#393: Lisa Shields on Building Tech-enabled Financial Services

Lisa Shields is FI. SPAN’s founder and CEO. She previously founded Hyperwallet System, which sold to PayPal for $400 million. In this conversation, we discuss the difference between marketing and sales, building an intentional business, open banking, embedded banking, rise of fintechs, and the importance of data ownership. ============================== BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp ============================== Bybit currently has over 300,000 users, with the number growing in double-digit percentages monthly. The exchange has no overloads during volatility and low latency trading plus 24/7 customer live support. At Bybit, we listen, care, and improve to provide the best possible trading experience and create a faster, fairer, and more human trading environment. Visit Now! ============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Lisa Shields is Five Span's founder and CEO. She previously founded Hyperwallet System, which sold to PayPal for $400 million. In this conversation, we discuss the difference between marketing and sales, building an intentional business, open banking, embedded banking, rise of fintechs, and the importance of data ownership. I really enjoyed this conversation with Lisa, and I hope you do as well. Before we get into the episode, though, I want to quickly talk about our sponsors.

• 0:39Anthony Pompliano?

  First up is BlockFi. BlockFi is killing it. I'm an investor, I sit on the board, and I'm a big time user of the platform. BlockFi provides financial products for crypto investors. Those products include high-yield interest accounts, US dollar loans, and no-fee trading. You should start earning today. You can visit blockfi.com/pomp. Again, blockfi.com/pomp. Go try out BlockFi and then tweet at me and let me know what you think. Next up is Bybit. Bybit currently has over 300,000 users, with the number growing in double-digit percentages monthly. The exchange has no overloads during volatility and low-latency trading, plus 24/7 customer live support.

• 1:21Anthony Pompliano?

  At Bybit, they listen, they care, and they improve to provide the best possible trading experience and create a faster, fairer, and more human trading environment. Go check out Bybit. You can use the link in the description of this podcast. Lastly, don't forget that I write a daily letter to over 75,000 investors about business, technology, and finance. I break down complex topics into easy-to-understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. Alright, let's get into this episode with Lisa. I hope you guys enjoy it.

• 1:58Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 2:24Anthony Pompliano?

  All right, guys. Bang, bang. I've got Lisa here with me. Thank you so much for doing this.

• 2:29Speaker 02

  Pleasure to be here.

• 2:30Anthony Pompliano?

  Absolutely. All right, let's jump right into your background. You have a very, very cool story and have had one major exit and hopefully you're on your way to the second major exit as an entrepreneur. But what did you do kind of before you started building companies?

• 2:48Speaker 02

  Yeah, so I'm one of those accidental entrepreneurs. I was always the irritated engineer in, you know, a technology company that thought, you know, management and the salespeople were always doing the wrong thing by the customer and I could do it way better than anybody else. Small side story, eight years later after I started Hyperwallet, I actually called some of my old bosses and apologized to them because then I knew how hard it was. But the, you know, the background really is, so I was a working engineer in aviation information systems and made the switch to payments 20 years ago when online shopping became a thing. And I took that job simply because I was interested in the technology, you know, internet databases.

• 3:32Speaker 02

  And really quickly I became intrigued by online commerce and the impedance in things like international payments. And the truth is, it was 1999, we were all partying like it was 1999 and we thought, hey, we can do it better. We're not going to let ignorance get stand in our way and we're going to found a company. So that's the honest backstory of how I founded a payments company. And then it was a long inculcation into like how the industry works and how to find a value prop within it.

• 4:05Anthony Pompliano?

  Got it. And so that business was Hyperwallet. You end up scaling it and PayPal eventually bought that business for about $400 million, to my understanding. Maybe just tell us kind of what was the original idea you guys had and then kind of how did you scale that product and kind of build something valuable enough for a large company like PayPal to come in and buy it?

• 4:26Speaker 02

  Sure, so the story of Hyperwallet is twofold. One, undercapitalized and a bunch of engineers building products looking for a market. So really, we, you know, Hyperwallet was an 18-year overnight success story. And what we built that was really interesting was something that in the industry is now called cross-border ACH. But the ability to do compliant and very cost-effective, low-value cross-border payments. So, you know, any idiot can compliantly send $300,000 from the United States to France and take a, you know, couple hundred or thousand-dollar commission for the foreign exchange and fees along the way.

• 5:08Speaker 02

  But if you want to send $300 from the United States to France for a business paying out a 1099 worker, for example, that's actually not easy to do at a price point and a compliance level. So that's the platform that Hyperwallet slowly built over the years was the ability to do, take advantage of local in-country, low-cost clearing networks. So we slowly built a global network of networks, if you will.

• 5:40Speaker 02

  But the business was still really small and so when it became more valuable was around 2010, when, you know, a salesperson, a sales executive actually joined and said, "Look, instead of trying to point this at individual consumers or point this at banks, let's point this at corporates that really need to pay many, many hundreds of thousands of 1099 workers." So that was the direct selling industry. Think Mary Kay, Herbalife, those kind of companies had a real problem. And ultimately, what we were competing against was checks in FedEx packages, right?

• 6:19Speaker 02

  And then what really provided the tailwind for that business was the, you know, evolution of the marketplace and marketplace-like businesses. And so it was a low, slow burn, slowly, you know, we bootstrap and made it profitable because we had to. We found a vertical niche that ultimately became more valuable and is a horizontal play.

• 6:44Anthony Pompliano?

  And what was your biggest lessons learned as you kind of built that business, right? Because it sounds like you kind of went through all the ups, the downs and the excitement and the tough times. What were the biggest lessons you took away?

