Latest / The Payments Shed / Ep. 60 - From Fragmentation to Unified Infrastructure: The Future of Payments with ISX Financial

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Ep. 60 - From Fragmentation to Unified Infrastructure: The Future of Payments with ISX Financial · 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 back to another episode of the Payment Shed podcast.
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Today we are joined by John Carrancis, Group CEO of Ice X.
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John, introduce yourself tells me all about your background.
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Well, firstly, thanks for inviting me on.
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It's a pleasure to be here today.
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Well, as you mentioned, I'm group CEO of IS6 and we operate
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Emis in the UK and the EA, so we've got broad coverage.
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My personal background, I'm an engineer with a law degree and a
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business degree. So a little bit of everything
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and nothing in particular, but you know, just enough to be
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dangerous in a few areas. But look a little bit about ISX
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public company sent a list on a on a Stock Exchange.
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We should hopefully be making that announcement the next month
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or so. And you know, we offer quite a
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large range of services for an EMI which we can talk about as
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we go. Perfect.
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And when you talk about your background there a dangerous man
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in certain situations, What led you into kind of financial
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services? Well, it was a total accident
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actually. So prior to this, I was the CEO
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of a company called Real Time and it was partially owned by
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Hollywood Studios. So for example, Sony, Warners,
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Fox, etcetera. And part of that we also had the
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the Sony games that we're looking to distribute
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physically. And of course, what happens with
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games, they're a, a great substitute for fraudsters to
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take into, I don't know if you remember EB Games, but they'd
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use cards online fraudulently, get the games delivered to the
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home, then take it into EB Games and get 80% of the game back
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right as a cash back. So, you know, with the, with the
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trade insurance of the game, it's a huge model.
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Anyway, I painted a service to prevent chargebacks and went
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head to head with PayPal on that.
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They had a service as well. We had a fight in the patent
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court and that was really the beginning of ISX.
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So you know an anti fraud system?
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Anti chargeback system for cards?
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Amazing my story. I think everyone always falls
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into payments accidentally, right?
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Certainly didn't tend to be here.
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So you know, but it's, it's very glamorous payments.
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Got to love it. Good, good.
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And as we kind of move into talking about the, the payment
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side of of your career, when we look at how most businesses are
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operating that they are pulling together lots of different
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products and services from different providers.
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Why do you think the industry's got to a point of of of where it
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is right now? Well, look, I mean there's a
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couple of things there. Firstly there's fragmentation
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that has arisen because of the schemes and what the the card
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schemes are trying to do. Then you've got domestic
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payments on domestic ACH networks, you know, such as
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separate or FPS. We've got the central bank or a
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stand in acting as a sort of clearing house.
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And then of course, you've got the mess that is the the
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International Payments Network and it's reliance on zero trust,
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you know, correspondent banking and all the intermediaries and a
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whole bunch of middle men in between, some of dubious origin
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and sort of actions and others a little more outstanding.
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And it's, it's still a difficult field.
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It's a very difficult field. But yeah, we we think we've
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we've made some progress in that area.
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Who do you think feels the the pain points of that
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fragmentation the most? Do you think it's the merchant
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platforms or or providers or better than with the above?
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Look, absolutely the merchant. I mean, having having been on
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the merchant side several times and you know, going back a long
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way in terms of online, you know, to the early 2000's.
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The problem has always been trying to get payment systems at
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work. And then you can present at your
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checkout page or your cashier as it's now called.
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But you know, you'd have this option, that option, and it
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would always be a confusing array to to customers and trying
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to get that right, as well as getting your providers right.
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Back in the early days, I mean, the quality, let's say, and
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professionalism of payment providers wasn't all that great.
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It would be cross your fingers and see whether you get paid.
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So there's a lot going on back in the early 2000s, but
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certainly gotten better now obviously the regulatory regime
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has made it such that, you know, we're safeguarding and one thing
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the other that you're more likely as a merchant to get your
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funds. And in fact, I would say that
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you will because you know, when you're dealing with a, let's say
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one of the top or better EM is or P is nowadays, it's almost
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unheard of that something shonky is going to happen.
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That's not the way the industry started, definitely not the way
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the industry started. Got there after a lot of pain
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and a lot of. Lessons of pain, a lot of
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regulation and a lot of shonks going out of business.
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Where do you think like orchestration comes in?
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That is, do we think it's kind of making it even more
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complicated, masking the problem?
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Look, you can certainly skew things.
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Is it making it better? I, I, I don't know
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orchestration. We've seen a lot of
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orchestration that has its sole purpose of generally avoiding
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regulation at one end. And the, you know, I'm not going
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to name names, but certainly when I think of orchestration,
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the first thing I think of is bunch of guys trying to miscode
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or route in a certain way or do cover payments or do something
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that is basically disguising where the payment is coming from
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going to. Not always the case, not always
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the case, but it's the first thing that pops into my mind.
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Gambling or gaming? That's.
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Exactly. And then it's how far they take
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that the The thing is that, you know, orchestration, I think
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when it's pulled together properly is very helpful.
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But the problem is you've got fragmented services and trying
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to pull all that together into a single platform is often
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difficult. And yeah, at the end of the day,
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you end up with disjointed services that are kind of pulled
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together, but they're not really properly fastened into something
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that you could say is a seamless service.
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And orchestration is is kind of a, a subject around obviously
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pulling in different providers. The same can be said around
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cross-border payments historically, right?
