The Pomp Podcast - #393: Lisa Shields on Building Tech-enabled Financial Services

Episode Date: September 26, 2020

Lisa Shields is FI.SPAN’s founder and CEO. She previously founded Hyperwallet System, which sold to PayPal for $400 million.  In this conversation, we discuss the difference between marketing and sales, building an intentional business, open banking, embedded banking, rise of fintechs, and the importance of data ownership. ============================== BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp ============================== Bybit currently has over 300,000 users, with the number growing in double-digit percentages monthly. The exchange has no overloads during volatility and low latency trading plus 24/7 customer live support. At Bybit, we listen, care, and improve to provide the best possible trading experience and create a faster, fairer, and more human trading environment. Visit Now! ============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Lisa Shields is Fispan's founder and CEO. She previously founded HyperWallet System, which sold to PayPal for $400 million. In this conversation, we discuss the difference between marketing and sales, building an intentional business, open banking, embedded banking, rise of fintechs, and the importance of data ownership. I really enjoyed this conversation with Lisa and I hope you do as well. Before we get into the episode though, I want to quickly talk about our sponsors. First up is BlockFi. BlockFi is killing it. I'm an investor, I sit

on the board, and I'm a big time user of the platform. BlockFi provides financial products for crypto investors. Those products include high yield interest accounts, US dollar loans, and no fee trading. You should start earning today. You can visit BlockFi.com slash Pomp. Again, BlockFi.com slash Pomp. Go try out BlockFi and then tweet at me and let me know what you think. Next up is Bybit. Bybit currently has over 300,000 users with the number growing in double digit percentages monthly. The exchange has no overloads during volatility and low latency trading plus 24-7 customer live support. At Bybit, they listen, they care, and they improved. the best possible trading experience and create a faster, fairer, and more human trading environment.

Go check out Bybit. You can use the link in the description of this podcast. Lastly, don't forget that I write a daily letter to over 75,000 investors about business technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. All right, let's get in this episode with Lisa. I hope you guys enjoy it. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp

as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Lisa here with me. Thank you so much for doing this. Pleasure to be here. Absolutely. All right. Let's jump right into your background. You have a very, very cool story and have had one major exit and hopefully are on your way to the second major exit as an entrepreneur. But what did you do before you started building companies? Yeah. So I'm one of those accidental entrepreneurs. I was always the irritated engineer in a technology company that thought management and the salespeople were always doing the wrong thing by the customer, and I could do it way better than anybody else.

Small side story, eight years later after I started HyperWallet, I actually called some of my old bosses and apologized to them because then I knew how hard it was. But the background really is, so I was a working engineer in aviation information systems and made the switch to payments 20 years ago when online shopping became a thing. And I took that job simply because I was interested in the technology, internet databases. and really quickly I became intrigued by online commerce and the impedance in things like international payments and the truth is it was 1999 we were all partying like it was 1999 and we thought hey we can do it better we're not going to let ignorance get stand in our way we're

going to found a company so that's the honest backstory of how I you know founded a payments company. And then it was a long inculcation into how the industry works and how to find a value prop within it. Got it. And so that business was HyperWallet. You end up scaling it and PayPal eventually bought that business for about $400 million, is my understanding. Maybe just tell us what was the original idea you guys had and how did you scale that product and build something valuable enough for a large company like PayPal to come in and buy it? Sure. So the story of HyperWallet is twofold. One, undercapitalized and a bunch of engineers building products looking for a market. So really, HyperWallet was an 18-year overnight

success story. And what we built that was really interesting was something that in the industry is now called cross-border ACH. But the ability to do compliant and very cost-effective low value cross-border payments. So, you know, any idiot can compliantly send $300,000 from the United States to France and take a, you know, couple hundred or thousand dollar commission for the foreign exchange and fees along the way. But if you want to send $300 from the United States to France for a business paying out a 1099 worker, for example, that's actually not easy to do at a price point and a compliance level so that's the platform that hyper wallet slowly built over the years was the ability to do take advantage of local in-country low-cost

clearing networks so we slowly built a global network of networks if you will but the business was still really small and so when it became more valuable was around 2010 when a salesperson, a sales executive actually joined and said, look, instead of trying to point this at individual consumers or point this at banks, let's point this at corporates that really need to pay many, many hundreds of thousands of 1099 workers. So that was the direct selling industry. Think Mary Kay, Herbalife, those kind of companies had real problem. And ultimately what we were competing against was checks in FedEx packages, right? And then what really provided the tailwind for that business was the, you know, evolution of the marketplace and marketplace-like