• 6:58Speaker 02

  Well, one is as an entrepreneur, that you know, as a product focused entrepreneur, you know, you shouldn't, it's not, sales is not bad and revenue is not bad. And you know, finding your market is not bad and actually servicing the customer is, is not bad. So I learned the difference between marketing and sales, which is a tough, tough lesson for an engineer to actually comprehend. But the other, you know, more relevant to financial services is it's, you know, building layer upon layer of what's there is okay. Trying to drill right down and build something brand new, and I call it like fighting city hall in the industry, is a bit of a mug's game.

• 7:42Speaker 02

  And unless you have the ability to raise billions of dollars, you know, that's kind of not a battle you want to be in. So that was my other lesson.

• 7:49Anthony Pompliano?

  Yeah. And then talk a little bit about kind of when the company actually was acquired. Was that, hey, we think that they can take it further and farther, you know, with us? Is that something, hey, I wanted to go work on another thing, like kind of what was the impetus? And really the idea being, there's a lot of founders who listen to this and they dream of one day having their company acquired, right? Or taking it public. And so how did you kind of go through the, the evaluation of what to actually do before you did that transaction?

• 8:20Speaker 02

  Yeah, let me preface it that I actually stepped down from an operating role in 2015. So I was still on the board and still very much involved, but not as a management and not sort of stewarding the business. But what I can say is it was time to provide liquidity to our shareholders. So that absolutely was part of the motivation. And when you think about it, we were profitable, profitable and growing. But within Hyperwallet, providing payouts, there was only so much the business could do and grow, and with the regulatory complexity.

• 8:58Speaker 02

  The opportunity to find a bigger platform that can marry in payments, marry pay in and payouts. Right. So think about from PayPal's perspective, putting Braintree and Hyperwallet together to compete against the likes of the Stripes and the audience of the world that are, you know, coming up. That was very exciting. So to broaden the applicability of the platform, um, you know, and be part of something big. Uh, and, and see that, you know, see that baby that we built really continue to grow beyond what we could do. It sounds trite, but that actually was part of it.

• 9:33Anthony Pompliano?

  No, that makes, uh, makes complete sense. And then once you decide, hey, I'm gonna, uh, go do this again and go bash my head against the wall and build another company. Uh, did you have an idea as to what you wanted to build or did you kind of make the decision, uh, let me build a company and then I'll go find what idea I want to work on?

• 9:50Speaker 02

  Um, is really interesting. This, the genesis story of Fisban is completely different than like bottle of Chardonnay and hey, this is a great idea. Uh, of Hyperwallet. Um, because I did have the benefit of 18 years in the industry. So I call Fisban a very intentional business. I literally sat in my basement for a year. Thinking about different business ideas, because this is the one truth about, about founders. If you had have asked me in 2012, if I would start another company, let alone a financial services company. I would tell you only an idiot would start a payments company. Um, and only like, uh, you know, a super idiot would try and do this again.

• 10:34Speaker 02

  But, you know, we have a very, very selective memory and all the highs and lows of running a business. You, you forget all the terrible lows when you want to shoot yourself in the head and you only remember all those great times, right? So, but, but Fisban is very, very intentional. And I certainly took some of the market observations from the Hyperwallet time. And a couple of things were, one, that all the hype in financial services is in the retail side. Because that's what everybody know. You know what it's like for you to use a credit card or for you to use Apple Pay, right? You know, when you get irritated about, you know, your bank's online banking.

• 11:11Speaker 02

  So that's where all the hype is and a lot of the attention, but I, I really believe that there's huge opportunities to make the world better for businesses. Um, and the second thing I knew. Being an intentional start to Fispan was, I didn't want to compete against banks. I fundamentally had this thesis that banks have superior payments products, superior cash management services, superior loans. Because they have a lower cost of capital, like just, you know, just think about the fundamental underlying attributes, but they have really, really, really struggled with, you know, that quote unquote delightful user experience.

• 11:55Speaker 02

  So I literally sat there and I was like, you know, is there an opportunity to introduce a company and a business model into the market? That's sort of the opposite of Platts, where you're not aggregating banks for third parties to own the customers. You're aggregating the endpoints to allow banks to better service their customers. So that's the genesis story of Fispan. A, forgot the bad times. B, had enough, you know, wanted to do it again and C, there was just so much opportunity.

• 12:27Anthony Pompliano?

  Yeah. And so this is a really interesting kind of framework you provided of like, there's plenty of people out there who said, hey, we're going to aggregate all the banks and then allow the third parties to have that relationship with the customer. You essentially are doing something opposite, right? Kind of taking the, the thing that everyone sees value in and has kind of been funding for a while and you flipped it. Why was that where you wanted to go? Did you have kind of a contrarian view saying that, you know, the other people just don't see this opportunity? Was it a skill set or an experience that you had? But like, how did you identify that where maybe others haven't spent a lot of time?

• 13:06Speaker 02

  Well, so there were some actual data points, conversations with CFOs and treasurers back in my HyperWallet day, where what HyperWallet had done, yes, we had this fantastic, low-cost, mass B2C service. But, and we'd exposed ourselves through APIs to be in the cool kids club. But we'd done one more thing, which is our engineers had integrated our products and our APIs into our customers' business system of record. These are big publicly traded billion-dollar companies. And that fact engendered a lot of love. And when I would go back and talk to my customers, they would say, hey, can you provide us B2B payment services? Can you provide us with cash management services? Can you provide us with foreign exchange?

