In this episode, Mike Townsend spoke with Alex Behar, CIO of Zotapay, a global payment service provider that facilitates online payment processing solutions for emerging markets worldwide, supplying innovative and secure technology. Alex is a visiting lecturer on Cyber Defense and Crisis Management at the University of National and World Economy, Department of “National and Regional Security”.
Mike: Today's guest on Around The Coin is Alex Behar. He is the Chief Information Officer at Zotapay. He is also a visiting lecturer, teacher on cyber defense and crisis management at the University of National and World Economy. He is incredibly knowledgeable when it comes to cryptocurrencies and cybersecurity, and we talked a bit about the intersection of crypto and global payments, particularly in parts of the world that are up and coming, how Visa, MasterCard networks are up against the wall in different parts of the world, and what the shift in payments is going to look like over the coming years with crypto.
Hope you enjoy this conversation. Here is Alex Behar.
Mike: Alex, I, I love your, your intro when we're talking pre-show about Head of the Geeks at Zotapay. Maybe to kick it off, I would you tell me a little bit about what the business does at Zotapay and sort of where your Headspace is over the last few years?
Alex: Yes. Thank you Mike for having me. So,. So, Zotapayis a payments marketplace, a global payment marketplace. An enabled merchant to access around nearly 6 billion people on the planet in over 60 countries worldwide, in various currencies in jurisdictions. So, maybe caters to enterprise and mid-size clients that are actually sophisticated, operate businesses in multiple countries, dozens from time to time. And we allow them to effectively bidirectionally access nearly 1200 various payment, 10 points and P methods in various jurisdictions around the globe.
Mike: Mm. And So, when you think about cybersecurity as somebody who does what is that? What comes to mind? Like what are the big parts of cybersecurity and what is cybersecurity?
Alex: So, I mean, to me, I'm, I'm a guy with sort of a payments hammer in my hand. So, So, of course. I, I want to make sure that, that the world of payments is able to conduct more securely and, and there's less fraud and, and other things that have played the.
I'll give an example. Some of the initial issues that, that customers complained of since the very beginning of credit cards in the fifties and sixties has been fraud. This is actually a constant thing, So, that hasn't changed ever since. And, and this all, all of that risk is effectively transferred on us as customers here in, in the Western world where we use cards for.
Large number of our transactions, either by the internet or, or physically in person. So, So, that's, that has been the security of discard information has been something that has been interesting since the very dawn of the industry. I, I feel So, So, the, the, the way the credit card is designed, it's actually one of your oldest pieces of technology that you physically own.
If you think about it, nothing else. There's a magnetic, you know, strip that you, you know, can go and at a tur So, So, that's, that's So, the legacy baggage that, that comes with the credit card industry. And, and one of the issues there is is of course the cybersecurity and fraud rate.
We've heard all of us about major breaches where millions and millions of card numbers are copied, and then they're useful then to be able to buy elit wears or, or conduct fraudulent transactions with them online. So, one of the, one of the. Alternatives actually. And, and as they're actually called alternative payment methods is, is what really is proliferating all around the world.
So, the 2022 fi global payments report noted that in, in a lot of the emerging markets, the penetra rate of Visa, MasterCard is under 20%. And there are several reasons for it. A bunch that, that I can see firsthand by, by observing it in, in locally and in various, with various merchants there.
And and just traveling and, and buying stuff at markets and talking to people. Is the fact that participating in the Visa MasterCard ecosystem is actually expensive, right? Any credit card related devices is an expensive ordeal. It the, the card itself, there's a certain amount of, of cost associated with it, but also the, the post itself is not a is not cheap.
It's a device that has to be certified, has to be secured. So, this exact point where the card needs the poster is, is expensive to run for merchants who. For example, Indonesian seller of of fish, for example would prefer to, to use his 25 or her $25 Android device to conduct a transaction instead of having to buy hundreds of dollars worth of a post you to use for only people that carry post you So,.
In vast areas of the world and nearly 6 billion people, So, there's 3 billion credit cards issued to about 1.5 billion unique individuals. So, nearly 6 billion people out there still conducts transactions digitally and online. They just don't do it via traditional payment methods. So, Zotapay effectively focuses on the alternative pain in the world, being able to reach bidirectionally everyone on the planet, especially those who do not have know a credit card. So,. I, I hope that's So,. Yeah.