businesses. And so it was a low, slow burn. Slowly, you know, we bootstrapped and made it profitable because we had to. We found a vertical niche that ultimately became more valuable as a horizontal play and what was your biggest lessons learned as you kind of built that business right because it sounds like uh you kind of went through all the ups the downs and and uh the excitement and uh the tough times what were the biggest lessons you took away um well one is as an entrepreneur um that you know as a product focused entrepreneur you know you shouldn't it's not sales is not bad and revenue is not bad and you know finding your market is not bad and actually servicing the customer is is not bad um so i learned the difference between marketing and

sales which is a tough tough lesson for an engineer to actually comprehend um but the other you know more relevant to financial services is it's you know building layer upon layer of what's there is okay trying to drill right down and build something brand new and i call it like fighting city hall in the industry is a bit of a mugs game. And unless you have the ability to raise billions of dollars, you know, that's kind of not a battle you want to be in. So that was my other lesson. Yeah. And then talk a little bit about kind of when the company actually was acquired. Was that, hey, we think that they can take it further and farther, you know, with us? Is that something, hey, I wanted to go work on another thing? Like, kind of what was the impetus? And

And really the idea being there's a lot of founders who listen to this and they dream of one day having their company acquired or taking it public. And so how did you kind of go through the evaluation of what to actually do before you did that transaction? Yeah, let me preface it that I actually stepped down from an operating role in 2015. So I was still on the board and still very much involved, but not as a management and not sort of stewarding the business. But what I can say is, it was time to provide liquidity to our shareholders. So that absolutely was part of the motivation. And when you think about it, we were profitable, profitable and growing. But within HyperWallet providing payouts, there was only so much the business could do and grow. and with the regulatory complexity the opportunity to find a bigger platform that can marry in payments marry pay-in and payouts right so think about from paypal's perspective putting braintree and hyper wallet together to compete against the likes of the stripes and the audience of the world

that are you know coming up that was very exciting so to broaden the applicability of the platform and be part of something big and see that baby that we built really continue to grow beyond what we could do. It sounds trite, but that actually was part of it. No, that makes complete sense. And then once you decide, hey, I'm going to go do this again

and go bash my head against the wall and build another company, did you have an idea as to what you wanted to build or did you kind of make the decision, let me build a company and then I'll go find what idea I want to work on? is really interesting. The genesis story of Fisben is completely different than a bottle of Chardonnay and, hey, this is a great idea of HyperWallet. Because I did have the benefit of

18 years in the industry. So I call Fisben a very intentional business. I literally sat in my basement for a year thinking about different business ideas, because this is the one truth about about founders if you would have asked me in 2012 if i would start another company let alone a financial services company i would tell you only an idiot would start a payments company and only like a you know a super idiot would try and do this again but you know we have a very very selective memory and all the highs and lows of running a business you forget all the terrible lows when you want to shoot yourself in the head and you only remember all those great times right But Fiseman is very, very intentional. And I certainly took some of the market observations from the hyper wallet time. And a couple of things were, one, that all the hype in financial services is in the retail side, because that's what everybody knows. You know what it's like for you to use a credit card or for you to use Apple Pay, right? You know when you get irritated about your bank's online banking.

um so that's where all the hype is a lot of the attention but i i really believe that there's huge opportunities to make the world better for businesses um and the second thing i knew being an intentional start to five span was i didn't want to compete against banks i fundamentally had this thesis that banks have superior payments products superior cash management services superior loans because they have a lower cost of capital like just you know just think about the fundamental underlying attributes but they have real really really struggle with you know that quote-unquote delightful user experience um so i literally sat there and i was like you know there is there an opportunity to introduce a company and a business model into the market that's sort

of the opposite of plaids, where you're not aggregating banks for third parties to own the customers. You're aggregating the endpoints to allow banks to better service their customers. So that's the genesis story of Fisban. A, forgot the bad times. B, had enough, wanted to do it again. And C, there was just so much opportunity. Yeah. And so this is a really interesting kind of framework you provided of like, there's plenty of people out there who said, hey, we're going to aggregate all the banks and then allow the third parties to have that relationship with the customer. You essentially are doing something opposite, right? Kind of taking the thing that everyone sees value in and has kind

of been funding for a while and you flipped it. Why was that where you wanted to go? Did you have kind of a contrarian view saying that the other people just don't see this opportunity? Was it a skill set or an experience that you had but like how did you identify that where maybe others haven't spent a lot of time uh well so there was some actual um data points conversations with cfos and treasurers back in my hyper wallet day where what hyper wallet had done yes we had this fantastic low-cost mass b2c service but and we'd exposed ourselves through apis to be in the cool Kids Club. But we've done one more thing, which is our engineers had integrated our products and our APIs into our customers' business system of record. These are big publicly traded billion