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And the dependence on intermediaries in that
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cross-border ecosystem. Why have we had such reliance on
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intermediaries and are we getting to a point where it's
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not going to be so complex moving forward?
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Well, correspondent banking, I mean, you know, the first thing
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is that no one trusts anyone. So no one will move the money
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forward until they receive the money from the step back.
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So every time you have a hop and each intermediary, each
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correspondent is another day waiting for the money to be
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received, they forward another half day and on it goes and on
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it goes. So the problem has always been
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when I trust now when we look at what the ECB is doing and in
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fact to some degree what the Bank of England is doing as
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well, they're looking to speed that up by bringing in let's say
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new technology entrants or you know, regulated entities that
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have a better grasp on technology.
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Now we as I six are the first non bank participant to T2,
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which is the real time gross settlement system at the
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European Central Bank and as well as TIPS, which of course is
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a cross currency instant payment system.
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Now without going into it, no, I'll go into it.
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What it basically means is that we're able to push money
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instantly to 950 global banks using what used to be called the
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SWIFT rails. So the SWIFT rails have gotten a
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really bad Rep. We can use that SWIFT message to
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move money instantly to 950 banks and same day to next
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business day to 22 1/2 thousand more banks globally.
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So you know, the whole SWIFT networks.
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And I'm not a proponent of SWIFT, I'm not here to advertise
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them, but it has gotten a bad rap over the years and that's
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because of the correspondence and intermediaries.
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So they hold the money or wait for the money and you know, all
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this SWIFT payment, it's taking 8 days.
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Well, it's because you got 8 hops, you know, so it's, it's a
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pretty easy equation. But what we've done by being now
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direct participant and not playing by the usual rules,
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which is OK, we're a big bank, we're going to hold your money,
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we'll send it on in X days and you know, do our own thing with
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it for a period. We've committed to basically as
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soon as we get the message, we'll move the money.
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Now that will be a shift because I think we'll be one of the few
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if maybe the only participant that's actually just going to
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move the money because we're not there to, you know, we, we're
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not making money on the yield particularly we're not making
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money on anything other than moving the money.
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So it's a different, different sort of commercial model to the
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bigger banks that are sitting on that.
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It's interesting, isn't it? Because the, you know, from a
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consumer point where you talk about the eight hops, the
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consumer has no idea that that's going on the background.
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They just go, why the hell is it taking days for my money to
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arrive? Right?
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Like there's no education really around what is historically sat
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behind. Money starts at a point A and
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ends at point B, right? Yeah.
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Well, what we will do, we're just finalizing our integration
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to the Bankers Almanac basically, which shows you the
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hops so we can see the hops before they happen, you know, by
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looking at the the sort of routing it's like ADNS table on
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the Internet. Yeah, and who's who gets what.
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Now we can show a traditional bank to bank on the number of
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hops versus actually coming in through the RTGS system and
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going direct. What gave me the idea of that
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actually was the the National Australia Bank.
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I went to move some money from Australia to Europe as Aussie
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dollars and we just sold out of out of a Stock Exchange that we
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own down there or partially owned, actually majority owned.
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And trying to move the Aussie dollars was an absolute
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nightmare because we had to find a route back to Europe because,
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yeah, the trade routes. And this is another problem.
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You look at the sort of frequency and the volumes of a
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particular currency pair, and if they're not quite right, the
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number of hops increases because you got to find a party who's
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willing to take it and push it on and push it on and push it
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on. Now, I never sort of thought
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that Aussie dollar from the National Australia Bank was
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going to be a problem. It would National Australia
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Bank, big bank going to happen. Problem is that the ANZ has
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apparently got 80% of the routes, so the NAB had to go via
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the North Pole, you know, come back down to Antarctica, come up
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again and all the rest of it. But they actually put that
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online. So they actually traced each hop
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for us on the on the thing. And I thought that's quite
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interesting. So what we did or what we're
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developing at the moment is sort of a comparison between what
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we're doing and what your conventional bank may do.
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Enter bank here and see where it goes.
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But yeah. It's quite interesting.
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I feel like we've kind of kidded ourselves as an industry when we
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talk about real time payments and how instant they really are.
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And it sounds like something you guys are actually trying to
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actually fix. When we speak to merchants, we
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say it's real time, but it can be a day if not too or you're
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you're having to front that cash through one of them hops, right?
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Yeah. Well that, that's, that's on the
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international side. But of course, separate instant,
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I mean we, we've been delivering separate instance since 2018 and
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that was a huge change. So you got to, you got to recall
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that in 2018, early 2018, everything was batch driven.
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So every bank was, you know, picking up a batch file and
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basically I'm bundling it and then crediting it, you know,
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clearing, settling into all that stuff.
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We had to actually introduce the concept of a queue into the core
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banking system. And of course no one had a
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thought of doing a queue into a core banking system.
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This is the very beginning of instant payments.
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And you know, we, we have a, a software company as well as part
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of the group pro banks that builds core banking systems as
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well as on boards, other payment providers and banks to the
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Central Bank of Latvia, Lithuania and the Bank of
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England. So we're certified for all three
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of those. So we had just enough knowledge
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to be dangerous once again. So we thought, let's see how far
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we can take this and where we go.
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And we put in this queue called Rabbit NQ, which is what the
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Central Bank of Latvia is now using coincidentally.
