Latest / Leaders In Payments / Instant Bank-to-Bank Payments with Arpit Goel, CEO of Root | Episode 515

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Instant Bank-to-Bank Payments with Arpit Goel, CEO of Root | Episode 515 · Leaders In Payments

• 0:00
  SPEAKER_00: Welcome to the Leaders in Payments Playman State, where we come up to see the leaders from the Cruise the Payments Lincoln State.
• 0:07
  SPEAKER_00: Really discussing the products and services that impact the payment space today, as well as trends and predictions for the future of payments.
• 0:14
  SPEAKER_00: We will also hear stories from our guests about their journeys to the topic.
• 0:18
  SPEAKER_01: Hello everyone, and welcome to the Leaders in Payments Podcast.
• 0:20
  SPEAKER_01: I'm your host, Greg Myers, and today's special guest is Arpit Gold, the CEO of Root.
• 0:25
  SPEAKER_01: So, Arpit, thank you so much for being here.
• 0:27
  SPEAKER_01: Welcome to the show.
• 0:28
  SPEAKER_02: Thank you, Craig, for having me here.
• 0:30
  SPEAKER_02: Really excited to have this conversation with you.
• 0:33
  SPEAKER_01: All right.
• 0:33
  SPEAKER_01: Well, to begin, can you give us a quick snapshot of your personal background, including maybe where you grew up, where you call home today, and maybe what makes you you?
• 0:42
  SPEAKER_03: Yes, yes.
• 0:42
  SPEAKER_03: So that's a very interesting question.
• 0:45
  SPEAKER_03: So, where is home for me?
• 0:47
  SPEAKER_03: I currently am in San Jose, California, in the Bay Area.
• 0:50
  SPEAKER_03: Where did I grow up?
• 0:51
  SPEAKER_03: I grew up in a very small town called Noida.
• 0:55
  SPEAKER_03: That's in the Delhi NCR area in India.
• 0:58
  SPEAKER_03: And I come from a very interesting background.
• 1:01
  SPEAKER_03: I'd say where I come from, entrepreneurship was not a choice.
• 1:05
  SPEAKER_03: It was the air we breathed every single day.
• 1:09
  SPEAKER_03: Both my parents were doctors, and they literally built their entire career, their entire hospital from scratch without any external funding or investments.
• 1:20
  SPEAKER_03: So they just earned and they built and they built and they earned.
• 1:23
  SPEAKER_03: And I saw our life turn around from pretty much almost ranks to almost riches in a span of 15 years.
• 1:30
  SPEAKER_03: So my dad was very interesting.
• 1:34
  SPEAKER_03: He was probably one of the most curious people that I have ever met in my life.
• 1:39
  SPEAKER_03: And he was always just taking risks.
• 1:42
  SPEAKER_03: He loved taking risks and he never cared about the outcomes or the returns.
• 1:45
  SPEAKER_03: And my mom on the other side, I would say, is uh is a perfect symbol of dedication, hard work, sincerity.
• 1:53
  SPEAKER_03: So I'm very lucky to get the good parts from both of them, I would say.
• 1:58
  SPEAKER_03: So I really enjoy risks.
• 1:59
  SPEAKER_03: I'm very, very curious.
• 2:00
  SPEAKER_03: I always pick new markets and new areas to explore, and I always start from first principles pretty much.
• 2:06
  SPEAKER_03: And secondly, I'm very excited to just always keep keep on, always keep working and have the dedication to make things happen.
• 2:13
  SPEAKER_03: So what makes me me, a lot of it is obviously my parents, then my siblings.
• 2:19
  SPEAKER_03: My sister is five years ahead of me, my brother is two years ahead of me.
• 2:23
  SPEAKER_03: I was always this weird ADHD kid.
• 2:25
  SPEAKER_03: So they were teaching me their classes, their courses.
• 2:28
  SPEAKER_03: So I was sometimes like learning three years ahead math, three years ahead physics, and teaching my classmates and my teachers at school.
• 2:35
  SPEAKER_03: So they second and after that, I did my undergrad in computer science from IIT Delhi.
• 2:41
  SPEAKER_03: Then I went to Stanford to do a PhD in operations research and statistics.
• 2:45
  SPEAKER_03: Had a phenomenal set of uh professors, advisors, mentors who taught me a lot and then uh got married to my wife and have a six-year-old daughter.
• 2:54
  SPEAKER_03: So we we are in uh San Jose, California.
• 2:56
  SPEAKER_03: So what makes me me is very simply all the people that I've interacted with, what I've learned from them, and I continue to learn, and a phenomenal set of colleagues that I got to work in the last seven, eight years as we build the startups that we will go over as we talk further.
• 3:13
  SPEAKER_01: Okay.
• 3:14
  SPEAKER_01: Well, can you walk us through your professional journey and how you got to root?
• 3:18
  SPEAKER_03: Yeah, so uh as I said, right, entrepreneurship environment at home, did undergrad computer science IIT Delhi, then did a PhD at Stanford.