dollar companies. And that fact engendered a lot of love. And when I would go back and talk to my customers, they would say, hey, can you provide us B2B payment services? Can you provide us with cash management services? Can you provide us with foreign exchange? And I'd be like, why? I'm just a tiny little undercapitalized company why would you even offer me and so what they'd said is look i'm highly banked but what my banks offer me is a file spec and now i need to go out and hire someone to integrate it with my workflows and then i have a separate process and then my internal controls are shot and then i have an additional audit cost um so that was the specific insight right it wasn't like i decided it's very clever to have a contrarian view to the market

it was that there was sufficient pain points by by corporates that they were willing to engage with third parties for like fund what i call fundamental transactional services and so like quite frankly it was just opportunistic i thought look um i don't i don't want to build something from scratch. But if I can arm banks to really service that need, that's better for the customer and better for the banks. Yeah, that makes a lot of sense. And so talk a little bit about what was the first product you built and what does that product or product suite look like today? Yeah. So fundamentally, what we like to say at Five Spend, we bring business banking into the customer context. And what we mean by that is from the customer's perspective, it's about jobs to be

done, not a bank product to be used, right? So I want to keep current with my overseas customers. I don't want to send a wire, right? I want to forecast my cash. I don't want to log into online banking to view my balances. So in practice, what we do is we embed commercial banking services within other applications. And the first and most important experience is embedding inside accounting and erp applications so we bring those bank services in context easiest way to think of it is by example i'm inside my erp i've gone through my workflow to approve a vendor invoice i just want to click and have this vendor invoice paid i don't want to care whether it's like ach check print wire right i just click it's going to be paid i know which bank account it's going

to be out of. Tomorrow, when all the magic has happened, that object is going to be automatically updated in my ERP. All the track and trace information is there. Open banking, APIs, host-to-host connectivity can make that all happen. Making that all happen seamlessly without the customer worrying about it is what we do. There's a whole bunch of magic that happens. and I always describe the type of business that you're in is you want the customer to know about you when you're selling them to use the product. And then when they're using the product, you almost don't want them to know you're there, right? Because you're basically kind of magically doing all of these things that just make their life easier. And part of this is there's these two key

ideas, right? So there's open banking, and then there's embedded banking. And maybe we can talk through open banking first. What does that mean? And how is that playing out in just fintech in general? And then how are you guys actually interfacing with open banking? Yeah. So open banking means different things to different people. It can be regulatory driven. But by and large, what it means is an obligation of a financial institution to make its customers' data and services accessible to third party applications and endpoints, right? So it's where the bank will expose a security and authentication paradigm that somebody else can come to, whether it's, you know, PIM, right? So personal finance, PFM, personal financial

manager application. And I can aggregate all my bank accounts inside this third party application. open banking requires the bank to say yes to that third party inquiry to receive my balance and transaction histories and in different jurisdictions it sometimes it actually almost always is a regulatory initiative right like bank thou hast must um so what open banking brings to the industry is a set of application apis that developers and third parties can consume to make these things happen. At FiSpan, we think embedded banking is an outcome of this technology, this API interconnectivity in a permissioned and secure way. But embedded banking can be a result of open banking, or it can be a result of an industry initiative. So we happen to service

at FiSpan, North American and primarily US financial institutions, where there is no obligated open banking. So we integrate with our banks in a trust model and then create those APIs for the bank. So I'm not sure if that answered your question. Open banking is the set of technologies and regulatory obligation. Embedded banking is the embodiment of that for the benefit of customers. Got it. And so the open banking aspect is really just providing way more connectivity between all of this infrastructure, these organizations. And the way I've thought about it, and you're the expert, so you're going to correct me if I'm wrong here,

is kind of what the internet did to connect organizations, people, infrastructure, et cetera, really open banking is just doing that in a kind of a single niche vertical of finance and banking, right? It really is this idea of like, how do we use these digital tools to provide much more connectivity and reduce friction across everyone who's part of it. Yeah, great example, right?

