Chuck Huang, Founder and CEO of Citcon, joins George Pebody and Yvette Bohanan on this episode of Payments on Fire® to chat about digital wallets across the globe. Listen in to hear their thoughts on where the industry is headed as the consumer payment choice continues to diversify.

ㅤ

George Peabody:

Welcome to Payments on Fire, a podcast from Glenbrook Partners about the payments industry, how it works, and trends in its evolution. I’m George Peabody, co-host to Payments on Fire and as always, really glad to be here with Yvette Bohanan who’s the other co host here at Payments on Fire. Hey, Yvette, how are you?

 

Yvette Bohanan:

I’m doing well, George. It’s always delightful to be able to work with you and talk with people in the industry who are really passionate about payments and I think we have just such a guest here with us today.

 

George Peabody:

We sure do. But before we get there. Knowing your role on the education team, what’s ahead and what are you hearing in terms of what do people really want to learn about, how are we adjusting to that?

 

Yvette Bohanan:

Well, quite a few things, actually. We are selling out of our generic Payments Boot Camp.

 

George Peabody:

All right.

 

Yvette Bohanan:

So our Payments 101, I guess it’s part of the great resignation is what they’re calling it and this sort of turnover of teams. But we have a lot of new people coming into payments who are very eager to learn about the industry so that’s keeping us very busy. We’re also doing quite a bit on digital currency workshops, whether it’s crypto coin, stablecoins, central bank digital currencies, web 3.0, or dare I say, metaverse. People are very interested in what all of those words mean. So we’ve been doing a lot of work around that with our workshops, and we’ve just finished a webinar series on global payments, and we’re getting ready to gear up in Q3 to do some webinars on Buy Now Pay Later and I think that our guest today might have comments on global and Buy Now Pay Later as we get into the conversation so I’m very excited to hear his thoughts.

 

George Peabody:

Cool. Well, let’s get there. It’s my pleasure to welcome Chuck Huang, who is the CEO and founder of a company called Citcon. Chuck, so great to have you here on Payments on Fire. Really appreciate it.

 

Chuck Huang:

Thank you. Thanks for the invitation and having me.

 

George Peabody:

So I’ve got a little bit of background on how Citcon got started, and I gather that in 2015, you were traveling through China and noticed like, “Wait a minute, there’s no cards here. There’s no cash here. Everybody’s using Alipay and WeChat pay.” And I notice what we’ve seen of course is the remarkable flexibility of QR. It’s just software. It’s just a display, just a software driven representation on the phone that everybody’s got. So pretty cool. So Chuck has got a PhD in Computer Science from the University of Florida. Gators fan are you still?

 

Chuck Huang:

Yes, I do watch football.

 

George Peabody:

All right.

 

Yvette Bohanan:

Go Gators.

 

George Peabody:

But like a lot of computer science folks, Chuck’s now in Silicon Valley and has founded the firm and Chuck, the way I understand it, you’ve really taken that lesson about what you saw in China in terms of digital wallets and said, “Look, North American merchants need to be able to deal, among other things, with these customers who are coming from China and other Asian markets for using digital wallets.” We’ve got an opportunity to enable these merchants to accept those methods of payment. So now you’ve got something like 100 digital wallets that you’ve programmed. That’s an extraordinary number. So if you would add a little more color to how Citcon got started, and then we’ll get into what you’re seeing today and what are the problems you’re trying to solve?

 

Chuck Huang:

Sure. Yeah. Happy to do so. I think you covered quite a bit of the story. How do I get an idea, Citcon getting started. It’s really when I traveled to China, I found back in 2014 and ’15, it’s very different a scenario how the consumer payment experience different from the US and the developed world. So, because I work in the payment industry for a long time, I work in PayPal and Visa for many years in the US, in Silicon valley, over 10 years. And in the US, we are the leader in the so-called first wave of digital payments, Visa, MasterCard, American Express, are all born here and still dominating the world.

 

George Peabody:

Right.