• 3:26
  SPEAKER_03: One joke I tell a lot of people is I think everybody knows who's the largest producer of unicorns in the world.
• 3:32
  SPEAKER_03: It is Stanford University.
• 3:34
  SPEAKER_03: But surprisingly, who's the second largest producer of unicorns in the world?
• 3:37
  SPEAKER_03: It is IIT Delhi.
• 3:38
  SPEAKER_03: So if you are from both of them and you come from the environment that I come from, you have no choice, but you are doomed.
• 3:44
  SPEAKER_03: So immediately after my PhD, like six months, one year later, I start building my very first company, and that is a data security company called Gamma.
• 3:53
  SPEAKER_03: I was the solo B2B cybersecurity founder with no experience in enterprise.
• 3:57
  SPEAKER_03: And hence, when I approached hundreds of VCs to get to raise money for my startup, all of them rejected me saying that you're a solo B2B cybersecurity founder with no experience.
• 4:07
  SPEAKER_03: How can this never return anything?
• 4:10
  SPEAKER_03: But luckily, my PhD advisor, some mentors that I had around me, they helped me construct around and I got some smaller investors involved.
• 4:18
  SPEAKER_03: And that company, surprisingly, was a phenomenal exit.
• 4:21
  SPEAKER_03: In two and a half, three years, we were acquired by Palo Alto Networks, after which I headed Palo Alto Networks data security business as a VP of product and GM.
• 4:30
  SPEAKER_03: And there I met one of another phenomenal mentor of mine who was the GM heading like a multi-billion dollar business at Palo Alto Networks.
• 4:37
  SPEAKER_03: So having gone through all that experience, after my handcuffs were done at Palo Alto Networks, there was no way I was going back to the corporate environment.
• 4:45
  SPEAKER_03: I'm not suited for that.
• 4:47
  SPEAKER_03: So I started teaching.
• 4:48
  SPEAKER_03: I taught enterprise how to start enterprise SaaS companies in Stanford.
• 4:53
  SPEAKER_03: I invested in about a dozen companies as a first check, like 50 to 250k.
• 4:57
  SPEAKER_03: I was writing by myself into those companies.
• 4:59
  SPEAKER_03: And I was finding what is the next big thing I want to invest the next 10 to 15 years on.
• 5:03
  SPEAKER_03: And I was I my modus opportunity for finding net new ideas is very simple.
• 5:09
  SPEAKER_03: I look for areas that have very complex regulatory modes, and the regulations or the things are changing so fast that it creates a market opportunity or a gap very quickly that needs some sort of fulfilling.
• 5:22
  SPEAKER_03: So the reason I started Gamma in 2018 was because data security and data privacy were on the rise.
• 5:27
  SPEAKER_03: And after that, the cybersecurity went really, really well.
• 5:31
  SPEAKER_03: Similarly, in 2023, I realized that the way money was moving in the US was 20, 30 years old while the rest of the world had changed.
• 5:40
  SPEAKER_03: And there was very strong intention all the way from the banks to the government to the net new stablecoin companies coming up to change how money moves.
• 5:49
  SPEAKER_03: So that's why I decided to invest into this particular market in 2024 and 2025 beginning is when we started root.
• 5:58
  SPEAKER_01: Okay, well, let's talk about root.
• 6:00
  SPEAKER_01: So tell us what root does and how it's making an impact in the instant payment space.
• 6:05
  SPEAKER_03: So basically, the way the current money movement landscape in the US is whenever any business or a consumer need to move money, they almost have to use some sort of intermediary or multiple hops to move from source to destination, right?
• 6:24
  SPEAKER_03: And this just creates a massive economic inefficiency for everyone.
• 6:29
  SPEAKER_03: It's bad for the source and it's bad for the destination.
• 6:32
  SPEAKER_03: And in the middle, all the layers that from whom the hopping is happening, they are probably making some money out of it.
• 6:37
  SPEAKER_03: And that's where the incentive structure comes in, that they are not necessarily incentivized to improve the speed of money movement.
• 6:44
  SPEAKER_03: Now, this is not the case for the rest of the world.
• 6:47
  SPEAKER_03: So in India, UPI allows five-second settlement from me to you, from anybody to anybody.
• 6:53
  SPEAKER_03: In Brazil, money moves instantly in five seconds.
• 6:56
  SPEAKER_03: And when I say money moves, it's actually settled.
• 6:58
  SPEAKER_03: So it can be used by you to make a further transaction.
• 7:01
  SPEAKER_03: It's not like just authorization.
• 7:03
  SPEAKER_03: So the way I realized this was as I was making investments into a lot of startups, I was researching and doing diligence on many of them.
• 7:12
  SPEAKER_03: So I got exposure to the payroll industry, and I realized that most of the payroll companies, almost 30% of their revenue is free cash flow float coming because they are sitting in the flow of funds, they are pulling money early, sitting on it, and then pushing it out later.
• 7:27
  SPEAKER_03: And when I research that market overall, it's not just the payroll industry.