Mike: So,. Yeah. So, what do you think of the general trends that's happening in the world, say outside the US in particular? There's, I, I almost think there's some, le tell me where you would push back on this, but there's a leap prong that's happening where distribution of actual physical cards is not happening at the same rate that it did in the US because during the card distribution era of the eighties and nineties and early two thousands, there wasn't the smartphone technology to handle payments through your phone. Now that that exists, there's just a far lower incentive for people in Africa, Southeast Asia, areas that haven't had those physical cards, or the merchants haven't had the terminals.
That network hasn't been built. There's just not, People don't want that. Right. They, they would just rather use their phone. So, are you basically saying that, Visa, MasterCard are not distributing physical cards. And instead they're like integrating with the Apple pays or Samsung pays of the world and, and they'll still have a successful network business, Visa, MasterCard, will, through just purely digital distribution of card numbers. Or do you think this plays out in some different way?
Alex: It's, it's there. The majority of people, So, at least 80% of people in, in outside of the OACD nations do not have a Visa or MasterCard product. So, whether it's a card, a debit or, or anything So, So, that that actually creates a, a world where visa mata are effectively the ability to address with creative card through credit cards schemes the world are, are not very large because the entry level of, of, I mean, there's a few unlocks that happened if you think about it with the.
Of the invention of the mobile phone and, and, and it, it's, it becoming So, widely accessible because of the cost curve of it falling right. It allowed a small device, a small computing device that has a display that is constantly internet connected. That has a camera So,. All of these things when put together effectively obs make, make the the card ecosystem obsolete even of itself, the physical plastic part of it, because you always have a constantly connected device.
The other entity has. Has the ability to potentially even issue you a QR code or any NFC kind of payment mechanism such as ApplePay and others So,. The, the way the payments are conducted outside of, of sort of Europe, the us Japan, and then a few other places in the world. Are more oriented toward this, this payment forms of peer to peer and alternative payment methods.
A way to think about this in sort of a US context is, is the way Venmo or, or would compete with Visa, for example. Right. It's an alternative payment method. Even though it's connected and, and let's assume for a second that it's an entirely alternative payment method, then you can be a Venmo customer and not be a, a Visa customer for the sake of the argument.
This exists all around the world. I mean, there are super apps out there and we start hearing about this more and more in, in, in English western media, but that has been the case for at least five to seven years in a lot of countries out. A single entity doing payment processing and, and other lending services and, and other things, So, So, that, that really is a non-ad addressed market for, I guess, the courage to uplift, if I may call it, to explain.
Mike: Yeah. So, do you, do you kind of synthesize that, that reality as the idea of a monthly credit card? Or monthly credit line kind of becoming obsolete as a thing of the past. Like why, why do people even use credit cards today? Is it, it feels like a little bit of this circular reward system where I use a credit card, not because I need the credit.
I have plenty of cash to pay off my bill, but you know, I'm not living month to month. But I would rather get the points and So, people use credit cards inside of debit cards or Venmo because of the points. Well, the points. Come from the merchants. The merchants pay tax to the credit card companies and So,.
It's like basically a slight discount,
Alex: Which means, by the way, we pay a tax to the credit card companies,
Mike: Right? That's right. Well, no, what It doesn't mean more specifically that the people who it means yes, you pay a tax, but the people who use a debit card or a peer-to-peer transaction at a merchant that also accepts credit cards, those are the people that are.
The biggest tax because they pay the tax for the people who use the credit cards, who get the points, So,? Yes. It seems like usually you don't go into a store and see two different prices. It's like you don't see like this is the price for credit card, this is the price for Venmo or cash. It's the same thing. So, there's like a tax that's really outsized on people who are paying with debit or direct cash.
Alex: Yeah, the, I, I guess the card companies, especially in the US and, and in Europe to an extent were able to build very successful modes around their business model by, by repeating merchants amongst other things of advertising the price without the transaction versus the price with transaction cost of various items.
But it, it has it, the let me just try to break this down into a few pieces. One is the plastic. Part, the effectively the payment instrument of the card itself, whether it's I debit or credit is irrelevant. And the other is, is the financial service that is attached to it, which is the credit aspect of it, the credit line aspect of it.
And there is no reason why an alternative payment method would not have a credit line aspect to it. Why wouldn't a local lender lend a small merchant say, Send Fisher to purchase a new fishing boat for her family? Or maybe a factory, create a factory for, for their products and lend against their cash flow future cash flow in order to be able to, to expand their business.
Right. So, there's plenty of, of lending and microlending ecosystems that have spurred out there. To the extent where, where Western Banks as we know them and as we use them look, nothing like the some local alternatives, especially in, in Africa and the central part of Africa.
