Latest / The Payments Shed / Ep. 37 - Beyond the Stablecoin Hype: Building Velocity, Raising Capital & Founder Lessons with Eric Queathem

Transcript

Ep. 37 - Beyond the Stablecoin Hype: Building Velocity, Raising Capital & Founder Lessons with Eric Queathem · The Payments Shed

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Welcome to The Payment Shed Podcast, the weekly podcast that
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dives into the big topics, trends and people shaping the
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world's of payments, fintech and business leadership with your
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two Co hosts, myself, Grant Evans and Justin Hanna.
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Welcome to another episode of the Payment Shed Podcast.
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Today we are joined by Eric Queefam founder at Velocity.
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Eric, welcome to the show. Thanks guys.
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Thanks for having me. Thanks for joining us.
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Can you tell us a little bit about yourself and velocity and
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then we'll get into things? Absolutely, absolutely.
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So yeah, I've been in payments for a while and just recently
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started this journey with Velocity.
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We started building the company earlier this year.
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I come from a payments background.
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As I say, I spent 10 years at World Pay leading a lot of
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different functions on the the business and you know, learned
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learned a lot about what I would call the Tratify space, but also
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had an opportunity to kind of dip my toes into the web through
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World as part of the organization I was leading built
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our crypto and web three business there.
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And so had been on the sidelines for a while watching kind of
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what's happening with stablecoins.
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Some of the early market fit that stablecoins found within,
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you know, the web three community, particularly within
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trading. Obviously, last year was a big
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kind of watershed moment as Bridge sold itself to Stripe and
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the whole world kind of woke up to the fact that stable coins
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are probably here to stay. That was ushered in along with
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lots of regulation change and really, you know, felt like the
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right point in time for us to build something in the space.
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But as we looked at the space, what we found was no one was
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really building from a Trad 5 perspective.
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Nobody had taken kind of the deep understanding of how the
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traditional payments and treasury world was built and
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figured out how do you bring stable coins into that
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environment and how do the two work together.
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And that's really at the core of what we're building at Velocity.
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It's the first stable coin infrastructure platform built
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for global CF, OS and treasures. And the idea is that these
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organizations don't have the Web 3 experience.
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They don't have the technical kind of chops to understand
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exactly how stable coins should and can be implemented.
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And what they want is the benefit of all of that without
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having to build that internal expertise.
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And that's what Velocity delivers.
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Perfect. Taken back a step.
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Pretty big leap going from a huge core organization to a
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founder kind of. How is that journey being for
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you so far? Yeah, it's been great.
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It's been great. I think, you know,
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entrepreneurships kind of always been in my DNAI grew up in a
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house where, you know, my, my, my parents were quite
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entrepreneurial and so I got to watch them build businesses.
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I I built the business in college with my stepdad that we
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took to over $1,000,000 in revenue.
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And so it's kind of always been something that I've enjoyed
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doing. And I, you know, I wouldn't say
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I'm overly creative, but just kind of clever enough to, to
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have a little bit of pulse on, on, you know, certain ideas that
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I think have legs. And I made a decision after
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university to go what is probably maybe one of the safest
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pass out there, which is I went into management consulting.
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I went to McKenzie for five years, loved it, had the
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opportunity to jump into what was Vantive at the time and
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later became World Pay as we bought that business and merge
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them in 2018. And I think along that journey,
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there was lots of different opportunities where I had the
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opportunity to to just build internally at World Pay.
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So the crypto and web three businesses is kind of one
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example of that, but there's lots of other kind of businesses
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that we built within, within World pay.
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So I think it's kind of always been in my DNA to, to kind of,
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you know, be a bit off to the side trying to, you know,
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innovate and, and push the limits.
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And so the transition's been really natural.
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I think being a founder after having spent ten years in a, in
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a large organization actually brings a lot of things that I
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maybe wasn't fully aware we're going to be so important kind of
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early on in this journey. You know, certainly first and
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foremost just the domain expertise, you know, the
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understanding of how things work both at a macro and, and a
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really detailed level across the payments landscape today.
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Certainly my network, you know, I'm, I'm running a, you know,
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enterprise B to B business now, which ultimately is a tough
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place to sell into, right? Enterprise sales are slow, they
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take a long time. Building that trust,
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particularly as a startup is quite hard.
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And so I'm able to bring my network into that discussion
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and, you know, have, you know, almost instinct credibility in a
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lot of situations. What I think is, is probably
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been the biggest accelerant to what we're doing.
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So how much of that McKenzie sort of experience do you bring
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into start up land particularly with like risk and opportunity
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like how you're mapping that out as a as a start up at the
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moment? Yeah, I think like start-ups as
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a general are are a little bit chaotic in the sense that you've
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you're so early that you could kind of do anything, right.
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You could take the the organization in a million
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different paths and certainly in such a transformative moment in
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payments where stablecoins have so much applicability and they
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have honestly such little traction relative to the size
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of, you know, payments, banking and treasury as a whole that
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there's a million things we could do.
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And so I think where it's been really helpful is thinking about
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how we prioritize and how we stay really, really structured
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and really focused and thoughtful.
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I think the other things that, you know, obviously come into
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play is, you know, I'm, I'm wearing a lot of different hats.
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And I think as a consultant, you, you know, you kind of fake
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it till you make it. You walk into a client that you
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may, you know, have just read their 10K the day before and
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they're trying to get up to speed on exactly what they do.
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And, you know, you're sitting with some of their senior execs
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pretending like, you know, you have a good plan for how to
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advise them on, you know, pivoting the company to, you
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know, XYZ reducing cost, whatever it might be.