• 7:31
  SPEAKER_03: You look at any industry.
• 7:32
  SPEAKER_03: You look at uh staffing, creator economy, insurance, vacation rentals, any sort of a marketplace.
• 7:39
  SPEAKER_03: The reason of this lack of the money generally taking three to five days to go from left to right is because there's somebody sitting in the middle who is trying to slow it down.
• 7:49
  SPEAKER_03: And the platform who owns that, they don't want it.
• 7:51
  SPEAKER_03: They want money to move fast.
• 7:52
  SPEAKER_03: But they are using an intermediary under the hood that is slowing it down.
• 7:55
  SPEAKER_03: So our goal became that can we build this programmatic infrastructure that allows instant direct bank-to-bank transfer money movement and real settlements so that money can be used by the destination.
• 8:08
  SPEAKER_03: And we are going against this weird thing that we say that there's a lipstick on the pig in the US, where there is a big credit economy created because money moves slow, there is like a factoring economy, there's like uh earned wage access and stuff like that.
• 8:22
  SPEAKER_03: None of that is needed if money just moves faster, or all of that is needed less if money just moves faster.
• 8:28
  SPEAKER_03: So the cash conversion cycle improves, everybody benefits, including the government benefits.
• 8:33
  SPEAKER_03: So that's the uh mission at route.
• 8:35
  SPEAKER_03: That how do we just accelerate the speed of money movement?
• 8:38
  SPEAKER_03: And the only way to do it is if we are ourselves not in the flow of funds.
• 8:43
  SPEAKER_03: So if we come in the flow of funds, then we are also incentivized to slow it down, just like others.
• 8:48
  SPEAKER_03: So what we have made a mission critical decision is that we will not be in the flow of funds.
• 8:52
  SPEAKER_01: Okay, well, what's the biggest challenge your company is solving for your customers right now?
• 8:57
  SPEAKER_03: So the biggest challenge, very simply, so we are focusing on only business customers right now.
• 9:02
  SPEAKER_03: So we are not focusing on consumers as such.
• 9:04
  SPEAKER_03: And the way we like to position is that we are basically building what Zell did for businesses, right?
• 9:09
  SPEAKER_03: So before Zell, if you had to move money peer-to-peer, you had to use a third-party wallet like Venmo, and you had to hold money there and then distribute it to another person who also needed to have a Venmo wallet.
• 9:20
  SPEAKER_03: But in Zell, you can go to your bank and send money to me and it will go from your bank to my bank.
• 9:24
  SPEAKER_03: But Zell is not available as an infrastructure for businesses.
• 9:26
  SPEAKER_03: So imagine a big marketplace like uh DoorDash, Uber, Lyft, Instacart, or Etsy or big insurance company or so on.
• 9:35
  SPEAKER_03: They need to move money from left-hand side to right-hand side almost regularly.
• 9:38
  SPEAKER_03: And if they rely on a third-party intermediary that is sitting in the flow of funds, then the speed of money movement is naturally slowed down because that intermediary is incentivized to slow down the movement of money.
• 9:49
  SPEAKER_03: What we are saying is customers, you can program your bank, program your treasury so that you can instantly receive from wherever you want and instantly disburse to whoever you want.
• 9:58
  SPEAKER_03: So we are basically Zell for businesses, is what we like to say.
• 10:02
  SPEAKER_03: Or ZEL for B2B transfers or ZEL for B2C transfers.
• 10:06
  SPEAKER_01: And doesn't that take all of the banks getting on board?
• 10:09
  SPEAKER_01: Is that not a challenge?
• 10:11
  SPEAKER_03: So banks getting on board is a big challenge.
• 10:13
  SPEAKER_03: And luckily we have gone through that challenge already.
• 10:16
  SPEAKER_03: So banks are incentivized to do this because the intermediaries otherwise are cutting the incentive of the banks.
• 10:22
  SPEAKER_03: So banks would prefer if money goes from bank to bank.
• 10:25
  SPEAKER_03: And hence, by the way, Zell was created by banks.
• 10:28
  SPEAKER_03: A lot of people don't necessarily know that Zell was created by EWS, which is a consortium of five or six banks, and they really want money to move faster between banks.
• 10:37
  SPEAKER_03: So it's hard to get banks onboarded because there are processes.
• 10:40
  SPEAKER_03: And you just have to, the way I like to say is that people say that it's very hard to work with banks, not so much if you just follow their rules.
• 10:46
  SPEAKER_03: If you break their rules, obviously it's very hard.
• 10:49
  SPEAKER_03: It's impossible and you should not work with a bank.
• 10:51
  SPEAKER_03: But if you follow their rules, it's not that hard to work with banks.
• 10:54
  SPEAKER_03: So we are live with four of the top five banks in the US already.
• 10:57
  SPEAKER_03: And we are live with many, many smaller banks.
• 10:59
  SPEAKER_03: And we don't we need to be live only with the bank of our customer.
• 11:04
  SPEAKER_03: We don't need to be the be live with any receiver's bank.
