When AI Agents Start Spending Your Money | Alex Rampell & Terry Angelos

a16z General Partner Alex Rampell sits down with VGS Executive Board Member, Terry Angelos, to unpack what happens to payments when AI agents go from recommending what to buy to actually making the purchase. Terry explains the infrastructure required to safely give agents access to payment credentials, why wallets like PayPal, Shop Pay, and Link are competing to become the default payment layer for agents, and how new agentic tokens could preserve the chargebacks, identity checks, and merchant relationships that make today's payment networks work. VGS, which already secures payment credentials across a significant share of e-commerce, is now provisioning millions of these agentic tokens each week. They also discuss what happens when merchants don't want to transact with agents, how delegated authority changes liability when an agent makes a mistake, and why AI could simultaneously increase consumer spending while eliminating the subscriptions, fees, and other forms of economic "breakage" that depend on people not paying attention.

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

• 0:01Speaker 00

  In the last three months, we've had this huge leap from agents being what I would call spectators to agents being actors, because they effectively have arms and legs, which are payment credentials.

• 0:11Alex Rampell?

  Amazon recently blocked Muse, and there are many reasons for this. You can either be antagonistic to agentic commerce, or you can be highly receptive.

• 0:21Speaker 00

  What's happened with the rise of Muse and Instinct is, once they have access to payment credentials, their utility increases. So we sort of have kicked off what I kind of call the wallet wars, where every wallet is now rushing to connect to the agents.

• 0:38Alex Rampell?

  Everybody who's listening to this podcast, I almost guarantee you have a credential that's stored at VGS.

• 0:43Speaker 00

  The largest online merchants, the largest neobanks, and the largest frontier labs all use VGS to secure payment credentials.

• 0:51Alex Rampell?

  It's a really formidable position to be in. Where do you think VGS is going to go?

• 0:56Speaker 00

  I think we're...

• 0:58Erik Torenberg?

  AI agents are moving from recommending what you should buy to actually buying it for you. That creates a deceptively hard question. How do you safely give an AI access to your money? In this episode, A16Z general partner Alex Rampell sits down with VGS chief strategy officer Terry Angelos to unpack the emergency payment infrastructure behind agentic commerce. They discuss the new wallet wars, how payment credentials could move safely between consumers, agents, and merchants, and why new agentic tokens could allow AI to transact without breaking the protections consumers already expect from credit cards. They also get into what happens when an agent buys the wrong thing, why some merchants

• 1:40Erik Torenberg?

  may actively resist agentic commerce, and how the economics of everything from credit card rewards to subscriptions could change when an AI is constantly optimizing on the consumer's behalf. Because giving agents the ability to spend doesn't just make them more useful, it could reshape who controls the customer relationship itself.

• 2:01Alex Rampell?

  Hi, everyone. I'm Alex Rampell, partner at Andreessen Horowitz, and I'm here joined by Terry Angelos. And I'm very excited about being joined by Terry, because Terry and I started a company called TrialPay in 2006, a long, long time ago, 20 years ago.

• 2:15Speaker 00

  20 years ago. Alex looked very different.

• 2:17Alex Rampell?

  Yes, you look the same. So I think you're insulting me and I'm complimenting you, and hopefully not the other way around. But today, this is the really cool part. One of my first investments here was a company called VGS, which stands for Very Good Security. And some people might not get that's actually a pun or a joke, because one of the most famous cryptography companies was called PGP, which is pretty good privacy. And obviously, it's very good privacy. It's not just pretty good privacy, it's incredible privacy, it's unbreakable privacy, because it's very hard to factor very large composite numbers into their primes, and pretty good privacy is actually very good. So that was kind of the original name for Very Good Security. So I led this investment a long time ago. TrialPay got bought by Visa. Visa, under your leadership, invested in VGS, and now you're back.

• 3:02Alex Rampell?

  And you're the chief strategy officer and board member alongside me at VGS.

• 3:07Speaker 00

  Yep. It's been a very fun and incredible journey. And I think if you look at VGS today, it's a payment infrastructure business. We secure credentials for about a third of all e-commerce by GMV. And we have the largest online merchants, we have the largest neobanks, and the largest frontier labs all use VGS to secure payment credentials. And I think today, part of the reason why we want to talk about agentic commerce is because VGS is involved in helping agents get those credentials, helping wallets hand those credentials to agents, and also to merchants who have to receive these credentials. And so we're sort of in the middle of these really interesting conversations and handovers

• 3:52Speaker 00

  between credentials.

• 3:53Alex Rampell?

  But maybe we should dig into what a credential is. I mean, credential is a fancy way of saying a credit card for laypeople. It gets a little more complicated than that when you really dig into it. But you work with, I don't know which merchants I'm allowed to say that you work with. You work with all the big ones, but like, why don't we take an example merchant that you work with, kind of pre-AI, pre-agentic commerce, and just explain what you do? Like, why do they use VGS? What do they use you for? And how pervasive is it?

• 4:18Speaker 00

  Yeah. Let's assume we're working with a very large online ordering platform. And so that company effectively has to store your credit card every time that you, every time that a new customer comes onto that site and hands over a credit card. That company doesn't necessarily want to be exposed to that card number. And so VGS is involved in capturing that card, securely vaulting it, and storing it. And every time that the online ordering service wants to transact with one of its processors, it goes to the vault and retrieves the information in such a way that the online ordering company never actually has to touch the payment information.

• 5:03Speaker 00

  Now, one of the things that I think has made VGS a lot more interesting since the days that you first invested, it's been a decade of becoming sort of the most trusted vault online, is that the card networks have also introduced a form of tokenization. So that, in our days back in TrialPay, we would actually store a 16-digit PIN, and we would encrypt it.

• 5:26Alex Rampell?

  A PIN is a primary account number.

• 5:28Speaker 00

  A PIN is a primary account number.

• 5:29Alex Rampell?

  Credit card number.

