Signature service event satisfaction survey
for the final breakout talk today we're going to take a look at the future of payments so say we're all sitting here at stripe sessions five years from now how will the world look different and how will your business need to adapt as a result the science fiction writer William Gibson said the future is here it's just not very evenly distributed yet so one way we could look at the future that may come to pass is by looking at pockets of futurism around the world that haven't reached us here yet let's start off with a brief history in China now you're probably expecting me to talk about a leap a and WeChat and we'll get there but we should start with the fact that China is home to the largest card network in the world China UnionPay so visa was founded over 60 years ago in 1958 MasterCard shortly after that China UnionPay was launched only 17 years ago and has already issued a billion more cards than Visa and MasterCard combined even in the US Union Pei has accepted pretty widely including on stripe and we started with the the approval of the People's Bank of China their central bank and so they were monopolies in the Chinese market so it wasn't the case that alley pay and WeChat launched into a cardless society you already had cards and yet now alley pay and WeChat each post a million are so - excuse me a billion active users so how were they able to grow so big so fast this is obviously a question we spend a lot of time on at stripe and what we sadly don't have a spare universe that we can use as an experimental control there's a few factors we can look at in that history that seem pretty relevant firstly merchants in China much more so in the u.s. bought the fees charged by Union pay and were quick to jump to the lower rates offered by the apps but more interestingly at the time that the apps started growing card terminals had gotten much slower adoption Jews need for a phone line to actually install them while the apps on the other hand they're really nice support for offline merchants merchants just print a QR code and the only internet internet connection leaders with the smartphone that the customer already had and this gets to an important lesson for the growth of any payment network luring barriers to adoption is critical to success in the initial visa launch actually in 1958 they just mailed 60,000 cards to people in Fresno who hadn't signed up for them and similarly in China they cracked away for anyone to send money to a merchants which is a few pixels on a card both Ali pay and WeChat have pursued Super app strategies which are different to what we see in Western markets you've got a vast supermarket of services everything from loans to pet care but this model isn't immediately repla Peugeot in every other country for example the machine learning curve consumer lending approach brought the scale by the Chinese apps simply isn't permissible in the United States because the data usable for lending decisions is much more tightly regulated and more broadly in payments absent a very strong improvement in convenience or cost the network effects of existing payment systems tend to dominate or let's move over to India while in China a few private companies have upended the market in ways that people wouldn't have predicted in India there's much more tops down approach happening India is one of the fastest growing economies in the world but economic inequality continues to be a big challenge so to bring hundreds of millions more Indians into the digital economy the Indian government is pursuing the India stack now I know amazing technology and government are probably not two things that you readily associate with each other but the India stack from its head point of view if you look into it is really pretty good if you take any frustrating task you have to do with the government anything from filing your taxes to going to the DMV chances are the Indian government has already digitized it and so some of the most relevant components of the stack for us are firstly the presence of Slayer or Adha so this is a centralized government database for demographic and biometric information keyed off a 12 digit identifier and while the rollout wasn't reside controversy around data privacy and civil rights think the incredibly impressive logistics operation requires to collect biometrics from 1.1 billion people which is what's now happened and then use the cashless layer or the unified payments interface an instantaneous payment bridge between any two entities and so there's several benefits that UPEI brings its public and standardized so different proprietary payment methods can be interoperable payments clear instantly it's run by the Indian government for free and it's all this open 24/7 instead of being tied to business hours and so you've probably heard of successes in India like lots have pay or Google pay these are built on top of and are interoperable with ubi and so that brings us to an important other-- important lesson markets can change radically in a short amount of time historically the investment climate and digital growth opportunities in India were challenging that has now changed you have one point 1 billion Indian citizens with digital identities data costs have plummeted over the past three years in big part thanks to the new mobile network operator reliance Geo so historically Indian consumers were famously parsimonious when it came to data usage you know Amazon actually made a special version of their app just a smaller app bundle because of how limited Indians were the amount of data that they could consume but now you have cheap data plans and 4G data in the hands of hundreds of millions of Indians the cashless trends has been driven by wealthy Indian governments seeking to kill cash in an anti-corruption move they rolled out their D monetization initiative where high value notes were removed from circulation and