 

Chuck Huang:

But back in 2014 and 2015, I think that the world is changing faster outside of the US. I think just when you go out through China, in fact, I also traveled to Japan, I just saw quite a few people, not using credit card to make payments anymore. They just using the mobile phone and the way their mobile wallet is also different from the US-based wallets back then, what I call is Apple pay and Google pay.

 

Chuck Huang:

That’s getting started there as well, but their wallets is very different because they are more like a software based wallet is harness agnostic, like a Alipay, which is a pay it’s can be deployed on both Google, Android as well as iOS. Okay. Secondly, in general, in those wallets, software based wallets, there is no card associated. There is no bank account sometimes So unlike Apple Pay and Google Pay, you need to have a card there. Okay. So that’s very different. I immediately getting more interesting this space for two reasons. Number one, I just found out, if you look at the number of users on those software, 10 times bigger of a Google pay. Even right now, if you do the research report, Apple Pay, Google Pay worldwide, that’s still just about a hundred million users, active users. But if you do your maths, Alipay has about 800 million users, same for WeChat Pay. Outside of the US Paytm India just quickly, already pass over a hundred million users. Fast forward, even in the US in the last five years, the rapid change also happen in the software based wallet, not in the Apple Pay, Google Pay, because if you look at the Venmo, Square cash, Buy Now Pay Later, they all grow much faster. They all close to a hundred million users levels. So that’s like a 2 billion.

 

George Peabody:

So that was a hint, huh? That’s going to be a good, good, good opportunity for you. Cool.

 

Chuck Huang:

Yeah, exactly. That’s number one. Right. You always want to, as an entrepreneur, you always want to tackle problem, which has bigger impact. So think about you have a solution.

 

George Peabody:

Sure.

 

Chuck Huang:

There, the user base is 10 times bigger, but the, secondly, I think that the opportunity is the payment infrastructure, which should require for those process, those software based wallets. It’s very different from traditional Visa MasterCard, because if you want to use Apple Pay or Google Pay, you can pretty much this merchant that can process that one with their backend system existing credit card, because there is a card in that wallet.

 

George Peabody:

Sure.

 

Chuck Huang:

Right. But if you want to use any consumer, let’s say you want to use your Square Cash, or you want to use your Venmo, go to Panda Express buy a meal or go to Safeway to pay them. The creditor cannot use their credit card real because…

 

George Peabody:

Yeah, I got it. And I thought you were going the other direction or to the other end of the problem where the merchant who wants to accept a whole range of payment methods, then they have this terrible reconciliation problem.

 

Chuck Huang:

Because actually that’s a-

 

Yvette Bohanan:

That’s an connection and reconciliation, right?

 

Chuck Huang:

Yeah. Yes. Correct. Correct. Because I mean, that’s a trend, I would say I also spot on back in 2015 because a lot of merchant want to starting accept those global wallets as well. The reason is globalization is really taking acceleration back then a lot of merchant want to expand globally. They want to sell even cross border e-commerce they want to sell to the Chinese consumers, Asian consumers. And in those countries, if you have just say my webpage or my mobile app only, except the Visa, MasterCard real, you are stuck because only 5% of people there have Visa, MasterCard, some even don’t-

 

George Peabody:

Yeah.

 

Chuck Huang:

And they use wallets.

 

George Peabody:

Yeah.

 

George Peabody:

So you are jumping right to Citcon’s marketing at the markets you serve. You’re not just about enabling North American merchants to accept those payment methods in the North American market. You’re also about helping those merchants North American merchants that want to be global to act globally. Anybody looks at a native, the domestic payment systems that are appropriate.

 

Chuck Huang:

Correct. Yeah, absolutely. I mean, it’s not only just North American merchants. We actually talking to a lot merchant that even outside of US, I think that the merchant, I would say the business landscape has been changed in the last five years. I talked to a company a couple months ago. It’s a e-commerce company and it’s not that big. It’s their GMV. Their total merchandise sale on their side is less than a hundred million dollars. But do you know how many countries consumers, they need collect payment? 40 different countries. Okay. The reason is if you look at the report in the last five years, majority of the internet population grows is outside of the US.