I can go back, I can see you and trump you on that analogy. All right, let's hear it. I can go back another generation and talk about ODBC, right? Which was like database, you know, open database, whatever it was like. So this was a technology, open banking is like a technology and concept

that enables greater access to an asset that can provide value to the owners or users of that asset. Whether or not a specific database provider, whether Oracle endorsed ODBC and opened up its database through this new paradigm was its own internal decision. And your analogy of the internet enabled this much greater access connectivity, interoperability, It would be up to an individual industry, whether it wanted to offer services and products online. That's where we are with open banking right now. The promise of it is huge and enormous. Banks are trying to figure out whether and how they want to participate in this and quote unquote, what's in it for them.

and then the idea of this kind of embedded banking uh that really is more of um leaning into this theme that like if just every technology company is somehow becoming a fintech right i mean it seems like every single business is in some manner trying to incorporate uh some financial service right yeah and so i would argue that that doesn't mean every single business is trying to become a fintech, that embedded banking allows every single business to make use of a fintech service for the betterment of its product and service delivery. Now, some do want to become fintechs. So an accounting system like QuickBooks that wants to offer a payment service and monetize it, that's one strategy. But an accounting system that just wants to provide the best experience for

its customer, not necessarily monetize it, is another example of somebody who's going to benefit from open banking. And so what does this mean for the banks themselves? I think that we've kind of historically, there was a line in the sand. It would be like a kindergarten teacher saying, okay, all the banks on the left side and all of the technology companies on the right side, I don't think you can do that anymore because that line is very, very blurred. So those traditional banks, what happens to them? Or are they actually beneficiaries of all of this? Massive beneficiaries.

And that was, when we go back to the founding thesis of Fisban, is I always saw open banking and the API economy as just an enormous opportunity for banks, not a threat. but everyone's worried about being disintermediated, right? So if my customer is using my payment service and it's not my brand, they're not clicking on like my button, somebody else's, that's scary.

But what I fundamentally believed is open banking has the possibility of bringing as much actionable but new data into the bank domain as it does to take data out of the bank domain and put it in the hands of third parties. Specific example, again, is imagine with connectivity to a customer's accounting system in a permissioned way, bank could now have real-time and continuous access to that business's open receivables, income statement, balance sheet, and now instead of inferring the best

customers to lend to and making a guess at the underwriting, imagine if, with permission of the business the bank could shave a few basis points off of a loan offer make the lending experience absolutely seamless and that treasurer just looks at his forward forecast and says yes i'll take this two million dollars of working capital starting from here to here you know and then loan servicing that's the promise and so these other endpoints and these other applications that will be embedding financial services in them. If you take the data and information out of them, it allows the bank to provide a better product and a better service to its customers. So one of the things that over the years absolutely shocked me about

anything banking and finance related was how non-predictive the technologies were. Everything was pretty much counting what was happening, facilitating things that are happening now. But it was very hard, I think. And some of that was due to lack of technology. Some was due to lack of data. Some was due to lack of just time and energy spent building it on more like the predictive analytics and kind of using what we know today to tell us what's going to happen in the future. It feels like this open banking and embedded banking kind of busts down that wall and creates a world where there's so much data and there's so much technology and so many integrations that there really can be, and maybe there is being a very big rise in a lot of these

predictive technologies? Completely agree with you. But what's interesting is, that's where I think this theme of new kind of data companies is what is the next, next thing. Okay, explain that. Yeah, so today everybody's trying to act on, you know, these breadcrumbs that we leave all around the world, right? And a bank or somebody else is trying to say, hey, which are the best customers to lend to based on what's happening with this business on LinkedIn, how many people they're hiring, what they've bought, et cetera. um and what i think is the future and what we've based our company on is what i'm calling like the custodial age of data and what i mean by that is that the new kind of data opportunities will morph from their current state which is this this massive amount of side effect information that you then need to apply ai on to to you know make sense of um you know she read an article on

business process automation right and so let's feed our ads for the for every crm and workflow app out there for the next 12 months i'm currently experiencing that so it's one of my pet peeves right instead of fine span we think that the most interesting opportunities will arise from the intentional sharing of actual data and actual intent with bounded and enforced usage rights around that data. And so when you talk about like the AI implications, right, instead of having it being artificial information, what about having it being actual information? And, you know, the best predictor of the future is actually the past, right? So the most interesting new platform owned businesses, you know, in my opinion, won't be the ones that are amassing the most data.

But instead, they'll be the platforms that provide the best access, data owner control, and watermarking services to the data exchanges that matter, right? And the data exchanges that matter, I believe, between a bank and its customers. Okay. So let's dig a little bit deeper on that because I think it's a really interesting view of the world. Historically, let's take social media companies, finance companies, all these different types of companies. They basically had a couple of different assets. Most financial investors would look at how much revenue do you have? What's your profitability? How many users do you have? All that kind of stuff. Inside of the companies, literally, I worked at Facebook for two years, so I know,

So the more access to information you have, the better you can make the product, the more personalized, the more contextual, the longer somebody will stay, the more ads you can serve. One of the assets is definitely the more information I get the user to give me, the better this is for us as a company, right? It's kind of one of the key tenets. It sounds like you're talking about, and that's true to banks and others as well, right? It's kind of the more information, the better. What you're talking about is actually almost flipping the model and saying, no, the winners of tomorrow are going to be the people who don't look at it as from the corporation seat. Instead, they look at it from the user seat and they say, what can we as a business do to empower this user to have the best experience, the most privacy, the most efficiency, kind of all of that. And a lot of it's actually going to be not to hold on to the data.