Mike: But wouldn't, wouldn't, isn't that idea a little bit backwards in the sense that when I use a credit card as a consumer, I'm getting paid for taking out credit.
You know, at the end of the month I pay off the bill and assuming I pay off the bill and I had that 30 days of of credit, they're paying me for having that credit. Whereas a typical credit line, I pay the bank or I pay whoever is lending me money. So, The incentives are kind of backwards for people who are using credit cards today, as opposed to people who are taking micro loans out for business purchases elsewhere.
Alex: So, it's a, it's a very interesting point. It is a, it is a very interesting point. I, I actually want to say one thing that is fairly uncertain sort of an axial, and that is the fact that, that neither the credit card providers nor any of the folks in, in the entire value chain are actually subsidizing your used to an extent.
Right. There is also. There's always a value transfer somewhere. And it's, it's at the end of the day up, there's industry standard pricing of, of, especially in the card ecosystem, and there's very little wiggle room to compete also because of the pricing being just So, I guess ubiquitous to So, many players that compete in the current space.
And that actually puts the pricing effectively pretty much the same across everyone So, So, from that perspective. The price discovering words between clients and, and the car providers.
Mike: So, me to make sure I understand you correctly, So, the clients and the car providers. So, you're saying that because there's So, much competition and commoditization, that the, the, the points that people, that consumers are getting for using credit cards is about the same, like one and a half to two and a half percent, whereas, Maybe that's also true for the lenders, but it's still, I still wonder like if, if there's this
Alex: on some purchase, on some purchases, the points are less than others. Like if you look for example, the airline cards working, I'm, I'm, I'm not an expert on, on the reward programs of of your card systems. I spend the majority of my life in, in Israel, Europe. But effectively it's an acquisition cost. It could be thought of as an acquisition cost by whoever provides the cart.
I mean, if they provide you better rewards for flying an airline. Purchasing from a certain store. At the end it's a positive return exercise for them.
Mike: So, it almost seems like there's a ab test going on on one part of the world. You have this kind of circular coupon reward system where you, where the, the network itself, the Visa, MasterCard, require that the merchants don't have multiple pricing.
So, the people who are using the credit cards are benefiting. They're getting the points back, and that's kind of exciting. People think about points, they like to use credit cards for the points, and on the other side you have peer-to-peer transactions where merchants are not accepting credit cards and So, the prices are gonna be two to 3% lower because they don't have that transaction fee through the payment process.
Do you see one of these methods as being. successful in the long run? Like, do we kind of converge? I mean, I would think that people would just want cheaper items instead of having this, you know, this game of like a monthly credit card and then you, you get points, but they're not really money. They're like points that you could only spend on hotels.
But, but does that, what gets played out in the numbers?
Alex: So,. I, I guess one of the, the, the biggest tailwinds to the card industry around the world also is, is the support for mobile payments such as Apple Pay and Google and So, on, but, but merchants themselves also especially ones that, that can do, that produce content or, or applications or games or, or, Any digital, any part of the digital economy and, and have assets on, on, on these app stores, they would like to address the non card, which is up to 6 billion people in the world, effectively.
The non card ecosystem. And it's very difficult to do this under the current model for Apple Pay and and Google and So, on because they only support either in some selected markets direct debit, but mostly connecting with cards that is either Visa or. And also paying with them this way.
Okay. So, So, I mean, So, So,. There's a loss of going on, and, and, and there's, there's a few challenges. And from my understanding, this is still ongoing and, and, and highly highly disputed matter. But I, I, the, the general feeling and, and the way we are looking at, at this is that a lot of Western.
Companies and in, in the US and Europe specifically, not knowing how large the non-car payment world is are, are maybe not monetizing, they're already strong brands out there in, in, in the emerging markets.
Mike: So, . And do you think, it seems like Apple Pay and Samsung Pay are in a really unique position because they're kind of controlling the future or the current, but really the ever more So, the future of the, the bottleneck of, or the hardware component?
The hardware software interface for payments, So, people use their credit card. Their credit card now is increasingly on their phone, and the concept of a credit card will probably feel like a, like a record or a CD or a cassette where it's. We have the little logo, you know, an MP3 logo on my computer.
Might have a cd, but like, you know, if you ask kids now, they don't know what a, a cassette is. Like So, this is gonna become like a, a software digitally represented. Token where the credit card, physical card, I imagine will have to become a relic of the past soon enough. And So, you have this card on your phone, you swipe through it like it looks like a bunch of cards, but really we're like, we're retrofitting the, you know, the horse to the car. It's like in reality
Alex: the expiration dates and there's So, several innovations that have happened. Pinholes and 3D secure.