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And so you get, you get a lot of experience very quickly.
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And so, you know, you're the CHRO, you're the CFO, you're the
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CEO, you're playing, you know, all these different roles across
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the organization. And I think actually that
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generalists mentality and experience that I had at
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McKinsey is actually proving to be really helpful because I feel
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quite comfortable kind of digging in, even though I'm not
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an expert in all these areas. I've seen it from a lot of
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different angles. I've watched other leaders
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operate in, you know, clients I served during my tenure at
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McKinsey. And so I've got at least a
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little bit of a framework for what I think it looks like.
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Building the car as you're driving it, right?
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Exactly. Exactly.
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Was there any kind of pleasant surprises?
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I think sometimes we talk about the fundamentality.
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You always think it's going to be 1718 hour days and it's
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always going to be hard work and it is hard work, but it's the
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only thing that was more positive.
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To be honest, I've had an amazing experience so far.
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I'm having more fun than I could have ever imagined.
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I think, you know, part of that is we're in a a fairly unique
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situation and that the market is really excited about
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stablecoins. So we were able to raise a good
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amount of money very early on and we've actually raised some
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additional capital, which we haven't publicly announced yet.
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And so we're well financed. I've had the opportunity to
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build a team from scratch, which I love doing.
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You're only as good as the people around you.
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And so I've really enjoyed that process and you know, look
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forward to continue to building the team.
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And so honestly, those those kind of early moments where
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you're, you know, not sure if if this thing is, is actually has
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legs, I think are a little bit stressful.
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But the exciting parts are, you know, when you have a, you know,
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your your first big customer conversation and, and you leave
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that having not been thrown out of the room and instead saying,
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Hey, that's really interesting. I think that's, you know, a
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product that we would, we'd be interested in, in learning more
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about. And so it's just those little
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moments you land a big hire, you kind of, you know, inch by inch
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make a bit of progress in the company.
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And it's, it's really exciting, right, Because you've built
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there, you've been there from day one, you've built it up.
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And I think it's just generally a lot more rewarding I think
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than being in some of the large organizations.
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We wanted to talk to you about, you know, the culture is such an
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early stage startup as well. And we were talking with another
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guest lead Eclipse just the other day around, you know, the
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right people for the right time. You know, your first ten
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employees and your 10 to 50 and then the 10 to 50 might be
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people that love the scrappy 10 to 50 stage.
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And they're not the people that go from the 50 to 200 stage.
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So how are you kind of going about building that early
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culture and and bringing the right people in around you as
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you scale this business? Yeah, it's a good question.
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I have this debate a lot with people over the last year on the
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right type of people, the right profile.
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And I think for me, I thought a little bit less about the
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specific role I need to get every job done and a lot more
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about individuals and people that you know, lots of new
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people I've, I've, you know, I'd say more than half the team are
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individuals that I've recruited over the first couple of months
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of, of starting the business. But then a lot of people from
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my, in my network where I had either worked with, interacted
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with them and other places. And so I had a really good sense
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of how these people operate. And in a lot of a lot of
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instances, outside of maybe some of the highly technical roles
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like a developer or a product designer, I'm, I'm in a lot of
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cases looking for athletes like people who are, are comfortable
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being at the company when it's zero to 10 people and playing
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every role. And also people who are
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comfortable. And I know we'll be great
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leaders when we're 150 or 200 or 1000 people, right?
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And so I think a lot of what I've been looking for early on
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is a mix of more senior people probably than what you see in a
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lot of startups. We've hired a very senior team.
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So we have an unbelievable amount of experience in the
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early team. And that was a thoughtful
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decision we made, which is we wanted to be a very mature, a
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very kind of well established team so that on day one, we had
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the credibility and the experience to walk into any
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situation and and and position ourselves different than I think
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we're a lot of the web three builders has started building
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in, in, in the space. So in general, like my my people
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philosophy has been much more about generalists and athletes
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who can, who can come on the journey and play a lot of
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different roles and then augmenting that with really good
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deep domain expertise in certain areas.
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Well, that's a really good way of looking at things.
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Obviously funding helps with bringing in more senior people
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from from an earlier stage as well, right?
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And, and sometimes convincing people to take less even as a
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basic salary on the, you know, the backing of the product,
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believing in the product equity comes into play in certain cases
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as well. So different things, right?
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I, I think sometimes people look at building a start up and
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business and they think that's going to be easy, right?
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Like, you know, so many people do it now all the tools are
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there to plug in and play. The reality of that can
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obviously be quite different. So you know what have the the
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hardest days initially in the process been like for you?
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Yeah. So I'm, I'm not a, an overly
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technical individual, right. And I think products like
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largely success in in payments today is defined by the product.
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And I think the hardest part for me early on is feeling not
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helpless, right, but a little bit under prepared for kind of
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leading the product and the technology side.
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And so we've over indexed on hiring, you know, absolute
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rockstars. We've got a phenomenal CTO,
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we've got a great product organization, which is will soon
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be 3 people, all just unbelievable talent.
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And so I think early on, I've been, I've been probably less
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confident in that area. And so I've had to surround
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myself with people who, who I thought, you know, would bring a
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lot of domain expertise and thought partnership.
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I think generally, you know, there's, there's never a day, I
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think in the last eight months where I've, I've woken up and I
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feel like I've got my hands around everything.
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It always feels like I could literally work 24/7 and still
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not get caught up on all the things I want to do.