• 11:07
  SPEAKER_03: So as long as we are installed with our customers' bank, let's say customer is using JP Morgan or US bank or Wells Fargo, if we are installed with any one of those banks, customers can do instant receivables, instant payables, or instant transmission of money for their use cases and program the treasury operations using root.
• 11:24
  SPEAKER_01: Okay.
• 11:25
  SPEAKER_01: Well, what differentiates root from your competitors?
• 11:28
  SPEAKER_03: So the short answer is let me take an analogy here, right?
• 11:31
  SPEAKER_03: And that analogy might help a little bit.
• 11:33
  SPEAKER_03: So the largest companies in the world have always been true infrastructure companies.
• 11:37
  SPEAKER_03: Whether it is Vanderbilt building railroads, or it is Rockefeller building the pipelines for transfer of oil and gas, or it is JP Morgan, who a lot of people think built the bank, but actually JP Morgan was the co-founder of General Electric who built the electric transmission lines across the US.
• 11:53
  SPEAKER_03: So the largest companies in the world have always been infrastructure companies.
• 11:57
  SPEAKER_03: But unfortunately, there is only one infrastructure owner who is incentivized to slow down the movement of the asset on that infrastructure.
• 12:05
  SPEAKER_03: And that happens to be money.
• 12:07
  SPEAKER_03: So like Vanderbilt would never want to slow down the cargo.
• 12:10
  SPEAKER_03: Rockefeller would never want to slow down the oil and gas.
• 12:13
  SPEAKER_03: But if you are owning the infrastructure of money, you are incentivized to slow down the movement of money because you can make money by slowing it down.
• 12:19
  SPEAKER_03: So that is what differentiates us from almost everybody out there.
• 12:23
  SPEAKER_03: Almost everybody is a custodian.
• 12:25
  SPEAKER_03: They like to slow it down, they like to make money on it.
• 12:27
  SPEAKER_03: And we are just trying to be a true messaging protocol that can move money bank to bank without ever being in the flow.
• 12:33
  SPEAKER_03: So that's what differentiates us from almost every other fintech infrastructure player out there.
• 12:38
  SPEAKER_03: That we are we are we are trying to be the true infrastructure and not necessarily take custody of the asset.
• 12:46
  SPEAKER_01: Okay.
• 12:46
  SPEAKER_01: Well, where do you see the biggest growth opportunities in instant payments?
• 12:50
  SPEAKER_03: So look, instant payments will be widely adopted in the US.
• 12:55
  SPEAKER_03: Nobody questions that.
• 12:57
  SPEAKER_03: The question is where to start and how does it become mass activated?
• 13:02
  SPEAKER_03: So we are starting with business disbursements as a use case where it's a very clear need.
• 13:07
  SPEAKER_03: Businesses want to disburse fast, and the receivers, instead of taking a factoring loan or like a daily pay loan, they can just get money faster and reduce their uh fees that they are paying otherwise.
• 13:20
  SPEAKER_03: So that part is clear-cut traction right now.
• 13:23
  SPEAKER_03: But the problem doesn't stop there.
• 13:25
  SPEAKER_03: Look at that simple merchant, the SMB merchant, the restaurant that you're going, or the grocer that you're going to.
• 13:30
  SPEAKER_03: When you pay them, it takes three to five days for them to receive the money.
• 13:34
  SPEAKER_03: And it takes longer during the weekends where they need the maximum amount of money to buy the next set of groceries or the next set of items to prepare or cook the food because the maximum volume of people is on the weekends.
• 13:46
  SPEAKER_03: So the problem is so widespread that 40% of US small businesses still accept cash and they reject electronic forms of payment.
• 13:56
  SPEAKER_03: And they do this.
• 13:58
  SPEAKER_03: A lot of people think that this is because of fees.
• 13:59
  SPEAKER_03: This is not because of fees.
• 14:01
  SPEAKER_03: This is because of delays, right?
• 14:02
  SPEAKER_03: The cash flow crunch is the problem.
• 14:04
  SPEAKER_03: It's not the fees.
• 14:05
  SPEAKER_03: They might be willing to pay higher to get money now.
• 14:08
  SPEAKER_03: So, how that bull whips forward.
• 14:10
  SPEAKER_03: Now, because almost 40% of the businesses are trying to go into the cash economy, it leads to situations where a lot of businesses think that why don't we do tax evasion too?
• 14:19
  SPEAKER_03: It's natural, right?
• 14:19
  SPEAKER_03: It's collected, it's not accounted for, let me do tax evasion.
• 14:22
  SPEAKER_03: So the the bull whip is very quickly at the government level, where it's literally like we are seeing so much tax evasion, why are we not seeing electronic forms of payment?
• 14:31
  SPEAKER_03: So government really wants real-time payments or instant payments or instant bank transfers to be adopted as quickly as possible.
• 14:38
  SPEAKER_03: And hence in 2023, when the RTP did not take off, the Zell infrastructure did not take the liquidity protocol behind Zell was RTP that did not take off because of some restrictions that big banks impose.