Mike: Exactly. You don't need that stuff anymore. I mean, it'll probably be there for a while because it'll just be, you wanna be able to use your card everywhere you go and So, some place.
Some merchants will be slow, but I imagine there ha like why doesn't Apple have their own like payment? I guess they kind of do. Like is Apple and Samsung's end goal, I guess Google to try to own the payment flow? Like are they viewing themselves? Effectively wanting to disintermediate the credit card companies and own that.
Own the, the payment network, do you think?
Alex: I, I, I can only assume but it, it definitely is a lucrative ecosystem for them, especially with the data and being able to launch other products on back of it, even subsidize the cost of payment effectively which they're currently not doing. But theoretically they could in order to, to try to monetize various other services.
But the, the demand for, for non card payments is clear already. I mean, even some more modern iPhones and of course Android phone support nfc from, from these MasterCards already, and you are right. The, I also, I also don't think that the, the. The payment instrument of a plastic card is something that will continue to be around for, for much, much longer just because of, of how aware everyone of, of, of using a cell phone is and and how much they understand the value.
So, So,. Even some car makers are already removing the car keys and putting them in digital key So,. I, I, I think that that's where it's going. Everyone's phone is sort of the center of, of their universe pretty much. And and that allows also running a business from your phone and, and accepting payments and other things.
Mike: Mm. Interesting. Yeah, it seems like it's converging on a simpler solution in one sense, where it's just digital, it's just one network. You know, unless it's,
Alex: And that's not to speak by the way of the challenge that, that, that digital assets and general crypto currencies have to, to traditional banking and, and traditional funds.
It's So, actually we're a fairly large user of, of stablecoin as effectively challenged to the solution network for being So, expensive. And the ability to, to actually conduct such treasury operations is, is something that many, many businesses are recognizing today. And if you speak to some of the guys at better or, or circle, or.
The big stable providers you quickly are, are kind of seeing that, that there are large players out there that effectively are using the digital asset space as just means of moving vast amounts of value as a challenger to already existing payment infrastructure of, of the past.
Mike: Interesting. And So, when you say the treasury, are they are these companies or do you think a winning strategy is to, I, I think of stable coins as, or the stablecoin operators as they have a bank account somewhere, a traditional bank account, and they have money in that bank account and the amount of money that they have in the bank account. Should line up with the amount of money in circulation one to one.
And U S D C is one currency, I think that's outright and audited to make that claim. Whereas Tether, I believe does not guarantee a one to one balance. So, If you look at the graph, there seems to be a, a, like a, a volume shift happening away from Tether towards U S D C, and I think there was a lot of pressure on Tether during.
The Terra Luna collapsed. So,. That's stablecoin. But you know, no one really knows how much money they have in the account as far as I know. Now, I don't know if you have another perspective on this, but how do you view these companies or how do you think the emergence of stablecoin or crypto in general starts to really meaningfully start to disrupt payment network?
Alex: So, I, I guess the crypto could be thought of as, as, as something that is equally as disruptive over the long run. As, as, I guess a mobile device. A mobile phone. A mobile computer really because it allows the, the the ability to transfer funds in a fairly cheap manner and the, the creative new assets and, and distribute.
And a bunch of other cool things that we haven't even thought of yet. Quite honestly, in five years, the crypto space will look completely different than it does today. It did So, five years ago already. Mm-hmm. So, that, that's sort of one thing that certainly it's challenging all kinds of industries, not just the payment instrument industry itself, but all across the value chain of, of.
And traditional finances, as it turns out as far as the, the stable Coin providers, I mean the tether and, and and circle, and I guess the finance are the three largest. I cannot speak about the controversial matters around te I, there's a bunch of stuff and will let the viewers and listeners actually do their sort of build their opinion on that.
But there are a lot of controversy around them and, and operating stable coins is certainly not an. Financial challenge. The stablecoin operators actually, if you, if you go and read through their documentations and, and speak to their sales people, you'll quickly understand that they have access to vast payment rails and the ability to, to conduct payments in various currencies.
Over Swift and SEPA and other payment networks all around the world, So, effectively, if you are a large consumer of, of of their services, you could send them sometimes from, from the data circle or actually post out hundreds of, of millions of dollars per week. And they would actually disperse that in field via Swift So,.
They effectively are able to, to do this on and off boarding at or on and off ramping at a ridiculous scale, which is their job in the.