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And it's everything from, you know, an investor looking for an
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update to, you know, that LinkedIn or, or marketing post
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that we want to do, even though we don't have a marketing person
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yet. And it's just all these little
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things that add up. And So what you end up doing is
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figuring out like, well, today, what is the most important
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couple of things I got to do to lay the foundation for success
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tomorrow and next week and the month after.
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And so it's been a really, it's been a really good kind of
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forcing mechanism to, to stay super focused on the stuff that
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matters. Do do you see your definition of
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success has changed around what you maybe see success one day
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compared to see success the next day?
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For sure, absolutely right. I think early on it was, it was,
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you know, the first couple months was like how do we put a
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team around us? Well, first it was how do we
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bring capital into the company in a way that allows us to start
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building what we want to. 2nd is, how do we then build a team
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around us that gets us to actually getting a product in
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the market? And now the real kind of, and
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now that the product's live, we went live with the product last
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month is how do we start ramping up the commercial side?
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And how do we build that commercial engine?
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And how do we take the 500 conversations we've have over
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the last eight months and actually put some real kind of
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sales rigor and sales process around them in a way that allows
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us to start scaling the business from a volume and a revenue
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perspective? And raising capital has been
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through a little bit of a tumultuous period, right to
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geopolitical, whatever it might be.
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I'm going to try and get my facts right this week.
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You guys have raised the largest precede round in Europe this
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year, is that correct? I think that's right.
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I think that's right. I haven't.
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You know that's right. So what was your advice for
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first time founders be around aligning with what investors are
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looking for right now? What's what's the guidance you'd
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give off the back of that great success for you guys?
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Yeah, I think it's a lot of things.
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I think 1st and Forest most at this stage people are really
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investing in, in, in people. And so I think as a, as a first
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time founder, I couldn't point to success of, of other
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businesses I've built. And so I had to rely on people
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to help tell the story of the success I've had in other
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environments. And so I think, you know, your
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credibility and your network is a, is a really important part.
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I think that probably the thing that I underestimated in the VC
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world is how good those guys are at getting to anybody to ask
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about what you've previously done right.
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You know, I don't know the exact number, but I'd be surprised if
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they didn't connect with 50 plus people that I've worked with in
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the past, right? And so I think, you know, if
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you're going to found a company, you know, your reputation, what
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you've done is incredibly important in those early stages.
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It's it's probably the key thing.
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I think second is, and this may be a little bit obvious, right,
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but I think you have to generally be aligning to a
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couple macro trends. I think funds often have
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mandates on, you know, things that are trending at the macro
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level. And so being able to position
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yourself either squarely within those or at least kind of on the
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on the periphery is, I think quite important.
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And then I think the third thing is early on, particularly in a
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technology business, I think what, what investors want to see
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is the confidence that you can build, right?
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And I didn't have that confidence myself because I've
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never I've never coded, you know, a single line in my life,
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but I brought people to the table that we're going to come
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on a journey that, you know, built a lot of trust with those
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investors. And so in terms of just
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credibility of of what they've done before.
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And so I think what you shouldn't be afraid to do as a
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founder early on is just know that the success of your
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fundraising is going to be as good as the people you have at
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the table. And so, you know, giving away a
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portion of the company to other Co founders or to other key day
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one employees prior to fundraising is not a bad option
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because it's going to significantly change the outcome
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of those early discussions you're having.
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They just care more, right? Because people know it's
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they're, they're in it for the long run.
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That's right, yeah. What would you say is the
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biggest mistake or lesson learnt that you kind of have had over
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the last eight months? That's a good question.
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I think there's a, there's, there's probably two things I
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would point to. I think I, I probably didn't, I,
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I wasn't as aggressive in kind of my early scrappiness of the
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first few months of kind of claiming, you know, I'm a young,
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you know, we're, we're a, we're a startup, we're a young
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company. You know, I need, I need more
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for less sort of thing, right. And I think I could have
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extracted a lot more from the market in terms of people who
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are willing to lead in to help to, you know, offer services.
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And so I think, I think we could have probably kind of gotten
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more out of the market. I think the second thing is
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we're, we're aiming to be the highest regulated stable point
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infrastructure business in the world, which means we're laying
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a huge breath of licensing framework around the world.
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We've got, we're fully licensed in Europe today.
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We've got 4 pending applications around the world on the
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regulatory front. And I think I didn't spend
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enough time understanding or probably nailing the sequencing
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of what I wanted to do or how those licenses should be done.
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And so we got a bit of a late start on a couple of markets
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that are now proving to be quite key.
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And so ultimately, that's going to slow us down a little bit.
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And so I think, you know, stepping back and thinking
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about, well, it might not feel like the most important thing to
18:12
solve on day one because it's not related to building the
18:14
platform or whatever. But there was a handful of
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things on the regulatory and compliance front that I wish I
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would have started on day one. It's quite interesting.
18:21
Maybe you join a new business, whereas a start up scale up or
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or brand new, the businesses you hope is never going to be as
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small as what it is at that point.
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And you don't want to look back in 12 months time ago should
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have done that 12 months ago. But we're just distracted by
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with shiny things. But actually processes are
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absolutely key. Let's when we take it back to to
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stablecoin, there's a lot of hype around it, right?
18:42
And deservedly so. There'll be a lot of listeners
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in the network that may be you can see the word stablecoin,
18:50
there's a lot of noise about it, but don't really understand what
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it works, why it works, kind of why people hearing about it so
18:57
much. Yeah, I think there's there's a
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bunch of reasons why not necessarily aligned to all the
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reasons of you know, why people have built what they've built.
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But I think from a first principles perspective, when you
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look at payments banking or treasury, the current
19:16
infrastructure is incredibly dated.
