40:39those spaces whether it's you know
40:41healthcare education they're really
40:43entrenched and movement in this space is
40:45it kind of glacial and so a lot of the
40:49innovation tends to be this hood
40:50ornament kind of stuff or or simply
40:53we're just you know we're throwing
40:54things against the wall that look like
40:56things that exist now but shinier that's
40:59a very mixed metaphor but I I'm curious
41:01you know I mean do you guys feel sort of
41:03the same way that I do in this because I
41:05think there's the US and Western Europe
41:08Austria like there they're very very
41:10developed markets where I agree with you
41:12in that especially if you're going after
41:14the banked credit card holding customers
41:17and giving them a new shiny way of
41:19already exchanging the payment
41:21credential that they already have is
41:23that solving a problem no it's kind of a
41:26nice ornament it makes things a little
41:27bit prettier you could solve little
41:29problems like as I mentioned with the
41:30item level detail on receipts for
41:32business travelers and whatnot if you
41:34make a two-way communication where as in
41:36the first investment that that I made
41:38here was in a sub-saharan sub-saharan
41:40African lending company called branch
41:42where what's really interesting is if
41:43you go to parts of the world that don't
41:46have any infrastructure you can just you
41:48have a clean slate and you can do you
41:50can skip all the existing infrastructure
41:52I mean sometimes that's bad like the
41:53fact that California has really crappy
41:55trains is because we said ah we've got
41:56the car now we don't need to build the
41:58train tracks and meanwhile in Europe
41:59they have these like transit go 300
42:01kilometers an hour and they're on time
42:03in most countries and they're much much
42:06better so sometimes when you leapfrog
42:07the old fashioned infrastructure that's
42:10but sometimes when you leapfrog it
42:11that's good because you're able to
42:13rethink how it's done and it's really
42:16amazing like you take all these people
42:17in Kenya that have never had access to
42:19credit and actually I think I'm a lot of
42:21Americans don't even realize when they
42:23use their credit card every time they
42:24use their credit card they're buying
42:26something on credit even if they pay
42:27their bill on time you have 30 days to
42:29pay that's like an imaginary universe
42:31for a lot of people that did not grow up
42:33in the Western world where it's like
42:35wait I can buy something now and then I
42:37can pay back after I've already gotten
42:38like two paychecks this is awesome and
42:41they don't have that right now there are
42:43no merchants like you're basically
42:45displacing cash and you're not doing it
42:47in like a little iterative fashion I
42:49mean the other thing that I found in the
42:51u.s. is that there's a lot of
42:52hocus-pocus around like what's actually
42:53happening so now and we were joking
42:56about this earlier but like there's this
42:57magic term of machine learning so in the
42:591990s if you wanted to show that you
43:01were innovative if you put an e in front
43:02of your name so it's like oh it's like
43:05e-commerce or e analysis or whatever
43:09then it was then it was dot-com then it
43:11was algorithm then it was big data big
43:14data it was really big what does that
43:16mean right and then it's machine
43:17learning and a lot of what machine
43:19learning is I mean machine learning is
43:20real like there is real real stuff there
43:22but a lot of people it just means like I
43:24have an algorithm and the algorithm does
43:26something I say if this then that that's
43:29not machine learning and there is a lot
43:31of powerful stuff that can be done for
43:33again solving a real problem not
43:35iterative is the big problem with credit
43:37not payments but credit is you can't get
43:40a credit score unless you have been
43:41granted credit you can't get granted
43:43credit unless you have a credit score
43:44and going back to the tens of billions
43:46of people even the hundreds of millions
43:48of people in the developed world they
43:50don't have access to anything and you do
43:52need machine learning and also you need
43:54some more regulatory leniency in terms
43:56of making loans to people that by and
43:58large are forgotten by the financial
44:00system because you just can't figure out
44:02if you're gonna pay if they're gonna pay
44:03you back there's a great New York Times
44:05magazine story that I was looking at
44:07doing my research I think like 1997 and
44:10it's like the end of cash is what it's
44:12called and it has it's it's just such an
44:16interesting way to look at today I mean
44:19it's so similar and instead of like
44:20everything has ecash he bucks you know
44:24it's just sort of this idea in this hope
44:25that you know but we're gonna do it five
44:28more years ten more years it's happening
44:29it's coming and we're having this
44:31conversation now the big difference is
44:33that a plastic domination today versus
44:36the 90s it's so much different I mean
44:39the percentage across the world that's
44:41now going on payment networks because I
44:43mean if you look at how fast the US
44:44economy is growing and what is it maybe
44:46one and a half two percent you're it's
44:48not really growing that much a lot of it
44:50is almost the population growth whereas
44:53if you look at how fast is on Visa or
44:57MasterCard which published their numbers
44:58or American Express how much transaction
45:02volume is growing much much more than
45:03that so there is a continuous
45:05displacement of cash for plastic and
45:08then the question is you know what
45:10percentage of that plastic is kind of
45:11purely digital and or biometric or
45:14whatever you call your hand thing how
45:16much of that is purely digital versus
45:18kind of in as plastic incarnation and
45:20that's where like there's probably not
45:21that much of a difference there like
45:22cash will go away it seems almost
45:24inevitable except for like you know
45:26black market activities perhaps I don't
45:29think Charlie has totally sold us that
45:31it's time to get implanted with a chip
45:33in Sweden but we'll have him back ten
45:35years from now to see if if that's
45:36changed I just want to thank Alex and
45:39Charlie for a great discussion thank you
45:40thanks for having me
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