UPI itself is now an incredibly impressive two hundred and fifty billion dollar run rate up 50 times from two years ago we are off to the races in India and now that we've looked at some of the conditions for change and how quickly it can come about let's look at one of the world's most dynamic payment regions Africa in Kenya and pezoo was introduced twelve years ago making it seamless for Kenyans to use their phones even feature phones for digital payments and this was rolled out by Safaricom a scenery of Vodafone but a pretty ingenious breakthrough they realized they could use the network of agents they had that sold Pripet prepaid airtime in Reverse so you know you've tiny stores like you see here but rather than the traditional act of going in giving cash and getting digital money in the form of airtime they realize that people could rock up and give their digital money their airtime and get cash in exchange they could turn it into a mobile money network and the Kenyan markers had just the right conditions for this to take off Kenya actually had a very large demand still does domestic remittance market with people working in the cities needing to send money home to their families in rural areas and so before they had to travel themselves or send the money with a friend on a long bus rides and peasant was born into a market where had immediately really strong product market fit from day one 49 percent of Kenya's GDP is now processed on Impella and 93 percent of Kenyans have access to mobile payments but now most discussions of payment innovations in Africa tend to start and stop there you talk about impasse and that's it and it's been 12 years since its introduction much more has happened in the interim so to talk about what's happening recently and what should get us excited I'm delighted to bring up Shola a Kannada the founder and CEO of Pei stock Sherlock I don't like to see you thank you so much um maybe just to lead us off why don't you tell us what pay stack does oh yeah thank you so much everyone pay stack is a payments company so we help merchants accept payments from your customers we're building a modern payments infrastructure for Africa think of us a stripe for Africa which is excited because stripe actually invested him we're very excited about it and you're starting in the Nigerian market right yes okay and doing bank cards doing mobile money what's the next yes so we help merchants accept multiple payment channels so cards mobile money bank accounts ussd QR and all that yes I think there's a lot of fragmentation in the market and they're doing a lot of work to a granade all that yep no and I think this is something people don't realize that they in the Nigerian market there's actually a very wide profusion everything from kind of wallets to direct bank transfers to cards that are used and so something like pay stock is neither's did not accept them your growth has been I mean I think the technical term for it is completely nuts maybe you want to tell us a little bit about that yeah like I said earlier pay stocks to be shown is to figure out how to accelerate all payments in Africa I think we've made some progress when we launched pay stack three years ago Nigeria as a country was doing about the reform that five million dollars in online payments every month last month pay stock alone did a hundred million dollars just in the month so it's growing and we're just getting started you know stack is now processing three times as much as the entire Nigerian e-commerce markers when you started exactly a lot of the Nigerian e-commerce market at least one in two transactions and process my face back today yes and so for folks here kind of thinking about the Marcus again I think the thing that tends to get headlines is mobile money you know as we've seen it in Kenya there are some markets like Nigeria Egypt South Africa that are fairly card heavy yes across the region because you you guys obviously think regionally across the region how do you expect things to play out in the balance between cards wallets and different payment methods I think it's gonna be 50/50 and I'm not trying to be political but I think HUDs have some advantages I think recurrent billina's one big thing I also think the globalization is very important and my dad's an idiot so I think cards will still be there but I think there's a lot of wallets there's a lot of mobile networks and so that fragmentation will continue yeah so my best guess is 50/50 got it yeah and obviously when you launched you launched into a Marcus this was much less used to digital payments if I then say the United States here we've been buying things online for twenty years everyone's pretty comfortable with this that is not the case in Nigeria yeah and so what have you had to do to bridge that trust gap yeah so when we launched a stock we really wanted to make it an API product but very quickly merchants were asking us that you need a checkout form we need to see the pay stock logo when people are paying and so we started doing a lot of work we launched a checkout form to give you some context my sense is that about 20% of people that pay a bit or four in the last three years we've seen people the first time they're using their card online is on Pesach you know so that is a lot and so we have to do a lot of work to build that trust early in the year we asked our customers we call them in and said what features should we build for you guys and everybody said billboards like billboards exactly and so just we just want people to know pay stuff we want people to know that pain online is secure paint that you can trust this and so we've done it about we put the billboards two of them actually create the consumer brands because you're not just selling people on you know P stock but on the concept of doing commerce online exactly and the way works which is very interesting is that consumers say oh because you use spaceback