a16z Podcast - a16z Podcast: The Oral History Of TrialPay — Obstacles and Opportunities in Payments

Episode Date: May 10, 2018

In this hallway-style conversation (originally recorded as a video), a16z general partner Alex Rampell and Terry Angelos, SVP of Commerce Solutions at Visa, discuss the trials and tribulations of their time as co-founders of TrialPay, an e-commerce payment and promotions platform. The story begins with their serendipitous initial meeting twelve years ago; tracks the obstacles overcome, rise, and eventual acquisition of TrialPay (by Visa in 2015); and ends with reflections on the future landscape and potential of payments. How can a third party increase profits for all parties involved? And how can a payments startup make a splash in an industry dominated by a few well-known incumbents? The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments and certain publicly traded cryptocurrencies/ digital assets for which the issuer has not provided permission for a16z to disclose publicly) is available at https://a16z.com/investments/. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

The content here is for informational purposes only, should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Welcome to the A16Z podcast. Today we're having another of our hallway style conversations. These episodes are based on videos that are also available on our YouTube channel at YouTube.com slash C slash A16. A16Z videos. How can a payment startup succeed in an industry dominated by a few well-known incumbents and what obstacles might it encounter along the way? A16Z general partner Alex Rampel and Terry Angelos, SVP of Commerce Solutions at Visa, discuss these questions and others in this free-flowing conversation about the future of payments and their time as co-founders of payments company trial pay. I'm Alex Rampel. I'm a general partner here at Andrewson-Horowitz, where I mainly cover things fintech or financial technology, and I'm here with Terry Angelos,

who is the SVP of Commerce Solutions at Visa, but I know him better as my co-founder at TrialP, which we started. So today is April 24th, 2018. I believe we incorporated TrialPay in April of 2006, so I've known you for 12 years. That's right. Nice to be here. Great. So given that intro, Can you think back, does your memory go far enough? Can your random access memory go back to 2006 and maybe say how we met? Yeah, it was kind of a strange trip for me. I had, I was, I just finished up at business school and had gone back to South Africa. I was working on some projects there.

And had flown back to Boston, actually having some discussions with Hay Montenasia and general catalyst and happened to connect with Chris Dixon. Chris, at the time, was working on an interesting company, was recruiting folks, and was sort of chatting with me about whether that might be a possibility. And at the time, I said, you know, I really want to start something. And he said, well, you know, you're kind of, he didn't quite use the word idiot, but you really should be saying, you shouldn't be saying no to me, but there's this other not quite idiot

who also, I've been trying to recruit and has said, no, this guy, Alex Rampel, and you guys should talk. And I think we chatted on a Friday night, and I was in New York at the time flying back to Johannesburg on Sunday, and after our conversation, I'm not quite sure what we talked about,

but I got on a plane, flew to California the next day, canceled my international flight, and somehow met you in the office right by the San Jose airport. Yeah, my recollection from my perspective is who would be crazy enough? So I told you what I was doing, which was this idea of offer-based payments called trial pay, or tentatively called trial pay. I think you didn't like the name. And you're like, oh, I'm going back to Joe. Johannesburg on Sunday. Interesting idea. And then you're like, no, no, actually, I'm going to cancel

that flight and come to California because I like this so much. I have to meet you. And then I think we met at that terrible bagel restaurant right near the San Jose airport. I think it was called like Bagel Arama or something. Or Bagel House. And that's how things started. And then it was a shotgun wedding thereafter because the other thing is you being a foreign national. You're like, okay, this is very interesting. And like we kind of talked about how we might work together. But the green card, not the green card, the H-1B visa application deadline is in like 10 days. So if we're going to do this, we basically have to do this. And then applied for your visa with my then little shareware company, Rampel Software. And you got your visa approved. You were one of the, because you had a master's

degree. So it was a little bit easier to get your H-1B under that. And then you moved out here with your then girlfriend, now wife. And then I remember we met for dinner at some Vietnamese restaurant in Mountain View. Actually, I think the first time we met was at the Shareway Conference in Orlando. Oh, that's true. That was the second time. Yeah, yeah. And I do think, I mean, you know, I'm sure as a general partner here,

you don't have the luxury of procrastinating. But in those days, I think the Alex I knew would have procrastinated a lot more on starting the company. So I guess we have the H-1B deadline to thank for deciding whether or not to move forward with a co-founder. Exactly, exactly.