 

George Peabody:

Oh sure.

 

Chuck Huang:

Yeah. The consumers in those developing world in China, in Asia Pacific, even in Latin America just grow tremendously. Their internet are penetration grow from like a 10% to almost like a 60 or 70% already.

 

George Peabody:

The demographics are all behind that trend. Absolutely.

 

Chuck Huang:

Exactly. So as a e-commerce company, even you just started probably a couple years ago, it’s not that big. You do internet, a Google search, a advertisement or Facebook advertisement. You probably get 80% of your traffic from outside of the US right away. And they want to buy your products. And what do you do? They don’t have Visa, MasterCard, right?

 

George Peabody:

So that’s obviously major pain point. I want to be able to sell to a global market. When those merchants think about deploying what you bring, what are the other considerations that you’re asking them to address before you go live? Has it got to do with customer experience? Is it integration into point of sales systems? What are the stumbling blocks that you’re encountering or you need to tell them about?

 

Chuck Huang:

Yeah. Yeah. Well, I think that you bought in touch a little bit. I assume there’s three things the merchant needs goes through. So of course it’s not a easy process. I mean, digital payment experience. I need to give credit to the Visa MasterCard folks and make the payment they experience so small, so fast. And the mobile wallet ecosystem pretty much need to deliver the same experience. But it delivers such experience is not easy because it’s a new phone factor. It’s there is no card. And sometimes for example, for install online, the QR become like a new phone factor. So that requires number one, you need integrated the wallet, the phone factor into the merchant’s a converse environment for online, you need to integrated their website, their mobile. And sometimes they use a third party converse platform, like a hybrids, like a Shopify. You need to integrated this app. That’s a different integration with the traditional credit card or debit card processing. So that’s number one. And the number two is you need to handle so called the consolidated settlement because normally you need to add the accept multiple wallets, and you need a consolidation into a single settlement into your financial system.

 

George Peabody:

That’s the reconciliation problem?

 

Chuck Huang:

That’s the reconciliation problem.

 

George Peabody:

Yes. Okay.

 

Yvette Bohanan:

Is that also flow of funds? Are you helping the merchants by basically collecting the money and then dispersing it to your customer, the merchant as part of that process or?

 

Chuck Huang:

Yes.

 

Yvette Bohanan:

Do they work directly with each wallet provider for the flow funds?

 

Chuck Huang:

Yeah. That’s very good question. In fact, you are right. We that’s a third problem we need to deal with is not only just helping to do the consolidation, but also actually Citcon, our provider needs help them to do the settlement they fund. I mean, that’s a complex part because a lot of wallets for the merchant is international based. It’s not a domestic. You need to deal with different compliance requirement, foreign currency control requirement. So that’s we need a Citcon to step to help the merchant. Otherwise the merchant that need to deal with some by themselves. It’s very complex. Yeah.

 

Yvette Bohanan:

Well, it’s very daunting. If you’re making a hundred million GMB, you have to sell to 40 countries, you can’t go out and create legal entities and bank accounts in 40 countries to accept your settlements. That’s hard to do.

 

Chuck Huang:

Correct. And also you need to make sure those wallet, when you integrated with them, I mean 40 different countries. You need to make sure you receive the fund from legitimate wallets. So they have certain comply with their local regulatory as well. Those fund can flow out. I’ll give you example. Some of the foreign countries do have foreign currency control. It means there can only license the provider can do those foreign currency conversion. Like Yvette said, as a GMB of a hundred million dollars, I been not able to set up local entity on each countries. I need to receive US dollars. But a lot every wallet provider is able to convert their local currency into a foreign currency by default. And if there’s that country has a foreign currency control, you need to make sure that wallet work with those license providers converted the currency. Otherwise those that channel is illegal.

 

George Peabody:

So you take care of all that compliance headache and are in the flow of funds. That includes that currency conversion to settle back for say an American, a US back into USD into their account.

