Transcription:
Penny Crosman: (
So, I should probably level set a little bit. We're not really gonna focus on crypto and blockchain so much in this session. The origin of this session was, we had an advisory board for this conference. And when we asked them, what are the, some of the topics you really wanna hear about emerging payments and like the future of payments was one of them, like, what are we doing today? And what is everything gonna look like tomorrow? So where should we be moving our payments technology or our payments efforts. So, then I said, okay, that's good. So who do you want to talk to? Should we invite like people from the federal reserve to talk about fed now and clearinghouse to talk about RTP and things like that. And they said, no, we know we hear from them all the time.
Penny Crosman: (
What we want is to hear about newer companies using newer technology, doing with sort of fresher ideas, doing, interesting things that we can learn from and maybe either get inspiration from, or maybe work with or things of that nature. So, I immediately thought of Wise and Remitly because I feel like these are two companies that have been doing a lot in the international payment space where some people are trying to use blockchain technology, but not everybody sees blockchain as like the answer. And so we invited them in and thank you very much for coming to share some of the work that they've been doing, how it works, how they see payments changing and what the future might look like. So hopefully this is interesting to everybody. But let's start just kind of talking about what you guys have been doing. So let's start with you Bridget. At Remitly, what was sort of the original mission of Remitly and how have you been trying to execute on that mission?
Bridget Abraham: (
Sure. The mission of Remitly was to be the most trusted customer centric, money remittance in the world and specifically focusing on immigrants, right? So there's about 280 million immigrants that live and work outside of the country that are born in. And our CEO, one of the co-founders Matt Oppenheimer, he worked for Barclays at the time in Africa and found how hard it was to receive or send money around the world in some of the traditional ways, and so he started this company about 10 years ago, focusing on that. And we're a pure digital company. We have continued to expand our share around the globe, so get licenses in various countries, but try to create our differentiator around a very easy platform to use for consumer to consumer payments quick, fast, and have lots of options. So we continue to expand our offerings to our customers around really financial inclusion and that that's still that space on immigrants, but give them options to deposit into bank accounts, which we have access to about three over 3 billion bank accounts today, about 600 million mobile wallets and about 380,000, I think cash pick up locations, you have multiple options.
Bridget Abraham: (
And we continue to try to expand our offerings around a banking app. So offering immigrants, some financial inclusions opportunities around DDA accounts, some potentially small dollar lending,
Penny Crosman: (
And you have a bank partner for that ?
Bridget Abraham: (
We have a bank partner. Yeah. We do not have a bank license. Yeah.
Penny Crosman: (
So yeah. Same question. What was the original, well, you originally transfer wise and what was the original idea and how far have you come ?
Balazs Barna: (
Transferwise started 12 years ago. Just founded by two Estonians living in London, Christa and TVET and they met at the dinner party and they were talking about how much money they're losing from sending money from Estonia to the UK. And they realized that if they just converted the money on the mid-market rate and exchange between themselves, they could save a lot of money. And then they realized that millions of people have the same problem. So it seemed like a good business opportunity. And this is what we have been focusing on the most in the last 10 years was cross border payments. So what we do differently to the incumbents? The incumbents use swift and the correspondent banking scheme to move money cross border.
Balazs Barna: (
And when you use that network, usually it takes three to five days to get your money. You don't know how much the recipient is actually going to get and it will take three to five days, and where we are right now, we currently have 13 million customers and we save 1.2 billion dollars for them compared to if they were using their banks on fees. So this was the first part of why is this cross border product? And then we realized that the problem is much bigger than this because people don't just want to transfer money. The world is becoming more and more global and people have the need to hold money and manage their finances. So this is what we call international banking and that's the second pillar of Wise. And the third pillar was when we were thinking about, okay, we've built this app. We built the applications, right? We have 13 million customers, but big banks in the US and Europe have tens of millions of customers. So how can we help them use better technology and how can we get to a hundred million customers and help more people and achieve our mission, which is that payments should be instant and we believe that they can be free eventually. So these are the three pillars that we are focusing on.
Penny Crosman: (
So we should probably mention blockchain since it's in the session title. I believe that neither of you actually use blockchain technology today. Why not? Why? Because some people like Ripple, companies like that would say it's the perfect way to exchange value across borders. Yeah. Start with you please. Sure.
