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Jan 2, 2019 · 21m · a16z

a16z Podcast | The Future of Money and Monetization

James Beshara · 6m spoken Alex Rampell · 6m spoken Kristo Käärmann · 5m spoken Michael Copeland · 56s spoken
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In this episode of the a16z Podcast recorded live at the UK Tech Summit, general partner Alex Rampell moderates a discussion with TransferWise co-founder Kristo Käärmann and Tilt founder James Beshara about how financial technology startups are reshaping banking. The panel examines regulatory compliance, customer acquisition tactics, legacy bank partnerships, and the evolution of transaction fee models.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →

The host as informed peer 6.8 Guest teaching 2.8 Guest disagreement 1.6 The host pushing back 2.6
05100:0010:0020:001:03–4:03 · The host as informed peer 6/10 Regulatory Compliance in Financial Technology Alex frames the discussion by contrasting fintech regulation with tech platforms like Uber and Airbnb, referencing KYC and AML laws. The guests agree with the host's premise, detailing how they secured licensing prior to launch rather than circumventing laws.4:03–7:05 · The host as informed peer 5/10 Strategies for Customer Acquisition and Product Design Alex asks about customer acquisition strategy against incumbent banks that cannot cannibalize their own fee structures. Kristo and James explain user education around hidden exchange fees and product design as primary growth drivers.7:05–12:24 · The host as informed peer 7/10 Partnering with Banks and the 'AWS of Money' Alex provides context on the difficulty of opening startup bank accounts and notes the extreme rarity of new US bank charters. James introduces the 'AWS of money' framework, urging banks to offer their infrastructure as an API.12:24–19:24 · The host as informed peer 8/10 Credit Card Processing, Interchange Fees, and Payment Friction James pushes back on Alex's framing regarding credit card interchange, claiming merchant savings pass through to consumers. Alex counters with empirical data from Australia's interchange caps and the MCX merchant consortium to demonstrate how lower interchange eliminated consumer rewards.19:24–21:27 · The host as informed peer 8/10 Alternative Monetization Models and Panel Conclusion Kristo turns the question to Alex regarding ad-driven banking models, prompting Alex to share insights from his nine years founding TrialPay and its acquisition by Visa. Alex concludes by outlining how point-of-purchase value will replace traditional transaction fee models.1:03–4:03 · Guest teaching 2/10 Regulatory Compliance in Financial Technology Alex frames the discussion by contrasting fintech regulation with tech platforms like Uber and Airbnb, referencing KYC and AML laws. The guests agree with the host's premise, detailing how they secured licensing prior to launch rather than circumventing laws.4:03–7:05 · Guest teaching 2/10 Strategies for Customer Acquisition and Product Design Alex asks about customer acquisition strategy against incumbent banks that cannot cannibalize their own fee structures. Kristo and James explain user education around hidden exchange fees and product design as primary growth drivers.7:05–12:24 · Guest teaching 3/10 Partnering with Banks and the 'AWS of Money' Alex provides context on the difficulty of opening startup bank accounts and notes the extreme rarity of new US bank charters. James introduces the 'AWS of money' framework, urging banks to offer their infrastructure as an API.12:24–19:24 · Guest teaching 4/10 Credit Card Processing, Interchange Fees, and Payment Friction James pushes back on Alex's framing regarding credit card interchange, claiming merchant savings pass through to consumers. Alex counters with empirical data from Australia's interchange caps and the MCX merchant consortium to demonstrate how lower interchange eliminated consumer rewards.19:24–21:27 · Guest teaching 3/10 Alternative Monetization Models and Panel Conclusion Kristo turns the question to Alex regarding ad-driven banking models, prompting Alex to share insights from his nine years founding TrialPay and its acquisition by Visa. Alex concludes by outlining how point-of-purchase value will replace traditional transaction fee models.1:03–4:03 · Guest disagreement 1/10 Regulatory Compliance in Financial Technology Alex frames the discussion by contrasting fintech regulation with tech platforms like Uber and Airbnb, referencing KYC and AML laws. The guests agree with the host's premise, detailing how they secured licensing prior to launch rather than circumventing laws.4:03–7:05 · Guest disagreement 1/10 Strategies for Customer Acquisition and Product Design Alex asks about customer acquisition strategy against incumbent banks that cannot cannibalize their own fee structures. Kristo and James explain user education around hidden exchange fees and product design as primary growth drivers.7:05–12:24 · Guest disagreement 1/10 Partnering with Banks and the 'AWS of Money' Alex provides context on the difficulty of opening startup bank accounts and notes the extreme rarity of new US bank charters. James introduces the 'AWS of money' framework, urging banks to offer their infrastructure as an API.12:24–19:24 · Guest disagreement 4/10 Credit Card Processing, Interchange Fees, and Payment Friction James pushes back on Alex's framing regarding credit card interchange, claiming merchant savings pass through to consumers. Alex counters with empirical data from Australia's interchange caps and the MCX merchant consortium to demonstrate how lower interchange eliminated consumer rewards.19:24–21:27 · Guest disagreement 1/10 Alternative Monetization Models and Panel Conclusion Kristo turns the question to Alex regarding ad-driven banking models, prompting Alex to share insights from his nine years founding TrialPay and its acquisition by Visa. Alex concludes by outlining how point-of-purchase value will replace traditional transaction fee models.1:03–4:03 · The host pushing back 2/10 Regulatory Compliance in Financial Technology Alex frames the discussion by contrasting fintech regulation with tech platforms like Uber and Airbnb, referencing KYC and AML laws. The guests agree with the host's premise, detailing how they secured licensing prior to launch rather than circumventing laws.4:03–7:05 · The host pushing back 1/10 Strategies for Customer Acquisition and Product Design Alex asks about customer acquisition strategy against incumbent banks that cannot cannibalize their own fee structures. Kristo and James explain user education around hidden exchange fees and product design as primary growth drivers.7:05–12:24 · The host pushing back 2/10 Partnering with Banks and the 'AWS of Money' Alex provides context on the difficulty of opening startup bank accounts and notes the extreme rarity of new US bank charters. James introduces the 'AWS of money' framework, urging banks to offer their infrastructure as an API.12:24–19:24 · The host pushing back 7/10 Credit Card Processing, Interchange Fees, and Payment Friction James pushes back on Alex's framing regarding credit card interchange, claiming merchant savings pass through to consumers. Alex counters with empirical data from Australia's interchange caps and the MCX merchant consortium to demonstrate how lower interchange eliminated consumer rewards.19:24–21:27 · The host pushing back 1/10 Alternative Monetization Models and Panel Conclusion Kristo turns the question to Alex regarding ad-driven banking models, prompting Alex to share insights from his nine years founding TrialPay and its acquisition by Visa. Alex concludes by outlining how point-of-purchase value will replace traditional transaction fee models.