 

Chuck Huang:

Correct. Yep.

 

George Peabody:

That’s a lot of work, a lot of added value.

 

Yvette Bohanan:

Yes. That’s a lot of heavy lifting that you’re-

 

George Peabody:

It’s not just about being a… when we think of a gateway function at its simplest, it’s just a switch, a protocol switch and valuable, but not a lot of added value.

 

Yvette Bohanan:

So you’re actually going through end to end and that’s where the value really starts to show up on the back end because you’re solving the hardest parts of the problem in a way that are not necessarily technical, but very important because you have to settle money. That’s what payments is about.

 

Chuck Huang:

Right.

 

Yvette Bohanan:

So you’re taking care of it. I’m really curious, Chuck, when you talk with your customers, the merchants, you just announced a relationship with Klarna. And, and we know that Buy Now Pay Later is exploding out there. We know that we see wallets like Venmo and PayPal and Cash App working now with digital currency providers, cryptocurrencies, stable coins, and that sort of thing. What are you seeing now in the horizon, the way you saw QR codes in 2015, what are you hearing from your customers and what do you think, where do you think this is going with wallets and consumers and what they are going to expect in the next few years?

 

Chuck Huang:

Yeah. I think the trend is very clear with the mobile. The whole mobile phone ecosystem has the biggest impact on the financial services. The system is to just give the consumers, worldwide consumers, access to many financial product, innovative financial product, more easy I think the biggest example probably we can say is so called a Buy Now Pay Later wallets. It’s just a couple years. Because traditionally the consumer can only access the traditional credit card, which is past consumer credit when you make a purchase, but the mobile phone just make it the alternative without using more credit. So that trend will continue. And we will see continuing innovation, this additional consumer facing creditor wallets to be available for worldwide consumers. Klarna, PayPal or Square Cash, they grow very fast. I actually talk to Southeast Asia, similar to Klarna functions in Southeast Asia. They have been going very fast as well.

 

Chuck Huang:

So the trend is, I think in the next five to 10 years, I mean, consumers will just have more choices of the wallets. Different type of wallets can be traditional like Alipay or PayPal, those almost custodial wallets. But then there were second type is those dedicated function of consumer credit, alternative consumer credit, like a Buy Now Pay Later, or like we just said, they can have some crypto wallets as well. We just launch our partnership with Solana Pay and the FTX. And they’re going to build quite a bit of quick proof based wallets. And the merchant, we are helping merchant to navigate this different diversify of wallet choices, their consumers, because for merchant, you cannot assume a static environment of the consumer. They will always pay you by some credit card or debit card and you are going to face, your consumer will pay you in different wallets. Could it be traditional like a PayPal wallets, but also you can, some consumer will pay you. So it’s Buy Now Pay Later. Or some people will pay you by crypto wallets.

 

Yvette Bohanan:

Yeah. You look back when Bitcoin was first announced in the wallets and that all the merchants were like, “Oh, we have to accept Bitcoin. And they were out trying to figure out how to do that.” Like 16,000, 20,000 merchant accounts a year, just in the US, we’re signing up like, well, quarterly actually we’re signing up to accept Bitcoin and then it just fell off. And now we see these new solutions coming up where the wallets are taking all that lifting off of the merchant and the merchants are like, “Wait, what? I’m accepting a transaction that started out in Solana or Bitcoin or whatever.” They don’t even realize it because the wallet and the exchanges are basically doing all the Fiat conversion. Companies like yours are doing that conversion for them. I’m curious if on the other side, if you see your merchant base asking you, “Actually, I really want you to settle to me in Solana or USDC or Bitcoin.” Are you getting that demand from the merchant now, as they start to understand what’s going on with the consumer?