• 5:30Speaker 00

  It's the 16-digit number that you have on your card. We would encrypt it and vault it. And then, when it came time to charge someone, we might unencrypt it and give it to, I think, Chase Payment Tech back in those days. Today, that doesn't happen. Today, instead, what happens is, rather than store that 16-digit card number and use that, you actually go to the network that issued it. So Visa, Mastercard, Amex, Discover, and you say, "I would like another version of this card that's actually domain-bound just to my merchant domain," which is safer, because if there's ever a problem, the only number that I have only works on my merchant domain. And I am going to use this when I send it to Chase Payment Tech.

• 6:13Speaker 00

  So VGS, as a company, vaults all these credentials on behalf of the merchant, also gets all of the network tokens, which is the primary way that these credentials are passed to the payment processor and to the network. And that's what we do today. And so because of that complexity of interacting with the card networks and doing this across multiple processors... So actually, here's a question for you, Alex. If you're a merchant with over $1 billion in GMV, how many payment processors do you have on the backend?

• 6:47Alex Rampell?

  Well, it depends. There are plenty that just have one, but you are better... I mean, but this goes to the use case of VGS, which is, rather than being locked into one payment processor, you'd rather unbundle that, and you'd rather be able to pick and choose which payment processor you use. But also, if you have kind of a shared infrastructure that is storing credentials, what if one credential goes bad? What if my... I just had a Capital One card, great example. Capital One bought Discover card, our Discover network. And then my fancy Capital One cash back rewards 1.5% Visa card, it became a Discover card. And every week, I get notifications from very sad merchants, "We are unable to process

• 7:32Alex Rampell?

  your card." Why are they unable to process my card? Because that old card number doesn't exist anymore. Even though I still have a relationship with Capital One, I just got a new card number from them. Granted, it's a little bit complicated, it's on a new network. There's also the possibility, like, merchants can't just say, "Oh, we know that this card became that card." One merchant cannot do that. But a large vault can do that. And then, as the actual networks themselves, like Visa and Mastercard, and actually Discover too, they have these account updating tools. So you could say, "Hey, I'm a merchant, I have all of these card numbers." And I think, what is it, every year, like, 10% of cards expire?

• 8:09Speaker 00

  Yeah, so about a third of all cards get turned over every single year.

• 8:13Alex Rampell?

  No, even more.

• 8:14Speaker 00

  Like, 25% mathematically, because it's a four-year expiration, and another 5% due to, in this case, Capital One buying Discover, or fraud, or something else. So back to that question, by the way, for a merchant of $1 billion, it's about three to five processors that merchant will have. So now...

• 8:32Alex Rampell?

  They don't have to.

• 8:33Speaker 00

  They don't have to.

• 8:33Alex Rampell?

  But they should, is the point.

• 8:35Speaker 00

  That is the average that we see across the ecosystem.

• 8:37Alex Rampell?

  But there's a reason for them to do that, because different costs, different approval rates, different regions, like, you want to shard...

• 8:44Speaker 00

  Correct.

• 8:44Alex Rampell?

  In kind of computer science terms, you want to, you have all of your cards, and if you just say, "I use the same processor every single time," that's just not a good idea, or it's not as good of an idea as I can have multiple processors. But in order to do that, I have to be able to securely send the card number to the processor that I've chosen.

• 9:03Speaker 00

  Yeah, that's right. And in fact, once you have multiple processors, then the job of vaulting and getting updates is multiplied by the number of processors. So maybe I have 100 million cards as a merchant, but I have to store 100 million with Chase, and 100 million with Stripe, and 100 million with Braintree, and each of those vaults have to be updated at their networks. And so what VGS does is serve as an independent vault, neutral infrastructure, on behalf of the merchants. For the vaulting and the updates such that the merchant can then send a Visa token to the merchant via Stripe. Back to your kind of annoying Capital One issue, if you're a VGS merchant, that should not happen.

• 9:46Speaker 00

  So there are mechanisms when Capital One is switching from Visa to Discover to get those updates. And certainly, that's the case if there's fraud or something else, and that's the role that VGS is playing.

• 9:59Alex Rampell?

  Yep, exactly. So hopefully, everybody has a good understanding now of what very good security does, VGS does. So out of nowhere, and this was a good business years ago. I mean, I've been a believer for a long time. And then this whole thing called Agentic Commerce showed up. I guess, how does the world change? And you guys are at the center of this because, again, I don't know what companies that work with you, I'm allowed to say or not, but let's just say like, a lot of AI companies have decided to work with VGS. And for what reason? Well, the reason is you don't, if I say, hey, buy me flowers, if I go into my little chat tool and say, hey, I'd like to buy flowers for my wife, it's Mother's Day, she'll get mad at me if I don't buy them, and she'll be happy if I do buy them, please buy them.

• 10:44Alex Rampell?

  I don't want to give my credit, maybe I do want to give my credit card number to, we'll call it chat app, but they don't want to store it. And then even if they do store it, they have to communicate it to the merchant. And how do they do that? And like, the better option is you have a third party that already knows how to do this. So you take out of scope. I mean, it's interesting, like, I don't know if most of our audience knows what the PCI DSS rules are, but that's the Payment Card Initiative Digital Security System, if I remember correctly.

• 11:18Speaker 00

  Very good, Alex.

• 11:19Alex Rampell?

  Did I get that right? So if you've heard of PCI compliance, that says, well, if you're going to be a merchant and you accept credit cards, there is a document, I think last time I read it, it was over 100 pages, of all of the rules that you have to do and maintain in order to be PCI compliant. And why is being PCI compliant very important? Because every bank demands it. You cannot process credit cards unless you are PCI compliant, you cannot issue credit cards unless you are PCI compliant. That's why it's this Payment Card Initiative, it's all of the, you know, Visa and Mastercard might be enemies, but on this, they agree. You have to be PCI compliant. One of the nice things that VGS takes PCI compliance out of scope. So you don't, you basically say, I can just run my business like a normal business, I

• 12:02Alex Rampell?

  don't have to follow these 100 pages of rules, VGS just focuses on that. Which kind of goes back to like, I want to buy flowers for my beloved wife, and I want to have my chat application do that for me. Turns out, VGS is pretty well positioned here just by being the backend infrastructure, but now can take a pretty vital role in this whole process.