Well, maybe we should talk a little bit about the evolution of trial pay, because if you think about where it is today, I mean, now you run a big chunk of commerce-type stuff at Visa. This all started from, like, the shareware conference in 2006. So the first iteration of trial pay was this idea of, particularly for downloadable software applications, you don't want to pay for X, but you will pay for Y. and I'm just trying to think what's the best way to explain to our audience here, like all the different trials and tribulations that we went through. But, you know, maybe that was the first model of trial pay.

I mean, we never really changed what we did, but we had to evolve with the time. So any interesting stories that you want to talk about? Yeah, I mean, I think what was appealing about trial pay and was the thread that continued through trial pay and Yub and a few of the other iterations of the company was, this really big idea that you had, payments is usually a two-party transaction, and we were adding a third party into that transaction in a way that was beneficial for all three parties. I think the challenge was to find an ecosystem where a three- or multi-party transaction could

occur. And so downloadable shareware software was a really good use case. And I think we were, you know, sort of fortunate that we, that you should. sort of, you know, you knew that market and we were able to establish a beachhead. I think our challenge was finding similar markets. And so gaming was one that emerged where I think we established ourselves in that market. The challenges with these markets is that they develop very very quickly. And so, you know, I think back on some of our, you know,

the tougher times of trial pay was where we had a very good solution for an ecosystem and then that ecosystem suddenly changed. And for us, there were a couple of step functions. One was Facebook and Facebook applications. You know, completely changed gaming and sort of social gaming became a much bigger part of the gaming ecosystem. And then mobile. And both of those step functions had impacts on our, you know.

I remember it as, you know, so we had downloadable Windows and Mac software, primarily Windows, and that was kind of going like this. it fell off a cliff. And then as we were falling down that cliff, then social gaming was taking off the zingas of the world on Facebook, and then that fell down the cliff. And then we had mobile. And then we actually did a couple things. We kind of sold the company a couple times, I guess you could think of it. But we spun off Yub. So maybe it would be interesting to tell that story. And then we eventually sold the company to Visa. But the way that that happened was a little bit more of, you know, thinking about this as not so much an offer wall, which was kind of

the concept that was popularized for social gaming, but really transactional advertising. So I don't know if it would be, I just thought it was, I have a lot of respect for founders, mainly because that's kind of what we had to do a little bit, which is, all right, you have to keep applying, like you don't really change, but you're not pivoting the company, you're kind of pivoting into a different market where the durability of the company is high. And I kind of think about that as that was what we had to do a couple times, shifting from this downloadable software to social gaming to mobile, but also recognizing some of the inherent weaknesses. Like, you know, we were a payments company, but we were also an ad tech company. So I don't know, recounts some war stories for me.

Yeah, I mean, I think probably one of the hardest things that we had to do was navigate. those two S-curves, right? So, you know, startups are difficult. I mean, finding product market fit is a really challenging thing to do. When you find it and you're successful and you build a business and a product around a market that's growing, that's an incredible feeling. But when that S-curves starts to flatten out, you know, this is the hard part. You don't have to find a new innovation engine. And that was very difficult to do.

You almost have to run at kind of two clock speeds. And so the hardest thing I think we did was make the decision eventually to really create a startup inside of trial pay. And that was a way of us maximizing what we're doing on our existing business, navigating that S-Cove, while creating something completely new. And that was difficult. And we had to have separate teams. We had to motivate people separately. Startups are difficult. Creating a startup inside of a, you know, eight-year-old company, six-year-old company is really difficult.

And I think that created a lot of, you know, sort of angst and pressure around how we would create to separate teams, structure that separately. you know, Clint Smith, our general counsel and, you know, all-round advisor on all things difficult and strategy, I think, pushed us in that direction. And that was a hard decision to actually split the company. In the end, we did something kind of crazy. We, we, you know, took two separate teams, separated them, had different identities, split the company, and then actually found separate offices about a block from each other and the thinking there was the only way to really get a startup working is to have two separate environments.