Bridget Abraham: (
Yes, we don't use blockchain. I think the reason why we don't use blockchain and I'm not the technology person, so don't quote me there, but is largely around the fact that we have gone out and built our network with direct connections with many of the banks globally. Right? So our ability to send payments is already in minutes up to almost instant, and so we can send that quickly and transparently for our customers around the globe with those connections that we have with our banking partners and other partners around the globe. I think some of the limitations for us, at least at the time when the company's being built with blockchain is mass adoption. We have direct connections with those various banks around the globe and then some compliance issues around making sure you can bring in the digital, the actual identity of a customer onto the chain and know who it's connected to and what are the obligations. So I think there's lots of opportunity in that space, but those are the driving factors.
Penny Crosman: (
Do you see maybe that changing over time?
Bridget Abraham: (
Sure. Yeah. I think that could definitely change. There's a lot there, if you can continue to push and work around, creating that digital identity and like almost have a consortium or a private network where multiple companies can participate in it. There's a lot of opportunity that could come from that.
Penny Crosman: (
So now you guys have the ledger, you have your own ledger.
Bridget Abraham: (
We do. Yeah. Exactly. So we have largely our own closed loop ledger. Yeah. Not the right technical term I'm sure.
Penny Crosman: (
I know that's one of the challenges because several years ago there were lots of attempts to have multi-bank blockchain payment ledgers. And one of the reasons those didn't work out is that the banks didn't want their rivals to see all of their transaction flow. I mean not all of it but it was on the blockchain. They just didn't want that visibility. So that's why it makes sense for a company like yours to actually be the manager of that ledger. How about you why does blockchain not make sense in your case?
Balazs Barna: (
Not sure if it doesn't make sense but as a product engineer, how we look at it is, why we want to use technologies to build a superior product. And why we were successful is because our product is superior, right? It's 10 times cheaper, 10 times faster. And right now we don't see how that would help people if we were using the blockchain. So for example, right now, one integration that we built, we have an API with device platform and you can use it through Google pay, right? They have 500 million customers and in the US, if you want to send money to India right now, you can do that within 20 seconds. Right? And there are some scalability questions as well on the blockchain. What I find really interesting is that as far as I know, most of the transactions are happening on crypto exchanges.
Balazs Barna: (
And the biggest crypto exchanges, they just simply use like a simple SQL database and they just write into that. They don't have those transactions there. So I think if somebody knows about the blockchain, it's these companies, right? And for some reason they still built their own database and that's what they use. So it's not something that, I think there are many like use cases where it could be useful and it could be helpful. But right now it's not something that we are planning to use.
Penny Crosman: (
For both of you, would you say you are offering something to people that they can't get elsewhere and can you think of an example where maybe you're changing, somebody's like the life of an immigrant for the better? Like either an anecdote or an example of how you can offer them a better deal?
Bridget Abraham: (
Yeah. There's several. I mean, sometimes it is, you're offering an immigrant an opportunity to make sure they're sending money back home in a trust and secure way for their families that they left. If you can think about those types of folks that are moving across the world, making money and sending back home, they're reinvesting in their communities, in education of their families or their local communities and building it up. The other side of it is, there are a lot of opportunities for people working in various countries and traveling around the world to then safely, securely, and much cheaper send back some of those funds into their accounts back home and repatriate those funds there and hold onto them versus setting up multiple accounts around the world. And it creates that opportunity. I think we make a difference in people's lives. Most of the time we also offer a lot of emergency services, you know there's a flood or something that's happened there, send it quickly low fees. It gets into somebody's hands immediately without having to wait to go through all the various chains like in correspondent banking or through accounts and then get it out and you get cash into somebody's hand immediately then they can do something with it on the ground.
Penny Crosman: (
I bet for Wise, what's a typical Wise customer. Like what are they doing?
Balazs Barna: (
So I just moved here. I'm an immigrant and Wise was the reason why I was able to get paid. So, when you come to the US, if you want to open a bank account, you will need the proof of address, but when you want to rent something, you need a bank account. So it's kind of like a loop. And I had my Wise account, so in two seconds I was just able to generate an IBAN for myself. Sorry, like an account number and the routing number. And then I was able to receive my salary there. And I was able to use that proof and start my life here.