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And I'll give you a couple of examples across kind of each of
19:22
those those ecosystems. First is from a payments
19:26
perspective, if I'm, you know, processing with a large card
19:30
brands and if, and let's just say I was just to take, you
19:33
know, Visa, MasterCard names or AMAX or discover whoever it is
19:36
out of the, the picture. And you were to tell me, hey,
19:39
I've got this great product for you.
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But 33% of the year to bank, bank, bank holidays and
19:45
weekends, the product actually doesn't work on the back end.
19:49
So it's gonna be it's gonna work on the front end, but you're not
19:51
actually gonna be able to collect your funds on the back
19:53
end. You would kind of think, wow,
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that that feels, that feels like not a great product, right?
19:58
Like 33% of the year I can't get my money.
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That feels, you know, quite odd, like I've given the goods out on
20:04
Friday and I'm not picking up the funds till Monday.
20:07
And so there's a lot of things that I think the world is kind
20:11
of gotten used to on how they work today.
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But if you actually go back to the first principles
20:16
perspective, there's, there's not a lot of of, of I would say
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like good, good rationale outside of the way the systems
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were built on why things happen that way.
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You know, we're largely operating on SWIFT for
20:30
cross-border payments today. That network was built or
20:33
started in 1973. Obviously they've announced a
20:36
few things they're doing in the space, but ultimately, you know,
20:39
whether I go across, you know, payments, banking, treasury, you
20:44
know, from a, from a, from a banking perspective, you know, I
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shared this data online a couple of weeks ago.
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There's close to $200 billion sitting in business bank
20:53
accounts in the UK paying 0% interest or yield to those
20:58
businesses. Imagine a world where that
21:02
roughly $8 billion of of interest or yield would have
21:06
flown back, would have flowed back into businesses in the UK
21:10
this year, right? Like what would happen to the
21:12
economy, Like what would have happened to the business
21:15
building within that environment If, if that capital was kind of
21:18
making its way to what I would say is probably, you know,
21:22
generally the right place it should be in.
21:24
So you have all these systems and businesses that have been
21:28
built on a set of norms and I think for a long time didn't
21:31
have a technical way to challenge.
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And stable coins for the first time provide that backbone to
21:37
start challenging all these norms, whether it's in
21:40
cross-border payments, whether it's in real time settlement,
21:43
whether it's in easy ways to get access to yield or reward
21:48
bearing products in real time. Like there's so many different
21:53
applications that solve for these things that we think are
21:56
kind of just the way it works. And now all of a sudden, because
22:00
the regulatory framework is in place largely around the world,
22:03
businesses are waking up to this and realizing, hey, I can take
22:07
advantage of this. And there's both consumer
22:08
application and there's business application.
22:10
I'm less excited about the consumer stuff and I'm not
22:13
building anything in that space. I think consumers are are are
22:18
searched pretty well in a lot of cases.
22:21
I think it's on the B to B side where the systems is have
22:24
probably not caught up to you know the times in terms of of
22:29
what should be expected from the technology today.
22:31
It's like Sunday trading hours for me.
22:34
Yeah. Like, it's a very legacy thing
22:35
as obviously religious, you know, links to that.
22:38
But should I not be able to do my weekly shop at 6:00 PM on a
22:42
Sunday if I work on a, you know, a certain day of the week?
22:44
Like I work on a Saturday? So I want to go that time.
22:47
But we still kind of stick to that and kind of, I feel like
22:50
the whole world, everything has shifted towards speed and the
22:55
now, right? You know, Amazon drives that
22:58
from a delivery point of view. I want to order something at
23:00
9:00 in the morning and I want to have it before the end of
23:02
today, right? And you can do that.
23:05
So why are we stuck in this legacy loop with payouts and
23:09
financial infrastructure, like you say, when actually it's such
23:12
a vital part of global business, global economy like this, this
23:16
money's just sat there. I mean, probably, you know, it's
23:18
the answer. People are making interest that
23:21
shouldn't be making interest. Is that one of the taboo kind of
23:24
topics with this, that someone else is actually making revenue
23:27
off the back of other people's money?
23:29
100 percent, 100%, right. I think, you know, this might be
23:33
one of the largest generational shifts in in revenue that we've
23:38
seen in a world where, you know, I control the account
23:44
infrastructure and in real time I can trade into assets that are
23:47
yield bearing. Whether that's a very simple
23:50
product like USDG or AUSD, where I want to move into something
23:54
more sophisticated like, you know, Athena or Agave or some
23:58
sort of kind of D5 product. Being on chain massively changes
24:04
my ability to access those products and it puts the control
24:07
and really the shift in the economics into my court.
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That's ISX dot Financial and a big thank you to the team at ISX
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for supporting the show. And what are the sort of myths
24:54
or some of the myths and hypes that you could kind of debunk
24:57
for us as well? Because we do stuff in payments
24:59
where we're like, OK, we're going to call this thing
25:01
stablecoins. Yeah, right.
25:03
Which has a crypto undertone to it as well.
25:05
And like Joe blogs on the street is kind of like how the stable
25:08
coins actually affect me. Yeah, I think, I think there's
25:11
three that's important for people to understand.
25:13
So I think first and foremost, the risk and compliance
25:16
standards in the stablecoin ecosystem or are as good or
25:21
better than the Fiat world. The idea that the, the right
25:25
checks and balances don't exist is, is just not true.