• 14:52
  SPEAKER_03: Fed released their liquidity protocol called FedNow, and that created a duopolistic competition between FedNow and RTP.
• 14:59
  SPEAKER_03: And that led to a phenomenal adoption of both of them.
• 15:01
  SPEAKER_03: So right now, if you just go to Gemini or Claude and ask how do you compare the instant payment adoption to, let's say, card adoption in terms of volumes and uh number of transaction growth.
• 15:14
  SPEAKER_03: They will say that in three to five years, instant payments is going to beat the card adoption pretty much.
• 15:19
  SPEAKER_03: The way it is going, it's crazy fast right now.
• 15:22
  SPEAKER_03: And that's the timing of when to do this.
• 15:24
  SPEAKER_03: So we started root when we saw the right timing.
• 15:27
  SPEAKER_03: But the problem is everybody knows.
• 15:29
  SPEAKER_03: Like it's not a new problem.
• 15:30
  SPEAKER_03: Everybody wants money to move fast.
• 15:32
  SPEAKER_03: That's undoubtedly the case.
• 15:33
  SPEAKER_03: But to answer your question, that's how I foresee first businesses, then disbursements, then maybe getting to business-to-business transactions, and then getting to consumers to pay to SMBs and businesses.
• 15:45
  SPEAKER_01: Okay, well, what does success look like for root, say, over the next three to five years?
• 15:50
  SPEAKER_03: I mean, so lots of things, right?
• 15:52
  SPEAKER_03: The world is changing so fast that three to five years is very hard to put a pen down to.
• 15:57
  SPEAKER_03: But look, uh, from the acceptance side, I definitely see that the acceptance will happen.
• 16:04
  SPEAKER_03: Right?
• 16:04
  SPEAKER_03: So every business will experience instant payments.
• 16:08
  SPEAKER_03: And instant payments is crazy.
• 16:10
  SPEAKER_03: It's this is not instant odd.
• 16:11
  SPEAKER_03: It's not like I'm telling you that you will get the money, but you will get it three days later.
• 16:15
  SPEAKER_03: The money shows up in your bank in five seconds and you can actually go and pay wherever you want to go.
• 16:20
  SPEAKER_03: Go and pay.
• 16:21
  SPEAKER_03: And people don't even believe that it exists.
• 16:23
  SPEAKER_03: So when I talk to customers, when I show it to my friends, I send them$5 using our product and it hits their bank, they're surprised.
• 16:30
  SPEAKER_03: So the the level of acceptance or knowledge around it is very low right now.
• 16:34
  SPEAKER_03: So the first thing from a success point of view would be that people just know and have seen or have experienced that five-second settlement actually works.
• 16:43
  SPEAKER_03: And consequently, we have built the network with the banks, with the merchants, with the consumers, with the businesses that can do this on a day-to-day basis.
• 16:52
  SPEAKER_03: But the way we want to build the network is not by becoming a full-fledged application layer.
• 16:57
  SPEAKER_03: What we are building is we are building the plumbing and offering our programmatic treasury as an API, where literally we have created an MCP server.
• 17:05
  SPEAKER_03: So any net new application developer can come and create their next version of, let's say, RAMP or TMS or even a Prex or maybe a payroll company or an EWA company very, very fast.
• 17:16
  SPEAKER_03: And we have dedicated the entire money movement layer to our skills framework and made it very, very easy for them.
• 17:22
  SPEAKER_03: So widespread adoption will not happen by us going everywhere.
• 17:26
  SPEAKER_03: It will happen by tapping into the developer ecosystem.
• 17:29
  SPEAKER_03: Very similar to how Stripe did for card acquiring, right?
• 17:32
  SPEAKER_03: Card acquiring was very hard before Stripe came.
• 17:35
  SPEAKER_03: We are basically saying there is a new account-to-account money movement rail that we are constructing, and the way to go out to the masses will be through the developer ecosystem that we built.
• 17:43
  SPEAKER_03: So right now, all the customers that we have, they have basically built their own applications on top of root on top of their bank.
• 17:51
  SPEAKER_03: And they were able to go live in in a few days, maximum weeks, compared to otherwise spending 12 months or 18 months of building if they were to do it directly with their bank.
• 18:01
  SPEAKER_03: So that's what we we abstracted there.
• 18:03
  SPEAKER_01: Okay.
• 18:04
  SPEAKER_01: So I want to go back to something because you mentioned India and Brazil as examples.
• 18:09
  SPEAKER_01: And correct me if I'm wrong, in in those two cases, the government andor big banks almost mandated that.
• 18:16
  SPEAKER_01: Do you think it's gonna take the US government to mandate something?
• 18:20
  SPEAKER_01: Or do you think the way you're kind of viewing this is gonna be how it happens?
• 18:25
  SPEAKER_01: What are your thoughts on that?
• 18:26
  SPEAKER_03: So very interesting question.
• 18:29
  SPEAKER_03: I would love to have the government mandate it because it just makes life easier for us and other potential competitors of root right now.