 

Chuck Huang:

Yes. The answer is yes, we do get some merchant is open to accept the crypto so-called tokens under as part of the sediment. A majority of them, to be frank is still want to get the fiat currency because that’s what they’re more familiar with. And it’s the most stable. But I think that the stable coin like USDC or USDT that really changed the landscape a little bit. Because that can provide a stable value for the currency that you accept. But the crypto token has certain advantage as well, because it’s a faster settlement. Because for fiat currency probably take two or three days to get the liquidity, to get to your merchant account. But for stable coin is instant. Okay, you got it instant. And it’s cheaper general from a lot of cases.

 

Chuck Huang:

So I think the innovation is always happening. I mean, Solana pay one of their focus areas to improve the authorization speed, because in the past, a particular Bitcoin, their protocol, if you want to do a payment authorization, then can take a couple more minutes. Sometimes 10 or 15 minutes, it’s not suitable for a lot of a consumer commerce environment, maybe okay for you to buy like a piece of [inaudible 00:20:37] or art. Because it’s a bigger transaction, you have patience. But if you want to use them to buy a cup of coffee, you cannot wait for 10 minutes. You probably will grab a water while waiting for the coffee.

 

Yvette Bohanan:

Exactly. Exactly.

 

Chuck Huang:

But Solana Pay and a few other blockchain companies is trying to speed up that other capabilities. So we will see how the plan pan out from the merchant side, also from the consumer side. But it’s something we’re helping our merchant as well.

 

George Peabody:

Chuck, I imagine that the pandemic certainly drove a lot of conversations for you with merchants who are desperate to shift over from a heavy physical point of sale experience for their customers to something that’s more virtual. What did you learn from that experience?

 

Chuck Huang:

Yeah, I think there are two things I learned from that one. Number one, you are right, a lot of merchant, because of pandemic hit they want to invest more in the online. So a lot of the…data online engagement with their consumer. Even we have a merchant called DFS Duty Free Store in the airport. Of course they get hit quite a bit, but the DFS traditional, they only do operate everything for in store because it’s imagined it’s in airport, it’s in the duty free store. But since pandemic hit, they’re also looking at to how to engage their  customers through online. So they launch quite a few online initiative as well. So that’s number one. Number two is even for some store, you have to operate it for in store because of pandemic because COVID, they’re looking for so called the contactless or touchless payment experience.

 

Chuck Huang:

I mean, example is I think that our solution helps them quite a bit as well. The adoption of the QR payments, because like a Panda Express, you can essentially, in the past, you have to pay credit card, you sign the credit card and you cash that require some contact. Just couple months ago, and they launch with a QR payment to support that you can pay with a PayPal and Venmo. So it’s completely touchless. So you just walk in, you pay, you want just show the QR code on your phone and the clerk will just scan. And even there is a glass in between the scan works perfectly fine. And then it’s no cash.

 

George Peabody:

It was certainly a forcing function for that contactless. Even in the old model, so many merchants I would go into that I knew perfectly well had contactless card capable terminals, but the contactless interface wasn’t turned on. COVID finally got them to turn that on, but I’m recognizing how really interesting it is that QR code that has become take the more flexible alternative. Because it is just, it really is software that’s driving this.

 

Chuck Huang:

Yeah. Yeah. I assume the industry you’re right. Even the contactless card has been a solution for the merchant as well. But sometimes I think the QR just because it is optical capabilities, make the contactless is even more scalable.

 

George Peabody:

Oh yeah.

 

Chuck Huang:

I will pay a Google Pay. You need a couple inch and then you still touch a little bit, again, you fail, but for QR you can scan almost couple feet.

 

George Peabody:

And I’ve always impressed how fast it is.

 

Yvette Bohanan:

Oh yeah.

 

George Peabody:

The scanning, the QR code is just a matter of a half a second and it’s done. So one geeky question, one of the areas of the topics that we’ve discussed and payments on fire is that how payments have increasingly become embedded and financial service have completely become more embedded in the overall customer experience beyond just which payment method would you like to use, having the financial service exposed at the right time, the right offer. That requires to doing that requires providers like you to have a pretty strong API model and team to support that. I assume that’s what you have in place. And I’m curious as to what you are being asked for, what your development team is being asked for to support this embedded process that is this trend of embedded finance.