• 13:50Speaker 02

  And I'd be like, why? I'm just this tiny little under-capitalized company. Why would you even offer me? And so what they'd said is, look, I'm highly banked. But what my banks offer me is a file spec. And now I need to go out and hire someone to integrate it with my workflows. And then I have a separate process. And then my internal controls are shot. And then I have additional audit cost. So that was the specific insight, right? It wasn't like I decided it's very clever to have a contrarian view to the market. It was that there was sufficient pain points by corporates that they were willing to engage with third parties

• 14:35Speaker 02

  for like what I call fundamental transactional services. And so like, quite frankly, it was just opportunistic. I thought, look, I don't want to build something from scratch. But if I can arm banks to really service that need, that's better for the customer and better for the banks.

• 14:55Anthony Pompliano?

  Yeah, that makes a lot of sense. And so talk a little bit about kind of what was the first product you built? And kind of what does that product or product suite look like today?

• 15:05Speaker 02

  Yeah, so fundamentally, what we like to say at Fisben, we bring business banking into the customer context. And what we mean by that is like, from the customer's perspective, it's about jobs to be done, not a bank product to be used, right? So I want to keep current with my overseas customers. I don't want to send a wire, right? I want to forecast my cash. I don't want to log into online banking to view my balances. So in practice, what we do is we embed commercial banking services within other applications. And the first and most important experience is embedding inside accounting and ERP applications. So we bring those bank services in context.

• 15:49Speaker 02

  Easiest way to think of it is by example. I'm inside my ERP. I've gone through my workflow to approve a vendor invoice. I just want to click and have this vendor invoice paid. I don't want to care whether it's like ACH, check, print, wire, right? I just click, it's going to be paid. I know which bank account it's going to be out of. Tomorrow, when all the like the magic has happened, that object is going to be automatically updated in my ERP. All the track and trace information is there.

• 16:19Speaker 02

  Open banking APIs, you know, host-to-host connectivity can make that all happen. Making that all happen seamlessly without the customer worrying about it is what we do.

• 16:31Anthony Pompliano?

  So there's a whole bunch of kind of magic that happens. And I always describe the types of business that you're in is you want the customer to know about you when you're selling them to use the product. And then when they're using the product, you almost don't want them to know you're there, right? Because you're basically kind of magically doing all of these things that just make their life easier. And part of this is there's these two key ideas, right? So there's open banking and then there's embedded banking. And maybe we can talk through open banking first. What does that mean and kind of how is that playing out in just fintech in general? And then how are you guys actually interfacing with open banking?

• 17:12Speaker 02

  Yeah, so open banking, you know, means different things to different people. You know, it can be regulatory driven, but by and large, what it means is an obligation of a financial institution to make its customers' data and services accessible to third-party applications and endpoints, right? So it's where the bank will expose a security and authentication paradigm that somebody else can come to, whether it's a, you know, PIM, right? So Personal FM, Personal Financial Manager application. And I can aggregate all my bank accounts inside this third-party application.

• 17:53Speaker 02

  Open banking requires the bank to say yes to that third-party inquiry to receive my balance and transaction histories. And in different jurisdictions, it's sometimes, it's actually almost always is a regulatory initiative, right? Like bank thouest must.

• 18:11Speaker 02

  So what open banking brings to the industry is a set of application APIs that developers and third parties can consume to make these things happen. At Fisban, we think embedded banking is an outcome of this technology, this API interconnectivity in a permissioned and secure way. But embedded banking can be a result of open banking, or it can be a result of an industry initiative. So we happen to service at Fisban, North American and primarily US financial institutions, where there is no obligated open banking.

• 18:53Speaker 02

  So we integrate with our banks in a trust model and then create those APIs for the bank. So I'm not sure if that answered your question. Open banking is the set of technologies and regulatory obligation. Embedded banking is the embodiment of that for the benefit of customers.

• 19:12Anthony Pompliano?

  Got it. And so the open banking aspect is really just providing way more connectivity between all of this infrastructure, these organizations. And the way I've thought about it, and you're the expert, so you're going to correct me if I'm wrong here, is kind of what the internet did to connect organizations, people, infrastructure, etc. Really, open banking is just doing that in a kind of a single niche vertical of finance and banking. Right? It really is this idea of like, how do we use these digital tools to provide much more connectivity and reduce friction across everyone?

• 19:47Speaker 02

  Yeah, great, great example, right? I can go back, I can see you and trump you on that analogy.

• 19:52Anthony Pompliano?

  All right, let's hear it.

• 19:54Speaker 02

  I can go back another generation and talk about ODBC, right? Which was like database, you know, open database, whatever it was, like connect. So this was a technology, open banking is like a technology and concept that enables greater access to an asset that can, you know, provide value to the owners or users of that asset. Whether or not a specific database Whether Oracle endorsed ODBC and opened up its database through this new paradigm was its own internal decision. Right. And your analogy of the internet enabled this much greater, you know, access connectivity, interoperability.

• 20:40Speaker 02

  It would be up to an individual industry, whether it wanted to offer its services and products online. That's where we are with open banking right now. The promise of it is huge and enormous. Banks are trying to figure out whether and how they want to participate in this and quote unquote, what's in it for them.

• 21:02Anthony Pompliano?

  And then the idea of this kind of embedded banking, that really is more of leaning into this theme that like, it feels like every technology company is somehow becoming a fintech, right? I mean, it seems like every single business is in some manner trying to incorporate some financial service, right?

• 21:23Speaker 02

  Yeah. And so I would argue that that doesn't mean every single business is trying to become a fintech. That embedded banking allows every single business to to make use of a fintech service for the betterment of its product and service delivery. Now, some do want to become fintechs. So an accounting system like QuickBooks that wants to offer a payment service and monetize it. That's one strategy, but an accounting system that just wants to provide the best account, you know, the best experience for its customer, not necessarily monetize it, is another example of, you know, somebody who's going to benefit from open banking.