Penny Crosman: (
So how does Wise get around the need for digital identity verification and everything that goes with that, the need for bank account, the need for other proof of who you say you are?
Balazs Barna: (
So, these regulations are local. So we have to be compliant in the US. There are like different rules in around the world to prove who you are. For example, in Singapore, when we started, we had a small little office and our customers had to come in in person to verify themselves with a passport. And then we lobbied for like two or three years with the government and with the central bank and we were able to convince them to change to like a more digital solution.
Penny Crosman: (
Do you guys agree with Trevor that blockchain technology could be used for digital identity and verification?
Bridget Abraham: (
Yeah. I definitely think it could be used for that. I think there's a really good use case for that and I think it's, again, it's just on the mass scale that you want to get. It just takes a really focused effort to move that forward.
Penny Crosman: (
Now, Wise recently expanded it's Austin office, didn't it? And hiring about a hundred engineers?
Balazs Barna: (
It would be great. We opened our Austin office. We want to get up to a hundred employees by the end of the year. And probably two to 300 within the next two to three years.
Penny Crosman: (
Okay. I've heard it's tough. There's a lot of competition for tech talent.
Balazs Barna: (
Yeah. So if you know, great engineers.
Bridget Abraham: (
We would say the same thing.
Penny Crosman: (
I Think they a job.
Bridget Abraham: (
We're all fighting for the same talent.
Balazs Barna: (
Yeah, but it's amazing to be here. We have offices in New York and in Tampa but we decided that we want a full stack office because that's what we believe in when from everyone, from product to designers, engineers, operations, customer support can all be in the same location and collaborate. There is a lot of synergy that is coming from that.
Penny Crosman: (
So, I think we talked about this in our pre-call a little bit where you guys are both trying to modernize the way payments international payments happen from the swift networks, the correspondent banks to something that's much faster and moves quickly. And it's tough to change that. There's a lot of trust in the swift process and there's a lot of regulatory and legal clout, I would say to that. What are some of the legal challenges to this speeding up of international payments and to all the things that you guys want to do? I think you said something about trying to live in 21st century, but the regulations are still in the 18th century or those aren't your exact words.
Balazs Barna: (
I think what I really trust is just capitalism in general. So if Google Pay can send money to India within 20 seconds, the incumbents are going to see that, right? And they're going to be so far behind that they will have to adopt new technology. And Swift does not, I don't think it's is gonna be able to give it to them because if they were able to solve this problem, then they would've solved it already. So that's why I trust in what we do and that there is a lot of value to be created and we also have to fight to have an even playing field everywhere. So one of the things that I've done in my country, which is Hungary, is, we are a direct member of the Fed there.
Balazs Barna: (
So we joined the central bank directly. So we don't have to use a bank to do our payments in Hungary. We have a bank account just like another bank and the advantage of that was that we were able to drop fees by 15% after we did that integration. So we calculated the savings and I told the central bank, we are going to do it. And three months after that, we calculated how it impacted our finances. And we saw that this is how much we are going to save by the end of the year and we dropped the price right away. So that's the sort of strategy I really hope that it's going to work, globally. Just drop the prices and then if you drop the prices and you truly have a 10 X better product. Then people won't have a chance but to join you and use your services,
Penny Crosman: (
How about you Bridget? You're in compliance. What are some of the legal challenges ,legal barriers that you'd like to see removed?
Bridget Abraham: (
I think similar in the same case. We see that there's a lot of regulation around the world. That's really written for banking in the past that gets applied to our remittances and payment companies. And so some of those things don't make any sense, right? For a company like ours, that's sending smaller dollar peer to peer payments and very quickly, and the types of risks that we worry about. So we spend a lot of time working through that, talking about our risks and then trying to help and influence changes to modernize those regulations and the enforcement of them. And I think the other part is even just the digital space, right? That Singapore's not the only example of a country where you had to go in physically to make sure you get a picture and onboarded versus onboarding digitally, which sort of defeats the purpose.