 

Chuck Huang:

Yeah. So that’s good observation. We do see embedded so-called payment experience with the commerce experience is growing> so even for the faster rise of software based wallets like Alipay, WeChat Pay was fueled by a embedded commerce experience. I give you example. Back in 2014, ’15, one of the biggest driver of adoption of WeChat Pay, Alipay is actually the DD. DD is a copy cat of Uber in China. It’s just a lot of people, because it traditionally in China, when you take a taxi, think about it locally in China, but even in the US, it’s very, a few people actually, you install a car terminal. It’s impossible to do that. So back in 2014, before this embedded experience, everybody, you need to carry some cash because you need to pay driver cash. So that’s all for experience. But with mobile wallet, like Alipay, WeChat Pay, then it’s fully integrated with the taxi so called the Uber app of the DD app. So you just go in there, just finish your ride. And everything is inside the app even though attach with the wallet themselves. That’s really, so I have a lot of adoption about the Alipay and with WeChat Pay.

 

George Peabody:

Yeah. Yeah. Thanks.

 

Yvette Bohanan:

Do you see that, we call it super app trend, that we watch. And in certain countries, in certain regions, this notion of your wallet becomes your access point to everything else you need to do that requires a financial transaction. Are you seeing that continue to grow? And is it taking off in countries other than say China or, we’ve observed it regionally, like in south America with RapiPay. Do you think super wallets are the next thing or?

 

Chuck Huang:

Yeah, I think it will. It largely depends on that particular country, even super app of course’s is ambition for a lot of, so what have. So you can come from different angle to be honest, to become a super app. Again, it can come in from the just traditional financial services app. For example, Alipay is a very good example that traditionally is a payment app, but then they expand it to many other things.

 

Yvette Bohanan:

Right.

 

Chuck Huang:

But they also can come in from a traditional social network app. And perfect example is WeChat. WeChat was not a wallet before. It’s just purely social chatting, but then they embedded a payment app capability in the app and it quickly turn off. They’ve done an amazing job to become the number two in China, almost on par with Alipay. We see that trend that can happen in some other countries as well. Like in south Asia, I believe has that ambition as well. But there is no guarantee you will have one super app in every country. It’s literally depends on the consumer’s preference.

 

George Peabody:

I’m smiling because I think there are a few North American payment apps who’ve declared themselves super apps and not remotely close.

 

Yvette Bohanan:

Not even close. Yeah. They need to do more studying maybe. Yeah.

 

George Peabody:

They have a whole ecosystem they’ve got to move.

 

Chuck Huang:

Yeah. It’s, it’s pretty hard to do. You need to come in, I would say with right resource, you have big enough, but even the big enough may not guarantee your success. For example, Facebook want to become, I think that they are very good candidate to become a super app, but they’re not there yet. Think about, I think in China, like Alipay, WeChat Pay, they have certain unique opportunities and they seize that opportunities and they have right resource, and they also have the right ecosystem there they’re able to be successful.

 

George Peabody:

So Chuck, to wrap up, this has been really interesting. I want to ask you to look forward to a whole new context that’s on the horizon, which is what is referred to as the metaverse the definition of that term is of course in play, but here’s this all virtual experience that we’re expecting to evolve, how you see payments fitting into that evolution?

 

Chuck Huang:

Yeah. That’s very interesting development. I think I’m very excited about those metaverse. So because in those environment that you will have a very different user experience, how people interact between the consumers and the merchant interact and also how they consumer to consume the services and finish the transactions. So that required a lot of potential, a lot of change on the payment ecosystem as well. I expect some new players emerge, be able to handle the payment for those scenarios more efficiently, but the traditional players will have still have a role to play there. Because I mean, think about it. You still need to have some bank account, money movement, all those kind of things, to be able for any new players to do those things by themselves from end to end is very difficult. I would expect the players, in fact, for any financial services companies, the best company is not only can understand the scenario new use case, but also to be successful, best companies should be able to integrate a lot of infrastructure component efficiently to deliver that experience. That kind of company can win. Yeah.