Mike: Right? So, Alex, one of the things I, I kind of am curious about here is what's the, how do we synthesize this? Like how do we synthesize this into a worldview or a general pattern or trend that's happening? And so that's where I'm most interested in the intersection of crypto because crypto feels like it's the thing that's changing everything else.
There's certainly har the hardware component with the smartphones that are changing it, but underlying the smartphones, the Samsung Pay and Apple Pay are still the same rails. So we're taking a new shape, but you know, it's mildly interesting. Like we have a digital credit card instead of physical credit card, but it's still a credit card.
Still the same incentive structures. I'm, I'm always fascinated when we change an underlying uh, system because that changes the incentive and that changes the world. So do you see from your vantage point a, a massive shift happening or do you anticipate it to happen or. I imagine it's gonna happen in different parts of the world first, but how does crypto really, like meaningfully change the world of, of payments that you're seeing?
Alex: So, in, in terms of as a, as an institution and, and looking at this for, from a very narrow point of view as, as effectively conducting treasury operations. There's already a, a big adoption of, of. Various stablecoin providers out there and, and they're used on chain very successfully. And and operators like circle for example process hundreds of millions of redemptions per per week, sometimes in, according to the public publicly shared information.
So, there's already an ecosystem with a lot of demand. They're able to of course, be a gateway specifically circle and, and te for example, between the digital assets space, the blockchain itself and fiat world by providing institutions and, and large clients such as family offices and other large financial entities.
Access to vast amounts of, of stable coins to fiat on and off ramping effectively So, the first way that I'm already seeing The, the blockchain and crypto digital assets space affect traditional finance is by the ability of various financial institutions to operate completely in stable coins on the various chains and redeem those for fiat as effectively a challenger to Swift and, and other banking institutions that, that are another, essentially linking the value chain and also being paid.
Sometimes there's a percentage of volume So,. We are seeing a lot of providers already mandate the use of it. And, and one way to actually judge how the, the enterprise So, of demand for, for these assets is to look at the adoption of, of things like fire blocks and, and other. Effectively treasury and, and asset storage management mechanisms that allow larger institutions to do this.
And, and, and the ecosystem is, is growing rapidly from, from my point of view. I, I'm not sure how retail payments and how that will, the, the whole crypto space will, is yet to, to meaningful impact the way we actually pay at at a post terminal. And, and that's entire life cycle. But on the larger institutional front there already. Quite a bit of demand and activity on that fund.
Mike: And break me down a little bit. So, you mentioned fire blocks and then institutional activity. What does that mean? Does that mean like a company is paying another company for services and they're settling on U S D C and then what are fire blocks?
Alex: So, Fireblocks is a is a company that, that manages provides multi signature access to digital assets on, on chain and off chain.
They have, I'm not going to make that a full pitch for them, but they have a very interesting product and allows companies like ourselves to, to manage digital assets regardless of the cryptocurrency in in secure fashion and conduct. Transac. With other entities, So, So, that effectively if you think of, of fire blocks as a, as a clever online banking for, for blockchain based assets.
So, So, that allows various large institutions to, to settle funds between themselves in, in seconds instead of days, and paying large fees. This could be thought of as a way for, for, let's say, a payment institution in Malaysia to settle with a European client of theirs for setting the search go to a service locally there.
Mike: Interesting. And So, that's happening rapidly at this point. These large organizations, which have a major, Yeah, major incentive. Yeah. Yes,
Alex: yes. It is just that the, the cost of, of conducting these transactions just the cost curve has gone So, low. That, that today wiring of a few hundred thousand u s D over Swift versus transacting it via a stable Coin like you or te So, actually quite all cheaper to do it on the chain.
Mike: And do you see, do you see a are we headed towards a world where there is a, just a, a decreasing influence from traditional banking and payment infrastructure and this new crypto technology starts to become like more mainstream? Or do you think there'll be a state either the US or other western states starts to really.
Fight that where they view it as like, Hey, initially, maybe it's U S D C, but maybe there's another stable Coin or people moving to Bitcoin and the US dollar starts to decrease in relative power for international trade. Is that, are we headed towards that as an inevitability, do you think? The US in particular, since it's the global reserve currency.
Do you think the US like institution as a, as a government, starts to fight this in some way? I mean, they haven't, they've kind of dragged their feet up until this point in terms of like regulation, but they have not by any means, like declared war on cryptocurrency. And I, I wonder, is that possible? Is that inevitable? Do you have a view on that?