Bridget Abraham: (
And I think there just continues to be more and more changes in regulation, trying to keep up with that, to look at the risks and how do you do it. And in some cases, we've tried to prove and show that actually, by doing it digitally and taking the cash out of the system, you're much safer, right? And we can follow that footprint around the world. So that's what we're looking for in that space. So I think it's just continuing to push for that. And then, the other massive challenge for a global company is just the variation of regulations around the globe and what they require from reporting or client onboarding and other things like that.
Balazs Barna: (
Sorry, just one last thing which is gonna be, I think really interesting is if we want to make the world greener, then we can't have this many branches. Right? So the world has to go digital. And that's also something at Wise that we are, not just profitable financially for the last five years, but we also reduced our carbon footprint significantly because what we do is everything is everything is digital.
Penny Crosman: (
Of course data centers use a lot of power.
Balazs Barna: (
And that's also another question on blockchain. I'm not an expert, but what I read was the Bitcoin network uses as much power as Argentina in a year. So, yeah, it seems like a lot.
Penny Crosman: (
It's like you're pushing the power consumption somewhere else. So, if you could look five or 10 years down the road and picture like an ideal state of payments, are there some technology advances that could help you in your work and for anybody trying to make payments faster and cheaper, et cetera. Is there anything on your wish list or any sort of technology advances that you're sort of hoping for?
Bridget Abraham: (
Yeah. I mean, I think some of mine are what we talk about, looking at digital identities and other things like that for payments just much. We spend the industry spends a ton of money on continuing to identify people, bring in their data. How's their data worry. Like privacy wise, you have now 55 more chances for your data to be exposed. So for me, I think continuing to invest in technologies that really bring together somebody's digital footprint and verifies who they are and that they're a real persons, not only to save money and make it easier and faster, which does go to your bottom line of how much you have to do here, but also just to reduce the friction for even consumers and what they look at. I think that would be one that's on my wishlist. I think that's just a big barrier to entry and causes a lot of friction up front.
Penny Crosman: (
Are there any projects, I think Estonia has a digital ID.
Bridget Abraham: (
There are in Europe, I believe some of the Nordic countries have national digital IDs. So it's more and more.
Penny Crosman: (
Just not the US yet.
Bridget Abraham: (
No, I think getting there, I'm not sure where that's at.
Penny Crosman: (
How about you, similar? Anything else you think?
Balazs Barna: (
I think that, with banks, I've heard this from a German banker that how banks work right now is that people use banks all the time, but nobody wakes up and thinks that I'm going to send like a thousand dollars today. That money movement is always connected to something. So there is no need anymore to go to your bank directly. The banks are going to be more open via API or anything else. And they're going to be embedded like services. And I think banks are going to do in the next five to 10 years, they're going to do less but more efficiently. So for example, does it make sense for like a US bank to compete with us on sending money to Thailand? Probably it doesn't make sense. Right? They should focus on what they do the best. And this is how customers are going to get better services is more focus on the niche product such as Wise and Remitly for example.
Penny Crosman: (
Yeah. And you see the banks embedding Wise and Remitly in what they have, or do you see Wise and Remitly embedding, like checking and loans and things like that in what you do.
Bridget Abraham: (
Yeah. I think there's a really strong case and it's already happening to embed Wise and Remitly into the banks in that it costs a lot of time and energy to create the connections to the last mile, to all these countries. And for many banks, it may not make sense at all, right, to like push and fight that network to focus on what you're focused on and partner with a company like Wise and Remitly who have done that themselves. On the other end, I do think there is a large space for individuals, particularly, our clientele, that's looking for more financial inclusion and access to bank accounts when they move into a country or to be able to do those things as well as I think there's going to be more and more need for like small and medium enterprises, as we continue to get more global to access and be able to send money around the world to pay for marketplaces and freelancers. And it opens up a bigger market for them to pay people around the world. And there's a big partnership still from banks to partner with a Wise and a Remitly to be able to offer more of those services probably more than it makes sense for us to turn ourselves into a bank beause that's not really what we wanted to be, but who knows.
Penny Crosman: (
Or for them to try to turn themselves into a payment platform.
Penny Crosman: (
Alright, great. Well, I think our time is pretty much up, but Bridget and Belos, thanks so much for coming.
Balazs Barna: (
Thank you.
Bridget Abraham: (
Thank you.