 

George Peabody:

Yeah. I’ve easily imagined Chuck that an incumbent payment company will be branding itself as the best way to pay in the metaverse.

 

Chuck Huang:

Yeah, absolutely. Well, but whether they can deliver that is another question, because a lot of incumbent the company, the reason because they’re successful in one area, they integrated their services to support the one particular, a traditional converse environment to go to a new, different environment that require retooling their lot of internal sense, but it really depends on how fast they can move.

 

George Peabody:

Absolutely. Well, Chuck, thank you so much, really appreciate this conversation and good luck with Citcon, and we’ll be watching your progress going forward.

 

Chuck Huang:

Thanks for having me. Okay.

 

Yvette Bohanan:

Thank you.

 

George Peabody:

All right. That was with Chuck Huang. It was a really interesting conversation.

 

Yvette Bohanan:

He’s an interesting guy and I really wanted to ask him, George they’ve connected to over a hundred, what he’s calling software wallets. We’ll double click on that in a second, just for everyone listening. But I wanted to ask how many wallets does the world need?

 

George Peabody:

I was thinking, how many metaverses are we going to have and how many payment methods tune for the metaverse.

 

Yvette Bohanan:

How’s this all going to hang together and-

 

George Peabody:

Wow.

 

Yvette Bohanan:

Yeah, yeah. I mean, it’s really something. And now we’re talking, he got into the crypto wallets a little bit and over 200 stable coins are out there over 10,000 cryptocurrencies are out there right now in the real world. And so the complexity here is interesting. And is it going to just balloon out and then distill back down or where are we going to land is on a global basis, but that’s probably a good thing or a bad thing, depending on where you sit. He’s probably like bring him on I’ll connect to all of them.

 

George Peabody:

That’s his job.

 

Yvette Bohanan:

Yep, that’s his job.

 

George Peabody:

And to me, the big differentiator for Citcon versus the other payment service providers that we’ve spoken with gateway operators, he is very much that wallet focus. And then, and I can underestimate the importance of the reconciliation and the settlement capability he’s got. The reconciliation to reporting back to that his merchant customers are going to enjoy consolidating all of that money tracking, if you will, across the dozen different wallets that that merchant may accept.

 

Yvette Bohanan:

Right. And actually being-

 

George Peabody:

That’s really big, a lot of value add.

 

Yvette Bohanan:

Right. And recon and settlement go hand in glove, as we know. Right. So, he’s handling the initiation of the payment through assembly API, and we’ll go back to the other pain points in a minute that people have to resolve, but the ones he’s really solving, I think the three big ones is one API for all these different wallets, because they all have a different way to do things. So he’s rationalized that for the merchant and they’re in different countries. So he’s rationalized settlement, collecting funds in local currency and being compliant to get those monies repatriated back to the merchant, wherever they reside, whatever legal entity and country they’re sitting in, with their bank accounts. But that’s no mean trick that’s hard to do.

 

Yvette Bohanan:

And then, the recon piece, the financial recon of taking all of the different formats of all of those different files and rationalizing those so that you can actually reconcile what you initiated to what they settled, to what showed up in your bank account. That three way recon that we always are trying to get to in [inaudible 00:34:08], is good practice. So he saw some really big pain points here, but he was also very forthright in answering your question about, well, there’s other stuff though that the merchant has to do. They’ve got to get the QR code set up and integrate it into their environment. Now there’s things that have to be done still, but he’s solving quite a bit and at scale for a small merchant, which is cool. We have a lot of large merchants, as well as small, that come to us asking about what wallet should I accept and how do I do this? And what does it take? And this is an interesting way to approach the problem.

 

George Peabody:

Well, he’s able to answer the needs of the tech team inside the company, inside the merchant and the CFO terms of-

 

Yvette Bohanan:

Right.

 

George Peabody:

I’m going to get my settlement and the reconciliation’s not going to kill me and my staff.