speaking balance: gold is the host, purple is the guest (3 minute bins)

0:00 · the host 0% · guest 100%0:00 · the host 0% · guest 100%3:00 · the host 0% · guest 100%3:00 · the host 0% · guest 100%6:00 · the host 0% · guest 100%6:00 · the host 0% · guest 100%9:00 · the host 0% · guest 100%9:00 · the host 0% · guest 100%12:00 · the host 0% · guest 100%12:00 · the host 0% · guest 100%15:00 · the host 0% · guest 100%15:00 · the host 0% · guest 100%18:00 · the host 0% · guest 100%18:00 · the host 0% · guest 100%21:00 · the host 0% · guest 100%21:00 · the host 0% · guest 100%
Sharpest disagreement ▶ 13:28 James challenges host premise on merchant fee pass-through

James directly disagrees with Alex's suggestion that lowering interchange fees harms consumers, asserting that cost reductions to merchants naturally flow down to end consumers.

 Hardest push from the host ▶ 14:41 Alex refuses James's economic framing with Australian case study

Alex actively pushes back against James's consumer benefit claim by citing specific Australian regulatory outcomes where interchange caps led to the loss of rewards cards and the introduction of annual fees.

 Biggest teaching moment ▶ 10:15 James details the 'AWS of Money' platform concept

James re-frames the relationship between fintechs and incumbents by outlining a clear strategic path for banks to monetize their backend licensing and compliance as an infrastructure platform.

 The host holds their own ▶ 14:41 Alex displays extensive payments expertise on credit card dynamics

Alex demonstrates deep domain knowledge by analyzing Target's net profit margins, Australian interchange regulation percentages, and the MCX merchant consortium's reward strategy.
the scores for every segment, with the reasoning behind each
ChapterTopicThe host as informed peerGuest teachingGuest disagreementThe host pushing backWhy
Regulatory Compliance in Financial Technology 6212 Alex frames the discussion by contrasting fintech regulation with tech platforms like Uber and Airbnb, referencing KYC and AML laws. The guests agree with the host's premise, detailing how they secured licensing prior to launch rather than circumventing laws.
Strategies for Customer Acquisition and Product Design 5211 Alex asks about customer acquisition strategy against incumbent banks that cannot cannibalize their own fee structures. Kristo and James explain user education around hidden exchange fees and product design as primary growth drivers.
Partnering with Banks and the 'AWS of Money' 7312 Alex provides context on the difficulty of opening startup bank accounts and notes the extreme rarity of new US bank charters. James introduces the 'AWS of money' framework, urging banks to offer their infrastructure as an API.
Credit Card Processing, Interchange Fees, and Payment Friction 8447 James pushes back on Alex's framing regarding credit card interchange, claiming merchant savings pass through to consumers. Alex counters with empirical data from Australia's interchange caps and the MCX merchant consortium to demonstrate how lower interchange eliminated consumer rewards.
Alternative Monetization Models and Panel Conclusion 8311 Kristo turns the question to Alex regarding ad-driven banking models, prompting Alex to share insights from his nine years founding TrialPay and its acquisition by Visa. Alex concludes by outlining how point-of-purchase value will replace traditional transaction fee models.

