The Future of Payments with Nabil Manji of Worldpay

Jeremy: Hello, I'm Jeremy Allaire and this is The Money Movement. I'm here today in Miami at Bitcoin 2022. I'm very excited to be joined by Nabil Manji, Head of Crypto and Web3 at Worldpay, an FIS company. It's so good to have you here.

Nabil: Thanks for having me, Jeremy. Really appreciate it.

Jeremy: Absolutely. We had some big news this week, which I'll come back to and we can talk about, but maybe we can just start. I'm always interested in people's own personal stories a little bit, their own personal journeys. Just take a minute for your own journey into crypto, how, and when you got involved, and then how did that manifest into you playing this leadership role at Worldpay? By the way, for other people too, maybe in that context also, not everyone knows Worldpay. A lot of people, if you're in the FinTech industry, you obviously know Worldpay, but to the broader audience.

Nabil: Sure. My own story, I started my career in consulting and investing. As I was finishing up my time in an investing role, I had a friend that approached me who had a friend that was one of the co-founders of MakerDAO, Dai stablecoin for those that are less familiar. My friend that had been one of the co-founders of MakerDAO had been in crypto since the early days, done incredibly well for himself, and wanted some help setting up an investment fund to invest his proceeds back into the crypto ecosystem.

They approached me and said, "Hey Nabil, we know you have a background in investing. Do you want to help us set up a crypto investment fund?" I said, "What is that?" The more I read about it and having had some exposure to financial services in FinTech, in my consulting and investing days, I read the Ethereum white paper, read the Bitcoin white paper, started to look at what was going on in the space and thought, "This is pretty interesting."

I took six months and helped my friend set up that investment fund and in the process of doing so, realized that this is actually really interesting, I'd love to go find something I could do in my career where I could have exposure and influence the space. Whenever you first read about crypto, one of the first use cases you read about is payments. Payments, remittances, financial inclusion, all that sort of stuff. That turned me onto the payments industry as potentially an interesting way to intersect with crypto.

I ended up joining Worldpay, and I'll talk more about what Worldpay is and what we do in a moment, about three years ago. Back then, we weren't really doing much in crypto. We had one or two clients, some exchanges around the world, but in early 2019, we decided to make it a core focus vertical for the company and lay a lot of the foundations in terms of our risk appetite, our policies and procedures, our monitoring and controls, and hiring expertise and talent. 2019 for us was really that foundation-building year, where we got the executive team comfortable, the risk and compliance team more comfortable, built that expertise and then that started to pay dividends really in 2020, 2021, where we went from having two clients at the beginning of 2019 to ending last year with something in the neighborhood of 25. That's my journey and today I lead that business globally for Worldpay.

What do we actually do? What is Worldpay? A lot of people don't realize this, but when you buy something online from a merchant or in-person using a debit card or credit card, Visa and MasterCard, which are the two major card networks, don't actually have a direct relationship with the merchant that you're buying something from. They all use what's called a payment processor or merchant acquirer, to use industry lingo, and Worldpay is the largest of those companies in the world.

What we do is we basically enable merchants, whether they're brick and mortar, e-commerce or both, to accept payments from consumers using debit cards, credit cards, e-wallets, local bank transfer payment methods, and also enable merchants to pay out funds as well. Today, we process about $2 trillion a year globally. About 16¢ of every dollar spent online is processed by us. We're the leading player in airlines and travel in the crypto space and a few other key verticals.

As it relates to crypto, we really view ourselves as being the leading bridge between the traditional finance ecosystem or the Fiat ecosystem and the digital asset ecosystem. We're really proud of the role that we've played over the last few years in enabling tens of millions of consumers to move tens of billions of dollars from the Fiat ecosystem into the digital asset ecosystem.

Jeremy: That's a lot.

Nabil: That's a lot of money.

Jeremy: It is. The scale's amazing. I don't think people have a good handle on that and breaking down the pieces of the ecosystem is really important. It was one of the things when I got started with Circle and was trying to understand, because I was drawn in by the idea of, how do you enable frictionless payments and internet native digital currency model? That was what drew me into this whole space as well.