• 22:08Anthony Pompliano?

  And so what does this mean for the banks themselves, right? I think that we've kind of, historically, there was a line in the sand. And it would be like, you know, a kindergarten teacher saying, okay, all the banks on the left side and all of the technology companies on the right side. I don't think you can do that anymore because that line is very, very blurred. So those traditional banks. What happens to them or do they are they actually beneficiaries of all of this?

• 22:35Speaker 02

  Massive beneficiaries and that was, you know, when we go back to the like founding thesis of Fisban is I always saw open banking and you know, the API economy as just an enormous opportunity for banks, not a threat, but everyone's worried about being disintermediated, right? So if my customer is using my payment service and it's initiate, it's not my brand, they're not clicking on like my button, somebody else's, that's scary. But what I fundamentally believed is open banking has the possibility of bringing as much actionable but new data into the bank domain as it does to take data out of the bank domain and put it in the, you know, hands of third parties.

• 23:20Speaker 02

  Specific example again is imagine with connectivity to a customer's accounting system in a permissioned way. Bank could now have real time and continuous access to that business's open receivables, income statement, balance sheet. And now instead of inferring the best customers to lend to and, you know, making a guess at the underwriting. Imagine if with permission of the business, the bank could shave a few basis points off of a loan offer, make the lending experience absolutely seamless. And that treasurer just looks at his forward forecast and says, yes,

• 24:03Speaker 02

  I'll take this $2 million of working capital, starting from here to here, you know, and then loan servicing, that's the promise. And so these other endpoints and these other applications that will be embedding financial services in them. If you take the in the data and information out of them, it allows the bank to provide a better product and a better service to its customers.

• 24:27Anthony Pompliano?

  So one of the things that over the years absolutely shocked me about anything banking and finance related was how non predictive the technologies were. Everything was pretty much counting what was happening, facilitating things that are happening now. But it was very hard, I think. And some of that was due to lack of technology, some was due to lack of data, some was due to lack of just time and energy spent building it on more like predictive analytics and kind of using what we know today to tell us what's going to happen in the future. It feels like this open banking and embedded banking kind of busts down that wall and creates a world where there's so much data and there's so much

• 25:10Anthony Pompliano?

  technology and so many integrations that there really can be and maybe there is being a very big rise in a lot of these predictive technologies.

• 25:20Speaker 02

  Completely agree with you. But what's interesting is I that's where I think this theme of new kind of data companies is what is the next next thing.

• 25:31Anthony Pompliano?

  Okay.

• 25:32Speaker 02

  So today, yeah, so today, everybody's trying to act on, you know, these breadcrumbs that we leave all around the world, right? And a bank is a bank or somebody else is trying to say, hey, which are the best customers to lend to based on the linked what's happening with this business on LinkedIn, how many people they're hiring, what they've bought, etc. And what I think is the future and what we've based our company on is what I'm calling like the custodial age of data. And what I mean by that is that the new kind of data opportunities will morph from their current state with this this massive amount of side

• 26:14Speaker 02

  effect information that you then need to apply AI on to, to, you know, make sense of. You know, she read an article on business process automation, right? And so let's feed her ads for the for every CRM and workflow app out there for the next 12 months. I'm currently experiencing that. So it's one of my pet peeves, right? Instead of fine spend, we think that the most interesting opportunities will arise from the intentional sharing of actual data and actual intent with bounded and enforced usage rights around that data.

• 26:51Speaker 02

  And so when you, when you talk about like the AI implications, right? Instead of having it being artificial information, what about having it be actual information? And you know, the best predictor of the future is actually the past, right? So the most interesting new platform businesses, you know, in, in my opinion, won't be the ones that are amassing the most data. But, but instead there'll be the platforms that provide the best access, data owner control and in watermarking services

• 27:31Speaker 02

  to the data exchanges that matter, right? And the data exchanges that matter, I believe are, you know, between a bank and its customers.

• 27:40Anthony Pompliano?

  And okay, so let's dig a little bit deeper on that because I think it's a really interesting view of the world. Uh, historically, let's take, you know, social media companies, finance companies, all these different types of companies. They basically had a couple of different assets. Most financial investors would look at, you know, how much revenue do you have? What's your profitability? How many users do you have? All of that kind of stuff. Inside of the companies, and literally I worked at Facebook for two years, so I know. The more access to information you have, the better you can make the product, the more personalized, the more contextual, the longer somebody will stay, the more ads you can serve, kind of, you know, one of the assets is definitely the more information I get the user to give me, the better this is for us as a company, right? It's kind of one of the, the key tenants.

• 28:22Anthony Pompliano?

  What, it sounds like you're talking about, and, and that's true to banks and, and others as well, right? It's kind of the more information, the better. What you're talking about is actually almost flipping the model and saying, no, the winners of tomorrow are going to be the people who don't look at it as, uh, from the corporation seat. Instead, they look at it from the user seat and they say, what can we as a business do to empower this user to have the best experience, the most privacy, the most efficiency? Kind of all of that, and a lot of it's actually going to be not to hold on to the data. It's going to be to give the user the data, to give them permissioning, to give them all sorts of tools that maybe historically they haven't had, because incentives weren't aligned between the corporation and, and the end user. Is that fair to say?

• 29:06Speaker 02

  Um, that's not only fair, that's probably a better way of saying it than, than I do at my pitch, so I'll invite you to, um, my next sales pitch.

• 29:13Anthony Pompliano?