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And you know, after a few years of training, we've now gotten it
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to the stage that we can just crank it.
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And you know, with some amusing moments include when ourselves
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and Revolute crank it at the same time at the Bank of
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Lithuania, we get messages that the bank goes down.
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Oh, really? The bank goes down.
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RQ is faster than their Q. So, you know, with Revolute
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pumping underneath as well. They yeah, they send us outage
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messages. We actually try to convince our
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customers it's not us, it's the bank.
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And we show the messages from the bank and say, guys,
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seriously, it's not us, it's the central bank.
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Yeah, there's a lot of disbelief.
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But yeah, that real time problem is still a technological problem
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to solve. It's not easy, Not easy.
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I suppose that getting to the whole point of kind of
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controlling the settlement at the central bank level, right,
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That's where everyone wants to try and be at some point.
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Exactly. Exactly.
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So whether it's, yeah, the SEPA network or the RTGS network,
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when you are moving monies from central bank account to central
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bank account, if you're moving central bank money, it's super
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fast. And that sort of brings us to
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the, to the sort of stable coin environment as well.
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Whilst we don't do a stable coin, we do laugh because you
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know, you hear people talk about how quick this is.
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Well, a swift message is just as quick.
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The problem is actually moving the money behind it, right?
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So no one talks about the on ramps, the off ramps, the
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compliance of the on ramp, the compliance of the off ramp.
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You have a stable coin, the compliance in between and all
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that stuff. Great, you've moved a coin,
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you've moved a message. Hey, I can move a message.
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The problem is moving the money afterwards and actually, you
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know, redeeming it for something you can use.
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And that's, that's part of the problem we've solved by coming
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in at tier one or tier 0, you know, into the RTGS system and
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moving central bank money between banks because that has
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to be accepted and that is accepted on an instant basis
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between banks that have got an account at the European Central
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Bank. So you get rid of all those
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problems of on ramp, off ramp, you know, coin, do you have a
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coin wallet? You know, all this mumbo jumbo
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terminology that the crypto guys have invented, you know, just
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shrouded in some mystique. Well, there were some.
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We are really. But you know, we do do the same.
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But certainly once you've got access to central bank money, it
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does change things very rapidly. It's a good segue into
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regulation as a topic. So you guys obviously operate
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across multiple jurisdictions. How much of the payments
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ecosystem today is driven by regulation do you feel?
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Look huge amounts. So we when we look at launching
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a new product and we are about to launch a product open banking
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product that is close gross border and you know we have to
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look at what that sort of product will entail.
14:57
So all of the product design actually starts with the Chief
15:00
risk officer, right and legal, and they come through into a map
15:06
of what is permissible. And you need to get the customer
15:09
experience as well as the user experience.
15:12
You know, if you like the graphical side of it to sort of
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come through this very narrow channel of legal compliance and
15:18
regulation and come out of the end of it with something that
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looks semi usable. Now that is getting more and
15:24
more challenging because there's more and more regulations
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stacking on. Thankfully, the core product of
15:31
the European Union is regulation.
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So it's one thing they understand very well.
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They don't understand business, but they understand regulation.
15:38
And, you know, I will say that, you know, the bureaucrats in
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Brussels have managed over the last 20 years to get better and
15:47
making sure that their regulation is internally
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consistent. So they use the same definitions
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now. Yeah, they they talk, they talk
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about the same things consistently.
15:55
So it's not bad. UK is all right, yeah, but when
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you start going further abroad, it's an absolute mess, right?
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You can. You can have slightly different
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definitions of things, different terminology within one set of
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regulation. You just end up scratching your
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head trying to work out what's going.
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On how, how do business then realistically manage kind of
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multiple frameworks? Is it kind of having to be
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reactive even if you don't want to be reactive?
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How do you manage look, I think if you mean businesses in the
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merchant or or the regulated entity?
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I, I, I'd say the merchants because sometimes they're
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reliant on being educated by the businesses that are providing
16:35
them a service, right? Look to, to some degree the
16:40
merchants, I mean, they're faced with a, a sort of dazzling array
16:44
of sort of products, many of which are really the same thing,
16:47
just rebranded and rebadged. But at the end of the day, you
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know, your merchant will look to your service provider, maybe
16:55
like ISX, they may consider us to be reputable and
16:58
knowledgeable in the area. And we will take them through
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and say, well, look, this is what the product can and can't
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do. And yeah, this is how our risk
17:06
appetite sort of fits within that where you can and can't use
17:09
the product and so on. So really it's, it's about
17:12
getting information from the, the PSP or the bank and making
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sure that, you know, they, the PSP accurately and faithfully
17:20
reflects what the product will do, which of course isn't always
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the case. But you know, we try to make
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sure that we, you know, do tell our, our potential customers, if
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we can't do a piece of business, we'll walk away.
17:33
And, you know, we've, we've had situations recently where, yeah,
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we're, we're, we're pitching to a customer and they say, you
17:40
know, such and such has offered this.
17:41
And we just say, well, we can't do that sort of price problem.
17:45
We just can't do that because regulation won't let us do that
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or, or something else. And you know.
17:51
Today's episode is sponsored by ISX Financial.