Statements from this episode (15)

Assertion Not checkable as stated
Rampell: Violating AML and KYC laws leads to prison, unlike ride-sharing infractions
“The challenge is, if you go into the realm of money, and you say, you know what, KYC. Know your customer laws. AML. Anti-money laundering laws. Those are stupid and antiquated. We're not going to follow those. You go to jail. So the consequences are much, much…”
Alex Rampell Jan 2, 2019 ▶ 1:28
Disclosure
TransferWise spent nine months securing UK regulatory licenses before launching product
“People have told me that I was stupid because I chose the other way. I spent about nine months before showing the product to anyone, going through the FCA, then FSA regulation process and licensing. So we took the way, unlike Uber or Airbnb, to be a fully lice…”
Kristo Käärmann Jan 2, 2019 ▶ 2:01
Insight
Käärmann: Customer acquisition for TransferWise is about educating users on hidden fees
“So for us, the customer acquisition problem is really explaining the problem.”
Kristo Käärmann Jan 2, 2019 ▶ 4:36
Assertion Not checkable as stated
Beshara: Tilt is the fastest growing app on US college campuses
“We're the fastest growing app on college campuses in the US.”
James Beshara Jan 2, 2019 ▶ 6:47
Disclosure
Käärmann: TransferWise pays millions annually across 52 banking partners
“In every country where we are, we have banking partners and infrastructure, so it's about 52 bankers that we, ah, that we pay fees to, and you know, in total, that's multiple millions a year.”
Kristo Käärmann Jan 2, 2019 ▶ 8:46
Opinion
Beshara: Banks cannot compete on UX, fintechs cannot match bank security
“Banks that have tried to get into, kind of, the UI, UX, I don't think they'll be able to compete with 50 really dedicated designers, developers that are just focusing on the user experience the user interface, and those 50 people will not be able to compete wi…”
James Beshara Jan 2, 2019 ▶ 11:33
Assertion Contradicted
Rampell: Only one U.S. bank charter was granted in five years
“Part of the problem, like at least in the US, there's been one new bank charter granted in the last five and a half years, and it was an Amish bank.”
Alex Rampell Jan 2, 2019 ▶ 12:03
Assertion Contradicted
Rampell: Eliminating credit card interchange fees would double Target's profit
“Target, big retailer in the US, has about a 1.5% net margin, so net income over revenue. If interchange went away, they would double their profit.”
Alex Rampell Jan 2, 2019 ▶ 12:33
Prediction Not checkable as stated
Beshara: Merchant savings from lower payment fees will reach consumers
“Well, if it goes to the merchant, then it will go to the consumer. And it might not be a complete hundred percent pass through, but I'd say that the transfer of wealth will make it its way to the consumer. It just always does.”
James Beshara Jan 2, 2019 ▶ 13:29
Assertion Partly supported
Rampell: Capping Australian interchange fees eliminated rewards cards and increased fees
“Like, so, Australia has interchange at 49 and a half basis points by law, and now, I mean, and this is not me supporting Visa. It's more of, It's very peculiar that you have an industry where when prices go down, consumers can be worse off. In Australia, now t…”
Alex Rampell Jan 2, 2019 ▶ 14:56
Prediction Not checkable as stated
Käärmann: Future payment processing fees will drop far below 49 bps
“You can't really imagine the future of payments costing even 49 basis points. It doesn't, just doesn't make sense. You know exactly how, if you know how payments, card payments work, you know, electrons go from the terminal or one web browser through the gatew…”
Kristo Käärmann Jan 2, 2019 ▶ 16:23
Assertion Supported
Beshara: Only $5B of $1.2T US peer-to-peer payments happen digitally
“The closest thing that I can get to is, I know in, and in some estimations, peer-to-peer payments in the US is 1.2 trillion dollars a year. The amount that happens electronically, digitally, is only about five billion.”
James Beshara Jan 2, 2019 ▶ 18:20
Assertion Not checkable as stated
Rampell: Writing paper checks is cheaper in the US than electronic payments
“It's actually cheaper in the U.S., in almost every case, to write a paper check than to make an electronic payment, which is crazy.”
Alex Rampell Jan 2, 2019 ▶ 19:15
Disclosure
Rampell: TrialPay Sold to Visa Due to Lack of Distribution
“We didn't quite hit it just because we had the innovation, but we didn't have the distribution, which is why we sold the visa.”
Alex Rampell Jan 2, 2019 ▶ 20:38
Prediction Not checkable as stated
Rampell: Payment Ads Will Shift From Banners to Value-Add Offers
“I definitely think that advertising will play a different role, but it's not banner ads. It's not click ads. It's actually, ah, things of genuine value and benefit to consumers”
Alex Rampell Jan 2, 2019 ▶ 21:00
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