Today’s episode is a live recording of a panel discussion at GGV’s 7th annual Evolving Economy conference in NYC last year. It is moderated by Hans, featuring four exceptional operators in the FinTech space:
Hans Tung 1:17
This panel is on structural, commercial, and technical moats, and we have a panel of operators. Let each one of them introduce himself a bit. Their description of themselves can tell whether they’re going to be asked me questions on structural or commercial or technical moats in Fintech. Let’s start with you, Michael.
Michael Rangel 1:39
Hello, everybody. My name is Michael Rangel, founder CEO of Novo, a small business challenger bank, here in the US-based. We’ve grown quite a bit recently. We now service around 200,000 small businesses across the nation. Our core product is a small business checking account that lives on the mobile phone predominantly with a debit card and as an extension, and as Sagar just shared in the previous panel, we’ve started layering a few different revenue-generating mechanisms on top of that, which has been really cool. And yeah, that’s me.
Hans Tung 2:14
Let’s go, Huey.
Huey Lin 2:15
I’m Huey. I currently am a venture partner at GGV waving the flag really proud. Prior to this venture adventure, I’d been an operator my entire life and started my career at a place now most people heard of called Pay Pal. Although when I first started, no one heard of it. Like, what is that? Subsequently helped build the firm from the GetGo. And then most recently served as the president of Flexform Asia.
Hans Tung 2:44
Great, Bradley.
Bradley Riss 2:45
I’m the Chief Commercial Officer of Checkout.com. We are a global payments organization sitting behind some of the brands that you all know and love, so companies like Uber and Netflix, and Samsung are using our rails. We do pay-ins and payouts, the movement of value on a global base. I’ve also been an operator for a long time had four and a half years at checkout, preceded by five years building at the NS Asia Pacific operations, opening six of their current seven offices in that region.
Rares Crisan 3:21
I’m Rares, I’m GGV’s VP of technology. I don’t think I need to introduce GGV that much here today. But fundamentally. What I do is work with the investment team and support technical due diligence. So I’m the one usually looking under the hood of everyone’s infrastructure, or code, or how things are built, and I also work a lot with our platform companies, as well our portfolio companies, with their CTOs or engineering teams just usually solve technical problems, challenges or uncertainties.
Hans Tung 3:48
And you were with that GGV former investment. That’s where we met you.
Rares Crisan 3:52
Yes, I was with a GGV portfolio companies prior to being a part of GGV, where I was doing a lot of active engineering as well, so I have a lot of fortune to still be able to actively code and work on infrastructure every day, while still actively supporting and working in the investment space.
Hans Tung 4:07
So all four operators, two of them were with GGV now as the capacity of operator as well. We’ll start with Bradley first, someone who’s not at GGV. And we talked about these three sorts of important rails that got invented over the last decade or so. That’s Adyen where you worked before. Checkout.com is where you are right now. Previously we had a partnership with Stripe also spoke here, tell us why doesn’t take three. These players all are very sizable. What does that say about the underlying infrastructure that’s in place that creates the need for these three separate players, to compete, and collaborate in this space?
Bradley Riss 4:51
I can probably talk for about six hours on this monitor, but I’ll try and I’ll try to brief this story. To understand payments first, it’s very fragmented. There is no one provider who has more than 10% market share. Probably, no one really, genuinely has 5%. That’s what I’m saying you’re talking about how you move funds and value. You could argue Visa MasterCard, as networks themselves PayPal, potentially to a slightly higher up the food chain. But when it comes down to kind of the intermediaries, the organizations that the world’s largest merchants look to work with to enable access to their customers, obviously, via providing relevant payment rails, in domestic regions. It’s incredibly fragmented, technically, as well. So that’s one of the challenges behind it. The moats in payments, I believe is one of the largest that you’ll ever find, because it is around having market leading technology, around branding, which is debatable how much of a moat there can be. But there are also huge regulatory licensing and cap requirements, like our cap table has to be pretty large to be able to satisfy various regulators in jurisdictions where we want to operate domestically. But to look at kind of the three as a group, Checkout.com, Stripe, and Adyen. I think it’s actually a fair assessment. Adyen deserves a lot of credit in 2006. They actually reinvented what the payments value chain was. And there are kinds of mini-lecture pieces. If you go down the street and ask the layman, how does your payment get accepted when you click book now on Uber or buying on Amazon? No one really knows, they know that their bank is somewhere involved, or they have this Visa or MasterCard branded card, but they don’t know what happens in between. Traditionally, there were multiple parties that sit in between a merchant, and where they want the transaction to get to, which is the issuing bank. There was a gateway thing off to risk platform brings it back to a gateway that sent it to a bank, which licenses a processing platform. Most banks view payments as a loss leader at best. They probably licensed this 30 years ago and chose the cheapest version. Then that technical platform operates to