  No, no, no, you, you do a fantastic job.

• 29:17Speaker 02

  But in all seriousness, like when I, you know, as I, as I talked about, you know, founding Fispan, sitting there quietly in my basement Googling away.

• 29:25Speaker 02

  I believe that the value of Fispan to our customers, the banks, and ultimately to allow them to provide value to their customers is precisely because I, as Fispan, assert no ownership or usage rights over any of the data that traverses my network, right? So, and the apps I build on behalf of the bank, so our JP Morgan Chase, you know, ERP extension, isn't branded Fispan. It's, it's branded JP Morgan, it's a, it's a service of JP Morgan Chase to their customer. But nonetheless, if it's a product I'm building, I'm building permissions inside of it, right?

• 30:10Speaker 02

  And if, when you click and install this extension and you say, I agree to share the vendor file, my vendor file with the bank, it's not for the purpose of the bank marketing to those vendors, it's for the purposes of the bank to provide me with a better accounts payable risk management experience, or something like that. So that's just our policy, and we think that that's going to build value in the future. And we are an example of a new kinds of, you know, data platform, but there'll be many more other kinds of examples of that.

• 30:44Anthony Pompliano?

  Got it. And then in terms of that, from a product building standpoint, it, do you have to have full end-to-end encryption so that not only do you not have ownership or usage of the data, but you actually can't see it? Or is this a situation where you kind of can't really do the job that the product's intended to, right? If you can't see the data? So it's kind of like this hybrid model of you don't want ownership, you don't want

• 31:17Anthony Pompliano?

  usage, it's more of just like a permission that the user told me to do X with their data, I go do that job, and then I don't do anything else until they tell me to do something else, right?

• 31:25Speaker 02

  Yeah, yeah.

• 31:28Speaker 02

  We're not there yet. And so I see, I absolutely see what you're saying. But it just happens that our business model is we're both a, you know, technology outsourced and servicing outsourced component of the bank. So in order to service the clients, we need to see that data.

• 31:50Anthony Pompliano?

  Yep. And that's what, that would be my expectation in that it's different for like, and for those that are listening who may not, who may think they were in the weeds here for a second. Take Facebook, for example. If Lisa and I are both on Facebook and I send her a message other than for advertising purposes, there's no need for Facebook to be able to read what message I sent to Lisa or what message she sends back to me. So you can have kind of full end to end encryption where only Lisa can read it or only I can read it. Facebook doesn't need to see that. Now, Facebook would like to see it because they'd like to target us on advertising, whatever. But for the intent and purposes of what we're trying to do in communications and encryption makes a lot of sense. When it comes to this information, though, you can imagine if you interacted with your bank,

• 32:35Anthony Pompliano?

  but they couldn't see the amount that you were sending, they really can't kind of do their job, right? So there's certain pieces of information, obviously, that they need, which would make sense in this situation.

• 32:45Speaker 02

  Yeah. So where we, where we're also not there yet from a technology perspective is, you know, there's, there's O Auth, there's all sorts of encryption, tokenization, that technology exists. But I haven't yet seen an embodiment of the, what I'm calling watermarking of data, which is like having its intended permissions around its usage being enforced end to end. So that technology doesn't exist, but we're starting to, within the industry, have discourses about it. So whoever invents that, I think will be, and it's not going to be me, but that will be another example of a very valuable technology and business to be introduced.

• 33:30Anthony Pompliano?

  And is this the idea, so? There's a lot of people, myself included, who believes that kind of every stock, bond, currency and commodity will get digitized in the future. And so let's take equity, for example. It would be awesome if the equity was in some sort of token or digital format, and it could prevent a non-accredited investor from buying an asset it's not supposed to from an accredited investor, right? And kind of, it's almost like this self-governance through an automated technology because the asset itself has rules and kind of regulations coded into it. Sounds like that's what you're talking about here?

• 34:10Speaker 02

  It's exactly what I'm talking, like a different analogy, but it's like the data that traverses, again, we'll use that example of if I'm a business and I'm going to share my list of all my vendors with my bank, right? And the purpose is to help me reduce accounts payable fraud, right? It's that purpose of the data, right? And so what I'm talking about is when that data is now conveyed to the bank, today at Fispan, I can pass along those permissions, but I can't enforce them. I can't, like, once that data is at the bank, except contractually, like, they know what they're supposed to do, but the actual owner of that data, today, I'm

• 34:52Speaker 02

  not providing him or her with an audit trail of exactly where that data went and what it was used for after it's gone out of my system. That's not a technology that I'm going to build, but I would love to see it because once we have something like that as a standard, then the opportunity for data owners to actually decide how much of, to really have control and confidence and be able to choose to use Facebook or not, right? To me, that's interesting. I mean, I'll hopefully be done by then.

• 35:30Anthony Pompliano?

  Absolutely, and I think that will happen at some point. It's just to your point, who builds the technology and kind of how do they implement it first, right? Is it equities? Is it currency, something like that? I would be absolutely berated on the internet if I didn't take the time while I had you to talk a little bit about digital currencies. You spend all day dealing with large banks, bank customers, kind of financial technology. What have you seen from a viability standpoint, whether it's, you know, a US digital dollar, a digital euro type thing? So kind of a central bank-backed digital currency. There's the private currencies like the Libras that have been kind of thrown out there as ideas, or even into the cryptocurrencies like the Bitcoins

• 36:15Anthony Pompliano?

  and things like that. Is there conversation about that in kind of the world that you operate in? Is it people are aware of it, they don't really care and don't talk about it? Just give us an idea of kind of what you've seen so far on the ground.