And I think that was the right decision and a very hard one. Of course, our responsibilities changed and we had to figure that out. So those were all hard things that I think we had to navigate. You're saying it was a hard thing about a hard thing? That's definitely hard. Well, yeah, my recollection on this, because now, you know, I see startups all the time that are going through hard times. And, you know, one of the things that we, I mean, just to explain to people what we ended up doing,

you know, trial pay was an offer-based payments platform. So we said, you know, you get your Zinga game for free when we were doing Facebook game monetization if you go sign up for Netflix. And we had this nice idea that most of commerce happen. offline. And people sign up for Netflix once every while. They shop at Gap.com every once in a while, but they spend most of their disposable income offline. Wouldn't it be great if we could have offline offers and say you get your Zinga game or you get your Angry Bird, Mighty Eagle for free, if you do some offline element of shopping, but how do we know if that offline element of shopping actually happened? Well, wouldn't it be great if we could use credit card data to close the loop on that?

And then how do we do that? It didn't exist. So we built that within trial pay. But then it wouldn't have been successful just purely within trial pay. Because in order for this concept to really reach critical scale, it had to be independent. And then it also had this nice benefit. This was my recollection of it, which was as an eight-year-old company that was no longer going up into the right. It's not like we were going down into the right, but we weren't growing as quickly as we were. You know, the hard thing was, in Silicon Valley, which is uber competitive, how do you keep and retain and attract the best talent when you're no longer growing 400% year over year. So one of the nice things about splitting Yub, which I have my T-shirt from, Yub was really a T-shirt production company. I think I have 20 of these. But one of the nice things about splitting Yub from Trial Pay is that we were able to take people, like some of the people that see it at Trial Pay, Inc. were the people that wanted more management responsibility and wanted to work in a different kind of company than people had said, oh, here's something that doesn't have product market fit. It's a series A startup,

because we basically birthed a series A startup from Series D trial pay. So Series A startup was Yub. It was an interesting idea. It didn't have product market fit. It could be big, but it didn't really belong in kind of steady as she goes trial pay. And I think that actually worked to the benefit of both, because otherwise we would have had this great idea of Yub, locked within trial pay. And the other nice thing was that from a cash perspective, because startups are consuming cash just like human beings consume oxygen, we were able to really lower the costs of trial pay significantly because we put 25 people into Yub, or the Yub Marine. We put 25 people into Yub. We had the rest of people at trial pay. And that was kind of a nice

way of dealing with a seismic shift to our business because we lowered our cost structure. for a trial pay. We allowed trial pay to focus more. We weren't doing 10 things. We were doing one thing. And then a lot of the new stuff, we kind of moved over to Yub. And this was this online to offline network. I think as hard as it was, I think some of the things that worked surprisingly well was, you know, the benefits of focus were just tremendous. It's, you know, you think you can manage two different speeds and you're aware of them. But when you actually actually focus, it's amazing, how much better you are at each of those individual items. That was a big thing. That worked out better than expected. And I think people self-selected

better. Yeah. We had a set of folks who just were very excited to grow the trial pay business and we're, I think, felt that we were over-investing in this new thing that was highly risky. And so once, you know, those folks could then focus on building something much bigger and other folks who really just wanted to have another swing at something, you know, that had a much higher beta. So those two things, I think, worked much better than expected. You know, I think there was, our founding team had a good relationship. Yourself, Eddie, myself, were able to shift responsibilities in a way that I think was, in hindsight, you know, quite risky. but that worked out.

So, you know, overall, probably worked out better than we had expected at the time, given how much we were sort of concerned about it. Well, I kind of think there are three ways of compensating people. There's, especially in Silicon Valley, there's cash, which is well-known. That's kind of what drives most labor markets. There's equity, and then there's responsibility. And then there's T-shirts. And then there's T-shirts, which is kind of a form.

It's a combination of all three. But the nice thing about what we did with Trial Pay and Yub, it's kind of funny. Like, after we did this, and then we saw, oh, eBay spun out PayPal, and then HP and HPE separated. So I like to think we began this trend. But I think one of the things that was very, very interesting is that it is that self-selection on responsibility. Because in some cases, like, it's a trade-off. Because if you want more responsibility, maybe you do join a startup, like a very, very early-stage startup, and what does that mean that normally entails less cash, more equity, more responsibility? And those three bar charts, if you will, they do self-adjust based on the stage of company that