• 18:38
  SPEAKER_03: There are uh very few or minimal.
• 18:40
  SPEAKER_03: But I think, and it's very hard for me to say what the government the Fed chair just changed, and uh Kevin Walsh is uh obviously very, very forward thinker, right?
• 18:48
  SPEAKER_03: He's actually extancred too.
• 18:50
  SPEAKER_03: So it is possible that they follow some of the things because UPI and PICs are phenomenal success, right?
• 18:56
  SPEAKER_03: Everybody knows that.
• 18:57
  SPEAKER_03: The rate at which UPI is growing, and UPI is now going global.
• 19:01
  SPEAKER_03: In fact, UPI is not only India, it's APAC.
• 19:03
  SPEAKER_03: UPI is no longer India.
• 19:04
  SPEAKER_03: And very and UPI is planning to enter and partner with CPA FPS in in Europe and UK.
• 19:10
  SPEAKER_03: It's open sourcing its uh architecture to Africa, and it's in no time it will cut it will try to have a presence in the US too.
• 19:18
  SPEAKER_03: So I think the US government may be thinking of doing a top-down order.
• 19:23
  SPEAKER_03: But given how US is, I like to say, like a capitalist democracy, right?
• 19:26
  SPEAKER_03: So it's hard for them to put a standard out to force everybody to adopt it, but they may create a standard, right?
• 19:32
  SPEAKER_03: They may create a standard RFC and say that banks, you have to get to this level of RFC at least.
• 19:37
  SPEAKER_03: Otherwise, maybe you will have higher rates or higher, higher Fed rates or something like that.
• 19:43
  SPEAKER_03: So it may be a policy level method rather than uh rather than an enforcement level method.
• 19:49
  SPEAKER_03: Because a good example is the open banking, right?
• 19:51
  SPEAKER_03: They they have tried to put this so last to last year in October 2024, there was an open banking release which talked about this clause that you have to give programmatic API payment initiation, right?
• 20:05
  SPEAKER_03: And right now there is this ISO 20 or 22 standardization nachcha happening right now, which will push a lot of banks to adopt the standardized framework.
• 20:15
  SPEAKER_03: So I think through standardized frameworks there will be something, but it won't be like if you don't adopt this, you are not a bank.
• 20:21
  SPEAKER_03: That's how India did it.
• 20:22
  SPEAKER_03: They said that if you don't adopt this, you are not a bank.
• 20:24
  SPEAKER_03: In US, is that if you want to be part of the ecosystem, better change your standards.
• 20:29
  SPEAKER_03: Yeah, that makes sense.
• 20:30
  SPEAKER_01: Well, when you step back and look at the big picture, what are some of the biggest trends that are currently reshaping the payments industry?
• 20:37
  SPEAKER_03: So look, payments is always in flux, right?
• 20:42
  SPEAKER_03: So the big topics that are being talked about are this instant account-to-account money movement.
• 20:48
  SPEAKER_03: That is a very, very big topic, especially seeing how the rest of the world has done it.
• 20:52
  SPEAKER_03: Second is the agentic payments, that is becoming a very big thing.
• 20:56
  SPEAKER_03: And third is this continuous stablecoin fiat or uh OUSD debate, which is basically what are there alternative liquidity settlement mechanisms, especially cross-border things.
• 21:10
  SPEAKER_03: So if we go to each one of them one by one, right, first we have talked enough about, so let's let's skip that.
• 21:16
  SPEAKER_03: Second, agent tick payments.
• 21:17
  SPEAKER_03: So agent tech payments, it's going through its hype and rough and crest, right?
• 21:22
  SPEAKER_03: So the thing is that agent tick payments is nothing but subscriptions.
• 21:27
  SPEAKER_03: If you have subscriptions, it's it's nothing different from subscriptions.
• 21:31
  SPEAKER_03: Basically, you are telling an agent that follows the same subscription protocol to pay now through an authorized approval framework.
• 21:38
  SPEAKER_03: So I don't think the payments rail needs to change for agent tick payments, but it just leads to many more reggae regdy regzi situations.
• 21:48
  SPEAKER_03: Right.
• 21:48
  SPEAKER_03: And then who is responsible?
• 21:50
  SPEAKER_03: Already nobody wants to take responsibility of any reggae, regzi, reggie.
• 21:53
  SPEAKER_03: I've talked to customers who say that Stripe takes all chargeback liability.
• 21:58
  SPEAKER_03: I'm like, why don't you dig into the APIs?
• 22:00
  SPEAKER_03: They charge you$30 for every single time somebody files a dispute.
• 22:04
  SPEAKER_03: So nobody takes any liability in this process, neither MasterCard nor Visa.
• 22:08
  SPEAKER_03: They are just building some monitoring systems and so on and so forth.
• 22:11
  SPEAKER_03: So agentique payments will only increase the fraud risks or the liability issues unless we build very strong device-linked customer-bound authentication mechanisms.