connect into Visa, MasterCard, Visa net, and bank net, which then talks to the issuer. That took a long time for me to say and it takes a long time for a transaction to go through that journey. So what Adyen did was collapse the four bits in the middle into a single-state platform. So, the risk of the gateway, the acquiring licenses, and the processing platform, Stripe did exactly the same thing later, Checkout.com is the most recent company to do that. So there really are only three payments organizations that are genuinely operating a single technical infrastructure, which encompasses the four key components of the traditional value chain. Again, the information asymmetries and payments are huge, and everyone in this room is an intelligent tech investor. But I’m willing to bet what I just said may have been used by a lot of people here because people don’t understand what the problem was that we were all solving. Adyen in 2006, Stripe in 2009, and Checkout.com in 2012 architecture were built. But we look in our rearview mirror, we don’t actually see anyone trying to replicate the structure that we have. So the differentiation around the three of us and the older school players, the five says well pay global payments. These massive companies are really around not having technological fragmentation, which enables our customers to really just have a much more scalable platform that they’re operating with. I can talk again about you know, where we sit against each other stripe, Adyen, Checkout.com, but maybe I’ll save that.
Hans Tung 7:53
Actually, I want you to expand on that. So what are the issues the most like each of the three companies are building?
Bradley Riss 7:59
Okay. Trying not to rant. Adyen, again, they started off as an online early company. As you can see from a lot of what they’re doing now, they tried to go into omnichannel and they’ve done a very, very, very effective job of that. So, really kind of the organization started focusing more into the large retailers, even though they had traditionally a lot of the tech companies on them. Stripe, again. You can see from the press releases, they said the word enterprise or institution at least 20 times a sentence. There’s a reason for that everyone wants to swim upstream. Unfortunately, swimming against the current is hard. Stripe is an amazing company. I’m a huge fan of theirs, they solved one of the most key problems, which is if I want to start an internet business, how do I accept my first transaction, and they are still the best company to go to to get your company up and running. That said they have hundreds of thousands of merchants where someone at checkout has a couple of 100. We are solely an enterprise that’s where we play. Everything we do is not really on a platform level, it’s on a very bespoke level. How we view the data pertaining to each different merchant. So really, if you want to kind of try and separate three of us and our Venn diagrams heavily overlap, because we have the same architecture. Adyen’s strongest pause and definitely have had a core focus. Stripe’s strongest SME and I would argue that Checkout.com had a second-mover advantage. Our platform is a replicant of the other two, but we just had technology that was built a few years later to build it on things like SnowFlake, analyzing data that just wasn’t available in 2006.
Hans Tung 9:22
I want to put the rares on the spot and often in the call an audible which means I’m going to ask a question that he wasn’t expecting. He is the police with the gadgets in our firm and tries different technologies of companies are investing or competitors that our portfolio company competing in. When you were playing technology try Stripe or Adyen or Checkout.com. What is your feedback from a technical engineer building stuff? How do you view these companies? Are they do they have any moat from a technical standpoint?
Rares Crisan 9:55
The biggest thing that so obvious that what am I experienced with these companies is more direct like actually trying to implement and integrate them, and it goes right back to Bradley’s point exactly. When Stripe first came out, as an engineer and when e-commerce started kind of becoming a thing you needed to figure out how to implement payments on your site. Over the very first time, I went exploring this, like using actual POS devices and having to program those essentially. It was a really difficult task, like getting the documentation, trying to sort through it trying to understand what the error codes were and where the problems were. It’s very difficult to read sometimes, and it’s very hard to understand if you’re doing something correctly or incorrectly. It’s kind of scary because you’re dealing with people’s money. Whenever you deal with people’s money, you tend to not want to lose it, essentially. So one of the things that stood out when Stripe first came out is their documentation was the biggest thing that I think a lot of engineers were just gravitating towards. It was very easy to read. It was extremely easy to follow. As Stripe continued to introduce more services, it was just very simple JavaScript bundles that made it really easy to just add stuff to your code, and further make it easier to adopt. So it was one of those things where if you knew nothing about payments, and you never had accepted payment in your entire life, because that’s just not something you did as an engineer, and average engineer and the 2000s. All of a sudden, you put the stuff on your website and you started collecting money. You’re like, Wow, that was really easy. That was a big thing that stood out from Stripe. All engineers gravitated toward it and became something ubiquitous that everyone started recommending to each other. It’s not even technical, it’s just speaking a language that was hard for people to understand before.