It's going to be to give the user the data, to give them permissioning, to give them all sorts of tools that maybe historically they haven't had because incentives weren't aligned between the corporation and the end user. Is that fair to say? That's not only fair. That's probably a better way of saying it than I do at my pitch. So I'll invite you to my next sales pitch. No, no, no. You do a fantastic job. um but in all seriousness like when i you know as i as i talked about you know founding

five span sitting there quietly in my basement googling away um i believe that the value of five span to our customers the banks and ultimately to allow them to provide value to their customers is precisely because I, as FISPAN, assert no ownership or usage rights over any of the data that traverses my network, right? So, and the apps I build on behalf of the bank, so our JPMorgan Chase ERP extension isn't branded FISPAN, it's branded JPMorgan,

it's a service of JPMorgan Chase to their customer. but nonetheless if it's a product i'm building i'm building permissions inside of it right and if when you click and install this extension and you say i agree to share the vendor file my vendor file with the bank it's not for the purpose of the bank marketing to those vendors it's for the purposes of the bank to provide me with a better accounts payable risk management experience or something like that so that's just our policy and we think that that's going to build value in the future. And we are an example of a new kinds of data platform, but there'll be many more other kinds of examples of that. Got it. And then in terms of

that from a product building standpoint, do you have to have full end-to-end encryption so that not only do you not have ownership or usage of the data, but you actually can't see it? or is this a situation where you kind of can't really do the job that the product's intended to, right. If you can't see the data. So it's kind of like this hybrid model of you don't want ownership. You don't want usage. It's more of just like a permission that the user told me to do X with their data. I go do that job.

And then I don't do anything else until they tell me to do something else. Right. Yeah. Yeah. We're not there yet. And so, i i see i absolutely see what you're saying um but it just happens that our business model is we're both a you know technology outsource and servicing outsource component of the bank so in order to service the clients we need to see that data yep and that's what that would be my expectation in that it's different for like and for those that are listening who may not who may think that we're in the weeds here for a second uh take facebook for example uh

If Lisa and I are both on Facebook and I send her a message, other than for advertising purposes, there's no need for Facebook to be able to read what message I sent to Lisa or what message she sends back to me. So you can have kind of full end-to-end encryption where only Lisa can read it or only I can read it. Facebook doesn't need to see that. Now, Facebook would like to see it because they'd like to target us on advertising, whatever. But for the intent and purposes of what we're trying to do in communications, end-to-end encryption makes a lot of sense. When it comes to this information, though, you can imagine if you interacted with your bank, but they couldn't see the amount that you were sending, they really can't kind of do their job, right? So there's

certain pieces of information, obviously, that they need, which would make sense in this situation. Yeah. So where we're also not there yet from a technology perspective is, you know, there's OAuth, there's all sorts of encryption, tokenization, that technology exists. But I haven't yet seen an embodiment of the what I'm calling watermarking of data, which is like having its intended permissions around its usage, being enforced, end to end. So that technology doesn't exist. But we're starting to, within the industry have discourses about it. So whoever invents that, I think will be, and it's not going to be me, but that will be another example of a very valuable technology and business to be introduced. And is this the idea? So there's

a lot of people, myself included, who believes that kind of every stock bond currency and commodity will get digitized in the future. And so let's take equity, for example. It would be awesome if the equity was in some sort of token or digital format, and it could prevent a non-accredited investor from buying an asset it's not supposed to from an accredited investor right and kind of it's almost like this um uh self-governance through an automated technology because the asset itself it has rules and uh kind of regulations coded into it sounds like that's what you're talking about here it's exactly what i'm talking like a different analogy but it's like the data that traverses again we'll use that example of um if i'm a business and i'm going

to share my list of all my vendors with my bank, right? And the purpose is to help me reduce accounts payable fraud, right? It's that purpose of the data, right? And so what I'm talking about is when that data is now conveyed to the bank, today at Fispen, I can pass along those permissions, but I can't enforce them. I can't, like once that data is at the bank, except contractually, like they know what they're supposed to do but the actual owner of that data today i'm not providing him or her with an audit trail of exactly where that data went and what it was used for after it's gone out of my system that's not a technology that i'm going to build but i would love to see it because once we have something like that as a standard then the opportunity for data owners

to actually decide how much to really have control and confidence and be able to choose to use Facebook or not, right? To me, that's interesting. I mean, I'll hopefully be done by then. Absolutely. And I think that will happen at some point. It's just, to your point, who builds the technology