• 36:28Speaker 02

  Yeah, in my simple world, businesses aren't asking. I'm a really simple person. At Hyperwallet, you know, we were all about enabling different sorts of, you know, pay you direct it. If you wanted to, company is sending you $300. If you want to have that direct deposit in your bank, cool, you can do that under your control. If you want to pick up cash at Western Union, cool, you can do that under your control. So when digital currencies and Bitcoin, Ethereum first came out, I mean, I was and still am like a fangirl just because of the technology, the prospect of it. So I really thought that Hyperwallet ourselves should become an endpoint.

• 37:10Speaker 02

  But this is, going back to our beginning, this is after 2012, when we're quote unquote, a real company that was making real money. So not just a bunch of engineers building the next cool thing. So I actually went to my head of development, I said, I think that we should become an endpoint, at least on Ripple, because it's, you know, it's, you know, in the cool kids club, it's bank last, right? And we went out and serviced our customers. And they were like, okay, we have no interest in it. So, fast forward to now where I am at Fispan.

• 37:46Speaker 02

  I'm trying to build applications that, you know, move the peanut forward a little bit for end customers. And to be honest, I'm not excited about digital currency for, you know, B two B payments.

• 38:00Speaker 02

  I've never thought that the rails were the problem. It's always been the endpoints in those consumptive applications. So I fundamentally don't think the world needs another payment rail. You know, taking aside the, you know, political view of unstable currencies and, you know, bad governments and everything else.

• 38:20Speaker 02

  Where I'm most excited about distributed ledger technology is around things like taking massive costs out of regulatory burdens. Doing things like encrypting your KYC file on a customer as a bank, putting that on some like Ethereum like block, whatever, whatever chain you want. And then having, you know, only permissioned and you know who's opening that little secret package and why. To me, this can take enormous cost and operational burden out of things like sending a wire from the United States to Thailand,

• 39:04Speaker 02

  where a bank today has to have, you know, a direct correspondent relationship. It's slow, it's horrible. Imagine if you could just put this delivery request onto an Ethereum block, onto some blockchain. Any, any delivery point in Thailand can pick it up and say, yes, I'm going to deliver this money to this, you know, endpoint. If and only if I get a regulatory hit, meaning like the Thai regulator says, whoa, whoa, whoa, that's on my KYB, you know, watch list. Then I'll pick up this package, unencrypt it. You'll know about it, the customer will know about it. And the purpose of us accessing this data will be known. So, long-winded explanation, but that's what I'm most excited about in financial services

• 39:48Speaker 02

  for blockchains and distributed ledgers.

• 39:51Anthony Pompliano?

  How far away are we from that?

• 39:53Speaker 02

  There's a number of initiatives actually started. And, you know, again, it all gets mired down into the business model. I know for a fact that, you know, JP Morgan Chase has started something exactly like that. Swift has their own initiative around something exactly like that. And what's interesting is banks are getting, of course, I immediately was like, oh, I want to participate, right? Just because it's like, it's not directly related to what I do, but it is like sexy and interesting. So some aspects of like the kernel of being like a nerdy engineer, never truly believe you. But we are, so the answer is we're close to having services like that. Actually, we're not just close, services like that are in beta now.

• 40:36Speaker 02

  What now has to happen is the various people have to, you know, think about their position in the market and how do they want to play on somebody else's sandbox? Because even though these things are open and owned by nobody, you know, they're, they're still perceived to have, you know, my competitor is behind that one. Do I want to play? But it is exciting and it is coming.

• 40:58Anthony Pompliano?

  Got it. What do you kind of foresee as the future path for the company, right? As you've kind of built Fispan, like where are you headed? And maybe not what the finish line is, but kind of what's like the big milestone that you say, hey, when we get there, like that'll have accomplished the goal?

• 41:20Speaker 02

  Yeah, I actually can answer that.

• 41:23Anthony Pompliano?

  Good.

• 41:24Speaker 02

  It's when there are applications being built not by Fispan that are actually delivering value. So we want to become an open banking. We want to support API programs and developer programs. And I want to have as delightful a developer experience as Stripe does, right? Where any, you know, Bob and Joe McKenzie can be in their basement, have a great idea for servicing, sign up and start actually providing value like on day one.

• 41:58Speaker 02

  When I have, so to answer your question, when I have 500 applications interoperating with my banks and they're not built by Fispan, then I'll, I'll be a happy person.

• 42:10Anthony Pompliano?

  I think that's a fair way to to look at it. Um, I wrap up every interview with the same two questions for everyone. The first is, what is the most important book that you've ever read?

• 42:29Speaker 02

  So you can tell that I didn't actually see that. Okay, it was actually a biography of Mao.

• 42:37Anthony Pompliano?

  Oh, explain that. Why is that your answer? That's a great answer.

• 42:41Speaker 02

  Um, well, first of all, I'm trying to think of all the books I read. I was really into different biographies of different despots.

• 42:49Speaker 02

  The

• 42:53Speaker 02

  uh, the overlay of, you know, history and individuals and death spots coming together. Um, and, you know, the cultural revolution. So, uh, I just found it really interesting. I didn't find it informative as to how I want to comport myself.

• 43:13Speaker 02

  But that was the most influential book that I've read.

• 43:16Anthony Pompliano?

  That's a great answer. Your first person to ever say that one. That's great. I have one more question. It's a little bit more fun, and then you actually get to ask me one question to to end it. But my question is about aliens. Are you a believer or a non believer?

• 43:29Speaker 02

  Total believer.

• 43:30Anthony Pompliano?

  Why?