you are trusted business you know and so we think of that as very important for us yeah so we're still very much for cost business but we've not of consumer affinity got it yeah and you know I remember you saying when you started the startup scene in in Lagos with you know relatively nascent yeah I'm Chris you can talk about just how that technology system has evolved yeah I have two important stats for that my favorite started when a stock launched in January 2016 we were the first Nigerian comets joined Y Combinator three years later their 1899 companies you know which is really amazing the second is that when you look at the Google Play Store on the finance app final segment that the top ten apps they're apart by pay stock and none of those apps existed when we launched in 2016 so I think there's a lot happening I think there's so many people building amazing things and just seeing that you can build a world-class company from Africa and you can have access to world-class tools it's really exciting it must be an incredible energy on the ground I mean what you're talking about in the span of is three years going from you know you being the only YC company to now 18 Nigerian YC companies yes you know pay stack now being three times larger than the the entire e-commerce market yeah when you launched it sounds like incredible progress sure thank you all right thank you so much John yeah that's just fabulous so we saw three totally different environments across China India and Africa and importantly how different they are the environments that existed ten years ago I want to move on now to some of the trends that we're keeping tabs on here at stripe in the payments world so firstly we talked about digital wallets in China how about what's happening in the United States are we using wallets anywhere and will that change so for in-person payments compared to penetration levels in other countries mobile wallet usage is still pretty low you've got Samsung pay with 10 million users Google pay with about the same Apple pay with 20 million users and of course in first place with 25 million users Starbucks wait what I mean I guess it helps when your product it's literally addictive but the dominance of Starbucks is actually pretty instructive if you dig into it broadly speaking there are two main categories of wallets open loop where the wallet can be used across businesses and closed loop where funds can only be used with one specific company Samsung Google and Apple pay all fallen within the category of open loop wallets they provide a layer for you to access your credit cards on your phone and spend it anywhere and two of the biggest blockers to faster adoption of open loop payment systems our infrastructure and habit you need the infrastructure in place to support the payment method in this case NFC for contactless payments and then you need to ingrain a new habit in the minds of consumers you have to change how they're used to working a good example is five years ago Transport for London introduced contactless payments at the turnstiles on the tube six months after they launched they recorded 60 million contactless payments representing a quite significant fraction of all the contactless payments in the UK at the time this shows how infrastructure and habit are related making a major leap forward in contactless infrastructure got consumers used to using it which drove consumer demand for mobile wallets and more acceptance infrastructure drives habit drives infrastructure if we look at the stripe data this chart isn't just the absolute volume of Apple pay on stripe it's the share of payments made with Apple pay and so Apple pay now makes up three times more as a potentially our payments as it did in 2016 it's really quite impressive but what about closed loop wallets each of Walmart targeted in the retail space lyft and uber and ride share or even iTunes for music and movies have developed proprietary payment systems that act as well as across their broad selection of products and service providers the Starbucks 2018 financial report true they had over 1.6 billion dollars in stored value across gift cards and their mobile app and for companies that have the purchase frequency to support a closed loop wallet they can enable better product experiences improve economics and drive customer loyalty now if wallets aimed to upend a narrow slice of the financial experience some people are taking aim at the very core there's an exciting uptick in the past few years of new challenger banks brick-and-mortar banks haven't traditionally been known for rapidly adopting the latest technology you know mainframes still occupy a coveted place in the hearts of the banking industry in fact we stress our one big four bank posting job descriptions for mainframe COBOL engineers now some incumbents are feeling the pressure to reinvent themselves we've seen nibbles from Goldman Sachs which has launched Marcus they're digital only consumer banking arm and they're working with Apple and the Apple cards but this is the exception and not the rule the majority of banks in the United States have barely budged but Europe is a different kettle of fish there's a generation of brand-new banks building direct to consumer offerings with the focus on rebuilding the banking tech stack a great mobile experience and providing stellar customer service as you see challenger banks have attracted six billion dollars in capital since 2014 and the velocity of funding isn't slowing down 2019 so a record-breaking 1.5 billion dollars in the first quarter alone almost as much as all the funding in the prior year that's not just investment type again looking at the stripe data this is the fraction of our payments in the UK made records from challenger banks it is now up to 10% so what has enabled all this growth in Europe first off you have a favorable regulatory environment atom Bank Tandon banks Darling Manzo and 26 all these