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That's ISX dot Financial and a big thank you to the team at ISX
18:32
for supporting the show. Do you think we're heading
18:36
towards a point where only players with, you know, really
18:41
strong infrastructure, a huge amount of licenses and the scale
18:45
are going to be able to compete? You know, there's been a money
18:48
2021 on the podcast recently and they're they're talking about
18:51
the great unbundling this year, but the bundling that's happened
18:54
over the last three years of companies coming together,
18:56
consolidate and creating these big sort of super companies and
19:00
payments. Do you think that we we've lost
19:02
a bit of space, space for smaller operators to compete in
19:05
the market with the regulation stuff and needing to go through
19:07
all those processes when you're you're operating multi region in
19:10
particular? Yeah.
19:11
I think that's been deliberate policy though.
19:13
So you look, you go back to the days of the PSD 1 and it was you
19:17
know anyone can have a crack and you know as you move through the
19:23
PSD 2, a lot of people could have a crack.
19:26
As the PSD 2 now starts to move towards the PSD three, you
19:30
really need some serious infrastructure just to meet the
19:32
compliance issues and the reporting.
19:35
The reporting burden has has gotten incredible the last two
19:39
or three years with the central banks now wanting more granular
19:43
information sets up. So the VAT authorities wanting
19:47
granular information on every transaction, yeah, they're,
19:51
they're two big sort of changes that I think have come in that
19:54
meant that your systems have to, yeah, adapt very quickly.
19:59
And then when you look at the concept of PSC three, I think
20:05
it's probably not designed to squeeze everyone out, but
20:07
certainly it's going to need much bigger budgets to operate
20:10
and and scale. Nice.
20:13
And you mentioned before an open banking and and the ISX new
20:16
product. When we talk about open banking
20:20
as an industry, it's been conversation that's going on for
20:23
a good few years now, right? And and the benefits it's going
20:26
to give merchants and benefits it's going to give consumers,
20:30
it's largely kind of state domestic, right?
20:33
And it's focused on kind of about initiation.
20:34
Tell me a little bit more about about your guys and what you're
20:37
delivering as a product. Yeah.
20:39
So we, we started on a project that we've internally named paid
20:43
by Global. So our paid by service was
20:47
basically a domestic network in in Europe and UK.
20:51
So I think about a year ago we said, well, why don't we cross
20:53
that? Why don't we put an instant FX
20:56
in there and do what the card schemes do, you know, just cross
21:00
it so seamless for the merchant. So what we effectively do is we
21:03
display the the price. Well, the merchant displays the
21:08
price in the native currency in pounds when they get, when the
21:11
consumer gets to check out, we display the price in euros and
21:15
the consumer just open banks straight through and we pass the
21:18
pounds through to the merchant next business day.
21:21
Not so it acts very much like the card schemes do.
21:25
The advantage with that of course is in some cases not next
21:28
business day might be same day, but it can be and it definitely
21:32
is much, much quicker than a settlement from a card scheme.
21:35
So when you look at what the the big sort of card acquirers are
21:38
doing and their settlement timing, this absolutely kicks it
21:42
in terms of, you know, how quickly we can get the monies to
21:46
the merchant. Now we've taken a view that
21:49
because we've got refund module, dispute modules, so we can do
21:52
refunds. You know, we do all the sort of
21:54
tracking that you get on a card scheme as well that we're sort
21:57
of pitching this in as a card scheme alternative and it does
22:01
everything that your card scheme will do.
22:03
And we've come from a card acquiring background.
22:05
We've been principal members and still are of most of the card
22:08
schemes. So does exactly what a card
22:11
scheme does, same sort of dashboards, all of that.
22:13
But of course it sells cheaper. That's marginally cheaper,
22:17
right? So we're not in for, if we're
22:19
going to be sustainable, we can't just go in and sell this
22:23
thing at, you know, 1P, right? We've seen some crazy open
22:26
banking pricing. 1P is not sustainable and I'll put I
22:29
generally put a bet on with my sales staff that company won't
22:32
be there in three months on this.
22:33
I raise another 50 million. We have the same conversations.
22:37
That launched a market as well, you know, that didn't allow for
22:40
being able to piece together an initial transaction to a refund
22:43
or they weren't doing batch settlement like stuff that, you
22:45
know, when you're mop creating a product that you want to compete
22:49
with cards in a payment sense, that MVP breakdown at least task
22:55
to tick some of the core fundamentals, right.
22:57
And I think there were there were definitely platforms that
22:58
went to market that were missing those basic things.
23:01
You start to close that gap and then you scale on top of it.
23:04
And then you get the digital wallet equivalent of, you know,
23:06
Apple paying Google Pay. Like that transition is is
23:09
certainly happening now. And I think that it's gone from
23:13
like the early adopters, the traditional you pay your tax
23:17
bill, you have to pay your credit card this way because
23:18
they switched off cards, right to more merchants in more
23:22
virtuals going. This is just a payment method
23:25
that we want to offer alongside cards.
23:26
It doesn't have to replace it, but we want it there.
23:28
Exactly. It's, it's an alternative.
23:30
You know, of course the speed of domestic settlement versus the
23:34
card schemes. I mean it's a no brainer when
23:36
you say to ACFO, look you'll get your money in 10 seconds versus
23:41
X days, that's a no brainer, right.
23:43
That's an easy sell. Then.
23:44
Then when you add on, as I say, the, you know, refund management
23:49
and we deployed that into the Wix network I think 18 months
23:52
ago with open banking, you know, to to small Wix merchants that
23:56
that come on, yeah, refund management, making sure we can
23:59
track the refunds up to the maximum amount.