and kind of how do they implement it first, right? Is it equities? Is it currency? Something like that. I would be absolutely berated on the internet if I didn't take the time while I had you to talk a little bit about digital currencies. You spend all day dealing with large banks, bank customers, financial technology. What have you seen from a viability standpoint, whether it's a US digital dollar or digital euro type thing, so kind of a central bank-backed digital currency? there's the private currencies like the Libras that have been kind of thrown out there as ideas

or even into the cryptocurrencies like the bitcoins and things like that is there conversation about that and kind of the world that you operate in is it people are aware of it they don't really care and don't talk about it just give us an idea of kind of what you've seen so far on the ground yeah in my simple world businesses aren't asking I'm a really simple person at HyperWallet um you know we were all about enabling different sorts of you know payee directed if you wanted to companies sending you 300 you want to have that direct deposit in your bank cool you can do that under your control if you want to pick up cash at western union cool you can do that under your control so when digital currencies and bitcoin ethereum first came out i mean i was and still

like a fangirl just because the technology the prospect of it so i really thought that hyper wallet ourselves should become an end point um but this is going back to our beginning this is after 2012 when we're quote unquote a real company that was making real money um so not just a bunch of engineers building the next cool thing so i actually went to my head of development i said i think that we should become an end point at least on ripple because it's you know it's um you know In the Cool Kids Club, it's Bank Blast, right? And we went out and serviced our customers. And they were like, okay, we have no interest in it.

So fast forward to now where I am at Fisban. I'm trying to build applications that, you know, move the peanut forward a little bit for end customers. And to be honest, I'm not excited about digital currency for you know b2b payments um i've never thought that the rails were the problem it's always been the end points in those consumptive applications so i fundamentally don't think the world needs another payment rail um you know taking aside the you know political view of unstable currencies and then you know bad governments and everything else um where i'm most excited about distributed

ledger technology is around things like taking massive costs out of regulatory burdens doing things like encrypting your kyc file on a customer as a bank putting that on some like ethereum like block whatever whatever chain you want and then having you know only permissioned and you know who's opening that little secret package and why um to me this can take enormous cost and operational burden out of things like sending a wire from the united states to um thailand where a bank today has to have you know a direct correspondent relationship it's slow it's horrible imagine if you could just put this delivery request onto an ethereum block and onto some blockchain any any delivery point in thailand can pick it up and say yes i'm going to deliver this

money to this you know end point if and only if i get a regulatory hit meaning like the thai regulator says whoa whoa whoa that's on my kyb you know watch list then i'll pick up this package unencrypted you'll know about it the customer will know about it and the purpose of us accessing this data will be known. So long-winded explanation, but that's what I'm most excited about in financial services for blockchains and distributed ledgers. How far away are we from that? There's a number of initiatives actually started. And, you know, again, it all gets mired down into the business model. I know for a fact that, you know, JP Morgan Chase has started something exactly like that swift has their own initiative around something exactly like that and what's

interesting is banks are getting and of course i immediately oh i want to participate right just because it's like it's not directly related to what i do but it is like sexy and interesting so some aspects of like the kernel of being like a nerdy engineer um never truly leave you um but we are so the answer is we're close to having services like that actually we're not just close services like that are in beta now what now has to happen is the various people have to you know think about their position in the market and how do they want to play on somebody else's sandbox because even though these things are open and owned by nobody uh you know they're still perceived to have you know my competitor is behind that one do i want to play but it is exciting and

is coming got it what do you kind of foresee as the uh future path uh for the company right as you've kind of built five spin like where are you headed um and maybe not what the finish line is but kind of what's like the big milestone that you say hey when we get there like that'll have accomplished the goal yeah um i actually can answer that good it's when there are applications being built, not by FISPAN that are actually delivering value. So we want to become an open banking. We want to support API programs and developer programs. And I want to have as delightful a developer experience as Stripe does, right?