• 43:33Speaker 02

  Uh, because of the, because the, because it's infinite and the concept is like it's it's simple math. The answer is simple math.

• 43:44Anthony Pompliano?

  I have yet to have anyone who has an engineering background come on and not answer. Of course, it's just math.

• 43:53Anthony Pompliano?

  I always tell you the two answers I get that are most the common is yes, of course, it's just math or probability or some version of that. Uh, and then the people who say no, uh, will say, well, I haven't seen one. So until I see one, they're not real. Like, okay.

• 44:06Speaker 02

  If you had have asked, will I, you know, will we see evidence of it in my life, in my lifetime? My answer is absolutely not.

• 44:13Anthony Pompliano?

  Yeah, because you think they're too far away. We don't have the technology or because

• 44:17Speaker 02

  Yeah, because we're not advanced yet enough yet.

• 44:19Anthony Pompliano?

  Yeah, I think that's a fair, fair answer. All right. You get to ask me one question to, to finish up. What do you got for me?

• 44:26Speaker 02

  My question is, why are your listeners so focused on Bitcoin and, you know, distributed currencies? What, why is that a focus of your podcast?

• 44:37Anthony Pompliano?

  Yeah.

• 44:37Speaker 02

  Um. Or a theme?

• 44:39Anthony Pompliano?

  So, uh, I pretty much am very selfish when it comes to the podcast. I just talk about the things that I find interesting. Uh, and if you want to listen, then great. If they don't, uh, too bad for them. It's kind of always been my approach and I'm pretty transparent about that. So, uh, you know, you end up finding people who have similar interests or they find you, right? Um, and on Bitcoin, uh, the two things that, uh, I think when somebody asks me why, right? Because everyone always asks me what, like, what is it? How does it work? It's all that kind of stuff. But like the why am I personally interested in it? I think that, uh, there are significant, and I mean, like world changing implications.

• 45:22Anthony Pompliano?

  When you get to the point of, uh, a currency no longer being a weapon against the people. And what I mean by that is, um, you know, take wealth inequality, for example. The number one cause of wealth inequality in the world is, uh, inflation. So through, uh, you know, the lack of inflation adjusted wage contracts or, uh, eating away at the savings of kind of the bottom 50% of the population that don't have investment assets, kind of all that type of stuff. The data is like pretty clear, even there's some papers from like the IMF and things where, uh, the bottom percentages of the socioeconomic ladder, like they experience much higher levels of inflation than, uh, the wealthier, uh, population. And so when you start to look at all of that, you say, there is a world where, um,

• 46:06Anthony Pompliano?

  A deflationary or disinflationary monetary policy would actually create a more equitable world. Now, that doesn't mean that you get 100% benefit and no downside, right? So, one of the downsides is inflation as opposed to engineer growth and consumption and kind of all of those things. But I think if you're optimizing for an equitable world, then getting rid of that inflation ends up being probably the number one most important thing you could do. It literally trumps all philanthropy, kind of everything else. The second piece to it is, I actually think that this idea of auditability and provable

• 46:49Anthony Pompliano?

  scarcity and transparency and decentralization and lack of control is just generally where the world's going, right? So, you talked a little bit about like, you know, what happens when the assets actually have things coded into them? Well, if you understand how to read it, like you'll actually be able to audit that and it'll be transparently available and you'll understand like, hey, I'm giving my data to this company and they can only use it for X purpose, right? And so, we're moving more and more to a world where it's less about like, I just trust you. And it's much more, I think people are being, maybe not so far as cynical towards organizations and institutions, but definitely more about like, prove it and kind of let me audit, let me see. And so, to me, it's like less

• 47:31Anthony Pompliano?

  about, do I think it's gonna happen or not? I think like, it's just the end game, right? It's just gonna take a long time to get there. This is not like a one or two year thing.

• 47:39Speaker 02

  Okay, okay. So, I can summarize that. Like, you're excited about it because of its potential to do good. So, that's okay. But, I know I'm only allowed one question.

• 47:51Anthony Pompliano?

  No, go ahead. You get as many as you want. This is a one point for me.

• 47:54Speaker 02

  What's the most interesting, like, so, that's all well and good, but like I said, I'm a simple person. So, what's the interesting yet, you know, good moving the peanut forward that you see happening realistically in the next 24 months?

• 48:11Anthony Pompliano?

  Oh, I think right now what we're about to see is the greatest theft of wealth the United States has ever seen, simply from the $3 trillion of quantitative easing, the manipulation of interest rates. And the way that I think about this is, everything that's going on macroeconomic wise, we saw 2008, 2009, people ran for kind of inflation hedge assets in general. So gold, real estate, all that kind of stuff. I think we're gonna kind of see that cycle play out again here. It's happening faster, right? So the kind of the government intervention happened quicker. It was a bigger kind of step into the market. And so whether inflation kind of at a high level happens or not, it's more just like the fear of inflation

• 48:55Anthony Pompliano?

  forces people to move capital into inflation hedge assets. And I think you kind of have that. You see, you know, the Stanley Drunken Millers going on television saying 5% to 10% inflation, like whether he's right or not, just scares the hell out of people. And so they run into inflation hedge assets. And so for me, it's, I personally believe the lack of financial education is like a national emergency, right? In terms of, there's literally people in the United States, and close to 50% of the population, who could not explain to you how the money that they're saving in their, you know, bank account is actually worth less and less every year. Like, that's just a foreign concept to them, right? They're like, oh, I have $100 that I saved, like, you know, next year it's worth $100, the

• 49:39Anthony Pompliano?