Hans Tung 11:44
How about others, besides Stripe?
Rares Crisan 11:46
Well, I have worked more moderately with mostly consumer payments infrastructures. One of the challenges I still find with enterprise infrastructure is still going global and international is very, very difficult. If you have to set up payments infrastructures and other parts of the world that were actually very, very difficult to do. I haven’t worked directly with Checkout.com because I’ve had to actually implement any actual enterprise stuff in the last few years. But back when I was doing enterprise payments cross border, it was very much like contacting local banks, figuring out what processors they’re using, and trying to work up through the infrastructure that Bradley described earlier. It was a very fractured system, essentially. Adyen was still growing, essentially at that point. But if you’re building across enterprise platforms, unless you’re doing huge volumes, like you really wouldn’t be contacting those players at the time. But it still felt like a very fragmented industry. Some of that was very challenging to implement and introduce into a lot of technology. I see it changing now over time, and it’s getting a lot more accessible to the average engineer. But I think enterprise payments solutions are becoming to the average engineer what Stripe was in the early 2000s, essentially.
Hans Tung 12:53
I’m gonna switch gears a little bit and talk about credit lending, which is one of the new products that Novo launched. When you have so much of a sort of payout data on your platform, from the SMBs that you serve, how does that give you the advantage to actually make a lending decision? What kind of system or models do you have to put in place?
Michael Rangel 13:22
Great question. I think the short answer is we’re still figuring it out. The way that we think about it, it is very different from traditional incumbents, right? That I think, Huey will be able to share a wealth more of knowledge than I will ever be able to share. But as it also relates, I’m going to answer your question with a little bit of context, and I’ll get to it to what the focus on the other side of the panel just shared right kind of the distinction between Adyen, Checkout.com, and Stripe. They overlap, but they all kind of have their own different focuses. Stripe might be moving on the market, etc. The way that Stripe hit jackpot was they made the on-ramp easy, and that’s how they took over. They just made the on-ramp easy, so easy that people didn’t even think about it like payments. This is a switch. That’s how we think about ourselves at Novo just in a tangential way. Right? So not necessarily payments, like we’re getting into the banking sphere, et cetera. We think about the Novo account as this on-ramp or this validation for the SMBs which we service, right? So that’s kind of like piece number one, piece number two then becomes that the core product is just that checking account or the hub itself. That core products become exponentially more powerful, the more connections we’re able to add to it. Getting back to what your question was, of when you know our customers are plugging in all of their platforms that they operate on. They’re plugging in their stripe accounts, their square accounts, their Amazon, Etsy, Shopify, whatever it is. The view of the field we have is so significantly larger. One of the things that I wanted to share just the tides are turning on just how we think about the quote and quote, credit box because the way that people do business now and into the future is gonna be so different. When you just look at what has happened now, in the last two years itself as a result of COVID, there were more new businesses created in the last 20 months to zero months than there were in the last 14 months before then. That means the velocity at which new businesses are spinning up is two acts as fast now. There aren’t tools to cater to those people, because they’re almost immediately invalidated by the typical credit box. Right? So the way that we’re thinking about and the way that we’re building these products is taking in way more data sources, to more acutely prescribe how much we can lend to these people. Then the other thing that we have in our favor is that we also control the hub as well, aka the checking account, or where everyone goes to.
Hans Tung 16:23
Rares, what was your impression, when you look under the hood?