24:01
All these basic things that card schemes do.
24:04
Now I think the difference between IS6 developing this and
24:07
you 2 guys in the garage is that the two guys in the garage are,
24:11
are techies. They've never seen a payment.
24:13
You know, it costs them 50 grand to get a PISP license.
24:16
They thought, oh, this is pretty cool.
24:18
We're now payments people and they've developed this clutch,
24:22
you know, and, and it just doesn't, it's, it's not a
24:24
payment system, it's just a part of a payment system.
24:27
So our view has always been that unless we can take the payment
24:31
as an initiated, process it along the instant payment
24:34
network, clear it at the central bank, which is what we do,
24:38
settle it into the open banking system that we provide our
24:41
customers with an account on whether it's a sort code account
24:44
or an IBAN, notify them that the money's been received.
24:48
So not just sent. So the money's in your account,
24:51
right? And then give them the features
24:54
of, you know, refund management and you know, fraud management,
24:57
recall management, all that sort of stuff.
24:59
So they can see troublesome customers or whatever else you'd
25:02
normally get, you know, using a card console, acquiring console
25:06
then it's not a product, right. So had to have all of that
25:10
before we launched and that's that's where we started.
25:13
Now when we look at the cross-border stuff, we are now
25:17
using this network of the central bank money.
25:21
So we are now able to move, I think we've launched across 16
25:25
currencies. So we can for example, take on
25:28
an Australian merchant, you know, a European can book their
25:31
Aussie holiday and pay in Euros and the Aussie travel provider
25:36
is is paid in Aussie dollars next business day and so on with
25:40
15 other currencies. So you know, it's, it's a truly
25:43
global system. Now as we now add other
25:45
jurisdictions and we've applied for, let's call it Pi or open
25:50
banking licences in other jurisdictions, particularly
25:53
around here in the Middle East, Middle East, North Africa.
25:56
Yeah, sure. You got places like Israel,
25:58
Amman, Saudi, etcetera, that are starting to, to go into open
26:02
banking. And of course, Latin America, it
26:05
becomes a true and viable alternative to the card scheme.
26:08
So when you've got, let's say we've got 2 initiation
26:11
currencies today. But let's say that when we had
26:14
tips, we then got SCKDKKNOKISK as initiation currencies using a
26:21
European license. So we're now up to six
26:23
initiation currencies. We add in a couple of, you know,
26:27
Middle Eastern ones, then we throw in a couple of Latin
26:29
American ones, and suddenly you got a real payments network,
26:32
don't you? Have you overarched that with
26:34
any like hedging capabilities for a merchant if they want to
26:36
set on funds before it transfers or not?
26:39
We haven't yet. That will require banking
26:44
licences that we're not quite committed to at the moment.
26:47
So everything we're doing is spotting forward, you know, so
26:51
we're trying not to getting to any of that just yet.
26:54
We want to get the the network working and be a, a great
26:58
product, a fantastic product for the merchant.
27:00
So they get paid quickly adding in all the, you know, what would
27:05
I call them buy now, pay later type options or hedging options
27:09
or anything else that's down the track.
27:10
I think for now let's just get the basic right.
27:13
So they've got a true alternative to international
27:15
card payments. Is to to me the problem with
27:17
with open banking account to account transactions from
27:21
settlement liquidity user experience, it sounds like Isex
27:24
have has come in and kind of negated all of them issues
27:27
right? Yeah, but you need a lot of
27:30
pieces to do that. I mean, access to central banks,
27:33
core banking systems, you know that you basically build
27:36
yourself so you can tweak them to do what you need to do.
27:40
Again, the rails, the core banking system that can keep up
27:43
with the rails. And again, that was a challenge
27:47
and initiation. Then you need the FX, right?
27:51
And making sure that you've got good, a good network to do that
27:55
based around central bank money first, right?
27:57
Because the last thing you want to do is be using conventional
28:00
FX routes. So you're paying with EUR and
28:03
you know a day or two to get that through the system by the
28:05
time you fund your FX and however long that takes.
28:08
So you've got to really go off the conventional and do things
28:13
in a different way to make it work.
28:15
This is probably a bit of an open question, but that if we
28:18
take the merchant perspective on this and A to a cross-border
28:24
global network, right. It's got all the bells and
28:27
whistles that that mirror card. If you were to say in even just
28:31
three years time to a merchant when they're looking at pay by
28:35
bank as a as a payment method, Do we think that the market
28:41
share is going to have taken a massive leap forward in three
28:45
years time versus card payments? Look, cards are super
28:50
convenient. They're not going to go away
28:51
anytime soon. Now, whether they're physically
28:53
embodied as a card or a token on your phone or whatever it is,
28:57
they're here because they're convenience.
29:00
You can walk up to a pause and you know that you're going to,
29:04
yeah, 99% of the time, affect the payment.
29:06
The problem with the open banking scheme, if I can call it
29:09
that, where's IS6 going down this route?
29:13
In order to make it a mass adoption proposition, we would
29:17
need to get into the pause as well.
29:19
Now to get into the pause now, speaking as an engineer, I've
29:22
got a firmware problem. So I need to somehow get my
29:25
software or refresh the firmware to get my software into all
29:29
these pauses. Now, even assuming I can do
29:32
that, I've got a different problem of the distribution, the
29:35
partnership. So I've got to convince the
29:37
operator of that pulse, be it, I don't know, Adrian or Worldline
29:41
or someone else to put my scheme in next to MasterCard, Visa,
29:47
etcetera. Right.