The first thing that I needed to do is like, I needed to understand the existing payment ecosystem and who are all the players and how do they actually work? There are a lot of different intermediaries, a lot of different steps, and when you put in your credit card or your debit card and you pay and you get your good, the actual money going from the person who actually is spending it to the actual merchant, there are a lot of hops and there's a lot of things. That's, obviously, largely invisible to people, but there's a lot there. Obviously, Worldpay is a huge player in that infrastructure.

I want to come back to actually one of the earlier things that you were talking about. One of the big issues obviously, and people talk about it in crypto all the time, which is fiat on-ramps, all this kind of stuff. That phrase even, just fiat on-ramps, is a meaningless phrase to most people in the world. It's actually in the glossary that you have to study when you become a new employee of Circle. It's like, "What is a fiat on-ramp? What does that mean?" It is this huge thing, and most people don't realize how hard that is. I know you talked about getting risk and compliance comfortable, and it would be interesting, you've got, as you said, 25 key clients in this space today, but I assume, how many merchants does Worldpay serve?

Nabil: Over a million.

Jeremy: Over a million?

Nabil: Yes.

Jeremy: The penetration of merchants that are transacting underneath in digital currencies, obviously, is still super, super small. Clearly, there's this high hurdle, and I think with risk and compliance in particular, that's all always this high hurdle. I think a lot of it is just preconceived notions, concerns, this kind of stuff. Maybe you just talk a little bit about, what are those big risks that people are focused on. In many ways, how has Worldpay addressed that, and not only got your own organization comfortable with it, but also all your partners? That ecosystem we talked about of all these other players, how have you gone about doing that?

Nabil: It's a big question. If you start from the beginning, as you mentioned, when a consumer makes a payment using a card or another payment method, it's not just us and the merchant and Visa, MasterCard, and their bank, there are a lot of other intermediaries involved. Maybe there's multiple banks that the money's going through. Maybe there's foreign exchange providers, maybe there's other payment service providers that are between us and the merchant. When you talk about getting that large and complex of an ecosystem comfortable with a new area of business or a new economy, such as digital assets, there's a lot of education that has to be done. I think that's part of the reason why, if you look at the early days of crypto, it was so hard for those companies to get banking relationships, payment relationships, and all that stuff. Educating a highly regulated industry segment that is typically relatively risk-averse and highly complex, that's a long journey.

A lot of it was just educating people on what is cryptocurrency? How is it being used? What are the controls in place? I think if you look at what the primary risks and concerns are, to answer the second part of your question, I think for us, it comes down to a couple of different vectors. One is, true or not, there was and continues to some degree today, to be this notion that cryptocurrency is used for illicit activity. Obviously, it's, A, highly regulated financial institutions ourselves, but also all the partners that we work with. There is zero tolerance for things like money laundering, sanctions evasion, all that sort of stuff.

Dispelling the narrative and using sophisticated tools like Chainalysis or CipherTrace or TRM Labs to actually illustrate that you can monitor and mitigate and control for risks, in terms of where funds are being used or where they're being sent to and from, is an absolutely key point.

The second big point is regulatory compliance risk. There's one thing to talk about controls for money laundering and terrorist financing and sanctions, which we just did, but there's also, what crypto services are legal to offer consumers and what are not? As you'll know, different financial services are regulated differently around the world. Some places regulate custody, some people regulate spot exchange, some people regulate derivatives, futures, et cetera. When you look at a business like ours operating in 50 plus countries, each of where we are highly regulated and are not allowed to sell our services to business that are providing unlicensed products and services to consumers, just the inconsistency and sometimes lack of clarity there, was another big risk that we had to get our head around with the help of local council in a lot of markets, external advisors, et cetera.