• 12:24Speaker 00

  Yeah, I mean, I think, you know, in the last three months, we've had this huge leap from agents being what I would call spectators to agents being actors. And how do they act on my behalf? Well, if you give them a payment credential in a safe way, I can go from recommending the flowers for your wife to buying the flowers for your wife. So like, I'll give you an example, like, just last night, my wife and I have been talking about getting a piano teacher for our seven-year-old son. And it's complicated, because you have to know our schedule, and he has soccer three days a week, and we want somebody who can come to the house, we have to know the schedule of the piano teacher. And, you know, I asked ChatGPT about this a while ago, and I got some recommendations.

• 13:09Speaker 00

  But just last night, I asked an agent, and it did the entire transaction task for me. It found a bunch of people, asked me a few questions, checked the schedule, and booked someone for, you know, for the very first lesson. So that is infinitely more useful than dumping yet another task on my doorstep. So agents have all of a sudden become significantly more helpful and useful, because they effectively have arms and legs, which are payment credentials. And so what's happened with the rise of, you know, Muse and Instinct and Town and other AI agents, is once they have access to payment credentials, their utility increases.

• 13:52Speaker 00

  And so we sort of have kicked off what I kind of call the wallet wars, where every wallet is now rushing to connect to the agents. And of course, as an agent, I want a wallet that has sort of two things. One, the most number of consumers that already have a credential at that wallet, and a wallet that has a very broad merchant reach. And so, you know, right now, this is sort of companies like Stripe Link, they have about 300 million consumers who have an account at Link, about a million merchants use Link. You have Shopify with Shop Pay, similar, you know, consumer size, probably more like 1.7 million merchants. Then you have PayPal, which has got, you know, over 400 million accounts, depends on how

• 14:37Speaker 00

  you kind of, you know, sort of, you know, how that's actually measured, but they have on the order of 30 million merchants. So these wallets are connecting to the agents, and I think are providing a lot more utility.

• 14:49Alex Rampell?

  So it's interesting, though, because wallet wars have been around for a while. So remember, not to speak ill of our old employer, remember VMe?

• 14:58Speaker 00

  Yes, V.me.

• 14:59Alex Rampell?

  V.me, but it was something before that, I forgot, they changed the name to VMe. But there have been many attempts, like, why were there wallet wars 10 or 15 years ago? Because it turns out that being the default stored credential for a consumer, right? Like, if I can, if I can get trained in a Pavlovian way, where it's like, oh, I see flowers, I use PayPal, well PayPal is better off for that.

• 15:20Speaker 00

  That's correct.

• 15:21Alex Rampell?

  Or one of the things that we worked on at TrialPay was, how does a Visa, it's very good for Visa, it's very good for Visa's issuing banks, if the default card in your Uber wallet, because Uber is a wallet too. You can store eight different cards or credentials within Uber, being the top of wallet is very, very important, because when digital wallets came out, like, I kind of like to think, before digital wallets, you had what I like to call dead cow wallets, you know, an actual, I think I have one here, I'll give a demo to our audience, this is called a dead cow wallet, has lots of, lots of credentials in there. But before, Capital One would pay Samuel L. Jackson to say, what's in your wallet? Why would they do that? Because when you go to Chipotle, they want you to pull out your dead cow wallet and

• 16:05Alex Rampell?

  say like, I'm going to pay with my Capital One card. And that was, whereas for, when digital wallets emerged, it's like, I'm Shop Pay, I'm PayPal, I want to be your default. And then actually, what the interesting thing is, like, within that wallet, there were other credentials, and those guys were competing to be the number one.

• 16:23Speaker 00

  If you recall, at Visa, when we were dealing with Uber and Airbnb, there was tens of millions of dollars paid by the issuers, so like Chase and Amex, to prefer their cards on those platforms. So that's one war, which is like, this is my card, I want, you know, I want to sort of, you know, promote this to the, to the, to the top of wallet. You're talking about the actual network war, where Visa and, and we helped Visa become a default card at Uber. And now you have this other layer, this abstraction layer of, I am a wallet that actually processes the transaction, the Shop Pays, the Links and the Paypals.

• 17:04Speaker 00

  And so we talked about how a checkout looks like a bit like NASCAR, because you have multiple different buttons.

• 17:10Alex Rampell?

  Pay with PayPal, pay with Google, remember Google Checkout came out along? They were yet another, but they're like, they're consumer wallets, and then there are merchant, like, the interesting thing is that I kind of think of VGS as a merchant wallet to an extent. I mean, like, it's a strange metaphor to use, because a merchant isn't paying for things, a merchant is receiving payments. But like, once I receive the payment, like, where do I put it, especially if I'm billing this customer again and again and again? And again, for PCI reasons and whatnot, I don't want to store scraps of paper with like, your, that secret three-digit code that of course is not secret, because it's on the back of your card, but I need it to process it, I don't want to store your 16-digit,

• 17:50Alex Rampell?

  you know, credential and just keep it in scraps of paper and like, my, my, my original cash register, like, I need something to go receive that for me. On the consumer side, it's like, I don't want to remember, like, what was the original purpose of a consumer wallet? It's that, it's 2 o'clock in the morning, I want to buy flowers for my wife, my wallet's downstairs, like, I don't know where my wallet is, I want to go pay on 190 flowers right now, and if I just enter my PayPal credentials, they were a wrapper and linked to all of my, my kind of, all the credentials in my dead cow wallet. That was the purpose back then. But what I find interesting with all of Agentic Commerce is, it's kind of the same thing. It's like, you know, you're, it's still 2 o'clock in the morning, you know, you still

• 18:33Alex Rampell?

  want to buy flowers for, for your wife for something bad that you did, or, you know, Mother's Day, or whatever.