Alex: So,. It's a, it's an interesting question, So, from a, a regulatory perspective I, there's a lot of things that are being said and a lot of activity on behalf of, of regulators in the US and they're also in every other large economy just because of these flows between crypto and fiat and, and the crypto ecosystem growing to, to surpass a trillion and then 2 trillion at some point.
So, it, it's it's definitely regulators definitely starting to pay more attention. I, I can speak to how that will affect the, or regulatory, the regulatory frameworks that, that the various regulators are looking at as our, my focus generally is is just on sort of the, the regulated financial institution on site.
And for now we effectively entities like us according to. To regulations such as the FCA and, and other European regulators. They actually forced us to treat this as a, as a normal treasury So,. The US DC effectively is just the US dollar, and it's being treated as such So, from that perspective.
There, there's, there's no not a significant difference there. It's an asset. I hope that that answers your question.
Mike: Yeah. Well, I, I'm, I'm kind of more or less getting at like, are are we headed? Do you think there's a 1% chance, a 99% chance or somewhere in between of governments overtly, like saying, Hey, we're, we're blocking citizens use of cryptocurrency, because they're gonna say it's for safety, right?
They're like, Of course, it's always about safety, but really it's about control and So, there's a, there's always a seesaw relationship between safety. Like privacy and safety, Like you could have incredible safety as provided by the government, but then you have no privacy and So,. I, I, I wonder to what degree people in, I ask this question a lot just to get people's temperature on it, like, I, Is there an inevitable conflict of interest?
There seems to be an obvious conflict of interest as we move away from the US dollar and its crypto. The US dollar is less valuable and the, you know, the gov, the US government cares about the US dollar's influence and World Trade So,. I dunno, I, I, I try to like mash this together and like, am I, is there something I'm missing?
Do you see something happening internationally? Get a larger back row sort of play.
Alex: I see, I see where you're going with this. Well, it's fairly open-ended question, but I'll say the following in terms of. Just the larger flows of U S D Europe and other currencies the crypto ecosystem is, is, is fairly small So, today, it really remained to be So, and maybe in the next decade.
So, I don't think it poses a threat to any national at least large economy national currency yet. But I, I think that any single country creating laws and trying to, especially enforce laws. Digital assets will actually cause or, or any, against any actually payment flow such as capital flight controls and others, which is a very popular dictatorship you know, method So, once these capital flows are, are, are enforced, then effectively the, the friction of using the crypto versus another painting method that.
Today, all of a sudden doesn't look very frictiony So,. It, it looks So,. I mean, it's, it's a lot easier to, to do this with crypto than, than what I used to do before. Cuz now I cannot transact, I cannot buy certain items. I cannot transact with another country and So, on and So, forth So,. From that perspective certainly you know politics in all kinds of places around the world could cause.
Small pockets, a very rapid adoption of, of digital assets. Maybe ones that are to the local market and local digital currency, maybe that, that local providers want. But, but I, I definitely see that happening especially in, in emerging markets.
Mike: Yeah. Yeah. It just seems like the US has printed an exorbitant amount of money and that that offsets, it really creates a. It really it hurts people internationally much more. So, you know, the US Bank or the Federal Reserve prints money gives it to US citizens. Well, that, that hurts everyone else outside of the US who's not receiving those payments. It would be one thing if they like airdropped it to everyone equally, that, but there'd be no point to doing that.
Just be like, you know, here's the money So,. Then it, it, at a certain point, it just, it reaches this, you know, you print money to pay off the debts that you already have, and then you sort of get into. The flywheel kind of loses grip and then like hyperinflation starts to kick in in a meaningful way. And I, the US is, you know, this is the number one concern of the country and it seems to be the number one most popular topic to not let this happen.
But if and when it does, it seems to be a pattern throughout history. There is a, like you say, a capital flight. People move out of the currency. They may buy property like real estate. They may went to the equities market, but increasingly, So, crypto is a fast and simple way to move out of the US dollar, and in particular, if you're holding your US dollar in stablecoin on chain, it's like, you know, 10 seconds later you could have Bitcoin instead of US dollars. So,. I given that the back door is So, open, you know,
Alex: Awkwardly enough. It's a very tangible asset for a number of of non SD and, and not, I would say non-Western countries such in South America where effectively buying the US share on, on from a, from brokerage might not be as easy as, as it seems, but buying crypto might happen even locally from peer to peer or even from a, of course, regulated exchanges.
That, that you're able to. So, digital assets all of a sudden become something that more people understand, as awkwardly as it might sound than, than they do traditional financial instruments that, that, you know, pension funds have traditionally invested in.