 

Yvette Bohanan:

Yeah. And they’re not taking on all that FX issue of different currencies and pools currencies and things like that.

 

George Peabody:

As we know, there’s a lot of revenue in FX.

 

Yvette Bohanan:

There is a little bit of revenue in FX.

 

George Peabody:

I’ve heard that.

 

Yvette Bohanan:

Yeah. I’ve heard that too. A rumor I’ve been trying to track down.

 

George Peabody:

Yeah. Yeah. Cool.

 

Yvette Bohanan:

I think the distinction he is making between software wallets is a good one to double click on.

 

George Peabody:

That’s where-

 

Yvette Bohanan:

Is that where you were going?

 

George Peabody:

That’s where I was going. Yeah.

 

Yvette Bohanan:

Yeah.

 

George Peabody:

So when we think about wallets and that’s a term that’s really systemic to the famous industry, we think about operating system level wallets, and that’s very much Android, Google wallet, Apple Pay, Apple Wallet. And there is, and certainly on the Apple side, at Google as well, at least at the physical point of sale, there’s hardware involved, we’ve got NFC chips and such. So there’s a hardware component to some portion of their operation. But on the software side where we’re seeing all this QR code activity taking place, there are really open loop and closed loop versions of that. There’s the open loop, which is where Alipay might sit, where Alipay that QR code are actually through by Alipay. The user is actually connected up to a bank account directly.

 

Yvette Bohanan:

Can be.

 

George Peabody:

Can be. Yeah. And then on the close loop side, I think for at least US listeners, Venmo is a great-

 

Yvette Bohanan:

Yeah. Venmo, PayPal, Cash App. And to some degree we could think of Alipay in certain cases or WeChat pay as closed loop as well because they’re definitely systems, because they are creating their own reconciliation accounts. They’re creating their own settlement files. All of these things that a system has to handle, he calls them software wallets because they’re not embedded in the operating system. They’re standalone pieces of software that work across the operating systems-

 

George Peabody:

They’re apps.

 

Yvette Bohanan:

They’re apps and that’s their primary model or their native model. They’re just apps. And then on the other side, you have things that are natively embedded. And part of the operating system like Apple Pay is very much embedded. And when we’re talking in boot camps, we’ll always draw this distinction around these digital building blocks and those staged wallet and a pass through wallet.

 

Yvette Bohanan:

And we talk about the staged wallet is actually a system, a payment system in itself, in its own right. Because it’s handling settlement, it’s creating settlement files that have to be reconciled in that. When you go to the pass through wallets, which are very much these wallets embedded in the operating system, they’re focused on the initiation, maybe the network tokenization of the payment credentials, but your settlement files in that come from the underlying payment instruments sitting in the wallet. So if that instruments of Visa, MasterCard file your settlement files going to come from them, if it’s American Express or whatever, it’s coming from that. So it’s a very different model. And the fact that he’s focused on what he’s calling software wallets, what we might call a stage wallet. And he’s adding that value to take it end to end from initiation all the way through to the completion of settlement of funds. That’s not something that you need to do on a wallet that’s just a pass through, but it’s absolutely critical for stage wallets. And if you’re a merchant trying to go out and support wallets in 40 different countries, that’s a really heavy lift. So it’s at scale that I think what he’s doing really starts to shine a bit in terms of approach.

 

George Peabody:

Exactly. Well Yvette, as always, it’s been fun. Appreciate… glad we did this yet again.

 

Yvette Bohanan:

Likewise. I will talk with you about payments anytime. Anytime.

 

George Peabody:

Well you know how to find me.

 

Yvette Bohanan:

Okay.

 

George Peabody:

Well, thanks everyone for listening, yet again, to Payments On Fire. If you’ve got questions about what we’ve been discussing or you’ve got suggestions for who we should have on the show, just drop us an email at paymentsonfire@glenbrook.com That will absolutely get our attention. And until the next time, then I hope all is well, do good work, and we’ll see the next time.

 

Yvette Bohanan:

Take care.