• 18:38Speaker 00

  Something good, Alex.

• 18:39Alex Rampell?

  Something good, right? You know, I always, always tend to buy flowers, I mean, make sure, we're sponsored by 190 flowers, so make sure to buy there. So you want to go buy, and your agent doesn't have access, like, it's the same problem, right? It's like, the agent could say, hey, Terry, where's your credit card number? And that's more work and more friction versus it has access to it, in the same way that you just gave access to all of your cards, all of your bank accounts, to PayPal, to reduce the friction when you were doing things manually 15 years ago.

• 19:07Speaker 00

  Yeah. And look, I think the word wallet is, is a bit overused, there's sort of different versions of it. One is the, the digital version of your, of your dead cow wallet, which is that it just stores the payment credential. And when it go to, when you go to a merchant, you hand that credential to the merchant, all right? That's kind of what Apple Pay does, right? When, when I shop at Apple Pay, or when I shop at a store with Apple Pay, Apple is effectively giving my Capital One Visa card, effectively tokenized in the wallet, to the merchant. The merchant receives this credential, and it decides whether it processes it through Chase, or Adyen, or Stripe, or Braintree.

• 19:47Speaker 00

  Then you have wallets that actually take care of the transaction for you. So think about Shopee or Leng or PayPal, where the wallet is in fact transacting with me, collecting the money from me and remitting that back to the merchant. And what's happening with agentic commerce is we're sort of getting this sort of blend of the two. And it's such a new ecosystem that it actually has parallels for me back to the early days of the internet. And for those people who were around in the AOL era, Stripe in many ways is like the AOL of agentic commerce. And I mean that as a compliment in the sense that they've figured out how to make agentic commerce just work

• 20:32Speaker 00

  in a way that's a very kind of sort of walled garden approach. So a few examples here would be, if I use Stripe Link, Link's only available at a million merchants. So it's great if in fact the item that I want is available at one of those million merchants. But very often, it's available at someplace where there isn't a Stripe Link connection. So a good example was, I think, two weeks ago, I had this event at my house. I wanted to buy some outdoor lights and I asked Instinct to go and help me find these lights. And it found the lights at Walmart, which makes a ton of sense. Walmart has lots of inventory. And the agent went, loaded the cart,

• 21:13Speaker 00

  and when it came time to pay, Link didn't have a connection to Walmart. Link has my card, but it can't just give my card over to the agent and over to Walmart. So Stripe did something pretty interesting. They purchased the chandeliers on my behalf. They issued their own, actually, this is like a Visa virtual card, one-time-use card, made the purchase, and then they charged me, Terry, at a second transaction. This is a little bit how DoorDash works today. You know, you spend 100 bucks at DoorDash and then the dasher goes and pays the restaurant. But in the case of this Walmart transaction, this is the point about it sort of being the AOL. It worked just great.

• 21:58Speaker 00

  Like actually, the item showed up, the transaction went through, I was charged the right amount. But if there's a problem with the chandelier, typically I call up my bank, Capital One, and I say, hey, I had this transaction with Walmart.

• 22:12Alex Rampell?

  Right.

• 22:13Speaker 00

  Something went wrong. And they say, well, we don't see a Walmart transaction here.

• 22:17Alex Rampell?

  Right, we see a Stripe transaction.

• 22:18Speaker 00

  We just see a Stripe transaction. In fact, you will find this pretty funny. I know someone who, in the sort of testing phase, did this exact flow on their Amex card, called up Amex and said, hey, this transaction with the merchant didn't go through, but Amex only saw Stripe. So they gave them a phone number to call whoever this Link merchant is. The person called them. It went straight to the cellphone of a Stripe engineer because Stripe's not set up to run a chargeback call center.

• 22:51Alex Rampell?

  Well, this is the main, like, one of the reasons why Visa and Mastercard have such impregnable positions is because they intermediate everything and they set the rules. And chargebacks are very important.

• 23:01Speaker 00

  Yeah.

• 23:02Alex Rampell?

  Right? Like, what if I paid for something? It's a trust mechanism. I pay you for something. I pay you for lights. You don't deliver the lights. Like, oh, shoot, I don't have money anymore. What do I do? No, no, no. You actually have rules by which I can kind of lodge a complaint. And then there is a central intermediary that helps adjudicate those complaints in a way that is more or less fair, that both parties agree on. I mean, it's part of the problem. Like, this is why crypto, cool, but like, it's a bearer instrument. I pay you with crypto, I'm never getting that back, which again, can be a bug or a feature. But for your lights example, like, what if the lights don't work? You want to have Visa and Mastercard in the middle.

• 23:41Speaker 00

  Right.

• 23:41Alex Rampell?

  That's high, high utility, actually even for the merchant, because now I'm much more willing to buy with the merchant, knowing that if they don't actually deliver a product that works, I can get my money back.

• 23:52Speaker 00

  Yeah.

• 23:52Alex Rampell?

  So that trust mechanism is very important. But again, if you add all these kind of interesting and very clever engineering steps, it just, the purpose, it doesn't work as well.

• 24:03Speaker 00

  Yeah. So in fact, this is like, I think, the right sort of direction of travel from the AOL ecosystem to the open standards ecosystem. The Cardnetbooks have actually come out with a new type of standard. They're called agentic tokens that will allow a wallet, like a Stripe Link or a Shopee or PayPal, to hand over a credential to the agent in a safe way and then have the agent hand it to the merchant in such a way that when that Walmart transaction occurred, it's my card. In fact, like, one sort of addendum to the Walmart transaction, after I bought the chandelier, everything was fine. I got an email from Walmart to say, hey, Terry, you paid for delivery.

• 24:48Speaker 00

  It was like $6.99. Why don't you sign up to Walmart Plus? And here's an offer. If you sign up today, we will credit the delivery toward your Walmart Plus subscription. So I said, great, hit the button. And of course, the transaction failed because the card that they had was the Stripe.