29:48
And it's doable. And it's doable because we've
29:50
got a lot more margin to play with, like a lot more margin to
29:53
play with than the card schemes. But it's going to be a slow
29:57
grind. And you know, at the moment
30:00
it's, I think as I said before, having come out of the the
30:04
digital movie industry, it's going to look similar to when we
30:08
were sort of shipping DVDs to stores and Blu-ray.
30:12
And then then we're posting them.
30:14
And then we're doing sort of slow downloads to PC and then
30:18
eventually the bandwidth caught up and boom, you've got Netflix
30:22
type services and all that coming out.
30:24
And you may remember things like Lovefilm here in the UK, that
30:27
was, you know, slowly posting out the DVDs, getting them back
30:30
and so on. So I think we're at that love
30:32
film stage today. You know, we are pre the mass
30:35
sort of bandwidth that allows us to do things.
30:38
And that bandwidth won't come from the pipes, it'll come from
30:40
the pulse. If I can make that sort of
30:42
analogy, it's at that stage that when a consumer can think, hey,
30:46
I've got my open banking on my phone.
30:47
I can walk up to a pause with NFC, tap it and something's
30:51
going to happen that you know, you'll get the network effect
30:54
and the network effect will bring the network effect and so
30:56
on. So I'm, I'm very, I'm very
30:58
positive about it. I think, I think it will happen.
31:01
And I've seen it happen in other industries.
31:03
It's just making sure we can get that catalyst to make it happen.
31:05
Start to age ourselves when we talk about blockbuster.
31:09
And I feel like we're an adolescent teenager in the
31:12
payments industry at the minute, just kind of picking up after
31:14
ourselves, but known as the future.
31:16
But I think in five years we're probably going to be saying the
31:18
same thing, right? Because when Blockbuster about
31:21
we thought was incredible, right?
31:22
And now Netflix is here and we think it's we think it's
31:25
incredible. And in five years time, there's
31:26
going to be something else. Sure.
31:27
And we're going to say, do you remember when we used to watch
31:29
Netflix? Yeah, there'll be something
31:31
else. But I do personally feel like,
31:33
you know, the last 12 months in particular for open banking have
31:36
been they needed a really strong 12 months in that space.
31:40
And I do think that has happened.
31:42
And I have seen that organic shift of merchant mindset to
31:49
asking about it, you know, whether that's in RFPs, whether
31:52
that's just chatting at conferences, whatever.
31:54
Like they do kind of talk about it more as, oh, and you offer
31:57
paperback alongside cards, I presume, like it's just
31:59
expected. Now that's a big Tivot that I've
32:02
seen in the last 12 months, particularly to, you know, it's
32:06
now a markdown. If you don't have that alongside
32:08
cards where they didn't really care before, I think that's a
32:11
big, big change. I think more.
32:12
RFPs now are including open banking and AI.
32:16
Yeah, they're just asking businesses, what do you do with
32:18
open banking? What do you do with AI?
32:20
And I mean, there's, there's some experts, but it's
32:23
definitely not experts with years and years of experience
32:25
because it's still so new to, to everybody, right?
32:27
Well, yes and no. We can talk about AI in a little
32:30
bit, but I think look, I think you're right.
32:35
We're at that sort of inflection point just before the inflection
32:38
point. But again, it comes down to
32:40
actually delivering to the merchant a complete service.
32:43
You can't go off half cocked with a push and prey like, you
32:46
know, I'm just going to push it and prey.
32:48
It ends up where it, you know, at some stage and something's
32:50
going to happen. You've got to get the whole,
32:53
whole delivery chain In Sync and, and give the merchant what
32:57
he's used to. Yeah, which at the moment the,
33:00
the, the sort of baseline is the card scheme, right.
33:03
So that's what they're used to do it better, do it better with
33:06
open banking and I think we can. Nice.
33:09
We, we mentioned AI, it'd be remiss of us to to not have
33:12
another conversation on it. Where are you actually seeing AI
33:17
in regards to payments industry today?
33:19
Where? Where's the impact coming from?
33:22
Let me start in a slightly different way.
33:24
We've, we've invested quite heavily in an AI company that
33:28
actually has won the Singapore government's border control
33:34
project. It's just picked up another
33:37
airline for pilot training. We run the AI services in
33:44
Mercedes cars, Porsches, the other comfort services and so
33:48
on. We've got actually got real
33:50
customers doing real things with real AI and it's not an LLC.
33:55
So this particular company, B Motion, what they did was they
33:58
went and studied human expression for 10 years and they
34:01
mapped human expression into joy, excitement, anger, fear,
34:05
etcetera. Now emotions really, really
34:09
useful particularly in the context of border control where
34:13
you're looking at humans faces or KYC.
34:17
It's particularly interesting when you're looking at
34:19
transaction authorization, particularly in the context of
34:22
app fraud, right? So I'm not going to talk about a
34:26
genetic AI making payments, all that sort of stuff.
34:28
Great, whatever. At the end of the day, we are
34:31
going to have fraud, we're going to have authorization problems,
34:33
we're going to have, you know, coercion issues, which of course
34:36
you see that rising with old age, you know, sort of customers
34:40
being coerced, you know, to make payments.