25:29
Maybe that existed in the very early days and you know, the
25:32
idea that stable coins are largely used for tariffs,
25:35
financing or those sort of things is, is just not true,
25:37
right? Just like Fiat, there are bad
25:39
actors in the ecosystem, but I think more so than in the Fiat
25:44
world, the transparency and the, the framework that's been put in
25:48
place, particularly travel rule, which is, is a global framework,
25:51
fundamentally changes. I think the ability for the
25:54
ecosystem to police and to get these bad actors out of the
25:57
system. I think #2 is you have a lot of
26:05
individuals who think stable coins is going to solve every
26:08
problem and it should be, you know, fully replaced Fiat.
26:11
I don't think that's true. I think there are use cases
26:14
where stable coins provide a very good solution.
26:18
There are probably as many or more use cases where Fiat is the
26:23
right solution, right? And so I think the world is
26:25
going to be a mix of Fiat and stables, which leads to my Third
26:28
Point, which is stable coins are only as powerful as the Fiat
26:33
network you build around them. In order to get into a stable
26:36
coin, I need access. If I want to do it in real time,
26:39
I need access to the local payment rails, right?
26:41
I need access to banks who are willing to accept these funds
26:46
and allow me to move them out of an account into an either a
26:49
stable coin issuer or a liquidity partner who's willing
26:52
to trade me the Fiat for the stables or on the back of that
26:54
transaction, the stables for the Fiat.
26:57
And until somebody builds that infrastructure on a global scale
27:00
that looks and feels like best in class Fiat partners, whether
27:03
that's, you know, a World Pay or a Stripe from an acquiring
27:06
perspective, or whether that's a global bank like Citi or JP,
27:12
there's, there's going to be limited things or limited value
27:16
that you can derive from, from stable coins.
27:19
And the world is, I think, you know, kind of craving for that
27:22
global partner, who is the single global partner that I can
27:25
look at and say that's the enterprise grade global partner
27:29
in the same way that I think about Fiat partners.
27:30
And that's really what we're, you know, we're aiming to build
27:33
a velocity. So from an ICP perspective and
27:38
when you look at the kind of the stable coin infrastructure, who
27:41
do you feel like you as a business and and other
27:43
competitors as and where we'll be selling the product to?
27:48
So we have, we have 3, three kind of categories of customers
27:52
that we're selling to first and foremost.
27:55
And I'll kind of talk to you in order of like how ready I think
27:58
these these segments of customers are to buy.
28:01
So first is is payment companies, this is networks,
28:04
this is acquires, this is remittance players, this is
28:08
payroll providers. Everybody who's generally kind
28:11
of registered as APSP or has some sort of payments licensing
28:14
around the world, These will be the first organizations and are,
28:18
you know, the first organizations to start
28:20
leveraging stable coins both for internal and for external use
28:24
cases. And that is a segment that we're
28:28
looking to power. Our first 3 or 4 customers come
28:31
from the segment. They're, you know, one's a
28:34
network, one's a large PSP and one's a global acquirer.
28:39
And we're providing a set of services for them, some
28:42
external, some internal that either solve for a payment or a
28:45
treasury use case. The second is just global
28:48
businesses. And I think global businesses
28:50
will start to procure these payments and treasury solutions
28:54
themselves directly. And so today, the primary place
28:58
to get access to a stablecoin payment solution is from a
29:02
payment service provider. In the future, I think some of
29:06
these businesses will be sophisticated enough, just like
29:08
most graduate from, you know, a pay FAC or an ISO or some
29:12
intermediary sitting between them and the choir.
29:13
They'll start to do direct deals with the the payment service
29:17
provider as well as the organization who's offering
29:20
these treasury solutions. So that's kind of global
29:22
businesses, anybody who operates in a multi jurisdiction.
29:25
And I don't mean, you know, I have an office in France and in
29:28
the UK, right. I'm operating in 20-30 forty,
29:30
100 countries around the world. I have tons of complexity of
29:34
getting cash in the right place, getting cash back to corporate
29:39
paying and receiving funds all over the world.
29:41
That's a huge opportunity. And then the third is actually
29:44
banks. I think for us, we've, we've had
29:49
a lot of conversations with banks, mainly because we're
29:51
trying to build that Fiat network, but also because
29:54
there's been a lot of interest in banks and figuring out what
29:56
do they want to build, what do they want to partner with.
29:58
And I think banks are thinking about what happens to the
30:01
deposits and therefore should I be issuing wallets and trying to
30:06
hold digital assets so that I can control those deposits.
30:10
I think that's a hard proposition because they're not
30:13
the natural person to do that. They, they don't have the domain
30:16
expertise. Second is if they're trying to
30:19
keep the deposit income, meaning hold the interest back
30:22
themselves, if they issue the wallet and somebody's expecting
30:25
the interest, they kind of lose in that situation as well.
30:28
So I think that area is probably less interesting.
30:30
But what we're seeing a lot of excitement from banks is, you
30:33
know, what you don't realize is global payments in the, the FX
30:38
economics around that is a very big value pool, But it's largely
30:41
concentrated typically in like the top, you know, 1-2 or three
30:46
banks in every market, right? And the rest of the banks are
30:48
kind of left out of that. A lot of, and this, this that I
30:52
heard from, from someone else a couple weeks ago, but the number
30:55
of corresponding banks in the world halved over the last three
30:58
years. And so the reason for that is
31:02
crazy stuff. The, the, the banks who were
31:04
trying to do it through a corresponding banking that were,
31:07
weren't making any money. And so they shut those programs
31:10
down. And so now they're actually
31:11
thinking about, is there another way to get in the game and
31:14
integrating a solution like Velocity to enable a global set
31:18
of, of, of cross-border payment capabilities is a potential
31:23
option. And so I think on the payment
31:25
side, what you're going to find is banks will have the
31:27
opportunity to use their distribution of their existing
31:29
customer base to sell more payments.