• 25:06Alex Rampell?

  One-time-use.

• 25:07Speaker 00

  One-time-use card. And part of the, you know, you mentioned like rules and norms. Part of the norms of e-commerce is that Walmart spends a lot of money to get me as a customer. And then they have the right to try to have a relationship with me, upsell me, cross-sell me. And in this case, because we were using the sort of AOL version, they weren't able to easily allow me to subscribe to this new service. With the new agentic standards, what should happen is if any of the wallets don't have a relationship with the merchant, but they have my card on file, my Capital One Visa card, that should be tokenized with the agent. There's a whole process by which the agent says,

• 25:52Speaker 00

  I'm about to make a transaction. I'm a verified agent. I'm going to spend no more than $100. That, the token is nothing more than a new 16-digit number.

• 26:03Alex Rampell?

  Right.

• 26:03Speaker 00

  We give that safely to the agent. Agent gives it to Walmart. And then Walmart runs the transaction, but it's my card that is being charged. And that preserves this ability to have a follow-on transaction. It preserves all of the rules around chargebacks. And so, you know, three months ago, this was at zero. It did not exist. VGS is by far the largest provisioner of these agentic tokens. We do it for the agents. We do it for the wallets. We do it for some of the merchants. And this was zero three months ago. Now we're doing a few million of these tokens per week. So I expect that as we make this transition from the walled garden to the sort of open standards,

• 26:46Speaker 00

  this will be the way that agentic commerce evolves.

• 26:50Alex Rampell?

  Yeah, I mean, it's one of the reasons why this like kind of long, I mean this as a positive, but like, VGS has a very boring business of, why is it boring? Because we have a vault. And anybody who's in a vaulting business is kind of, it's not an exciting business. Like, your job is to be not exciting and be safe and be secure. And it's like, things go in the vault and then every now and then, things go out of the vault. Right? It's not like a one-way door. Because this is, the way that I always thought about VGS is, there are these credentials that you store. So it's like, you get these 15-digit Amex numbers or 16-digit Visa, Mastercard Discover numbers. You store them. You give back like a token. This is not a crypto token. This is just like, here's something that you can use. And then there are verbs that can be performed on those credentials.

• 27:34Speaker 00

  Right.

• 27:34Alex Rampell?

  So if I am a big burger chain or something, hypothetically, we don't know which one, but like, you work with a big burger chain, right? Like, I have a consumer app that has tens of millions of users. I know that whenever that user says, I want to buy a hamburger, like, VGS plays a key role. It's a very boring role. But I retrieve and charge, right? So I retrieve it with the purpose of sending that to a payment processor and saying, charge Terry $9 right now. But I never have to touch that credential again. You know, very, very, very boring business. But you've gotten to, I mean, what percentage of cards do you think you've seen or touched or stored? It's probably, what is it, 80% of cards in America?

• 28:17Speaker 00

  We have like 10 billion credentials.

• 28:20Alex Rampell?

  A lot of credentials.

• 28:21Speaker 00

  I think you're talking about something really interesting, which is vaults are going from single-player to multiplayer. And that makes them a lot more valuable. So for example, put aside agents. The fact that merchants have multiple processors means that the vault at VGS is effectively the vault for each of those processors, right? Because the network tokens stored in that vault now have to be sent to Chase, Stripe, Adyen, Braintree, Razorpay.

• 28:51Alex Rampell?

  Right.

• 28:52Speaker 00

  That's multiplayer. With agents, if you have a vault, let's assume you're like a large frontier model. I mean, here's a good example. You're a large frontier model. You're vaulting cards in order to charge for your subscription.

• 29:10Speaker 00

  But now the agent wants to use that same transa- that same credential to make a payment. And so the vault used to be single player, it used to be just to make sure that you could pay for the subscription. But now you can effectively give that credential according to these open standards to the agent. It's now multiplayer, right? And so I think, you know, any business that is going from single player to multiplayer inherently becomes more interesting. I mean, even one password, right? Like, it's just, it used to be a single player vault. And maybe I share my credentials with my wife and a few things, but now it's multiplayer. So I'm trying to give it access to multiple different parties.

• 29:49Alex Rampell?

  Well, this is a really complicated thing, going back to like the rules and procedures of what Visa and Mastercard have done. Which is normally, I just have to, there are almost like three steps to a transaction, I kind of think of. Number one is, is this identity real? Like in general, like is this a real card number? Right? That's important. But wait a minute, I can have a real card number and you're a thief. It's still a real card number. So kind of step two is once I validate, because there are actually, there are two ways of validating a card number. There's one, there is a, there's like a cyclicality check, right? You kind of add up the, yeah, it's checksum, right? But it's this mod 10 check of the credit card number, is it valid? But that doesn't mean it's a real card. But it means that it's like a valid, it's in the valid universe of cards.

• 30:34Alex Rampell?

  But I can go check with the bank, is this an actual card? That's step one. Step two is, is the person that I am interacting with the valid owner of this card? So like if you, if you went to a jewelry store 25 years ago and you wanted to buy something for $15,000, they'll take the credit card number, they'll take your credit card, your piece of plastic, but they'll do two things as well. Remember, I used to be, I used to have to sign the signature of the back of the card? Like, I thought the first card that I ever saw that just got rid of that altogether was Apple. So the Apple card, I mean, even though they want you to use Apple Pay, if you get the physical Apple metal card, there's no place to sign on the back. None. But they would also say, can I see your ID? Like, I remember I bought, I bought something very expensive one time. It might've been jewelry for my wife that I sometimes buy flowers for as well.

• 31:19Alex Rampell?

