The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:13:01 · S1, Nik Storonsky
[00:13:01] S1: it wrong. How would you rate your relationship with the regulators today? [00:13:06] S0: It's actually much better, again, because I was inexperienced and I had this perception in my mind, which was, well, not forced on me, but confirmed by, you know, many, many people, investors that... Because I'm young, right, techy. I should not speak with the regulators because they will not understand me. Instead, I should hire some gray hair banking CEO who've been in the business for a long time, and that they need to speak with regulators. What I really found is is actually very bad advice, right? Because whenever you speak with regulators yourself, whenever you explain exactly in plain English what we do, how we do it, because you build it yourself or I build it myself, Right? I can explain it in very simple terms. And because we are also innovating a lot in these areas compared to legacy banks, you show data as well that our results are better compared to legacy banks. But that's in that world matters. Right? If you show data, that's how you've been looking three or four years ago. That's how we do now. That's how other banks are doing. We're ahead of them. That's what matters. A problem with the traditional banking CEOs, they are not tech driven at all. And then they they they rather speak in a very vague jargon to hide their incompetency or their limited knowledge in in tech related, matters. So regulators, I don't think they like it. [00:14:22] S1: What have been your biggest lessons around crypto, Nik?
00:14:22 · S1, Nik Storonsky
[00:14:22] S1: What have been your biggest lessons around crypto, Nik? [00:14:25] S0: Never speculate. Crypto. Have you changed your mind [00:14:29] S1: on anything in crypto? You made the decision to include crypto early. How do you reflect on that now?
00:14:29 · S1, Nik Storonsky
[00:14:29] S1: on anything in crypto? You made the decision to include crypto early. How do you reflect on that now? [00:14:35] S0: I think it's a good decision, because in reality, a lot of use cases in crypto is still speculation. Right? People, I mean, speculate is more, I would say, entertaining for them. But then, some use cases are definitely valid. For example, stablecoins or enabling instant money transfers through stablecoins competing with SWIFT on corresponding banking system is actually very valuable. What's been the biggest challenge with the crypto product? There were quite a few. I mean, the relative probably biggest challenge is different licenses in different countries and then different rules attached to these licenses. I remember when we received our crypto license, several years ago in UK, there were certain rules attached to it, which actually cost kind of 99% false positive. So for example, a person wants to send money in crypto to another account, and then we will block this transfer because of certain rules imposed by regulator. But then in 99.9% of cases, we were wrong, you know, blocking this transfer because, I mean, transfer is... Was okay. Right? It wasn't fraudulent. Wasn't. So it took us, you know, some time to explain to regulator a short date that these rules that you imposed on us are actually wrong rules. We should optimize it, and then we can capture, you know, more fraudulent transfers and then not waste time of innocent people.
00:14:35 · Nik Storonsky, S1
[00:14:35] S0: I think it's a good decision, because in reality, a lot of use cases in crypto is still speculation. Right? People, I mean, speculate is more, I would say, entertaining for them. But then, some use cases are definitely valid. For example, stablecoins or enabling instant money transfers through stablecoins competing with SWIFT on corresponding banking system is actually very valuable. What's been the biggest challenge with the crypto product? There were quite a few. I mean, the relative probably biggest challenge is different licenses in different countries and then different rules attached to these licenses. I remember when we received our crypto license, several years ago in UK, there were certain rules attached to it, which actually cost kind of 99% false positive. So for example, a person wants to send money in crypto to another account, and then we will block this transfer because of certain rules imposed by regulator. But then in 99.9% of cases, we were wrong, you know, blocking this transfer because, I mean, transfer is... Was okay. Right? It wasn't fraudulent. Wasn't. So it took us, you know, some time to explain to regulator a short date that these rules that you imposed on us are actually wrong rules. We should optimize it, and then we can capture, you know, more fraudulent transfers and then not waste time of innocent people. [00:15:50] S1: You mentioned that kind of the different regulatory elements. You added The US as another geography. I I never understand The US, Nik, if I'm honest, because, like... And the other thing
00:15:50 · S1, Nik Storonsky
[00:15:50] S1: You mentioned that kind of the different regulatory elements. You added The US as another geography. I I never understand The US, Nik, if I'm honest, because, like... And the other thing [00:15:58] S0: I love about Revolut is Revolut is [00:16:00] S1: the one company from Europe that shits on its US counterparts. Like, Chime is the biggest, you know, player in The US, which is, a quarter of the size of Revolut, which is completely unique. Why has no one been able to win US neo banking? I didn't understand that.
00:16:00 · S1, Nik Storonsky
[00:16:00] S1: the one company from Europe that shits on its US counterparts. Like, Chime is the biggest, you know, player in The US, which is, a quarter of the size of Revolut, which is completely unique. Why has no one been able to win US neo banking? I didn't understand that. [00:16:13] S0: Well, I think in US, first of all... So there is a culture in tech companies. They don't want to be regulated. Because they don't want to be regulated, they need to partner with the bank to use their license and use use their platform. As soon as you partner with the bank and use their license, use their platform, you you need to follow their process, which are not automated, which are not built as a product. It slows you down. Plus, on top, there is a compliance with the bank that needs to approve every single screen, every single marketing material and so on. And because they are not very efficient, it slows you down. Plus, because you're not a bank, not able to use your balance sheet or your deposits, so you cannot really do credit cards efficiently. The US is a credit driven market. Whatever a customer spends over a credit card, bank receives actually much more money from a merchant compared to debit card. And banks, they spend part of this interchange to do... To give additional benefits to customers in AMIs or points. As result, credit cards are much more attractive for customers compared to debit card. Well, as a result, you see fintechs purely partnering with the bank issuing debit cards, just not very attractive value proposition.