31:32
And you'll probably see more challenging of the couple of big
31:35
banks who are kind of dominating the space today.
31:37
So obviously stable coins, you know, stable coins, some are
31:41
call it what you will this year. It's obviously the the biggest
31:43
kind of hype word in the payments industry.
31:46
It is a flooded market. There's a lot of start-ups.
31:49
You know, if I'm going to really pitch velocity in the market,
31:53
what differentiates you guys from the competition?
31:57
Yeah, you're right. There is there is a lot of a lot
31:59
of capital that's that's gone to the market.
32:02
That being said, you know, we are so early in in the future of
32:08
of what stablecoins can enable. I think as with all things and
32:12
payments, it's not going to be winner take all.
32:14
There's going to be a lot of a lot of you know, big winners or
32:18
big players in the market. If you look at the biggest
32:21
players in the market today and you know, I won't share this
32:25
with names, but you know, the the biggest players are 50
32:29
million of revenue, 35 million of revenue, 10 million of
32:32
revenue and then a whole long tail of players kind of sub 10
32:35
million. There's actually no scale player
32:38
in the space, right. When you compare, you know, what
32:41
is global, global and world pay now combined revenue something
32:43
like 12 billion, Fiserv similar size ad in three or four, I
32:48
think stripes nearing 7 billion. You know, there is nobody kind
32:52
of nowhere close to building a scale business.
32:55
And so I think we're incredibly early in, in what's going to be
32:59
built in the space. So for us that's exciting.
33:02
We, we, we sat on the sidelines long enough to get to see a few
33:06
big mistakes and decide what we wanted to build and how we would
33:10
be differentiated. And we think there's a lot of
33:13
markets still to play for. But ultimately the pie is just
33:15
going to be growing so fast that I think anybody who who builds
33:19
smartly in the space should be able to to kind of ride that
33:22
that wave and be successful. It's very similar to the
33:25
trajectory we've seen with open banking platforms in many ways
33:30
beyond Plaid, maybe you know some of the really large success
33:33
stories, but there's certainly been a lot that have kind of
33:35
been, you show me the money sort of has been the market
33:38
narrative. Right.
33:39
You can have quite a big brand name though, in such a a small
33:42
market where no one is a pure leader of the game because it's
33:44
only been around for three or four years, right?
33:47
And I think there's some, definitely some experts that
33:50
have learned a lot over the last four or five years in this
33:52
space. But as you mentioned, no one's
33:54
got to the point, you know, because the rest of the world's
33:56
only just started taking this product on.
33:58
It's just going to start growing rapidly.
34:00
And you can get 1% that market share now compared to what that
34:03
1% would be 5 or 6 years time. It's billions of worth of.
34:06
Different. It's been acquired really early,
34:08
like with Bridge, with Stripe, right?
34:10
Like they've been taken off the board so soon.
34:11
You didn't really know. I mean, they they'll still be
34:14
scaling in the background. You didn't really know what they
34:16
could have done in their own right organically, because
34:18
they've been consumed by a bigger Bistro.
34:20
That's right, that's right. It's.
34:22
Always going to be the dream as well though, right?
34:23
When most people build a business, a lot of the time it's
34:26
to sell the business, right. So the bridge guys got the
34:28
number they wanted to at the time then it's good, but we're
34:30
never going to see what the full potential would have been by by
34:33
not being acquired, right. Do do you think then we were in
34:37
this industry you mentioned there about that, that long tile
34:39
of that sub 10 million that are still involved in dominating
34:43
space as it is. Do you think it could be
34:45
saturated quite quickly from people trying to say they have a
34:48
product that maybe they don't have just yet?
34:52
I think in the feedback we hear from a lot of a lot of
34:56
enterprise businesses across all three of those categories, FIS,
35:00
global companies and payment service providers, is that
35:04
there's not a lot of people building in the space who have a
35:06
lot of deep payments expertise. There's a lot of folks who grew
35:09
up in Web Three who really understand that side of it.
35:13
But I think ultimately success will be defined about will be,
35:17
will be, will be defined with people who can build a product
35:21
that is easily sellable into the Tradfi world.
35:25
You got to meet people where they are.
35:26
And I think the, the current kind of go to market of a lot of
35:31
these organizations struggles to understand the current problems.
35:35
Right. And I, I love, I love one of my
35:37
favorite things I've done over the last eight months is getting
35:40
in front of, you know, I'll, I'll say, hey, I'd love to meet
35:43
the treasurer and talk a bit about, you know, where stable
35:46
coins could be applicable. And, you know, the individual
35:49
I'm asking for the intro from is like, look, I'm just going to
35:52
warn you, they're really grumpy and they're a huge skeptic,
35:57
right? And, and, and you know, they've
35:59
been here for 25 years. They've built a pretty great
36:01
treasury operation. Like, you know, Are you sure you
36:04
want to do that? And, and every one of those
36:06
conversations, you know, it starts exactly right, that like,
36:09
look, you know, I don't see the applicability.
36:13
And then I start asking a few questions, right?
36:15
So, yeah, I just want to ask you 3 questions, right?
36:18
There's, there's a couple of things that'll help me just kind
36:20
of understand how you think about managing your capital.
36:22
So are there any instances in your Business Today where you
36:26
guys are doing any pre funding? And usually it's like, well, pre
36:33
funding, what do you mean? Do you have any short term
36:35
credit lines that you draw upon in order to meet, you know,
36:38
short term payables for any reason?