Mike: Mm. Are there other areas, So, we talked a little bit about this tension between governments and policy as the US dollar it competes with in a more meaningful way.
Alternatives and crypto we talked about the evolution. The credit cards and the potential tension that they're gonna have with competing like digital currencies. Are there other areas that you think are especially poignant or especially interesting as we go into like 20, 22, 3, 4, 5, 6, the next, you know, Five to 10 years that will be very topical or maybe underappreciated in the world of payments that you're seeing?
Alex: Yeah, I I definitely see a few trends that are that are very, very interesting and, and effectively will benefit clients the most. And that is the the way the entire ecosystem is, is. Effectively fighting to reduce the cost of transferring and making payments when a large amount of market share, especially in retail payments, is controlled by duopoly such as the Visa, MasterCard, monopoly, and, and, and other scheme in, in all, all around the world.
When, when such things occur, there's unnatural price discovery. Effectively, they're able to corner the market. And I think by just the virtue of, of how fragmented the market is all around the world and similar sort of calls and realizations on, on, on behalf of our Western firms and digital technology companies here.
I think this was, this is something very, very interesting El. Is saying all kinds of things about Twitter going into payments, potentially global payments. So,. We're yet to see you know, there's also the, the story of Facebook's project in the space So,. We we're yet to see who managers and how to sort of implement These kinds of functionalities here, but in other places all around the world.
I think that's, that's already up given just because they skip the whole process of, of dealing with credit cards. That entire technology cycle of digital payments came with the mobile phone and at this point the card system didn't make much sense. Interesting. So, So, would you So,? From my perspective, I do say a sort of an arc, a narrative arc of, of.
Just removing all of these layers and frictions and entertainment network system.
Mike: So,. It's almost to say that the thing to look out for would be existing social networks. It like injecting payments into them. So, like Facebook did this So, with the Facebook Messenger. There's like a pay button.
Apple Pay does this. You could pay other people with the cash. Then there's companies. Square who kind of pseudo did this because they had an existing network of merchants and, but then they had, they launched the, the cash app, which is like, you know, they had to build that from the ground up, but they really kind of doubled down on the user experience.
There seems to be maybe an opportunity like in Twitter where you have a large existing social network that you can then include payments into that as opposed to try to build it from the ground up, which makes sense to me. I mean, Twitter, there's probably not a lot of those, right? There's like Twitter, You know, maybe Reddit, you know, whatever social network is out there.
Then another approach would be like government forced, you know, you could have, but, but that seems like it's just not gonna happen. I mean, cbdc is a topic, but.
Alex: The, the government is, is of course best spended effort by, by pulling instead of pushing. Yeah. With regulation. I mean, there's a bunch of very, very clever folks working on behalf of regulators.
I mean, I, I, I get to deal with them a lot over the, the last few years. And I actually see the level of talent that works there and the folks that are operating and. It's shortsighted of us to, to not consider the fact that some of the brightest folks work in these institutions. Is that right?
Are also looking at the same data. We are, for example, on the fact of the Federal Reserve, right? So, of the brightest economists of our generation are, are sitting in offices, are right now in trying to crunch the numbers. And innovating in, in in all kinds of ways for us to be able to better understand this level of data to this level.
Mike: See, like, I'm so torn because I love that you're saying that, but when I look at around, at the, in particular US politicians, but even, even many of the western politicians, there seems to be such a consistently, uh, shallow level of sophistication amongst. Folks talking about particularly economic policies that, I don't know, I just, it doesn't gimme a lot of hope.
There's a lot of faith that there's much intellectual capacity happening underneath the hood
So, I, I love this point. I find it really fascinating, which is that I.
You're, you're saying you're interact with a lot of people in government, I imagine the US government that are sophisticated, nuanced, the best economists of our time, which is awesome to hear that. That's that's what I would have hoped you would have said. I hope it's genuinely true, and I hope they're having the ability to influence policy in a meaningful way.
The smartest people, I, I somehow just. I don't see it ripple effect. I worry about the interaction politically because it seems like political leaders are just not nearly as either, both honest and nuanced in sophistication, in their sophistication of economic policies. Like it just kind of feels like broad strokes, you know, pretty a trillion dollars here, pretty trillion dollars.
There's no, there's no philosophical stance or maybe none that's articulated clearly about what the policy is like. I think back. John Maynard Keys and Hayek and like the, the role at which government should be intervening in the private markets. And there was a lot of really great debate happening, but it, I don't see it.