you go to. And at trial pay, we got people, the people that stayed, because this was a big concern that we had when we did split the company, is that would people say that those that were going, like was yub the good company and trial pay the bad company or vice versa? And we try to do it in a way where people self-selected and people that were excited about the new thing, actually taking less compensation, more equity, different types of responsibility, not management responsibility, because you don't need managers at a very, very small company, but you need a lot more management at a larger company. And I think that was one of the things that really helped us get through a challenging time on that. It wasn't quite an S-curve, because normally the S-curve goes like

this, we started going like, our S curve, I'm trying to think of the shape of that letter. It's probably not in the Latin alphabet, but it started going like this for each one of those. So I have my own set of answers on this one, but were there any times that you were absolutely paralyzed with fear that we were about to fail? I mean, I think failure for us, you know, we were fortunate that we had a business that produced revenue and cash, and we had cash in the bank, there were some times when I think we sort of came close to, you know, came close to, you know, pushing the limits on that. But I think failure for me personally was more, where we're going to be able to become the

kind of company that we had set out to become. And I think that's maybe less of an urgent, you know, pay the bills type failure and much more, how are we going to realize a vision that we've had for a long long time? And that was part of, I think, our story was we're always very innovative and had built an incredible product. And the question was, how did we, you know, how do we get that into the hands of, you know, millions and millions of, you know, of consumers? I don't know, What's your about to fail? I seem to recall about 50. I mean, I think my biggest concern,

I mean, if you remember this, when we were going into social gaming, at least I remember it this way, I was opposed to it. And I wasn't opposed to it, but I thought that the quality, so like the key thing behind our business model actually working is that if we were doing

something called incentive marketing. So as opposed to like you drive down 101, You see a big billboard, and it says Netflix is great. And then you're like, okay, I remember that. Maybe next week I'll go sign up for Netflix. We said you're on fandango.com. You want a movie ticket. Click here to get the movie ticket for free if you sign up for Netflix right now.

And we track that whole transaction end-to-end. And that worked okay because if you take the Fandango case, like you're in the market for a movie ticket, that means you probably might like Netflix, you would think, especially in 2006 when Netflix didn't have. 100 million plus paying customers. We were a big check of that, but we helped them get there, I would say. I think we're almost 10% of their signups at one point. Yeah, yeah. We were their biggest channel by far. So this worked really well because this was incentive marketing. We're saying, we're going to give you something if you go engage with an advertiser. And that worked well from a

one-to-one perspective. It didn't work well. Or it had downsides if we said, okay, every time you go engage with an advertiser, you get 10 coins and you're addicted to coins. So you would get people, you'd have a wall of all these offers, not one to one. And I just, I had grave doubts around like, okay, we can do this and we kind of need to do it because the shareware business is falling apart. I'm not falling apart. It's just like people used to download software from things like download.com in 2006. And then there was this seismic shift where like everything kind of went to cloud and web. And then there was another seismic shift where things went to mobile. But neither of those really existed when we started the company in 2006. So social gaming was kind of

this next wave. And it was kind of, I looked at it as a damned if we do, damned if we don't. Because if we don't do it, then our shareware business is going to go just teeter down into irrelevancy. So we can't do that. If we do do it, then the quality of customers that we're sending to advertisers like Netflix, and just to put it in context, like if we send somebody that Netflix, they sign up, they get their 5,000 coins in Farmville, and then they cancel Netflix like five seconds later. Like, why would Netflix pay us for that? And the chance of that for business model 1.0 or like kind of market 1.0 was very, very small. The chance of that for model 2.0, or market 2.0, which was social gaming, was astronomical. And we had this

problem. But all of our competitors had it. And it was this, it eventually became this tragedy of the commons issue, where some of our competitors, they didn't care about this at all. I cared about this a lot because I just thought it went to the sustainability of the model. So we would have the revenue equivalent of fools gold, where we would grow tremendously. But A, like, would social gaming last? And then B, even if it did, if we're sending very, very bad quality customers to advertisers, like, is there going to be anything in it for us? And then C, which was almost more disconcerting, is was there any defensibility? Was there any defensibility? to the business, because if we were sending people to Netflix and Gap and 100 other advertisers,

and so did other competitors like, how many of them do we have? We had like 100. I think the analogy that we talked about a lot was the notion of brown water, right? So we had this sort of, you know, high quality. And this is one of our probably most discussed principles, which was, you know, how much to be focused on the quality of the customers that we're sending. And this is an area I think where we probably disagreed a little bit. And I think overall your perspective was probably more durable, but created a few problems, which was we have to have super high quality leads. Of course, if we're this sort of channel of water, this super clean water,