companies were able to obtain a bank charter in less than two years this would not have been possible in the United States and challenger banks have been able to expand broadly within the European Economic Area thanks to pass porting where they can become licensed in one country and then expand to all 27 countries in the EEA without needing additional licensing and it's not just in Europe new bank in Brazil is one of the largest challenger banks in the world they were started only six years ago and they're now already one of the top card issuers in Brazil and so what makes these challenger banks so successful well they are building for the mobile first world with most you can on board in five minutes a card is generated on your phone where you can fund it instantly and spend right away when you compare that to the last time you visited a bank branch you can see why they're being successful and why you need to pay attention now it would not be a future of payments talk without covering crypto I'm sorry I don't make the real assess just how it works so we have been enthusiastically following this space since the original Satoshi paper came out and we read it and sadly did not buy any Bitcoin when we did that there has been a dizzying amount happening in crypto both within payments which is the original use case contemplated in the paper and far beyond and so to rapidly tell us a little bit about what's happening I'd like to bring up one of the leading lights in the crypto community Balaji Srinivasan apology alright so I'm gonna tell you guys a little bit today about ten things happening in crypto gonna first go through some qualitative things things that as a developer or somebody in FinTech you'd be interested in and then ten quantitative things financial primitives at blockchain and crypto of 10x so just show hands leave your hands up so first show hands who here has heard of Bitcoin or aetherium or crypto alright pretty much everybody okay now who here holds Bitcoin and aetherium or anything like that alright and then who here is actually coded with crypto like written something the smart contracts or what have you okay so much smaller percentage of the audience so I want to kind of tell you what is now you know possible with currency what what this is capable of and maybe go from there alright so 10 things to do my crypto let's start with the the qualitative the new capabilities first this always amazes people when I show this demo you can load millions of dollars into an application with 12 words right with a so-called crypto mnemonic phrase it's a way to represent a private key you paste that into an application and it's got you know money available you probably want to you know audit the application before doing it but it's possible to do second thing you can do the crypto you can now paste in bytes into a program to send money so you extend that counts of a mnemonic over here to get a you know just at the bottom there's a string of bytes over there a program can now hold and send money autonomously independent of any human being okay so you can actually do that which is cool when you do this when you hit Enter when that when that is initiated you can actually now monitor and view payments as packets right so this is Wireshark here there you see you know IP and then TCP and then on top of that the bitcoin protocol and you can literally look at the string of bytes moving across the network to see payments you know flowing back and forth and what's remarkable here is what's not here namely there's no wells-fargo there's no you know Federal Reserve there's no reference to any country this is literally payments just on the pure internet fourth kept building with crypto you can raise millions in seconds okay so in 2017 one of the first ones to do this was you know Brendan Eich of brave raised more than thirty million dollars in in under 30 seconds and that's now actually old hat that's an that's that's being done for two and a half years and that's remarkable in terms of the amount and speed with which money is flowing around in these crypto networks it is transformative lis different than traditional financial networks in terms of the the speed at which you can raise money next you can use crypto to scale a cap table to hundreds of thousands of users or even more in just his background you know folks here many folks here are involved with companies the table which has people down the side and share classes across the top of where each entry says who owns what share that's called the cap table sure for the capitalization table typically that's managed in Excel there's also software services like carded that do that and you're limited to you know a few hundred people before you're forced to go public with with cryptocurrency you can actually have tens of thousands or even hundreds of thousands of people who have a similar sort of equity like alignment with your organization so here's you know a contract on either scan with more than fifty thousand holders of the of the be eighty token and that's remarkable because you know the equity alignment of the cap table built Silicon Valley would you know a few hundred people building Google or Facebook whatever before they went public what key do a tens of thousands or hundreds of thousands it's maybe transformed really different next another qualitative capability the crypto gives you for any scaled network effect right whether it's a social network a messaging app a two-sided marketplace which you might be building with like stripe connect or something it's often difficult to dislodge an incumbent because the more users they have the more utility the marketplace has on what cryptid lets you do is it lets you mint a token and because that token is most valuable in terms of upside or has a highest upside rather early in the life of the network it's an offsetting term in the same way for example that an early investor in snapchat