And, and I, I hope to God it's happening because it's just So, important. You can't just assume the government could come in, print a trillion dollars to solve the problem. And deep down we all know that, but like the answer is somewhere really nuanced and sophisticated.
Alex: So,. Yeah, I guess the answer was to print between zero entry you know, and 1 trillion, I guess somewhere in the middle.
But I guess where, where all of us are sort of discounting what it means to be a politician and and, and effectively to be dealing in state crafting the day and age of social. And the kind of talent that's attracting. And there's a great bunch of very, very good science So, on effectively what it means and what the kind of people it takes to, to effectively be able to polarize in the wrong ways in, in modern politics.
So, I guess that's, that's sort of, that's where your observation would be, would be stemming from, and I, I can't really talk about this part very much as, as. I have no expertise in, in political matters, especially in, in the complex, already complex US political system as it. But I will say the following, I, I, I think that, that the institutions such as the Federal Reserve and and local and, and of course some of the global banks some of the folks that, that work there are, are, are, are very, very sophisticated operators.
I would say, I mean the, the level of, of, of knowledge and understanding and, and the sort of commitment it takes to, to analyze this data in. Let's say Federal Reserve of of St. Louis is just, that requires people who are, you know, would have an amazing career on, on Wall Street if, if that's what they wanted, right?
So, some of the, the people working there are, are, are amazing at their craft. They're able to analyze and effectively innovate in how data is analyzed and understood. And I think that's, that's. What has showed that the US model to be more successful in, in, in many ways than, than the European model where each and every country sort of runs its own yard stick measurement apparatus.
And, and they're not as effective as and not able to implement such policies as the US ones, but not. One thing to be cognizant of is the fact that such institutions attract amazing people with different kinds of skill sets and commitments. And some of them actually really don't need to, to progress from a career perspective.
If they come, for example, from a wealthier family, So, they're they don't want to to go into Wall Street and, and, and everything that comes with that work culture over there and sell their So,. Yeah. And instead focus on, on effectively state craft policy. Uh, I think that's a very interesting very cool folks.
And and there's, there's some very amazing innovation that.
Mike: Yeah. Anything else you wanted to share? I know you, you spent a lot of time thinking about cybersecurity and crypto and payment networks, particularly abroad. Otherwise I can ask you your favorite books and podcasts and things that have influenced you the most.
Alex: Hmm. So, I, on, on, on the cyber security side, I'd like to sort of merge this for, for with, with crypto and digital assets more broadly. I think that that's a really defining issue and we can see this in, in the statistics and unless as an industry we figure out how to collaborate together.
Now to chase these, these, the threat actors and, and be able to mount more meaningful counter measures to them being able to, to actually move this money into, into real excuse me, to move this money into a, the real financial system which which is happening by threat actors such as North Korea.
And others all around the globe who are able to, to you know, conduct this at, at scale So,. I think that as an industry in both the payments and of course digital assets from a business to business So, the B2B perspective we just need to get, get our heads together collectively and figure out what this new platform and ability to transact allows.
In order to better address the threats that we all face So, that there is a large disincentive of someone to, to go and, and perpetrate a large hack of an exchange or, or any digital asset ecosystem or project. Just because they, they now know that that local or global law enforcement will, will come after them and, and seize those assets.
So, So,. I think that's, that's a that's a major challenge that, that the entire industry needs to be more serious. As, as, as far as podcast. Go ahead.
Mike: Yeah. I was gonna ask what, what books or or content pieces of content have influenced your, your thinking the most in recent? ,
Alex: So, So,. I, I would say Philip Tetlock Superforecasting.
That was a very, very interesting book. And it is just it's interesting how, how folks who professionally work as, as forecasters and, and to predict certain events what their success rate is and and, and how this entire industry sort of works in, in, in the scope of finance, financial consulting financial managers and So, on and So,.
Not a podcast. I, I, I enjoy a lot. Is, is, is Dub for Economics and, and the related series. I don't know if if you've been listening to them. They have amazing content, very thoughtful and and a cover of variety of, of matters that, that I enjoy, Of course Financial Times and. And Barry Al's actually a Bloomberg reporter.
He brings interesting business leaders to, to discuss various matters that they're very interesting and, and folks from, from various backgrounds also from literally from security to real estate, to to finance and other things. And yeah, that, that, that would be a few good ones to to, I guess,
Well thanks So, much, Alex. Congrats on all your progress So, far and you know, it sounds like a really exciting area to be in. So,. Hope to have you back on someday and thank for your time, man. You forward.
Alex: Yep, you too.
Mike: Take care.