and competitors don't have the same, you know, sort of their water, their water is. isn't as clean, ultimately it often gets combined, and so just becomes a brown water. And that was our debate was, you know, are we getting appropriately compensated for the care that we're putting in to make sure that our leads were particularly high, you know, particularly good, good quality leads. I think in times, we probably should have cared less about that. Right. And there are other times where I think it saved us. And I think, Certainly social gaming was one. We had huge debates over this. And I remember, my sort of perspective was we'll figure out, we have to go where the business is going. We'll figure out the advertising model.

It turned out to be less commerce and more brand advertising, video advertising, which I think in the end was an area that wasn't a core strength for us. But we had to be in that market. And I think in the end, we, My concern was always, even if we won, we would lose. Because I think FERC victory came up a few times. Yes. And that, so that, you know, that wasn't, we're about to fail. We never got to the point where we had like two weeks of cash left. We got to the point many, many times where it's like the current trajectory would get us to two weeks of cash left at some point in time.

Like there was no, it just seemed like there was no way off of the downward slope, except if we did something new. But the challenge is that if we have an existing business. that has tens of millions of revenue, which we did. And then we had all these new things that would produce nothing, but were interesting ideas. Like that was the, again, kind of both of those options were bad. The other set of, you didn't have to deal with this as often as I did, where we would get into an acquisition discussion, which I believe happened like 10 times before the ultimate one that worked. And we'd get to the end. And it's like, yeah, it's going to happen. And I'd be talking to the corp dev people. It's like, we're going to buy your

company for hundreds of billions of dollars, and then it just has to go through this final thing from the CEO of this big giant company, and then the CEO of the big giant company, I used to joke had a bad tuna sandwich or something that morning, and then decided not to do it after it seemed like a done deal. And that was probably the toughest period, because it wasn't we're about to fail. But, you know, one of the things with M&A in general is that I've now, this has kind of changed my perspective on a lot of things, which is you cannot change people's minds with data. It just doesn't work. You could change people's minds with data and time. And I now think about, I actually give this advice to people all the time in my current job,

which is, you know, if somebody pitches me on Monday and I have a bad tuna sandwich and I say, no, I'm not interested in investing in your company. I might be completely wrong. They might be completely right, but you can't change, like feelings are what they are. You can't change that. So if the person that pitched me on the company came back Monday night and said, hey, I think you were wrong, how about now? It's like, no. Well, here's new data. No. Like, it's just, it's very hard to change perspectives with data. You need enough time along with data in order to reset belief systems. And sometimes you just need people, sometimes the data that needs to change are people that are working at a company. Like, that does change out. So, you know, one of the

challenges of if you get rejected by, especially in an M&A process, like a company doesn't go and say, hey, we want to buy your company, they do all this diligence, they're ready to go, and then the CEO says no on a Monday, and then on Tuesday they're ready to roll again. Like, that institutional memory lasts for a long time. So every time we went through one of those processes, which, as you recall, there were a handful of them. They weren't numerous. It fits on more than one hand, I believe. So several handfuls of them.

Like, that was very demoralizing because, you know, if you raise venture capital, you often, I mean, you're doing it not to run a quote-unquote lifestyle business. You're doing it to eventually bring liquidity to the shareholders. And that's ideally, you know, it's an IPO. It's you get acquired. And actually, maybe this is kind of a good segue to something, which was, you know, my key learning from trial pay, and there are thousands, and I'm sure you have thousands as well. But my key one, and actually this became my first blog post here. I suppose I called it innovation versus distribution. And I kind of have this little pithy saying now, which is the battle between every startup and incumbent comes down to whether the startup gets the distribution

before the incumbent gets the innovation. And this was my key thing. If you remember, I called it the TiVo problem at trial pay because we built this great appendage on top of payments. We made payments more lucrative. We made payments more profit. Like everybody benefited, as you said, normally a payment transaction is two parties. We introduced a third to the benefit of all three. And I think we did a very, very good job of that. The challenge was that we didn't control the payment infrastructure. So it was hard. I also called it the janitorial services problem, if you remember. It was very, very hard to go to a company that has billions of transactions and lots and lots of revenue and, you know, their core business and say, hey, we want to add