Then the third big piece, which I think the industry's come a long way in is credit risk. A lot of people don't know this, but as the payment processor who works with a merchant, if that merchant was to become insolvent and not be able to deliver goods and services to consumers, we're the ones left having to make those consumers whole. That's part of operating with Visa and MasterCard. They push that liability down onto us. A good example of this is like in COVID, there were a lot of travel agencies and tourism companies that went bankrupt.

If you were a consumer that had purchased a trip or an excursion from one of those companies where we were the payment processor, and you filed a dispute or a chargeback because this company that was supposed to give you this trip is now insolvent, we have to compensate everybody. As that relates to crypto is, let's say you're a consumer that bought some crypto and it's sitting on an exchange and that exchange gets hacked and that crypto's gone.

Jeremy: Or the price goes down and you don't like that. Friendly fraud.

Nabil: Yes, exactly. There is some degree of credit risk that exists in the crypto space where if one of our clients as an exchange or a wallet gets hacked and some of the consumer funds go missing, there are scenarios where we would be left with that exposure. Some of the ways we mitigate that or got comfortable are looking at what portion of assets are held in cold storage versus hot storage? What's the security around that cold storage? Are there insurance policies in place? Which, historically, there weren't, but some insurers are coming around. It's really those three risks. Again, just to recap, the financial crime risk around things like AML and sanctions, the regulatory compliance risk in terms of the evolving landscape as relates to crypto, and then the credit risk, just acknowledging that hacks have happened in the past. In most cases, governments want consumers to be made whole for those types of incidences.

Jeremy: Yes, totally. As you know, Circle has a long history of being at that intersection between traditional payment methods, cards and crypto. I remember very early on, one of the goals that we had was we wanted to create a magical experience where you could have an app with a debit card. You could spend money from your debit card directly to a Bitcoin address. You could scan the QR code and boom, it would be like I'm sending dollars directly to a Bitcoin address.

We made that work, but it was really hard, not only getting all the partners needed on board to do that, but then I think coming back to some of the comments that you just made, that credit risk and fraud risk and all the kinds of things that would happen, extremely difficult. I know there's a lot there. Thank you for indulging me on that question.

It actually is an interesting segue, a little bit, into the role of stablecoins. Obviously, we'll get to the Circle and Worldpay partnership in a moment. Stablecoins have a lot of promise to actually fulfill a lot of the promise of payments with digital currency. The volumes are actually pretty amazing. We've seen over $3 trillion of on-chain transactions in USDC, which is a big number. Every year, it continues to grow, but we're still early days. Making this work for everyday businesses has been a challenge, but just conceptually, as you think about this and the role you can play being that interface layer between all these people who have traditional bank accounts and have traditional cards and other things, and then this digital currency world, how do you think about stablecoins, the role they play, just overall?

Nabil: First of all, I think stablecoins have been the backbone of the modern crypto industries as we know it today. I think for all the reasons we just talked about, moving fiat money, whether it's for payments or remittances or disbursements or whatever, it is complex, and you need a lot of parties involved. Obviously, stablecoins and any direct account-to-account or peer-to-peer payment removes a lot of those intermediaries and that complexity. I think for that reason, they've been tremendously helpful to the ecosystem, because as we all know, crypto is 24/7, 365. It does not sleep.

Jeremy: Your business is always on. Why aren't your dollars?

Nabil: Right. I think in the crypto ecosystem, because those businesses are operating 24/7, 365, using fiat as the liquidity source or primary treasury currency for them, it just doesn't-

Jeremy: By fiat, we mean really specifically, the existing money transfer rails and the electronic ledgers in a sense of the existing financial system is fiat. Then crypto native digital currency is on the internet, on Blockchain.

Nabil: Yes. To me, it's absurd that we could have food show up at our door in 10 minutes or packages like a TV show up in 24 hours, but if I want to send you $100, it might take three days. I think stablecoins have helped the crypto industry grow by providing that liquidity and real-time rails needed to support some of the business models that we see.

I think the other big piece is, obviously, there's an evolving regulatory landscape around classification of different types of assets, tax of different assets and different activities. I think stablecoins as that available medium have helped the industry not only achieve growth, but manage risks associated with that growth.