34:42
So we've taken the view that AI can be a really interesting anti
34:46
fraud tool as well as part of border control, comfort and
34:49
other things. And during the sort of selfie
34:51
process, we are now mapping expression of the person.
34:56
If if at some stage we, you know, the conventional risk
34:59
fraud engine detects that there's something a bit hinky
35:02
going on, we can flash that camera on and just have the AI
35:06
look at the expression and see whether someone's been going to.
35:08
Talk about AI fraud versus AI fraud, defence versus AI attack
35:14
here, right? Ultimately, it's AI versus AI is
35:17
the check forward. Yes and no.
35:20
So you know, the good thing about emotional AI is that it's
35:24
also very good at taking deep fakes, right?
35:26
Because when you look at your micro expressions, you know,
35:30
we've still got AI delivering of 6 thumbs, right?
35:33
Micro expressions go to another level.
35:35
So you know, we are looking for the micro expression on a
35:38
person, the way your face is sort of moving to determine your
35:41
reaction. Now we're still a long way away
35:44
from those six thumbs doing micro expressions, right?
35:47
So I think, I think we've got some runway on this.
35:50
I think it's the responsible use of AI, right?
35:54
And you, you mentioned this AI versus versus AI and how can we
35:58
with it, especially in the payments industry make it become
36:02
a high trusted environment for AI from both a consumer
36:05
perspective and merchant perspective and defending and
36:08
attacking, right? Wow, that's a, that's an open
36:12
question. And I have, look, I mean, I, I
36:15
suppose we've, we've, we've adopted a view that the human
36:19
has to be in the chain somewhere because whether you're taking
36:22
your agentic AI and authorizing it to do certain things or, you
36:25
know, you're still doing conventional authorization, the
36:28
humans in the chain somewhere. Now, with that, we want to make
36:32
sure that the human in the chain is a human, you know, and
36:36
obviously looking for deep fakes via emotional, emotional
36:39
expression and that that person is actually authorizing the
36:42
transaction. Now, have you ever met a happy
36:45
male shopper online? Right.
36:47
Unless they're buying a toy. No.
36:49
Yeah, they're paying bills. We get to do all the boring
36:51
stuff, right? Pay the bills, do everything.
36:53
We would never be happy online. Come on.
36:55
But meanwhile, let's say that, you know, a lady shopper and
37:00
that might always be a case I'm stereotyping here a little bit,
37:02
but they take a lot more enthusiasm.
37:04
I know when my wife is buying, she can sit there for hours
37:07
looking at something online and I might just buy the damn thing,
37:10
right? You know, and, and they have,
37:13
they experience joy online. Whereas for me, I mean, it's the
37:15
day job, looking at a damn PC or, you know, a MacBook all day.
37:18
There ain't no joy left. You know, I just want to get
37:20
over and done with. Click, click, click, I'm out.
37:24
So I think using the emotional aspects and I'm being very
37:27
flippant about it, but using the emotional aspects is important
37:31
because if I'm being coerced to do something, you know,
37:34
particularly with, you know, the, the sort of the basis of
37:37
app fraud where someone is dialing, you know, the old aid
37:41
pensioner and, you know, convince him that something's
37:43
going on, log in here and do that.
37:46
We have a good degree of being able to detect that, right?
37:49
And that's, that's, that's important.
37:50
That's a good start. We also have a good degree of
37:52
probably detecting your, your shifty character and that comes
37:56
out of what we're learning from the border control.
38:00
All right, so, and I think, I think the government of
38:03
Singapore said that we're either 22% or 27% more effective at
38:07
determining a shot than a human gate agent, you know, side by
38:12
side, both, both working in parallel.
38:15
So I think, I think it's got some legs.
38:18
So to, to go from, from AI to another buzzword in payments at
38:22
the moment, embedded payments, embedded finance, even sorry,
38:27
you know, from an embedded finance point of view, I
38:30
mentioned embedded payments, embedded payments is one of the
38:32
subsets and embedded insurance, all the things that sit below
38:35
embedded finance at the moment has brought us to this multi
38:39
provider model. Again, which going back to our
38:43
very start of this conversation, when we're talking about the
38:45
banking system and all the different individuals, do you
38:48
think we've embedded finance that we'll get to a point of
38:52
consolidation as well when we've got providers that are servicing
38:54
all of those things beneath the top level embedded finance
38:57
tagline? Look, that's a tough one as
39:01
well. I mean, firstly, your regulatory
39:04
permissions to actually be A1 size fits all and do it all in
39:07
house. It would just be crazy.
39:10
So you know, you're, you're looking at A at a regulatory
39:12
stack that's JP Morgan style or HSBC style to do that.
39:17
So of course a lot of that is going to be shipped out to other
39:19
providers and you know, white labeled outsource, whatever you
39:22
want to call it. I'm not a fan of the everything
39:26
app or the everything service. I think payment companies and
39:32
finance companies which you want to look at it should have a
39:34
reasonable degree of specialization, you know, offer
39:38
a great service for an excellent service around what they do,
39:41
perhaps some adjacent services, but let's not go nuts and try to
39:44
be everything to everyone. You know, one, the cost of doing
39:49
that and the likelihood of failure is high.