would have more upside than a later investor an early user of your new token based social network messaging app or two-sided marketplace would have more upside than a later user and that gives an offsetting term that allows them to tolerate the initial buggy early less functional phases next this is pretty cool you can use crypto actually as a log mechanism right unlike you know Facebook or or email you can actually use a cryptocurrency wallet to log into apps without giving up your identity or your privacy you can basically be done with a digital signature this is an alternate login mechanism and here's how that works using meta mask login to an application and tada you're there you can actually you're in as an account as a crypto account not as a not as a user or human being next get building you can basically represent any scarce asset so obviously gold like you know like digital gold or you know cryptocurrencies themselves but also stocks bonds commodities real estate even things like video game items things that were not initially thought of as monetizable or tradable before are now monetizable and tradable with crypto and there's lots and lots of companies doing this you can also you know one of the things crypto gives you you know for the last 20 years we've you know seen how valuable open source is being really you know maybe close to 30 and that's created not just github but linux and my sequel Postgres you know most major tech companies are based on open source one of the amazing things about crypto is it gives you not just open source but open state and open execution databases and so just to compare those open sources the top row there you can actually go and view the source code on github and download it open state means set a particular instantiation of a database or in this case a blockchain you can actually see everybody has read access to the raw bytes and if you have enough cryptocurrency you can write to that database so that's you know open Steve then open execution means if you look at the bottom of the pending transactions you go to a block Explorer like either scan you don't just see the the data that's there you can monitor all the pending rights and in fact insert your own pending right in the queue if you have enough of that cryptocurrency so this is allowed is for basically massively multi-client databases databases where everybody can read and write contention is resolved by basically the virtue of an auction how much you're paying in fees that's a new paradigm for essentially database design and I think pretty powerful Newark a building that crypt gives you your attempt you can now basically incorporate on chain you can set up corporate vehicles similar stripe Atlas in the sense where you know the the equivalent of shareholder votes and distributions dividends you know all those kinds of things can be done on chain there's a you know organization called Eragon that is doing this so you're basically like qualitatively taking all these aspects of the traditional financial system putting them on chain and then adding adding new capabilities besides and that gives you a sense of like qualitative things let me also talk about quantitative things right so things financial primitives that crypto is actually 10x - okay I'll publish this table at my Twitter account - calm front slash and Balaji s let me just go through the these rows very briefly so first row there is gold right so if you're removing money you know the Bundesbank moved you know billions of dollars in physical gold from the US to Germany that cost of millions of dollars took them years recently you know people were able to move like a billion dollars in Bitcoin for a few hundred dollars in fees so that's like you know but literally a thousand X improvement on this core asset of the financial system second row there is international wires so with Swift you know a typical sapphire will take you know a few business days with you know something like aetherium you can send and depending on how many confirmations you know you can be done in minutes or maximum an hour and that's at least a hundred X improvement it's the difference between sending like a postal mail that gets there in a few days versus hanging an email that gets there in a few minutes you can be on the phone with somebody send them something in aetherium they can see it clear and then execute on it so it increases the metabolism the speed at which business especially international business moves and this is happening especially within the crypto space people use this for sending money you know third is basically downtown so you know banks basically have you know 9:00 to 5:00 so they've got 128 hours of weekly downtime encrypted networks have pretty much zero right so that's interesting so any application that requires one percent uptime you can you can do that forth in terms of crowd funding a large online crowd funder in in 2015 was like on the order 20 million dollars someone like the Pebble watch as a 2017 with crypto it's like four billion dollars EOS raised four billion dollars on chain that's an enormous increase and and something that's quality of ly different v in terms of incorporation already mentioned that you can you can incorporate very rapidly rather than in Delaware you can actually import and in terms of cap tables I noted that you could go from you know a few hundred you know holders to to hundreds of thousands or more in terms of account setup right if you go to a bank and try and get a new bank account that'll take you at least on the order of a few hours probably a day whereas you can generate thousands of Bitcoin addresses or aetherium addresses in fractions of a second which means you can also set up test accounts anonymous accounts you can set up accounts for users and have them earn even before logging in the ability to decouple an account from a human being is a completely new capability um in terms