36:41
Like, well, yeah, actually, yeah, we've got this weird
36:45
payment flow where, you know, when, when consumer funds
36:48
arrive, there's like this day lag.
36:50
So I take out like a $20 million credit line a day in France.
36:54
And yeah, I've never been able to get rid of it.
36:57
It's like, OK, well, that's interesting.
36:59
Let's talk a little bit more about that, right.
37:00
And the next question is, And so you, you, you start, they start
37:04
to open up like, oh, interesting.
37:05
Yeah, you could do same day move.
37:06
Yeah, actually we could get away from that, that $20 million a
37:09
day. And actually now that I think of
37:10
that, I've got three or four others in Asia and there's a,
37:13
there's a pretty big one in the US actually I'm spending $100
37:15
million or I'm using $100 million credit line a day for.
37:18
And it just kind of spirals into this conversation of like, oh,
37:21
actually I do have a bunch of things that I didn't think were
37:24
solvable. And now I understand there's
37:26
opportunity. The second question is, let's
37:29
just talk a bit about your, your FX, right?
37:32
Oh, I have the best FX rates in the world.
37:34
Like there's no way stable coins could save me money.
37:38
Great. Give me an example.
37:39
What are you, you know, what are you paying for a flow for, you
37:41
know, to, to give me your, you know, one of your biggest, your
37:44
biggest corridors. Oh, I'm paying two basis points.
37:47
That's great. What, what rate is that being?
37:51
Is that being is being sold off, right?
37:53
Are we, are we at the, the midpoint, the Bloomberg rate or,
37:56
you know, where is where is the rate?
37:58
So I don't know. I just know I'm paying two bits,
38:00
right? And so like the depth of
38:02
understanding around like, what am I actually paying and what is
38:04
the true spread on, on these currencies, right.
38:07
And then the third is just general capital efficiency.
38:10
Like how complex is it for you to get all of your money into
38:13
the right indices in the right time in order to meet payroll or
38:16
whatever operational needs I have?
38:18
And what you end up finding is they're spending huge amounts of
38:22
resources in order to solve this, like, you know, armies of
38:25
treasury OPS people and or they just have a ton of cash.
38:29
That's, that's, you know, inefficient.
38:32
And, you know, yeah, I've got, you know, I, I've got 3 or $4
38:37
billion on my balance sheet. But yeah, 100, a 150 that's kind
38:40
of tied up and isn't effective. Well, what if you could earn 4%
38:43
on that, right? Or what if, you know, what if
38:45
that was completely fungible, right?
38:46
And so when you start to unpack through these discussions is if
38:51
you really understand how these businesses operate and how
38:54
payments integrate into treasury and how treasury plays out
38:57
within these large organizations, you're able to
39:00
very quickly through a handful of questions, really start to
39:03
uncover these opportunities. And I think that's what's been
39:06
really helpful for us in these early conversations.
39:09
And I think a lot of the reason why these early treasures and
39:12
CFOs have been probably a little bit less excited or enthusiastic
39:18
about stable coins is 'cause they haven't.
39:20
They haven't seen the vision, right?
39:21
But the second the light goes on, it's fun to watch.
39:25
Well, they don't know what they don't know, right, Using them to
39:28
kind of open, just open up. And then it's what all sales
39:31
people want really, right, is just tell them all the challenge
39:34
that you have. I will.
39:35
And I think we may be able to solve them.
39:38
So let's let's dive into the future of payments a little bit
39:40
more broadly, I guess then how or where do you see the payments
39:44
industry going over the next kind of three to five years?
39:48
Yeah, I, I think for me, I don't see a lot happening on the front
39:52
end of consumer payments. Like I don't see stable coins
39:54
transforming how people pay at the point of sale and things
39:57
like that. I think there'll be people who
39:59
experiment that space and there may be certain markets around
40:02
the world where folks become, you know, stable coin native
40:06
and. Maybe there's, you know, a bit
40:10
of volume happening on stablecoins, right?
40:12
And I liken this to something like buy not pay later, right?
40:14
Buy not pay later. I think from, from a, you know,
40:17
global market share perspective is a couple of percent, right?
40:20
And so is there a world where like stablecoin payments on the
40:22
consumer side could be a couple of percent for sure, right?
40:26
But I don't see the applicability in the use cases
40:28
much on the consumer side. I think on the B to B side is
40:32
where we're going to see massive transformation.
40:33
And I think what's going to happen on that is people are
40:36
going to demand that money moves in real time.
40:38
People are going to no longer be comfortable or near real time,
40:42
right? Like same day movement on on, on
40:44
almost all funds. People are no longer going to be
40:46
comfortable just allowing their funds to sit in transit for, you
40:51
know, 2345 days, right? They're going to be asking the
40:55
questions why? Well, where is it?
40:57
And am I earning interest while those funds are in motion,
40:59
right? I think people are going to take
41:02
control over and now have a much better understanding of FX
41:07
economics. And I think you're going to see
41:09
a ton of compression across large banks in the world as well
41:12
as, you know, middleware or or FX providers or FX specialists
41:16
who are going to get compressed or they're going to kind of get
41:19
on board and find a better way to do it.
41:20
And that's going to be off the back of stable coins for a lot
41:23
of quarters. There's a domino effect to that
41:24
though, because they lose money here.
41:26
Where does that pivot? Higher mortgage rates, whatever.
41:29
There's always like a downstream to that.
41:31
So yeah. What's the interesting one
41:33
because I feel like the FX world have got been lucky for last 25
41:36
years when you compare it to the acquiring world where margins
41:39
just got smaller, smaller and smaller and smaller.