Jeremy: Yes, for sure. I guess I have this concept of, there's a transition underway and that transition, some people might say it'll happen in three years. It could be 10 years, but there's a transition underway of electronic dollars going from the existing fiat world into the digital currency world. I use the metaphor of upload your dollars to the internet. In many ways, the partnership that we formed, and we could talk a little bit about that, I think about that as like, it's a big step in enabling businesses that want to operate in digital currency, who instead of operating in a traditional commercial banking world, they want to settle funds into digital currency. Then they're using that in their own treasury and in their own operations and so on. I'm excited about this partnership because it's, again, like taking a company who's really been at the forefront of commerce on the internet and a million merchants and so on, and really saying, "Hey, businesses, here's a way for you to directly operate in digital currency, but also have the ability to work with all these customers where they already are."

Nabil: Yes. I think a couple points there that you mentioned that I think are super interesting are, a lot of these crypto native businesses, as you've said, they operate their treasury, they maybe pay their vendors, they maybe pay their employees, et cetera, in stablecoins or in crypto. For us, those are our clients in the crypto space, but we've always been in fiat. There's a disconnect there. Maybe we send the fiat slower than when they need it to pay their third-party vendors for a product and service that they're delivering

Jeremy: Or their customers, maybe, if it's an exchange, their customers want to be able to use it right away or whatever.

Nabil: Yes. The exchanges are a great example. Some exchanges have enough liquidity in their own environment to fulfill most or all orders, but a lot of exchanges don't, particularly the smaller ones. When you place an order using your debit card or credit card to buy crypto, sometimes they need to pay a third-party liquidity provider. That third-party liquidity provider wants to be paid in stablecoins, they don't want fiat. Then you end up in a situation where you have an exchange or a broker, a wallet that has basically a time lag between when we send them the fiat money and when their liquidity provider is expecting to be paid. That working capital, so to speak, is not insignificant when you're running a global crypto exchange and consumers are using cards to pay tens of billions of dollars.

Jeremy: Totally. One of the things that we're seeing and I'm sure you are as well, is now that we have these dollar digital currencies on the internet and they're programmable and it's this kind of thing, all of a sudden, now people are saying, not only can we use these to settle a transaction fast and with good security, but they're actually saying, "Hey, I want to keep my working capital in this and I want to borrow and I want to lend." The basic functions of money, of banking, if you think of it, these basic functions are actually moving on-chain.

People are borrowing and lending, and I think most merchants, they think about, "Okay, I need to be able to have my electronic money because I need to be able to pay people, et cetera. I also want to be over in this traditional commercial banking world," because what do commercial banks do? They lend money. I'd be interested in your thoughts on, as this move happens, do you see growth in maybe more traditional merchants and businesses? Today, it's the crypto natives, and then there's the crypto forward. Do you see businesses, eventually, like other internet firms, saying, "Hey, actually, we want to operate with this because we can lend and borrow. There's yields and things like that."?

Nabil: Yes. I think a couple points. One is, you're absolutely right, our target audience for the partnership that we're launching with you is way beyond just crypto natives. I think they'll be the early adopters and they've got very clear use cases and economic reasons to use stablecoins.

Jeremy: It's intrinsic to who they are, what they do.

Nabil: Everybody wins. There are a lot of other merchants of ours in traditional verticals, retail, travel airlines, et cetera, where we're getting approached weekly by dozens of people saying, "What should we be thinking about as it relates to crypto?"

I think for a lot of them, and typically, our client at a lot of these companies is someone in treasury or their payments program or something. They're thinking about money movement. They're thinking about return on capital. They're thinking about efficiency of corporate treasury and all that. Stablecoins in my perspective are the easiest way to dip your toe into crypto. You don't have to worry about things like tax considerations because there's no appreciation or depreciation. You don't have to worry about volatility, all that sort of stuff. I think this is going to be the use case that we pitch out there is, if you are interested in exploring what something like a stablecoin can do to benefit your business, this is the right first step. That's one point.