something to this little, little tiny part of, we want to add something to the checkout receipt. And to get them to care about that was very, very hard. We cared about that a lot. So, you know, and I call this the TiVo problem because we effectively built TiVo, but we didn't have Comcast. My concern was that, I mean, and actually, if we had to do it over again, the way to have potentially built trial pay would have been to say, let's build Stripe first, and then after that gets critical mass, after we have distribution for this thing that is, in many respects of commodity, I mean, I don't mean that disrespectfully to Stripe. I don't mean that disrespectfully to any company that does a very, very key part of critical

infrastructure, but they're doing something that doesn't have a lot of bells and whistles attached to it. you get massive distribution for that. You get very, very patient. You make sure it works very, very well. And then you add the bells and whistles on top. And even though people like to hate on Comcast, I mean, what they did for V1 of their product, if you will, is they strung a lot of cables. And they made this thing work. And then eventually they were in the position with tens of millions of customers to introduce their own TiVo called the digital video recorder. And now TiVo kind of became a patent So that was kind of my key learning. I'm kind of curious. What was your key learning?

So just to kind of build on that, I mean, if you think about now what trial pay looks like inside a visa, and I sort of have this view that most acquisitions, the ones that work, either work because you kind of leave them alone entirely or you sort of fully absorbed them. And this was a case where we took that innovation, put it on to a much, much, much larger platform at scale. And so, you know, today, if you look at what we've done with local offers in Uber, you actually start to see how that innovation works at scale. And you go back to your example of, you know, I'm going to get lunch today at Chipotle or at Chili's. How does that actually benefit me vis-a-vis a game? In this example, when I go have lunch at Chipotle, I can

actually get credit in my Uber ride. I think that would have been very difficult for us to have pulled off as a standalone company. And so that principle, you know, I think what it did, it limited the number of companies that I think we could ultimately work with. But when we combined them, we actually landed up getting that innovation sitting on top of a, you know, much more sort of scalable platform. Yeah, I mean, I think the other kind of, you know, learning.

for me from, you know, from, from trial pay is that just the, the payments ecosystem is unbelievably complex and sometimes defensibility is just simplifying it. So I think we had the conversation about Stripe early on. And, you know, we were a pretty large payment sort of processor just because it was a complicated thing to do. And I think we always dismiss that and said that that isn't very defensible. So I think that that is something that at the time, if we spent more time in that, I think we could have built an interesting payments company, not just this intersection of payments and advertising, just because it is super complicated.

Yeah, and I think it's hard to start off with TiVo, recognize that this whole distribution thing is important, then go build Comcast while still maintaining TiVo, when the world perhaps isn't ready for TiVo? Because we tried building Stripe, if you remember. We actually built a payment processor, and I remember it was very controversial within the company, because, like, why are we, there already exists 100 payment processors. Like, why are we doing this? It was actually hard to sell the team, sell the troops internally, because I think it strategically made sense, but we didn't do, I mean, we built one, but it wasn't the best. in class, as opposed to like Artivo product, if you will, I think was.

Yeah. Yeah, I mean, I think the point is that we, that had we focused on it, I think we could have done that. Yeah. And that certainly is a, you know, is a learning for me. So we're, so maybe kind of talking about payments now, less about history and and lower from the early days of trial pay. Like, where do you see payments going?

Or what are the things that you find most exciting about it? Yeah. So, you know, obviously from the visa vantage point, I think we get a pretty good view of what's happening kind of, you know, globally around the world. And there are a couple of things that I think are super interesting. One is the idea of verticalized commerce. And this is really an innovation that is coming out of, you know, Alibaba and Tencent where you have a whole commerce ecosystem and payments is just embedded as part of that ecosystem. I mean, I think examples here would be maybe Uber or Toast, where you have, you've built all of this functionality that in the past would have been separate systems and the payment is embedded and, frankly, is not something that merchants have to think about. I think that's both an opportunity for startups or for sort of payments in the ecosystem, but it's also a threat.