Rares Crisan 16:31
I’m loving the hard questions, keeping me on my toes the whole time. So, the big thing, that’s I mean, obviously, I spent a lot of time with Tyler, who is the CTO and co-founder at Novo. And one of the things that I think a lot about when I look at infrastructure. So this is something that I really value a lot when it comes to infrastructure is that agility and the ability to be able to move and be quite adaptable is extremely important. My usual analogy for this is if you’re building a road, essentially, and you set up at a suburb somewhere. I’m going to do this as non-technical as possible, so everyone can follow along with this wonderful technical story. If you’ve got to connect these two places together, your first instinct probably will be to build a road essentially. That sounds like the right idea. But maybe when you first build that road, you are unsure. You don’t know what might have to happen. Maybe the population base was really big, and you have to expand to a 14-lane highway. But you can’t do that, because you built part of the road on the edge of a conservation area or a particular area of water. These decisions that you make early will drastically impact your ability to expand and move faster and grow later. So as an engineer who’s not used to planning ahead and doesn’t know this is the future. Here I am today just building the roads that connect you from A to B. But an engineer who knows what the final state looks like, and knows all the little things that need to be adjusted along the way knows the exact perfect place to put that road so that every future challenge or expansion or knee that comes along, is accounted for and ready for. That’s extremely important when you’re building Fintech because it’s a heavily regulated industry. It’s not like most start-ups where you can just try and build something and then just see where it lands. You have to deal with reporting, even as a private company, you have to deal with audits and get licenses. These things take years to come around. You can’t just start up, build what you want and be ready to go. You have to be planning ahead. Plus, it’s less forgiving as an infrastructure. Unlike a lot of software, you can’t make mistakes. If you make a mistake, you’re dealing with people’s money. And that’s not something that will be positively looked upon. And software engineering is still a relatively an industry. I’m sure everyone here has a website is down experience in their life somewhere. That’s just not acceptable in Fintech. You can’t have that type of standard, essentially. So the bar is higher The challenges are higher, and the planning is higher. I spent a lot of time with Tyler in Miami. The thing that I took away from my time with him is that he knew that landscape incredibly well, not just the engineering side, but the regulatory side, which is so important for Fintech. So when you’re talking to him, he’s telling you this is what we built today, this is how it’s built, and this is why we made the decision to build it today. He’s like, this is what I’m building in two years, as I’m building in five years. And this is what the plan will look like when it’s 2030. And he’s anticipating regulatory changes and laws that are about to happen. His road probably goes like this. It is ready to expand into a 25-lane highway with subdivisions all over the place, and that is the general takeaway I had. So hopefully, I didn’t have to cover any technical stuff for you because you’re giving me threats backstage to do that. But hopefully, that analogy resonates with everyone about what’s interesting about how they’re building stuff.
Hans Tung 19:49
So as you can tell to get investment from GGV, your tech stack has to pass the bar of Rares’s assessment. You don’t need to have a lot but you’ve been worried about where you’re going and how you’d have to build it but you got to be able to articulate it and not bullshitting it. Then I’m gonna turn a sort of attention to Huey, who is a legend in the payments space. And she’s a key reason why Michael choose to work with GGV. So Huey shared a bit more like when we first met Novo or any other companies. What’s going through your mind? Why did this company deserve the time and help and resources from GGV, and how to decide how to help?
Huey Lin 20:42
It’s this thing that sounds cheeky, but really, really hard to do. That is customer obsession, and really thinking about what Win Win Win could look like. So one of the things I remember most, when I spoke with Michael was just how much he understood the ones in need of the customers and how he wants nothing more, but to help them get back to work. And so things like providing an awesome checking experience all the way to even sort of predefining the way to help them do their work better and right, identifying some of the software’s that like my mom and dad were SMBs. They’re not the folks in front of a computer. Googling, how to do you, you know, do bookkeeping better, and the likes. So that was one thing that really mattered. The other thing, which is really, fundamental and extremely important, especially now is that they’re thinking like an SMB. They’re thinking about profitability. They’re thinking about the path to actually get things done faster and better without basically bragging about a very large CAC. That is not something that will sustain especially in this business. And so that behavior, that type of mindset of thinking about how do we reach as many as possible? How do we do it in the most efficient way possible? What would that take? What are the things that we need to offer for them to resonate with us was something that really, really struck a chord. Also, I have a very, very special spot from Miami. I grew up in Miami, and so when I found a fellow entrepreneur because, for us, it really is a huge dream to bust out of Miami and to be able to be having a commercial discussion about how to actually change the world. That really made a huge difference for me.
Michael Rangel 22:34
I just want to add something real quick to that, you know, some things that are floating around the room, right? This is the concept of access, right? It’s the concept of speed. These are actually two of the three things that we focus the entire company on. Right access primarily is like, how do we get the most SMBs? How can we help the most SMBs with that on-ramp to success, that they do not usually get those tools anywhere else, or if they do and an incumbent, they’re charged a monthly fee, or nickeled and dimed for all sorts of things? Right? So how do we give, we lead with that transparent fee structure? Giving them that on a ramp that tool that they wouldn’t get? How do we move them faster? How do we move their money faster so they can do business better? Right? Then also the last one is connectivity, something that you alluded to as well. Like how do we connect SMBs to the world around them, and centralize it all for them, so they have a better chance to succeed?