The second point is, a lot of people, you hear this phrase out there in the world today, every company is going to become a financial services company. I think if you look at the data around number of companies that offer loyalty and reward programs, or own branded credit card programs, it's just exploded over the last few years. I think as a lot of these companies are thinking about, "What are the financial services that we want to offer to our consumers?" some of the things around lending, yield and other products that are quicker, more lucrative, et cetera, on Blockchain and using stablecoins. I think it's, again, a natural use case where here's something that me as a merchant can use to not only help me internally from an efficiency and liquidity standpoint, but also provide something attractive to my end consumers that'll make them want to do more business with me.

Jeremy: There's this new economic value that's being created there that's available To people. I know there's some big growth categories, too. I'm guessing that of the folks that are the targets today, there's a lot of exchange, brokerage, that kind of thing. Now, all of a sudden, we have people building Blockchain games and we have people building NFT marketplaces. We have people building social tokens, all these other categories. I know in your title, it's crypto and Web3. Web3 is a nod to all the other stuff. What are the biggest categories where you see this happening? Without getting too proprietary, what are some of the big focuses for you guys?

Nabil: I think it's all the ones you just mentioned. I think, obviously, NFTs have become absolutely massive over the last 18 months. The amount of money and consumer interest and merchant interest flowing into the space is huge. I think the stablecoin settlement offering that we're bringing to market is going to be naturally attractive to them, because a lot of those products and protocols are crypto native. They don't have the ability to interact directly with fiat and so that's really interesting.

I think the other thing that's really interesting is, a big chunk our merchant book is big B2C brands. Some of the retailers, the airlines, all that sort of stuff. All of these guys are thinking about NFTs too. Is there a day in the future where Worldpay offers an NFT marketplace? Probably not. We're a B2B company. That's a very B2C type of product or industry. Do we want to be the infrastructure from a financial services perspective that sits behind that? Yes. Does the stablecoin element help power that? Absolutely.

Jeremy: I have a theory, which in a sense, I know firms like Worldpay and in fact, the entire credit card industry, there's the actual transaction and moving the value, but so much of it is often tied up into rewards programs, points programs, loyalty programs. That was the next layer of the stack that got built up. Apologies if I don't know, you guys probably have a whole bunch of products in that space.

Nabil: We do.

Jeremy: That's this whole arena, and in some ways, just like stablecoins enable open interoperable open-loop, open internet money movement, NFTs in some ways represent an open interoperable open-loop model for affinity and rewards. I think with those big brands, some of the opportunity is not just, should we have Nike shoe NFTs or whatever it is, but it's like, how can we use this material, this new creative material to create different kinds of relationships with our audience, our engaged users, but also the people who transact with us? I'm excited to see what developers are going to do with NFT protocols that are designed around loyalty incentives, awards, et cetera, that I actually think could be not only rivals to the credit card points systems, but actually could be way stronger in terms of what they deliver.

Nabil: I think a couple points there. Every consumer-facing brand and merchant is fighting for everybody's eyeballs, like the time. We have a ton of research and not just us, any company that's involved in e-commerce and things like checkout on payments. Friction destroys conversion. If you think about something like a stablecoin and programmable money, that is all designed to simplify things for the consumer. I think the brands and the retailers that innovate in this space and leverage that and understand what that means in terms of better CX for their consumers, are going to be the ones that over time grow their share of eyeballs spending time on their platforms.

Jeremy: Yes, totally. It's interesting, there's a corollary in the FinTech Neobank world. For a long time, the issuers were checking accounts. They're like your Bank of America account or your Chase account or whatever. Probably the fastest-growing issuers now are the Cash Apps, the Venmos, and even the BlockFi card or the Coinbase card now as like crypto native. The issuers were that, and in some ways, the card issuing was a feature that was attached to something that was this really great user experience of peer-to-peer payments or whatever the anchor user experience was for that. There still isn't yet an anchor user experience that unites all of these things like identity NFTs, money, assets, et cetera. There's a lot of people experimenting there, et cetera. I'd love to hear your thoughts on, will the issuer-- Issuer's even the wrong word. Will that unifying consumer product experience, what's going to be in that? Who are going to create those? Have we even seen it yet?