39:53
And I'm just not sure. And a great example I suppose is
39:57
Apple and Goldman's. You could be fantastic at one
40:00
thing. You branch into something else
40:03
and how presto, you're absolutely hopeless out at
40:05
mining back at 1,000,000 miles an hour now.
40:08
Are they planning to go again though?
40:09
Do they read they're planning to go again elsewhere?
40:11
After that I don't. Know.
40:15
Yeah. But that's pretty much what I'm
40:17
saying. Stay in your lane, get good at
40:19
what you're doing, maybe an adjacent lane or two, but let's
40:21
not go crazy and, you know, swim sideways across the pool, you
40:26
know, and, and see where we get to.
40:27
Sometimes full stack doesn't need to be full stack, right?
40:30
Yeah. Nice.
40:32
And who who do we think wins then in in that world?
40:34
You have kind of PSPS, you have the banks, you have
40:36
infrastructure players, right? If you were to start a business
40:40
right now, what lane would you choose?
40:44
Something that's by the beach, maybe not payments at all.
40:49
Look, if if I was to start payments today, I think it would
40:52
be very confounding. You know, I look at a lot of the
40:56
new players coming in and really wonder what their motivation is.
41:01
You know, they're, they're coming in.
41:03
They may or may not be raising some money.
41:06
You know, they're, they're just dropping their pants at
41:07
ridiculous, unsustainable rates, trying to hustle customers with
41:11
promises that they they can't keep.
41:13
And you know, unfortunately and inevitably, in many cases,
41:18
there's the implosion. Now, would I want to go through
41:22
all that again? Probably not.
41:24
I think I'd be looking for a bit of a softer target in terms of
41:27
business sector than payments. There's just way too much
41:30
regulation now. Yeah, it's it's OK if you've
41:32
sort of grown up with it. I don't think it's so good if it
41:34
comes at you as an avalanche. Nice.
41:37
That's a valid point, I think. I think the nice thing about
41:40
payments has always been the speed of change and the fact
41:44
that there's always something new on the horizon.
41:46
But that new thing adds to a bigger and bigger stack, right?
41:49
And then the regulation alongside that has to mount up.
41:52
So, you know, I dig out what you're saying there.
41:54
So we have a final part of of the show, John, that every guest
41:57
gets asked this question. We, we have a topic called the
42:00
Shelf of Shame, which is where you nominate something from the
42:04
business world, payments, fintech, whatever it might be.
42:07
If you could banish something forever, and ick if you will,
42:11
what would you nominate to bring to the Shelf of Shame today?
42:15
Wow, what would I nominate to bring to the shelf of shame in
42:20
payments? Look, I've seen some some crazy
42:26
shit. The, the, the one of the
42:30
craziest shits that I remember was back in the early days of
42:33
crypto was a a crypto coin for porno specifically called, I
42:39
don't know if you remember it, but Puma pay.
42:42
And this thing was running around back in the early days
42:46
trying to convince everyone to use anonymous coins to, to pay
42:49
for your porn. And the way they went about it
42:52
was pretty out there, certainly entertaining for a little bit,
42:55
but probably not safe for work anymore.
42:58
And but that's certainly the sort of thing that we just don't
43:02
need something that puts a spotlight on that sort of aspect
43:07
of, you know, the business sector and what payments can be
43:09
used for. We all know it goes on, right?
43:12
We all know what happens. I mean, you know, there's some,
43:16
you know, PSPS that specialize in it, but do we really need a
43:19
specific coin that's advertised to do this?
43:21
Probably not, but that is something that I'd think, OK,
43:25
you know, I found that a little bit out there in terms of what
43:29
we as Isaacs have done. I mean, we've we've had some
43:33
amazing product flops. I'm not going to go into them
43:36
because I mean amazing product flops.
43:38
But you know, at the end of the day, I think if you are
43:42
genuinely trying to deliver, you shouldn't be afraid to give it a
43:45
go. Expect some flops, but don't go
43:48
out and do something that's completely out there and just
43:51
you couldn't take home and explain to your mother or your
43:52
grandmother, you know, I just just not into that.
43:55
So you're nominating, I guess single track high risk payment
44:00
methods or what? It's let's, yeah, we can, I
44:03
suppose, put that wrapper around it, yeah.
44:05
OK, well, I think they completely agree with.
44:07
That I do agree. Don't need to glorify what
44:09
people are doing when people don't, when there's other people
44:11
wouldn't agree with it, right? And all graphic crypto coins
44:13
that's a new one for the podcast.
44:15
So I've learned lots today and that's the the cherry on the
44:19
top. But thanks so much for for
44:21
coming on the show. This has been a brilliant
44:22
conversation where where can people get in touch with
44:24
yourself find out more about ISX.
44:26
Obviously you sponsor the show, so by listening to the payment
44:29
check. Well, I mean, ISX Stop
44:31
Financial, it's not a difficult website to find, certainly hit
44:35
us up there. But we are located in Cyprus and
44:38
we've got people, you know, in Amsterdam, Malta, London,
44:43
Vilnius, Latvia. I don't know Israel pretty much
44:46
there's an ISX Rep hanging around somewhere, not quite on
44:49
the street corner, but you know, we are, we are sort of local in
44:53
a lot of different jurisdictions, but Cyprus is the
44:56
is the HQ. Amazing.
44:58
John, thank you so much for your time.
44:59
So it's been great to have you on.
45:00
Thank you. It's been great to meet you.
45:02
Thank you very much.