Hans Tung 23:37
Yeah, one of the first people that Huey introduced you to was Brad, who ended up joining you guys. Why did you take advice from somebody who will not be is not even your investor yet?
Michael Rangel 23:57
Well, that is pretty obvious, or at least it should be. I think there were a few things right? I connect first with Robin is really how it all kicked off right in December in Miami. I met with Rob and then she connected me with Huey, I think in January Huey and I kicked it off but it’s the early afternoon for me right thing is like 1 pm or 2 pm. Then I was like as the new COVID code right? You’re like, hey, where are you calling in from the right where are you today? She’s in Singapore. It’s gonna be like 2 am there right now, what are you doing? Then we had 45 minutes over an hour conversation. We kicked off in Miami. Then I will remember this, you know, forever at the end of the call she’s like, Michael, listen like I don’t usually do this on. But how can I help you? Everything that you’ve said is kind of like up my alley, helping SMBs the products. Then I told her to listen, the beauty of Novo from the outside, and everyone thinks we have it all together. As you know, start-ups usually kind of look alike. But from the inside out, it’s cool, because we’re still going zero to one in certain places. One of those places was BD. I said, I think BD could have the power to change the game for us, and how we operate with the world around us. Then she goes, got it. I have one single name that comes to mind. I’m like, one single, I have to meet this guy. But then I looked at his profile. I’m like, this guy will literally never talk to me ever. Why would he talk to me? Anyways, he’s talking to me way more now.
Hans Tung 25:54
What does Brad bring to the table that you didn’t have?
Michael Rangel 26:00
Ah, a lot. I’m just trying to condense that into words. I think what he brought up is really interesting. That obsession with the customer and familiarity with the customer is something that you can’t really buy. You can’t really even accelerate it either. I think a lot of people at Novo have become more intimately familiar with our target customers and how to help them and obsessed with like, kind of raising that up for them. But Brad kind of already came equipped with it. He already knew the language. He knew the problem very, very well.
Hans Tung 26:43
What other relationships or ideas has he brought from people? It’s helpful to you guys.
Michael Rangel 26:48
He’s also brought together the proverbial Rolodex. I don’t know if people use that term anymore. But like, he had one and he showed up with one to Miami. I’m like, it’s kind of odd and inefficient, but I’m glad he has one. And so he was able to bring his Rolodex, aka the industry relationships. From a partnership perspective, it’s critical for us at Novo given that we operate the hub where all of these SMBs effectively work. That hub needs to connect to all of the tools around it. Right? All the tools that push money into the account, as well as all the tools that pull money out of the account, and all the tools that help that hold money experience. While it’s in the account. Brad literally, I think it was over 100 names that he brought on day one. He’s like, cool, let’s work through this. It was almost like a cheat code hiring you. So it was really great. We had a really incredible conversation. It is that incredible conversations that have helped us also think about strategy and color in how we think about strategy in different ways. It relates to some of the bigger industry players in the space. How are they thinking about strategy with their banking product versus not? And it’s been incredibly helpful, for sure, just spin up those partnerships.
Hans Tung 28:14
One last question for you is that there’s been a lot of talk about recession and soft or hard landing, whether it’ll take a while for the IPO market to reopen again, etc. One could say that SMBs are a segment that almost anyone else has left, but you’re still holding for it to service that segment, with a segment getting harder than enterprises during the recession. How do you plan to navigate to show continue to grow during this period of uncertainty?