Because if you're building that ecosystem, you have tremendous power over who is the processor. So you take toast, for example, you know, they've done all the hard work of verticalizing restaurant point of sale, everything from the front of the house to the way that that whole ecosystem works. Their decision as to who is going to actually process the payments is really about who has the pipes to kind of plug into that ecosystem. In the case of, you know, 10 cent or, you know, or sort of AliPay, you've really got entire ecosystems that are managing everything from the menu that I see when I walk into a store to, you know, where do I go after that visit? And payments is just embedded. So I think we're going to see a big race toward verticalized commerce.

I think when you put together in the U.S. at least what Amazon is trying to do, what Google is trying to do with Echo and a few other things, you'll see payments just recede into the background. And that may become harder for others to penetrate. If my entire, you know, Amazon today is almost like a sort of enterprise software for my life. At some point, they're going to have, you know, my entire supply chain will just be sitting in the cloud and stuff will show up at my house based upon my usage. and that's how companies work.

It's very hard to think of, there's almost no payment in that world. It's just consumption that happens to be fronted by some sort of store of value. That's one area. Yeah, so I'm curious what would you think about on the verticalized commerce trend. Yeah, I think that's certainly true.

I mean, the thing that I, one thing on payments is that if you look at the plastic world, and payments are increasingly going towards plastic or towards digital and away from cash. So if you look at that world where a lot of the advertising is really around, how do I influence share of spend? So you do it at the network layer. Like Visa wants people to use Visa cards, but ultimately Visa doesn't make Visa cards. Visa has card issuers who issue cards that go on the Visa network.

So this begets Samuel L. Jackson saying, what's in your wallet for Capital One? why does he do that? Not so much to get new cardholders. I mean, that's part of it. But also, if you have five cards in your wallet, and one of them is a Capital One card, and one of them is a Chase Amazon card, and one of them is an American Express card, when you go to Chipotle, which one are you going to pull out? And why do you choose it? And there might be some background processing in your brain, because you watched some commercial five hours ago with Sammy saying, go use, you know, what's in your wallet, use Capital One. That gets you to use Capital One. We're, versus the online wallet, or rather like the Apple Pays, the Google Pays of the world where

they're still in their infancy. But if that takes off and all these different payment modes are actually digitized, you're not really choosing, like, I want to pay with this. As far as I know, my Apple Pay thing seems to be alphabetized. So my Amazon card pops up first and I end up paying with my Amazon card, which is a Visa card, so don't worry about it. So that's, I think there's a lot of interesting thing is it start changing when, what is your default card for a lot of these applications? I think that's one thing in payments that I find interesting. Like, if the entire stack moves to your phone, and I have a presentation that I think I've shared with you on this, but like you can actually start unbundling the different components of credit cards. So part of a

credit card is the payment. Part of the credit card is the credit part if you don't pay your bill on time. But in Apple Pay, as an example, what if you add a credit? provider. You add lending club there. You have the payment go through here. And it's potentially bad for the big banks. And the opportunity might be for startups that maybe it's a robo-advisor for debt that says, hey, there's a company called Talley that does this as an example. So, you know, I think that's interesting. I think there's also a lot of opportunity in commercial cards. And providing more granularity that way. I think the wallet is a good example of both sort of payments disappearing, but also sort of unbundling. So a lot of what I think issuers today are providing

is authenticating a customer. And by the way, in the U.S. at least, debit cards are a very large percentage of transactions. And so that credit point is becoming less and less of a use case. And so why can't you have credit at the point of sale, say, a firm, or have some intermediaries sit between me and my actual debit card? I think those types of applications become a lot more interesting because you've done two things. You've authenticated the customer. There's a method of payment. And now you're just adding the sort of credit layer on top of that. That's super interesting.

saying. So, and I'm not sure if that benefits the incumbents or sort of benefit startups, but, you know, as you sort of digitize payments, you have the opportunity to unbundle some of the functionality that's there today. And I think that's probably going to happen across all types of, you know, all types of payment. The other point about having multiple cards is we haven't really come up with a system where you optimize. And so maybe you should use your Amazon prime card only on Amazon and Whole Foods where you get 5% back. Right.