41:42
People will haven't flipped that focus go actually what do we do
41:44
in the FX world here? And I'm paying whatever it might
41:47
be. And it's not just that blue
41:48
mower. Oh yeah, the scheme also charges
41:50
X percent. I didn't really think about
41:52
that. And merchants have just got this
41:53
2 bit mindset in their head, but they're happy because that's
41:56
what they think they've got because they feel like they've
41:58
negotiated and had a position of power when they go through
42:02
contract negotiation, but not really seeing where where
42:04
there's revenue being left on the table, right?
42:07
Yeah. Will AI have its say on stable
42:10
coin? Yeah, I think naturally the 2GO
42:14
well together, right. If I think about the use case
42:17
for agentic commerce, stable coins provide I think a pretty
42:22
great medium to be transacting. I think, you know, there's a lot
42:27
happening on the consumer side of agentic commerce.
42:32
You don't hear many people talking about the B to B side.
42:34
And I think to to me that that's where the biggest opportunity
42:37
is. And I think when you're
42:39
interacting with programmable money and you're operating on
42:45
digital wallets instead of bank accounts, the ability to reduce
42:49
cost and to execute transactions in a genetic world I think
42:53
becomes pretty interesting. And so I think we're we're quite
42:57
bullish on that space. So if we were to put you back in
43:00
the large core ecosystem tomorrow, what would you be
43:03
screaming internally around what businesses in that that arena
43:07
need to be doing as far as stable coins are concerned?
43:10
Yeah, I think if you, if you aren't as an organization
43:15
experimenting with stable coins, then you're going to get left
43:19
behind. Not because the short term
43:21
impact is that meaningful, right.
43:23
Like you can't survive as a company.
43:25
It's because what you have to do, I think as a organization is
43:30
begin to learn, right? And you have to build expertise
43:32
internally. And in order to do that, you
43:35
have to try stuff, right? Like you can't sit on the
43:37
sidelines for five years. And then when it's so big,
43:40
you're like, OK, I'm now going to do something about it.
43:41
And so I think everybody who's who's smart doesn't have it
43:46
figured out or, or who who I think is acting smartly doesn't
43:50
necessarily have it all figured out.
43:51
But what they have done is said, look, I need to learn this.
43:55
I'm going to personally start experimenting and I'm going to
43:58
create opportunities for the company to learn and kind of
44:01
come on this journey. And so I think that's, you know,
44:04
as a, you know, as a general business principle, I think
44:07
that's what what folks should be doing CF OS, heads of payments,
44:09
treasures, etcetera. I think if I was back in a large
44:12
Corp, obviously be figuring out as this transfer of economics,
44:18
you know, start shifting and and the model start changing, like
44:21
how do I build products around that right?
44:24
Velocity shouldn't be the best positioned organization in the
44:28
world to capture this. But I think a lot of ways we are
44:33
because we're unencumbered by kind of the history of what our
44:36
core businesses and kind of hanging on to, you know, to
44:39
legacy, not only legacy tech, but like legacy go to market and
44:43
legacy ways of thinking. And so I think because of that,
44:46
there's going to be a lot of disruption from from newcomers.
44:49
And I think despite everybody in the traditional payments world
44:52
trying to bring stablecoins into their environment, I think it
44:55
will be hard in my view to see a lot of those individuals, you
44:59
know, with a high success rate of of kind of pivoting to the
45:02
solution. So if you're if you're an
45:04
acquirer right now and you acquire across the globe, you
45:07
should be speaking stablecoin, not necessarily using it just
45:11
yet conversation. Right.
45:12
You should have a strategy you should be thinking about on a
45:14
treasury side. You should be experimenting with
45:16
everything Visa MasterCard had launched in terms of, you know,
45:18
funding capabilities, settlement capabilities.
45:21
You should be, you know, raising your hand.
45:23
You should be the first one knocking down the door of Visa
45:26
MasterCard and others saying I want to be in the next pilot
45:28
program like that. I think ultimately is how you
45:32
you learn and you you grow in the ecosystem as an
45:35
organization. Fantastic.
45:38
Cool. So Eric, thanks very much for
45:40
joining us today. This has been a really great
45:42
chat. We have a section at the end of
45:44
each episode that we run called the Shelf of Shame, where we
45:47
allow you to to nominate something, let's call it an ick
45:51
in the world of of payments fintech business in general.
45:54
What would you like to nominate for us today?
45:58
Oh, good question. Good question.
46:03
Without throwing any individual or one organization under the
46:07
bus, I think I would put non transparent FX fees on that
46:14
list. Yeah, I would 100%.
46:18
I don't even need to hesitate to be honest with you.
46:20
I think that's a very, very good nomination.
46:23
And I think quite often, you know, there's been a rise in, in
46:26
hedging platforms in the last 1224 months as well.
46:29
And they, they exist for that very reason.
46:31
I think that they're kind of giving businesses a bit more
46:33
control over their their FX rates and a lot of people don't
46:37
even realize. What I think most airlines will
46:38
be very for that is where I've had a real understanding of what
46:41
they're paying and. Effects.
46:42
Yeah, they would. Brilliant.
46:43
Well, yeah, thanks for for joining us today.
46:44
Eric, where can people go and find out a little bit more about
46:47
velocity? How do they get in touch with
46:48
you? Yeah, Velocity dot XYZ.
46:50
Look me up on LinkedIn, Eric at velocity dot XYZ.
46:55
Would love to hear from you guys.
46:56
XYZ. Is that the new IO AIO?
46:59
It's the future. It's a huge.
47:00
Getting old. Matt, thank you so much, Eric.
47:03
Thanks, Eric. Thanks guys.