Michael Rangel 28:42
Great question. Obviously, very hard one that wasn’t on the list. So listen, we haven’t seen this before. But as I share with people internally, history doesn’t repeat itself, but it rhymes. Back in 2020, before we even raised a Series A, I remember going out to Silicon Valley with my co-founder Tyler. We started seeing the paper signs up on the VC windows of like, don’t shake hands, don’t touch, don’t even breathe or look at us. All of that seven years, this is weird. At that time, we couldn’t raise series A. All the oxygen was sucked out of the room. I don’t know, were small businesses going to become extinct? I don’t think so. But like no one had. The unknown is very scary at that time. But what ended up happening after we ratcheted down all the spend variable acquisitions, and all of a sudden, we actually saw all of our metrics tick up to the right because everyone people were being laid off. People were going home, locked down, etc. People were spinning up their businesses. The reason why I share that is that the customer segment that we serve is largely anti-cyclical. I think a few other people today have shared that same concept. These are the most resilient people that exist. It’s also the economic engine of this country that has pushed us forward forever. But they’ve largely been kind of, backed up into the corner and underserved by incumbents, etc, as they chase profitability and all that stuff. So this core will always be there. As you said, in your intro today, you guys look for, I think you said something to the effect of democratizing access to tech. It’s Novo’s mission to democratize the entrepreneurial American dream. How do we make that easier, better, faster, and stronger, to allow people to do it more? It’s still very difficult to start a business. It’s very scary. So we figure that if we are in kind of the perfect position to just help people do it, do it faster, better, and stronger. That’s kind of what we said as I think about what a recession looks like ahead. I think it’s going to be a very challenging time, potentially, obviously. But that’s where we’re going to swoop in and support our customers the best we can. I think that that will create a flywheel for us to be a more well-known, and advocate of SMBs in the country,
Hans Tung 31:29
And hopefully, you know, Brad’s Rolodex of channel partnerships will lead you to better SMB reserve that should be thriving over the next two or three years. Bradley at this point, probably thought I haven’t looked back at him. And we’ve talked about GGV and Novo for the last 20 minutes. But that’s more of a setup to see this. You see a video of how, in 30 minutes, a VC takes a serious meeting, and to see if this VC model or not. That’s not how it really works. What really works is the process we just went through. We think about the market, think about differentiation, and think about the moat, and then pull in different domain experts, and technical experts to help us figure out where this team has what it takes to really scale. We don’t have someone on the team on this panel from our platform team, who asked questions on talent, practices, and people practice to see if the team is ready to rule the scale in multiple dimensional levels. The reason I have that setup is part of the asking, Bradley, do you have picked companies? Well, they’re joining Adyen wasn’t the most obvious thing, especially when the US most people have never heard of Adyen when we mentioned its investment opportunity back in 2016. From that you joined Checkout.com, which people thought, hey, there’s stripe, there’s Adyen and what do we need a Checkout.com? How did you decide where to go? Because the VC has allocated capital, you allocate your time. It will come in and for the next four years, five years of your life. How did you decide to join Adyen? What did you see back then? How did you see when decided to join Checkout.com
Bradley Riss 33:03
Yeah, tempted just to say dumb luck and leave it at that. But luck and timing, are probably the most two important factors in life. Obviously, old adages, the harder you work, the luckier you get. But payment is a complex industry. Many of the companies that you guys will be investing in our incredibly complex and new industries that don’t matter. If you went to the best business school in the world, and we’re doing organizational studies. You don’t know how a DAO operates. You know, there’s constantly this sort of whack-a-moat to knowledge around, especially in Fintech, because it encompasses so many different competencies, which make up the synergies that ultimately formed the likely success for a business. I’ve been bouncing around payments for a little while before joining Adyen. No one as a little kid dreams of being a famous professional, top three astronauts, football player, or payment professional. Number three, I think that you do the job kind of parts as a job, then you start going down the rabbit hole and you learn more and more and you realize how broken it is. Everyone just accepts that it’s broken, because it has been for so long, and people view payments as a commodity. Then suddenly it was about technology. Understanding that there was a value chain was probably the big aha moment for me speaking with Adyen for a long time before taking the role with them. Then they’ve given me the cap launch, look, it’s APAC, we’re just starting out here. That as a personal sort of goal was appealing to payments is like capitalism in some ways. You go down to the macros, it’s about demographics. So being based in Southeast Asia, for me with Adyen felt like a wonderful opportunity as broadband and smartphone proliferation was growing. It felt inevitable that payments are going to be a core driver or enabler of the success of so many other businesses. Payments as a business are also incredibly good. I’m really privileged that I can be talking to CFOs of those companies I shamelessly name-dropped to the introduction on almost consecutive days of the week, so I get this really privileged insight into what matters thinking, what Google’s thinking, and what Netflix is thinking. Adyen was In my mind, in those days position to just do something different collapsing this value chain and internalizing all of those costs avoiding this API pinball game. You don’t have to be a technical savant to realize that. 12 API going down to 4 will probably mean faster, fewer technical fail points, more efficiency, and more cost control. Again, it wasn’t rocket science. But that’s all in hindsight, at the time. It was like, oh, I wonder if this will work. Then when it did work, it was great. We saw Stripe grow up kind of alongside us Adyen, and start to become relevant, albeit with a very different market focus, especially in 2012 and 2013, those sort of days. And then with Checkout.com, it was a conversation, as often as the case with a very charismatic, very intelligent man who is the CEO. It was the fact that I felt that I could come in and help. For me, that was appealing that he was sitting on top of this exact architecture that he’d created based on his knowledge of payments. And it was really about understanding how do you convert what is a great technology platform into a great go-to-market strategy. I felt that again, this experience at Adyen was going to lead me to help kind of paint that picture for Checkout.com. Obviously, going to market is a complex thing, but it helps a lot if you have the best product underpinning that. It’s about how you peel the onion to a point where the value is derived from working with someone like us, which is easily understandable. Then obviously, we can hopefully replicate that message across our teams, to take that message out to market as well. So a bit of a convoluted answer, but Adyen was the sense that maybe a new technology stack, what are the payments industry needed, and then Checkout.com was a chance to basically look at what Adyen did right or wrong. To be fair, they were not perfect. Well, if I can find someone who’s built this exact technical architecture, knowing that to get your acquiring license takes four years, by the way, that’s when we talked about moats. It’s a huge moat around payments on the licensing side. They were just primed with one license to explode, and that’s obviously what we’ve done since 2018.