But you want to use your Capital One card for international trips. And today, that's kind of murky and unclear. And a lot of the consumer messaging is actually unclear. One of my sort of takeaways from being a visa is, for all the marketing that's spent, it's incredible how confusing or confused customers are as to what. the benefits are on their card. Right. You know, some of the things we're thinking about are how does some of the trends in crypto and sort of, you know, digital currencies impact payments? And one of the

things that we look at is what does a, what does digital Fiat look like? And so today we have really, you know, payments are electronic in the sense that we're not carrying cash around. So the ledger is updated in real time, but settlement is delayed. Once you combine that into a native digital asset, you have what I think was never sort of happened before, which is the notion of programmable money. Because at that point, I've got the proof of funds in my wallet, and I can have a smart contract that can do some things that I can't do with a sort of ledger settlement, sort of set up that sort of exists today. And so, you know, when that starts to happen or if that starts to happen, that radically

changes how payments work. I think, you know, the set of circumstances where digital fiat exists are, you know, more around kind of how governments might want to sort of implement this. But you could see certainly if I was an autocratic state, And I wanted to have perfect visibility into all transactions in my economy. I could implement a central bank digital currency, demonetize the larger bills, remove the lower bound on interest rates, have tax collection at the point of sale. I don't have to rely on some merchant who that has to report her sales. So there are a lot of reasons why I think a nation state could implement a central bank digital currency.

On the other side, you might have a kind of upstart nation who wants to sort of innovate and maybe they'll adopt a central bank digital currency. So I'm not sure the U.S. is going to do this first, but if any of those scenarios happen, I think it completely changes the way payments work because you have the story. value in a wallet, much so that you need an intermediary to then to then actually sort of transfer the value. And so I think that's a trend that may appear as governments grapple with how they can take advantage of cryptocurrencies. Yeah, no, I think that's interesting. I mean, I don't know if I'd call it cryptocurrencies per se. I think it's more of this idea of, you know, the government controls the money supply, but doesn't really control the commerce supply, which is almost as important. So if you think about, I remember actually when I was, when we

became part of visa, I think at one point we had to enforce sanctions against Crimea. And this wasn't visa doing it. It was like the government of the United States says, okay, Putin annexed Crimea. We think that's bad. And therefore, you cannot do business in Crimea. United States companies, visa being one of them. And it turns out that a Crimean that's buying something with their Visa card or their MasterCard in Crimea, that transaction gets routed through San Francisco, if it's Visa, or purchase New York, if it's MasterCard. So the government of the United States made a private company not allow commerce to happen in another nation state that's 5,000 plus miles away. So, and this was never an issue because governments printed cash and once upon a time

cash was backed by gold. And like the government really just wasn't involved in this process. Like one government couldn't do anything to constrict commerce in another government's territory, but now that that does happen, which is actually kind of interesting. So it makes sense, at some level, like this is why China has China union pay because, or cup, they nationalize their commerce system, if you will, so that it's not subject to any third parties. So you can make an argument, because I agree with a lot of what you're saying, which is you can make a very strong argument that the entire flow of money should be controlled by the government. Now, from the startup or corporation perspective, it's like you would rather that not be the case, but there is a lot that

could be done if there was one single kind of programmable and not watchable. That's kind of a scary word. But a set of, like a currency that actually is a little bit more controlled, as opposed to something where it's like there are all these disparate actors. Everything's fungible. You can't really track everything. In moving to a currency, actually, moving to a digital currency, I mean, call it cryptocurrency or not, but like there would be a lot of repercussions for it. But in many respects, this is kind of like the incumbents of the 200 plus nations on Earth, they've been doing this kind of print money thing for a long time. So I don't. I don't know who's going to be the first to adopt that. I mean, I think once a nation state discovers the superpowers of controlling a digital currency, that's going to be intoxicating. And I think that will certainly have an impact. It may not happen. It may not happen in Western democracies. Actually, one of the challenges with Visa and MasterCard is if you try to buy Bitcoin today, that is seen as buying cash because it's totally fungible.

And so as a result, there's a whole lot of, there's a certain rate that gets charged, there's certain kind of currency controls, a few other things that sort of come into play. But if I could buy Ether and know that it's going to be used to buy Filecoin, and it's specifically used for that purpose, well, then we can create an MCC code for storage, and it's a perfectly allowed transaction, provided that the resulting... digital currency is used for that purpose. That doesn't exist today, and that could be enforced by government or sort of commercial entities. I think that that's some of the exciting stuff that's sort of coming down the line. Yeah, totally agreed. Well, thank you so much for coming in.

Fun to relive some old stories and think about new futures. Yeah, great to be here.