Where any, you know, Bob and Joe McKenzie can be in their basement, have a great idea for servicing, sign up and start actually providing value like on day one. Um, when I have, so to answer your question, when I have 500 applications interoperating with my banks and they're not built by Fispen, then, um, I'll, I'll be a happy person. I think that's a fair way to, uh, to look at it. Um, I wrap up every interview with the same two questions for everyone. Uh, the first is what is the most important book that you've ever read? so you can tell that i didn't actually see that um okay okay it was actually a biography of mal

oh explain that why is that your answer that's a great answer um well first of all i'm trying to think all the books i read i was really into different biographies of different despots um the uh the overlay of you know history and individuals um and despots coming together um and you know the cultural revolution so uh i just found it really interesting i didn't find it informative as to how i want to comport myself um but that was the most influential book that i've that's a great answer your first person to ever say that one that's great um i have one more question it's a little bit more fun and then you actually get to ask me one question to uh to end it uh but my question is about aliens are you a believer or a non-believer total believer why

uh because of the because the because it's infinite and the concept is like it's it's simple math. The answer is simple math. I have yet to have anyone who has an engineering background come on and not answer, of course, it's just math. I always tell people the two answers I get that are most common is yes, of course, it's just math or probability or some version of that. And then the people who say no, will say, well, I haven't seen one. So until I see one, they're not real. Like, okay. um if you had have asked will i you know will we see evidence of it in my life in my lifetime my answer is absolutely not but because you think they're too far away we don't

have the technology or because yeah because we're not advanced yet enough yet yeah i think that's a fair uh fair answer uh all right you get to ask me one question to uh to finish up what you got for me my question is why are your listeners um so focused on bitcoin and um you know distributed occurrences? Why is that a focus of your podcast? Yeah. Or a theme? So I pretty much am very selfish when it comes to the podcast. I just talk about the things that I find interesting. And if people want to listen, then great. If they don't, too bad for them. It's kind of always been my approach, and I'm pretty transparent about that. So you end up finding people who have similar interests, or they find you right um and on bitcoin uh the two things that uh i think when somebody asked me

why right because everyone always asks me what like what is it how does it work it's all that but like the why am i personally interested in it i think that uh there are significant and i mean like world-changing implications when you get to the point of uh a currency no longer being a weapon against the people. And what I mean by that is, take wealth inequality, for example. The number one cause of wealth inequality in the world is inflation. So through the lack of inflation adjusted wage contracts, or eating away at the savings of kind of the bottom 50% of the population that don't have investment assets, kind of all that type of stuff. The data is like pretty clear, even there's some papers like the IMF and things where the bottom percentages of the socioeconomic

ladder, like they experienced much higher levels of inflation than the wealthier population. And so when you start to look at all of that, you say, there is a world where a deflationary or disinflationary monetary policy would actually create a more equitable world. Now, that doesn't mean that you get 100% benefit and no downside, right? So one of the downsides is inflation is supposed to engineer growth and consumption and kind of all of those things. But I think if you're optimizing for an equitable world, then getting rid of that inflation ends up being probably the number one most important thing you could do. It literally trumps all philanthropy, kind of everything else. The second piece to it is,

I actually think that this idea of auditability and provable scarcity and transparency and decentralization and lack of control. It's just generally where the world's going, right? So you talked a little bit about like, you know, what happens when the assets actually have things coded into them? Well, if you understand how to read it, like you'll actually be able to audit that and it'll be transparently available. You'll understand like, hey, I'm giving my data to this company and they can only use it for X purpose, right? And so we're moving more and more to a world where it's less about like, I just trust you. And it's much more, I think people are being maybe not so far as cynical towards organizations and institutions, but definitely more about like

prove it and kind of let me audit, let me see. And so to me, it's like less about do I think it's going to happen or not? I think like, it's just the end game, right? It's just going to take a long time to get there. This is not like a one or two year thing. Okay. Okay. So, so I can summarize that. Like you're excited about it because of its potential to do good. So that's Okay. But I know I'm only allowed one question. No, no, go ahead. You get as many as you want. This is a one point for me. What's the most interesting, like, so that's all well and good, but like I said, I'm a simple person. So what's the interesting yet, you know, good moving the peanut forward that you see

happening realistically in the next 24 months? Oh, I think right now what we're about to see is the greatest theft of wealth the United States has ever seen, simply from the $3 trillion of quantitative easing, the manipulation of interest rates. And the way that I think about this is everything that's going on macroeconomic wise, we saw in 2008, 2009, people ran for kind of inflation hedge assets in general. So gold, real estate, all that kind of stuff. I think we're going to see that cycle play out again here. It's happening faster. So the government intervention happened quicker. It was a bigger step into the market. And so whether inflation at a high level happens or not, it's more just like the fear of inflation forces people to move capital into

inflation hedge assets. And I think you have that. You see the Stanley Drunken Miller's going on television saying 5% to 10% inflation. Whether he's right or not just scares the hell out of people. And so they run into inflation hedge assets. And so for me, I personally believe the lack of financial education is like a national emergency in terms of there's literally people in the United States and close to 50% of the population who could not explain to you how the money that they're saving in their bank account is actually worth less and less every year. Like, that's just a foreign concept to them, right? They're like, Oh, I have $100 that I saved, like, you know, next year is worth $100 a year after. Yeah, you're right. And so that you just