Hans Tung 36:57
I’m getting a chance to advocate for Checkout.com, and Stripe is an amazing company. I think there’s a tickler extremely well. What are the earlier additional enterprise-grade services you’re providing to make it so that your customers want to stay with you?
Bradley Riss 37:15
I think it’s the opposite of that. In some ways. It’s about focus. Because if you look at what Stripe has done, they’ve done a very good job of this. They went lateral. As if you’re servicing an SME, what does an SME need? They need you to incorporate their entity, they have that service. If I go to Amazon, saying I can incorporate it. They’ll be like, thank you so much, but we don’t really need that. So a lot of it was about in our world, payments are not an ERP system. It’s not CRM. The reason I kind of use those examples is that you don’t want multiple ERP systems. Normally, you don’t want multiple kinds of CRMs. Most contracts that you license from your software providers are it fulfills your need for that aspect. Payments are way too important to your point about people’s money. The framework I use is actually still in Maslow’s hierarchy, right? Everyone knows what it is. That bottom benchmark is hygiene, which basically means safety, and so the first thing that enterprises build is resiliency, which is you do not single-thread your payments. So going laterally and saying I’ve got huge stickiness stripe connect as a marketplace platform, but I really don’t think that an Amazon or an Airbnb, whatever use that, because they don’t want the Swiss Army knife of payments. You know, when you’re eight years old, and it has a knife and it has a screwdriver, and it’s fun. But if you’re building a garden shed, you’re not going to use it. You’re going to go and find the best screwdriver. When you’re sawing the tree down, you’re going to use the best saw. I think that’s how enterprises approach it. They don’t actually want that bundling. For SMEs, it works super, super well. It creates immense stickiness and value. I think at the enterprise level, they’re looking for the best tool for the job. So in our world, it’s about, saying, do we want to be everything to everyone? No, but I want to provide the core of our services really, really, really well. Then for the things that we don’t think we do, we won’t have a really strong partnership proposition. I think we build out a very effective ecosystem on that front for the bits that we know are tangential to what we bring to the table. Equally working on the assumption that if you are these major 100 billion dollar plus companies, they don’t need us to go source a KYC provider for them, they can go do that themselves. They have the resources.
Hans Tung 39:16
We’re two minutes left, I’m gonna quickly go down to each one of you. What is one thing that keeps you up at night? It was the thing that excite you. Despite all that, this is what I’m counting on.
Rares Crisan 39:36
I mean, the biggest thing that keeps me up at night is mostly the infrastructure question, because I do look a lot at people’s infrastructure at different companies and all the ones that I work with. Other people’s infrastructure is the thing that I stress about the most because it is something that is so core. The thing I love the most, I love building. It’s my favorite thing. I love understanding how to build things and the patterns. When I see something that I know, like, you guys all build companies, it doesn’t have to be perfect to work. It just has to work, but that doesn’t always last forever, eventually. That strategy can catch up with you. That’s when the slowdowns happen. So what keeps you up at night? I look at all these different things, like, can we fix this> I just want to get in there and fix it, but I have to be patient and work with people and take the time to navigate everyone through the journey. When I’m like, please let me in there. Let me go in and rip it all apart and redesign it, but that’s obviously everything takes time. So that’s one thing. The thing that excites me is that the software industry keeps evolving. It keeps getting better. There’s more tooling that takes away the complexity of having to build everything from scratch. 10 years ago, it was crazy. I still find that the craziest story that Roller-coaster Tycoon. This crazy game was built on assembly code, which nobody could do today anymore. So the fact that the tooling has come so far away now, like so long. You don’t have to build everything from scratch. That’s really exciting because when you don’t have to do that, the opportunities get way more massive.