Nabil: I don't think we've seen it yet. I think it's a really interesting question because my view, if I take a step back from the industry, phase one of Blockchain and crypto was, who can build the best protocol, the base layer? Phase two was, who can build the best dApps on those protocols? I feel like that's where we are right now. The third is, once those winners from a protocol and dApp perspective have been chosen by the market, how are they all going to work together and fit into a nice niche consumer experience? That's where interoperability comes in. I think interoperability is going to be the most popular buzzword of crypto going in for like the next few years.

Jeremy: That's the whole promise. I actually feel there's this whole narrative around super-apps. Uber's building a super-app, we have super-apps in Asia. We're really, really well known. Is PayPal building a super-app? Who's doing a super-app? To me, the meaning of super-app, I don't particularly like that phrase, but the meaning of that, I think for most people today, has been grounded in the idea of putting together these different financial utilities together into one app. Maybe like ticketing or other things. I wonder if the super-app is actually, really, is it like the Web3 consumer browser?

Nabil: Is it a layer?

Jeremy: Is it that layer that is like how you interact with this new internet and both from a payments and NFT and [unintelligible 00:27:49] I think it's such an open creative space. I feel like back in the late '90s, Google didn't exist yet. The paradigm of how I'm going to really get into the internet, there were lots of people who'd been trying and building and so it didn't exist yet. I feel like in this space, it doesn't exist yet. Which is really exciting, because it means there's going to be some company or companies or projects, whatever, that are going to boom and are going to hit a billion people and surprise us all.

Nabil: Yes. I think the trade-off right now, there are super-apps as you said. WeChat's a good example.

Jeremy: Totally.

Nabil: They have such a great suite of services, but research has shown over time that consumers still want choice. I think we want to get to this place where there's this hub of interoperability where you can take things like your identity, payment credentials, assets, et cetera, but then still be able to use that at the venue of your choice or with the product or service or merchant of your choice.

Jeremy: This is deeply the Web3 vision as well and building up on it. I think probably for, again, being a little presumptuous, but some of your colleagues maybe who are more on the traditional finance side, who are looking at crypto, et cetera, are looking at it through a fairly narrow lens of, why would anyone use Bitcoin or whatever? It's like the classic cognitive dissonance, "I don't understand this," et cetera. What I think probably most people aren't seeing is, actually, no, there is this whole new internet. If you thought like being out in front and being an important provider for e-commerce was important, this is actually probably going to be more important. Just having you guys focus on the space is obviously awesome.

Nabil: Yes. I think if you ask most people what is crypto used for, bought for today, most people would say investment or speculation. That's still a big portion of the market, but that portion of the market is declining as a percentage of overall share of the activity that's going on. I think it reminds me, the early days of the internet were used for gambling, some other not so great activities. That was the narrative for a long time. Now, everybody uses the internet for literally everything. Our lives are built on the internet. I think it takes a long time to shift that mindset, but I think what's really interesting is if you look at the younger generations, all of this technology and all of these concepts are incredibly native to them.

Jeremy: They just get it.

Nabil: There's always going to be that upward education that they're going to do with the generations above them, their peer set and all that sort of stuff. I think the growth curve that we're seeing in particularly the Web3 side of the ecosystem, gives me a lot of optimism that I think things are here to stay.

Jeremy: No doubt. We're excited to be putting together some building blocks here with you guys. Obviously, lighting up dollars on the internet is a piece of the puzzle, but obviously the puzzle's very, very big. It's a mosaic puzzle, whatever. It's a lot there, but again, grateful for the partnership with you guys-

Nabil: Likewise.

Jeremy: -and psyched that you could come on the show.

Nabil: Thank you for having me, Jeremy. I appreciate it.