  This was probably 25 years ago. And they wanted to see my ID, they checked the signature. Why? Because they knew that the card was valid, but they want to make sure that I am the actual owner of the card. And then number three, and you probably only see this in Vegas. But it's like, are you of sound mind to make this transaction? So like, if you went to a, to a casino in Vegas and you pass, you know, number one, card's valid. Number two, it's like, yep, here's your ID, here's your signature, it matches entirely. But there's step three, it's like, if you've had 15 drinks and you can't even speak properly, they're probably gonna not let you pay. Right? So this was kind of like the old world. And if you bring that metaphor to the new world, well, it's like, well, is the card valid? Yeah. Does the person?

• 32:03Speaker 00

  Or the agent.

• 32:04Alex Rampell?

  Well, but this is tricky, right? It's like, the card is gonna be valid, like that, that part solved problem. But the second part, it's like, what does that mean? Right? Like, is the person that I am interacting with, is my interlocutor? I love that word. Is, is, is the person that I'm interacting with, are they the valid owner of this card? It was always a hard problem to figure out on the internet because I can't like signature, picture, like what does that mean? You're an IP address and maybe I've seen you before and I've checked your login, but now I have an agent. And then that part three is pretty important as well from a liability perspective. Because you do see these anecdotes on X and whatnot of people that are on Instinct. They're like, what do you mean you spent $900, you idiot? And like, who, where does the chargeback come from?

• 32:47Speaker 00

  So, so I mean, this is exactly what these open standards are, are, are solving for. So let's, let's take an example where I instruct my agent, in fact, this is a real example. I was looking for a hotel for a trip we're making for my daughter's gymnastics tournament. And I said, go and find a hotel in San Diego and, and don't spend more than, you know, $500. So the first question when that, when that agent is provisioned is, to your question is like, is this a real card? That's a solved problem. The second one is, is the request for the agent a valid request? And the way that this works with the networks is that agent actually has to be registered with Visa or Mastercard or Amex.

• 33:30Speaker 00

  And so there's a whole sort of mechanism there. The third question is like, is the agent of sound mind? Like, did it get it right?

• 33:38Alex Rampell?

  Right.

• 33:38Speaker 00

  And?

• 33:39Alex Rampell?

  Was it drunk?

• 33:39Speaker 00

  You know, exactly. Did it hallucinate? And so that part, I don't think we fully understand yet. Because if there's a mistake that the agent makes and the, the card network did everything right. They validated that this was your agent and your instruction. In fact, part of the way these agent, these, these new standards work is you give it context. You say, I'm buying a, this is a hotel reservation at this amount. It's hard for me to know the, if you got, if you got the actual dates right. If there's an error there, then that dispute mechanism is sort of unresolved. But I think we will, we will get to that point and probably the agents will have to take on some responsibility.

• 34:21Alex Rampell?

  Well, it's this idea of delegated authority.

• 34:23Speaker 00

  Yeah.

• 34:23Alex Rampell?

  But it's how do you, how do you, like, who is liable? How does this change? I mean, it might be something where if two agents are competing for your business, like, hey, Terry, please use me. I'm Muse, or please use me, I'm Instinct. What is one of the value adds that I'm going to give you? I will take on, because if, if the merchants are smart, they're not gonna be like, I don't give a crap that like you got the wrong hotel room or you did this. It's like you told, you gave your card. You delegated authority to either an AI agent or your human assistant or your wife or whatever. Like, I don't care. I need to know if I'm accepting payments for something, that there's no excuse at the end. I mean, this was called for, for, for those that know this term friendly fraud once upon a time.

• 35:08Alex Rampell?

  There's this concept of I can buy something, we used to see this at trial pay.

• 35:11Speaker 00

  All right.

• 35:11Alex Rampell?

  I spent $10,000 on virtual gems. My wife and I share the, I didn't actually do this just for disclosure, but let's just say I did. I spent $10,000 on virtual gems for some stupid game. The credit card bill comes due at the end of the month. I'm like, honey, I never spent $10,000 on, ah, that wasn't me, I don't know. Like, and you, you refuse the transaction, not because you didn't get the service that was offered, but because it's so embarrassingly terrible. And merchants had to deal with this all the time.

• 35:39Speaker 00

  Yeah.

• 35:40Alex Rampell?

  And in many cases, like the, the, the banks would say, well, if it's a $10 transaction, it's not even worth fighting it. We'll just give it to the consumer every time, which created moral hazard. But delegated authority gets really tricky here. I mean, maybe if I can ask a different question, because this is probably the more important one. You saw that Amazon recently blocked Muse. And there are many reasons for this. It's mainly that Amazon is an advertising company and they want you and your eyeballs going to their website. They don't want your agent. It's the agent, you can't monetize an agent's eyeballs because the agent doesn't have eyeballs. But I kind of think of it as you can either be antagonistic to agentic commerce or you can be highly receptive to agentic commerce.

• 36:21Alex Rampell?

  And I don't actually think, I think it's an oversimplification to say anybody who's antagonistic is, is a light eye and they're gone. It's like, well, Amazon has a reason, like a real financial reason to be antagonistic. Because advertising is, is so much more lucrative for them than just selling things. Like, the highest value skew is when they, they get your eyeballs and they, they sell the eyeballs. But I guess, how do you think about this, this kind of playing out? Because it feels like being, enabling technology for merchants to be receptive to AI commerce is highly, highly, highly valuable. And, but by the way, at the same time, helping the antagonistic ones filter out the agentic commerce is also highly valuable. Because again, sometimes they have a reason to do that.

• 37:05Alex Rampell?

  But if I can make it so that, you know, chat GPT services like, yeah, you should buy here and I make that as simple as possible, it just, it goes without saying, like, I'm probably gonna get a lot more transactions than somebody that inserts 15 captchas and says, in order to proceed with this. And then Muse is gonna say, hey, interrupt your, your nap, you gotta go do these 15 things. No, no, no, you're gonna go with the one that is receptive to AI commerce.