Bradley Riss 41:12
It’s a lazy answer in some ways, but macro environments do worry me right now. It’s rare that we’ve seen what we’re seeing with hyperinflation. We could say that the flight to the dollar is a good thing. But when you’re ultimately kind of inflating away value, it’s not maybe the best long-term. Wars in Europe don’t Bode so well. China’s productivity decreasing with obviously the socio-economic problems based on demographics that they’re likely to confront as well. None of these things bode well. I liked globalization. I don’t like the loss of localization and culture. But I like the fact that the world is coming together. The top of our value chain is we’re all humans. Right? So that’s kind of where we felt we were moving towards, and it feels like there’s a little bit of regression politically, socially, and economically. That’s not good for international businesses like mine, or many of the others in this room. I think that’s going to be too divisive. I don’t think it helps anything, and there’s nothing we can do about it. That’s probably why it keeps me up at night because I can’t fix this problem. This said, you know, do we have a recession, depression, or something looming? Are we in one already? I don’t know. But the word evolution has come up a lot. And now it’s obviously called evolving, right? But evolution works best when you have a harsh environment. I think that you need to thin the herd right now across Fintech in general. I think a lot of the valuations were way too fluffy. I think a lot of the companies didn’t have a path to profitability. I’m actually again, selfishly from Checkout.com’s perspective, quite excited for the really robust businesses to get stronger and show their resiliency through this time. If I had to pick one area, I’m in payments, right? But I really like the advent of blockchain. I really think that we’re moving away from speculation on expensive JPEGs, and meme coins to real utility. I’m a real believer in that. I think that’s going to converge really well with my sector specifically, to actually solve problems and drive the world forward on a two-to-five-year basis.
Huey Lin 43:00
Well, I have been in payments and moving money, mind her life. When I see moments like this, I am worried about those that want to earn that money differently. All the people that may want to steal your identity and source. I think that the flare-up in a downturn tends to be one where we’ll probably see more and more of that. It’s amazing to see the amount of digitalization and sort of what COVID did in terms of putting a lot more people on the grid per se, but I know that’s going to be a thing, and it will continue to be a thing. I also think that all of that will make the main more complicated as the world turns away from each other and the laws and the rules will start to come together in terms of what you can do. To your point about international businesses. the world is going through a bit of a divorce, and there’ll be more and more regulatory requirements in order to fulfill sort of private, and consumer needs, at the same time. It may inflict an uglier experience. So there are types of complicated issues that I think we’ll have to deal with. As far as things that I get excited about, once an operator always an operator, and despite the ups and downs. There’s just still so much to do. So, so much. We talked about the world, that’s actually digital ties, just still a small fraction, and none of the big players actually make up even a huge number, per se. I think it was like, if I remember correctly, 70% of commerce is still not done online. So as much as I get sad about the way that people view this industry. I think that the work, there’s still plenty of work and the work needs to get done. So that we make ourselves more productive and can deliver more to the world.
Michael Rangel 44:48
Cool. I will keep mine short since I know we’re almost over. What keeps me up at night? Just give a little context for those in the room that don’t know. Novo is still a relatively early-stage company, and we’ve grown a lot in the last two years. I think we were about 30ish employees globally, fast forward to now, and we’re about 300ish employees globally. That’s scary to me. What keeps me up at night is not, you know, how big the opportunity is, and all that stuff, it’s more personal as it relates to culture, which is very hard to manage, especially with a rapidly growing organization. But then when you throw in the other variable of a potentially virtual environment as well, it’s even more difficult. So, as I like to have the rearview, mirror view is like when we were all very small and all under one roof, trying to keep that today was difficult. Just trying to bridge that gap is something that I think about a lot. What excites me most about the world? Novo, specifically, is we’re evolving as a company away from the typical kind of definition of what a challenger bank is considered to be, which just a checking account plus debit card, the one trick interchange pony. We’re evolving away from that. One of the ways that we’re positioning ourselves now is that’s just one layer in the layer cake. But way more excited about all the other layers and where we’re actually going. As it relates to access speed connection, we’re going to be doubling down on both speed and connection in a very big way, or we’re going to start moving into just a category of around and work toward just redefining what people can even expect from a checking account. That’s what excites me most great.
Hans Tung 45:34
On that note, thank you everyone for being on this amazing panel.
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