of chargebacks so everybody here I'm sure they love the stripe dispute interface it's it's very good but it's also a pain and you have to you know spend money on chargebacks and so on and if you accept an encrypted currency you don't have to do that now you have to convince of course your users to send you that money in crypto but for some kinds of applications for example domain name sales or other kinds of things which are large international final kinds of sales that may be feasible ix in terms of export ability if you want to go and take all your money out of the bank in cash it's probably gonna take you at least a day you know they're gonna look you up and down they're gonna ask you you know all kinds of security questions and and what have you you can set up all those same kinds of security questions in in a cryptic exchange or a custodial unit but you can also withdraw your money in minutes or hours with no questions asked and then ninth in terms of testability if you go and you you know use stripe sandbox or or a developer environment like that you can simulate a few test transactions and try things out with someone like Bitcoin or aetherium though you can replay the entire history of the economy from T equals zero right just like you know we went from six degrees of separation to a digital object of social network we'd go from this vague concept of the economy to a blockchain which actually has a record of every single transaction that's happened since T equals zero which is pretty amazing so that's you know ten things qualitative and quantitative a crypto thank you very much thank you so much Paula gee and so super helpful overview I mean I'm curious as you you obviously live in this world you know crypto is not short in certain pockets of hype what do you feel is still under hyped encrypter like what should people be getting excited about yeah it's a great question so I think of it as similar to the dot-com bubble where it was simultaneously overhyped in the short term and underhyped in the long term so crypto certainly had a huge boom in 2017 brought a lot of new people into the space um two things I think are particularly under hype there folks outside haven't heard about so one is the sheer quality of talent that's gone into space you have Turing Award winners you have you know Cornell professors you have you know some of the real you know tech like elite and you know academic elite going into this which is similar to what happen in machine learning where folks are expert in stats and so on all came into it so you're getting folks in formal verification distributed systems compilers all those are folks going into crypto the second thing from an application sample and that thing is underhyped is so-called defy so pound defy for decentralized finance you can do to centralize interest loans derivatives prediction markets all the type of stuff and interest rates in particular are like you can get 10 11 percent APR with with with the crypto which is much higher with some risk of course yeah super listen technology thank you so much great cool so the last trend I want to quickly touch on it's actually related to our ballot ball she flashed up in the screen this notion of 128 hours of downtime for bank payments cuz I mean if you think about it why does that have to be the case you know we have the technology let's talk about some of the upgrades coming to the core bank transfer mechanisms that we rely on so in the u.s. it still takes many days for a check to clear or you know sometimes for a bank transfer to go through and needless inefficiency that hurts the 50% of Americans that live paycheck to paycheck I mean I remember I moved to the u.s. from Ireland and being shocked to ask how slow it was you know interacting with the US financial system but it can be done better many other countries have figured this out already luckily many countries including the United States are finally making real progress on faster bank payments on August the fifth the Fed announced plans to develop its own round-the-clock real-time payments and settlement service called Fed now and if rolls out would finally replace the slow and error-prone ACH system with a fast and functional bank Network and it'll be Universal infrastructure to include all banks including the smaller ones now there's been some fairly silly controversies in the wake of this announcement for example you might have heard large banks complaining about competition with private systems but the point we've historically been underserved by the private payment systems in the United States in part because the large collective action problem that exists coordinating more than three thousand banks in countries like the UK with real-time payment schemes while cards are still in heavy use we've seen bank payments come to occupy a significant share of not just b2b but consumer payments as well the timeline that has been muted for the rollout of Fed now is 2023 or 2024 so you don't need to blow up your q4 roadmap to accommodate it but we could be looking at a very different and much improved landscape in five to ten years time and as you step back a bit that's the lesson we should be drawing from all dynamics that we've looked at today whether it be India going from limited connectivity to 1.1 billion people in the digital economy on high bandwidth devices or consumer starting to go to a tech company rather than a traditional bank as their primary bank it's easy to overestimate change in one year and underestimate the change in 10 years when we come back for stripe sessions next year it's probably not gonna be the case that everything has been radically upended Bitcoin won't be the only payment method except by stripe at that time but we've made a ton of progress across the industry for the past 10 years I think the early shoots of progress for the next decade should give us plenty of cause for optimism thank you [Applause]