like that alone, I think is somebody once said to me, we ask people to go to work. So let's say you're a teacher, you're a fire man or woman, you're a surgeon, or you, you know, you're a janitor, whatever your job is, we ask you to go be the best you can be at your job. And then we say, oh, by the way, in order to protect your wealth, you also have to be an investor. So you can't just save the money because it'll just get eroded away from a purchasing power standpoint. So we need you to go learn about stocks or bonds or give you the money to somebody else and they'll invest it for you or whatever. And so the idea of Bitcoin, there's this saying in the Bitcoin community, it's a savings technology. So basically what you can do is

rather than saving dollars, you just quote unquote save and just denominate it in Bitcoin. And then therefore, because it's a deflationary structure with a disinflationary monetary schedule, basically it protects your wealth, right? And so like, I think part of this is like,

when I say all this stuff, it's not lost on me that there's a portion of people who are like, that sounds insane. But I kind of think that's like where the market gets made, right? Is there's a portion of people who think like, everything I just said makes a ton of sense. And like, that's where the world's headed.

There's a ton of people who think, that guy's crazy and there's no way that's going to happen. Um, and like the market will ultimately decide, right. Of like, but have you seen anything real that's going to, um, be usable by the guy that doesn't understand that the a hundred dollars in his bank account next year or two years from now is actually going to give him less purchasing power and provides a viable alternative for him in the next 24 months? I'm going to give you three data points that if you're not in it every day, I think this kind of surprises people, but they're like, oh, wait, something's going on here. Last year in 2019, if you take the annual transaction volumes

on Apple, Venmo, and PayPal, and you compare them to what's called the adjusted on-chain transaction volume. So we take out all the exchanges, take out all of the transactions to and from exchanges, really trying to get at what is the transaction volume on the Bitcoin network. The Bitcoin network did more annual volume last year than Apple, PayPal, or Venmo. So a lot of people don't realize that. There's a lot of activity that actually is occurring. It's just not all happening in the US in a consumer-friendly type application. So we don't think of it that way. The second data point is there's a gentleman named Michael Saylor. For 22 years, he's been the CEO of a publicly traded company. The company's worth about $1.2

billion, $1.3 billion market cap, trade from the NASDAQ. He recently found himself earlier this year with $500 million of cash on his balance sheet. He's got a business that throws off about $50 million in EBITDA annually. And he was worried about the macro situation. And so over the last about eight to 10 weeks, he has taken 85% of that balance sheet, about $425 million. And he has converted it to Bitcoin and publicly came out and said, I am going to use Bitcoin as the reserve asset on my balance sheet because I believe that every other asset I could put this wealth into or this value has a negative real return. And so again, it's only one person, but I think that he basically is kind of like breaking the dam open. And so I don't think everyone's going to

go run and do it, but does one guy lead to two, to three, to four, right? And so that's another kind of data point of, it's not the individual, but it's a corporate CEO, right? So he's kind of paid to think about this stuff, but I think that's important. And then the third one is actually the OCC, which you're probably more familiar with than I am. Brian Brooks, who's now the head of the OCC, came from Coinbase, which is the largest US-based exchange. And he recently had a clarification that was issued. So this isn't a new ruling. It was just kind of clarified that banks are legally allowed to custody crypto assets, along with all the other assets. So a lot of banks kind of hid behind, oh, the OCC hasn't given us clarification, we don't want to play this game. So like, we're just not going to do anything. Now that that is out there, I think what it does is it kind of opens the door for some like M&A activities. So does, you know, the JP Morgan's of the world go buy a crypto exchange or custody or something. And then two is like, there will be some forward thinking banks that just say, hey, we're gonna somehow build out services for, you know, kind of digital currencies, whatever that looks like.

and so i say all those data points is like each one individually probably doesn't matter as much right kind of like it's off on its own when you start to put these together i think it's just you're driving in the right direction we just don't know how long it takes to get there how fast you're going that type of stuff super cool um so you can make a different podcast about this The skeptic who does ignorance and doesn't let ignorance stand in their way asks dumb questions. Listen, my favorite part about the podcast is that people come on and I learn much more from them than they learn from me, but this is what makes it fun, right? I know. This has been super fun for me. Really appreciate it.

Awesome. Lisa, where can people find you on the internet or find out more about FISPAN? uh www.fispan.com and they can find me on linkedin uh slash lisa was here lisa was here oh how did you get that i don't know it was the first like lisa s was already taken and so anybody can have any vanity url you want on linkedin still it's the last vanity opportunity left on the internet i love that okay thank you so much for doing this we definitely will have to do this again in the future yeah i really appreciate it lovely talking to you