  year after. You're right. And so that you, just like that alone, I think is, somebody once said to me, we ask people to go to work. So let's say you're a teacher, you're a fireman or woman, you're a surgeon, or you, you know, you're a janitor, whatever your job is, we ask you to go be the best you can be at your job. And then we say, oh, by the way, in order to protect your wealth, you also have to be an investor, right? So you can't just save the money because it'll just get eroded away from purchasing power standpoint. So we need you to go learn about stocks, or bonds, or give you the money to somebody else, right? And they'll invest it for you, or whatever. And so The idea of Bitcoin, there's this saying in the Bitcoin community, like it's a savings

• 50:24Anthony Pompliano?

  technology. So basically what you can do is rather than saving dollars, you just quote unquote save and just denominate it in Bitcoin. And then therefore, because it's a deflationary structure with a disinflationary monetary schedule, basically it protects your wealth. Right? And so like, I think part of this is like, when I say all this stuff, it's not lost on me that there's a portion of people who are like, that sounds insane. But I kind of think that's like where the market gets made, right? Is there's a portion of people who think like, everything I just said makes a ton of sense. And like, that's where the world's headed. There's a ton of people who think that guy's crazy and there's no way that's going to happen. And like, the market will ultimately decide, right? Of like-

• 51:04Speaker 02

  But have you seen anything real that's going to be usable by the guy that doesn't understand that the hundred dollars in his bank account next year or two years from now is actually going to give him less purchasing power and provides a viable alternative for him in the next 24 months?

• 51:24Anthony Pompliano?

  I'm going to give you three data points that if you're not in it every day, I think this kind of surprises people, but they're like, oh, wait, something's going on here. Last year in 2019, if you take the annual transaction volumes on Apple, Venmo, and PayPal, and you compare them to what's called the adjusted on-chain transaction volume, so we take away, take out all the exchanges, take out all of the transactions to and from exchanges, like really trying to get at like, what is the transaction volume on the Bitcoin network? The Bitcoin network did more annual volume last year than Apple, PayPal, Venmo. So a lot of people don't realize that, like, there's a lot of activity that actually is

• 52:07Anthony Pompliano?

  occurring. It's just not all happening in the US in a consumer-friendly type application. So we don't think of it that way. The second data point is, um, there's a gentleman named Michael Saylor. He's the, he's for 22 years, he's been the CEO of a publicly traded company. Company's worth about 1.2 billion dollars, 1.3 billion dollar market cap, uh, trading on the NASDAQ. He recently found himself earlier this year with 500 million dollars of cash on his balance sheet. He's got a business that throws off about 50 million dollars in EBITDA annually. And, uh, he was worried about the macro situation. And so over the last about eight to 10 weeks, he has taken 85% of that balance sheet, about 425 million dollars.

• 52:51Anthony Pompliano?

  And he has converted it to Bitcoin and publicly came out and said, I am going to use Bitcoin as the reserve asset on my balance sheet. Because I believe that every other asset I could put this wealth into or this value has a negative real return.

• 53:06Anthony Pompliano?

  And so again, it's only one person, but I think that, um, you know, he, he basically is kind of like breaking the dam open. And so I don't think everyone's going to go run and do it, but does one guy lead to two, to three, to four, right? And so like, that's another kind of data point of it's not the individual, but it's a corporate CEO, right? So like he, he's kind of paid to think about this stuff. But I think that's important. And then the third one is actually, uh, the OCC, which you're probably more familiar with than I am. Uh, Brian Brooks, who's now the head of the OCC came from Coinbase, which is the more just US-based exchange. And, um, and he recently had a, uh, clarification that was issued. So this isn't a new ruling.

• 53:47Anthony Pompliano?

  It was just kind of they clarified that banks are, uh, legally allowed to custody crypto assets. Along with all the other assets. So a lot of banks kind of hid behind, oh, the OCC hasn't given us clarification. We don't want to play this game. So like, we're just not going to do anything. Now that that is out there, I think what it does is it kind of opens the door for some like M and A activities. So does, you know, the JP mortgages of the world go buy a crypto exchange or a custody or something. And then two is like, there will be some forward thinking banks that just say, hey, we're gonna somehow build out services for, you know, kind of digital currencies, whatever that looks like. And so I say all those data points is like each one individually probably doesn't matter

• 54:32Anthony Pompliano?

  as much, right? Kind of like it's off on its own. When you start to put these together, I think it's just you're driving in the right direction. We just don't know how long it takes to get there, how fast you're going, that type of stuff.

• 54:46Speaker 02

  Super cool. So you can make a different podcast of this, like, like

• 54:53Speaker 02

  the skeptic who does ignorance and doesn't let ignorance stand in their way asks dumb questions.

• 54:59Anthony Pompliano?

  Listen, you, you, uh, my favorite part about the podcast is that people come on and I learn much more from them than they learn from me, but uh, this is what makes it fun, right?

• 55:08Speaker 02

  I know. This has been super fun for me. Really appreciate it.

• 55:11Anthony Pompliano?

  Awesome. Lisa, where can people find you on the internet or find out more about Fispan?

• 55:15Speaker 02

  Uh, www.fispan.com and they can find me on LinkedIn slash Lisa was here.

• 55:22Anthony Pompliano?

  Lisa was here. Oh, how did you get that?

• 55:25Speaker 02

  I don't know. It was the first like Lisa S was already taken. And so anybody can have any vanity URL you want on LinkedIn still. It's the last vanity opportunity left on the internet.

• 55:36Anthony Pompliano?

  I love that. Okay. Thank you so much for doing this. We definitely will have to do this again in the future.

• 55:40Speaker 02

  Yeah, I really appreciate it. Lovely talking to you.