• 22:23
  SPEAKER_03: And that's what, again, UPI and PIX did it very, very well.
• 22:27
  SPEAKER_03: So for every transaction, if you can create evidence that it was the user, biometric Greg, because biometric is easy on your phone, right?
• 22:34
  SPEAKER_03: So if for every single payment, whether it's an NFC via card or whether it's a bank transfer, doesn't matter.
• 22:40
  SPEAKER_03: The important thing is that we need a strong customer auth, which is a standard in PSG2 and UPI and Pix, and US just needs to adopt it, which is nothing but a transaction bound proof combined with your biometric slash device identity.
• 22:53
  SPEAKER_03: So that friendly frosters can't just do it.
• 22:56
  SPEAKER_03: It has to be a real fraud.
• 22:58
  SPEAKER_03: It has to be a real account takeover and a real biometric takeover, which is next to impossible.
• 23:02
  SPEAKER_03: So that is where agent the buck around agentic payment stops, according to me.
• 23:06
  SPEAKER_03: The third stable coins, I mean, today with the big news circle finally got the OCC whatever bank charter for being a crypto-regulated bank.
• 23:17
  SPEAKER_03: So two years ago, when stable coins were coming up and becoming a hype, I made this statement to all my friends that there's only one stable equilibrium of stable coins, which is that they have to be regulated like a bank.
• 23:27
  SPEAKER_03: They have to have a bank charter.
• 23:28
  SPEAKER_03: And that's what we are seeing right now, and that's the convergence.
• 23:32
  SPEAKER_03: Banks are launching their own tokenized rails for settlement while this OUSD is MasterCard Visa and Stripes play to compete against the banks, bank consortiums.
• 23:42
  SPEAKER_03: And then Circle is becoming a bank.
• 23:45
  SPEAKER_03: So that's where it will all converge.
• 23:46
  SPEAKER_03: It is all good for what the world that we are envisioning because this is all accelerating the speed of money movement.
• 23:54
  SPEAKER_03: It is all pushing customers or businesses or banks to experience what true instant settlements can mean, right?
• 24:01
  SPEAKER_03: Not just auth.
• 24:02
  SPEAKER_03: It's actual true instant settlements can mean.
• 24:04
  SPEAKER_03: And we are agnostic.
• 24:05
  SPEAKER_03: We, since we are non-custodians, we work with uh stablecoin issuers as well.
• 24:10
  SPEAKER_03: Because in my mind, they are always banks.
• 24:12
  SPEAKER_03: In my mind, all the customer is choosing that do I have a circle account and or do I have a JP Morgan account?
• 24:17
  SPEAKER_03: Or and or do I have a Stripe account?
• 24:19
  SPEAKER_03: The customer is making the choice.
• 24:20
  SPEAKER_03: And we are just building the orchestration around it to be able to move the messaging as swiftly as possible.
• 24:27
  SPEAKER_01: Okay.
• 24:27
  SPEAKER_01: Well, if you could go back and give yourself advice at the start of your career, what would it be?
• 24:33
  SPEAKER_03: So look, I mean, luckily or unluckily, there are a few principles that I follow, right?
• 24:37
  SPEAKER_03: So first of all, uh life is a set of choices where I can't go back and change anything.
• 24:42
  SPEAKER_03: And since I'm always taking risks, I literally treat every day as like if there's not enough risk, then it there is not enough fun.
• 24:50
  SPEAKER_03: So that's has been the mental model, but my risk taking appetite has increased over, it has not decreased.
• 24:56
  SPEAKER_03: It's only it's it has only increased over the years.
• 24:58
  SPEAKER_03: And as Jensen Huang, I think, said in a statement, right, a couple of years back, that if you are from one of the top universities, I wish I inflict a lot of pain in your life because you have not gone through pain.
• 25:09
  SPEAKER_03: So luckily, my risk taking appetite has increased because I've gone through a lot of pain in the last four or five years or last seven years since I started my entrepreneurship journey.
• 25:17
  SPEAKER_03: So if I were to go back and talk about my younger self in 2018 when I was starting uh Gamma, I think my risk taking appetite was very high, but still it wasn't as high as where I am today.
• 25:28
  SPEAKER_03: So on that note, if I were to formulate the advice to myself in some ways, I feel a lot of times people fear taking risk is because they see failure as a stopping point.
• 25:43
  SPEAKER_03: They think that once I fail, it's over.
• 25:46
  SPEAKER_03: There's nothing left after the after the failure.
• 25:48
  SPEAKER_03: But if you can just convince yourself that failure, I mean, there's nothing to convince, it's actually true that failure is not a stopping point, it's only a learning point so that you can start afresh with a lot of learnings and go to the next one.
• 25:59
  SPEAKER_03: Right?
• 26:00
  SPEAKER_03: It's a continuum.
• 26:01
  SPEAKER_03: So there's no there's no fear of failure.
• 26:03
  SPEAKER_03: In fact, the most successful people, they talk openly about their failures.