• 37:28Speaker 00

  Yeah. I mean, I think this is one of the most fun, sort of fronts to, to watch in, in agentic commerce. And I think we're gonna get multiple different versions of this. We have Amazon, which I think has many reasons to, to, to block your agents, as you said. They're effectively, you know, in the advertising business. You have Walmart, which is very sort of similar, right now hasn't, you know, hasn't taken that step. And in fact, you might argue that if you are one of the largest retailers on earth with the best last mile delivery, that this is all good for you. And then you have this series of merchants that are sort of under the Shopify umbrella, which are a lot of small businesses, that really, this is probably a new, like, vital channel.

• 38:10Speaker 00

  So maybe there's like fear on the Amazon side, maybe there's greed on the Walmart side, and maybe there's like, you know, no choice on the, on the SMB side. And each of these actors or each of these merchants are going to experiment with, with how they deal with agents. I think this reminds me a little bit, I know we sort of have a different view on this, of how open banking, you know, was rolled out, which is, do I have the right as an Amazon customer to delegate my login to an agent? And does Amazon have the right to say no? This is what happened with Plaid and, you know, Chase and, and the banks. And in the end, what tended to happen was there was this like long negotiated settlement

• 38:50Speaker 00

  where the likes of Chase said, hey, you can access, you, you, you do have the right to this information, but only on my APIs. And my APIs limit what information I give you, they tokenize the bank accounts.

• 39:01Alex Rampell?

  And I might charge a lot of money.

• 39:02Speaker 00

  And I might charge you some money for it. So actually, I think the interesting question is, I think we may have plenty of opportunities or plenty of merchants who just welcome agents. We may also have merchants who have their own agents. And in fact, this is what happens, if I go to a Best Buy and I want to buy a flat screen TV, I assume there'll be a salesperson there with an agenda and he or she will say, let me show you some flat screen TVs. Now, their job is to help me, but their job is also to get a commission.

• 39:30Alex Rampell?

  Right.

• 39:31Speaker 00

  So we might have, in, in the case of Chase and open banking, it was much more a case of like security and control. In the case of Amazon, it might be, I am an opinionated API. I have an opinion on what you should buy, Alex, based on many, many different sort of, you know, data points about you. And then my agent may have an opinion about what I want. And so that's gonna be a fascinating battle or, or communication. And in the end, I think consumers probably win.

• 40:00Speaker 00

  But we don't know what that's going to look like going forward.

• 40:03Alex Rampell?

  Right. Well, maybe on that, like, what do you think is overhyped versus underhyped in terms of everything that's happening? I mean, in general, my rule of thumb is that Silicon Valley overhypes things, but then the rest of the world underhypes things. So, you know, everything here, every conversation is AI. And it feels like you go to Iowa, nobody's talking about AI, but then you show it to them like, holy shit, how is this real? Because they tried it three years ago. And like, you know, I just bought a new Tesla. And I remember I had an, I had an old Model 3. I think this is a good metaphor for what we're talking about. Like, I had an old Model 3 in 2017 with self-driving, didn't work at all. It was a joke. Eventually got, you know, got a different car. And now it's like, it actually works. But I was skeptical because I was used to the 2017 thing.

• 40:47Speaker 00

  Yeah.

• 40:47Alex Rampell?

  Right? And I feel like a lot of that is playing out with AI right now, where if you had tried ChatGPT with all the hallucinations and everything in 2022, you're like, oh, it's a cute toy for like, writing poems. But we're doing my homework in English class or something. This is not going to actually buy things for me. This is not going to write. It does all these things right now. So I guess what, what do you think is underhyped versus overhyped in terms of everything that's going on?

• 41:09Speaker 00

  Yeah. So maybe, maybe I'll start with, with overhyped. Like, I don't think we're going to get a bank run on savings deposits where agents are going to sort of maximize yield and move my money around between different accounts. I mean, a perfect example, I am a very happy, you know, Mercury personal account customer. I'm also a Chase customer. And, you know, ideally, I should put all my savings in Mercury where I get a very good savings rate. And then at the last moment, when I have to make bills, sort of pay bills, I'll move, I'll, I'll move over the, the cash to, you know, over to, over to my existing bank, Chase. But their bill pay just works better and it's, it has more integrations

• 41:52Speaker 00

  and I have more kind of setup. So I, I think there's enough friction in, in the world where we, we won't see some of the crazy volatility in, in financial services. I think maybe what's underhyped, there is a lot of demand that is unmonetized. And this is both at the sort of part of the world where you could expect more GDP. An example of this is, we actually have a group cycling WhatsApp group, and we have a person on that group who every, I don't know, it seems like every six months when, you know, our friend Seth comes up with a new recommendation for what tires to get, because he looks at rolling resistance. And every time he does this, I'm like, oh, I should remember to buy those

• 42:36Speaker 00

  tires because they're safer. But I only buy it, you know, every sort of, you know, two years. If my agent was in that group chat, I would be buying tires every time Seth makes a new recommendation. You're dramatically undermonetized on your, on your bike equipment, Alex. If the agent could find things that could help you with cycling and just bought them for you, there's more GDP coming out of Alex on cycling.

• 43:01Alex Rampell?

  Right.

• 43:02Speaker 00

  That is underhyped. At the same time, agents are going to save us money. So like, you know, there's probably many places where I'm either, I have some subscription and it's just been a hassle to cancel, or I did some trial and I forgot about it. So I think agents will simultaneously save us money, maybe use that, that savings to, to help us buy, you know, buy sort of, you know, new, new items. So I, I think we're, have yet to experience the always on nature of these agents. And as far as I can tell, human desires and needs are infinite. So there's always something else that I will want. And so I, I think that is, that's.

• 43:44Alex Rampell?

  Maybe on this kind of antagonistic versus conciliatory, or whatever the opposite of antagonistic would be here. I mean, a lot of what people are very excited about with the agents is it gets something for you that is intentionally hard and is not really subject to the laws of economics. The laws of economics are like, you know, the cure for high prices is high prices. If it's really hard to get a restaurant reservation because you have to call at 7:00 AM, well, now everybody has a tool that calls at 7:00 AM. And therefore, the first five people that have the tool, now they have an amazing tool. The last five people, like, no, no, no, like, it's, it's, you know, it's so crowded, nobody goes here anymore, kind of thing. So how do you think the world changes? Because it feels like

• 44:28Alex Rampell?

  right now, this is the weird, this is the weird position that we're in, is that a lot, a lot of the early wins, if you will, the consumer successes are around like, oh, it saved me money, it did this. It's because of the asymmetry.

• 44:40Speaker 00

  Yeah.

• 44:40Alex Rampell?

  Right? Like, a very small number of people have the tool. The merchant or the counterparty has no idea what's going on. I can't wait, you know how like, as a consumer, I've been trained to say, no, no, I want to talk to an agent or press zero, or it's like, you can look up, how do you get out of the stupid phone tree? I can't wait for the other side to say, no, I have to talk to Terry. I ain't talking to Muse.

• 45:00Speaker 00

  Yeah.

• 45:00Alex Rampell?

  Right? Like, wouldn't that be funny? You call Comcast, you're like, I hate you, you suck. Your service is terrible. You went down 10 times. This is, I do this all the time. And then, but I of course have, I actually did this with Codex, because it turned out Comcast is blocking Muse. They know the IP addresses or something, so it won't let you log in. So I just have ChatGPT, you know, Codex, Astra, like, login on my computer, does everything. But I'm waiting for the day when Comcast says, we know this ain't you. Right? Like, put Alex on the line, because I'm not giving something to his agent. And that's going to, because right now, again, that's what I mean by the asymmetry. It's like, the small number of insiders have this tool. But you know what? It's not gonna, you can't scale that infinitely, because the world is going to adapt.

• 45:43Speaker 00

  Although I do have news for Comcast, the GPT Astra and Alex are about the same sort of foe. So, so be careful if you, if you get them on the phone. Yeah, I mean, I think you're pointing out something that, that we have yet to appreciate, which is, what happens when you actually read the terms and conditions and go to the edge of what is allowed and disallowed? So, you know, an example, the other day, I was looking at flights. I wanted to buy a flight that was on the edge of the price that I could pay that would get me an upgrade. And that's a kind of hard thing to do. Sometimes I overshoot it. My agent did that perfectly. Or, you know, sort of any, any case where it's very

• 46:26Speaker 00

  difficult to uncover the terms and conditions. A good example might be, what happens to rewards? Like, rewards on cards are only there because I get you this very sort of big headline reward on dining, but then you also spend it on fuel. And if agents are intermediating all of our transactions, and I'm only getting points on the card that gets me, I'm only using the card where I get points, the whole points reward ecosystem falls apart. So many, many of these things could start, anything with a sort of breakage model in it is going to start to fall apart. And then we will have to have new terms and conditions. So maybe that's better, maybe that's worse. I don't know, but it'll certainly be, be different.

• 47:12Alex Rampell?

  And maybe what, what are you kind of with all of these themes, like, what, where do you think VGS is, is going to go? Because I, again, I find it so interesting, because it's the world's most boring business around, it's this giant vault that stores all of the payment credentials for like, most, like, everybody who's listening to this podcast, I almost guarantee you have a credential that's stored at VGS, because you interact with the merchant that uses VGS for storage of credentials. So that's a, it's a really formidable position to be in. And it's been growing remarkably, just because like, yeah, you need to, every merchant needs to store the credentials of the consumers that they work with. But like, where do you think is the most exciting of everything that we've talked about for VGS's future?

• 47:56Speaker 00

  Yeah. So I think there's sort of three eras of VGS that are kind of overlapping and compounding. And you talked about the first era, which is the vault. This is 10 years as sort of becoming the most trusted store for credentials across the internet. A very hard business to, to execute on, but that's, you know, that's the sort of privileged position that the company's in. The second era has been, which you talked about, sort of, you know, information going into and out of that vault. So that's a third of those credentials have to be updated. That's become very interesting and complicated, because each network has their own standard for how you update their credentials. And each network

• 48:39Speaker 00

  has created multiple network tokens that represent the vault. If you were just storing the information, it'd be one thing, but you have to store it and get a, a series of tokens from the networks, so that, so that the data is effectively, you know, refreshed.

• 48:57Alex Rampell?

  Right.

• 48:58Speaker 00

  The third era is what we call the network era, which is this, this role of brokering the credentials among multiple parties, in a way that makes sense according to the rules, and that adds value to, to all, to all of the ecosystem players. And we're sort of starting to do that now with agentic commerce. There are other cases where VGS is actually working with the banks on the tokenization front. So if you're, if you're tokenizing the cards and you're storing the cards, you're on both sides of this, of this ecosystem, which allows you to do some of the information swaps that you, you know, that you, that you sort of talked about earlier. So, and, and all of these combine, all of these combine.

• 49:40Speaker 00

  We'll continue to be a vault. We'll continue to add services. And as we add more services on more merchants and on more issuers, we continue to get this network effect where you can broker credentials, you know, among the parties. And I think agentic commerce is just fuel into that ecosystem.

• 49:58Alex Rampell?

  Well, Terry, this is, this has been fun down, down memory lane. One of these days we should do, do we ever, I think we actually did a history of trial pay one a long time ago.

• 50:08Speaker 00

  Yeah, I think we should, we should redo it. It was, it was one of the first podcasts that we did. The, the studio wasn't, you know, wasn't as nice. But I think what's consistent between that first podcast and this one is you should be buying more flowers for, for your wife.

• 50:20Alex Rampell?

  Yes. I think that, I think that's a great idea. All right. Well, thank you very much.

• 50:23Speaker 00

  Thank you for having me.

• 50:27Alex Rampell?

  Thanks for listening to this episode of the A16Z Podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify. Follow us on X at A16Z and subscribe to our Substack at A16Z.substack.com. Thanks again for listening, and I'll see you in the next episode.

• 50:52Alex Rampell?

  As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16Z.com/disclosures.