• 26:07
  SPEAKER_03: The second most successful people, or or the less successful people, they flip their failures into or they hide their failures, they don't even talk about it.
• 26:16
  SPEAKER_03: The least successful ones, they try to flip it into a success or something like that.
• 26:21
  SPEAKER_03: So the point I'm making is uh it's it's almost like you're falling if you're skydiving, right?
• 26:26
  SPEAKER_03: And you're falling.
• 26:27
  SPEAKER_03: The reason you are scared is because there is a bottom.
• 26:30
  SPEAKER_03: But if there is no bottom, if it's an infinite abyss, it's a free fall and it's a lot of fun.
• 26:35
  SPEAKER_03: So how do I go myself and convince five, seven years back on every single day that how do I just keep taking more risks?
• 26:41
  SPEAKER_03: And how do I how do I keep convincing people to take more risks?
• 26:44
  SPEAKER_03: Because it's just fun to do so, and there's no stopping point.
• 26:47
  SPEAKER_01: I love it.
• 26:48
  SPEAKER_01: I love it.
• 26:49
  SPEAKER_01: That's awesome.
• 26:49
  SPEAKER_01: That that's a good advice for anybody.
• 26:51
  SPEAKER_01: I mean, just uh not not even for your own self, but for anybody.
• 26:54
  SPEAKER_01: So I love that.
• 26:55
  SPEAKER_01: So let's wrap up the show with one final question.
• 26:59
  SPEAKER_01: What's the one thing that payments leaders that are listening today should be thinking about right now?
• 27:04
  SPEAKER_03: So I don't want to bias this with my my cybersecurity experience, if anything, I always pick markets that which don't require any of my experience so that I can learn the new thing.
• 27:15
  SPEAKER_03: But still, payments is one thing where the most important thing is security.
• 27:21
  SPEAKER_03: So it's like if you do one thing wrong, you're gone.
• 27:24
  SPEAKER_03: So how to make pay and and surprisingly, the more I talk with payment leaders, I see less of them care about security.
• 27:33
  SPEAKER_03: In fact, you'd be surprised that most of the payment companies are not, they don't even have security teams, they are not built by security people.
• 27:41
  SPEAKER_03: And since we are a little bit security freaks, we know loopholes of a lot of payment companies, which we don't talk about.
• 27:47
  SPEAKER_03: So, how do we tell payment leaders that as this new world where yes, agents will talk and do payments, whether it is card, whether it is transaction bound, whether it is bank transfers, whether it is whatever protocol, agents will at some point of time interact with your bank, will at some point of interact with your treasury.
• 28:06
  SPEAKER_03: Educate yourself on security, not compliance.
• 28:10
  SPEAKER_03: Compliance is a follower.
• 28:12
  SPEAKER_03: At Palo Alto Networks, we had this thesis that compliance is only a checkbox.
• 28:17
  SPEAKER_03: Security has to be 10 years ahead of compliance.
• 28:19
  SPEAKER_03: So how do we ensure that payment leaders get more security knowledge and strive for more fundamental security knowledge faster than ever before?
• 28:30
  SPEAKER_03: Otherwise, the agents are coming.
• 28:31
  SPEAKER_03: I mean, it's it's just coming, and you you have to you have to learn something that you have not yet learned.
• 28:37
  SPEAKER_03: A lot of people are looking at AI, AI, AI, but I don't think payment leaders need to worry about learning AI.
• 28:44
  SPEAKER_03: They need to be, they need to worry about what are the risks when AI enters the payment territory.
• 28:49
  SPEAKER_03: So maybe that would be my perspective and not necessarily biased from my cybersecurity experience, but more from what we are seeing happen in the in the payments landscape more and more.
• 29:02
  SPEAKER_03: That if you are not voted one vendor and they have one flaw, and you the agents will find that flaw today, after 10 years of you implementing them, and they will exploit it faster than any human Swarm could have done it.
• 29:17
  SPEAKER_03: Okay.
• 29:17
  SPEAKER_01: Well, Arpin, I think that's a great way to wrap up the show.
• 29:20
  SPEAKER_01: So thank you so much for being on today.
• 29:22
  SPEAKER_01: I know your time is very valuable, so I really appreciate you being here.
• 29:25
  SPEAKER_03: Awesome, Greg.
• 29:26
  SPEAKER_03: Very nice to talk to you and uh look forward to more of this.
• 29:31
  SPEAKER_03: And those were some really, really good questions.
• 29:33
  SPEAKER_03: Thank you for that.
• 29:34
  SPEAKER_01: Absolutely.
• 29:35
  SPEAKER_01: And to all your listeners out there, I thank you for your time as well.
• 29:38
  SPEAKER_01: And until the next story.
• 29:40
  SPEAKER_00: Thank you for joining us this week on the Leaders in Payments Podcast.
• 29:44
  SPEAKER_00: Make sure you visit our website at leadersinpayments.com, where you can subscribe to the show and where you'll find our show notes.
• 29:51
  SPEAKER_00: If you enjoyed listening, please share on your social channels as well.