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Drew Harris for Rapyd

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Rapyd CEO Arik Shtilman: How Fintech APIs (and Developers) Are Eating The World


Arik Shtilman (00:15):
First of all, it's amazing that I already see my slides. It's a great starting point for today, and I have a tough competition because the guy before me actually did an amazing job without the slides. But I have one story that I will tell you which is different than him, which is actually how you make fucking money from your software. Okay? It's not going to be $93 that I can assure you, and we're going to see different ways of how you can actually embed fintech complications and make money in the world of software. My name is Arik Shtilman, and I'm the CEO and one of the co-founders of Rapyd. Rapyd is one of the world's most valued startup companies valued at 15 billion, and raised up until today, $800 million from variety of investors. I'm going to talk about fintech in general and not try to sell a specific product.

Basically, the talk that I have today is how fintech APIs are going to eat the world. Now, there is a very famous sentence that Marc Andreessen from Andreessen Horowitz and actually the founder of Netscape said in 2011, and he said, "In short, software is going to eat the world." He basically made an amazing prediction in 2011 that everything that we know in 2011 is going to change in the next 10 years and software is going to change the way that we do everything. It's pretty much true. Almost everything that you do today is powered by software. It doesn't matter if you call a taxi, order something to eat, want to buy something, use a banking application, everything is software. He was right with the prediction and basically software is going to eat the world, but he made one mistake. He thought that software companies are going to eat the world.

The mistake was that it wasn't companies, it was actually developers. The thing that changed dramatically everything around software was actually the fact that APIs were suddenly emerging,. If you look back in 2011, there were software companies, Oracle, IBM, or even Google. All these giants, they were selling software. They were selling software to other enterprises. Nobody was building APIs. But suddenly from 2011 until these days, everything is API-based. Almost every single company that you guys know, and girls, is an API company. Everybody wants developers to build on top of them. The thing that actually accelerated this move of software eating the world is APIs. Everything moved to cloud, everything moved to API. The acceleration basically allowed other developers that are not working for an Oracle, or an IBM, or whatever it is, to think outside of the box, think differently, and find different solutions to problems that exist on planet Earth.

The developers were the one that created these new applications that basically changed everything that we do today. Now, Rapyd was one of these companies that emerged from this new wave of basically doing APIs. We are what we call a type of an Amazon AWS for the fintech space. We build a full blown API platform that allows developers to build, on top of us, financial applications, and we basically provide APIs that work in 105 countries across the globe to do collection of money, disbursement of money, storing funds in custodian accounts, aka wallets, which a lot of you know what a wallet is, issuing cards, doing FX, and doing a lot of other things through an API. When our thesis was basically very simple, we need to give developers tools to build any type of financial application that they might want to build. Basically, they will create these new waves application that will eat the world.

It's true because today on top of Rapyd, we have new banks that have built the full blown bank on top of Rapyd. We have companies that have built a huge eCommerce business, companies that build payroll applications, and endless other number of use cases that build on top of our platform. Now, our company started with 2016. In the beginning, we actually wanted to do something else, and I will talk in a couple of minutes what exactly we wanted to do. But since we switched to becoming an API company, basically everything that we know about ourselves changed dramatically. Up until we defined ourselves as an API company, we raised $3 million. After we invented the sentence that says "AWS of fintech," we raised another $767 million into the company. That was pretty much the shift also in the mindset of investors between, "I want to build a consumer application or an enterprise application," versus, "I want to be an API company."

Up until today, we build the business from zero to $400 million in revenue in seven years, have almost 1000 employees globally, offices in probably already nine different countries across the globe, and we have the world's biggest investors that invested in the company. From Fidelity, BlackRock, Target Global, Dragoneer, General Catalyst, and you see a very long list. Even Stripe, which is actually our competitor back in the days, invested in the company. Now, we wanted to do something completely different. We had a very stupid idea in 2016 that we wanted to compete with PayPal. Back then, it looked amazing, myself and one of our head engineers that actually still sits here in the table, in the seat in front of me, we had this idea of, "Okay, we're going to build this application. It is called Cash Dash, and we're going to compete with PayPal by building this consumer facing wallet that is not built on Visa and MasterCard rails, but they actually build on what we call alternative payment rails, banking applications, and stuff like this.

This new app is going to change the world. We're going to build it through the entire world and it's going to change everything that people know about payments." It was basically, 2016, was the best time for Uber. Everybody wanted to become the Uber of something. I don't know if you remember the headlines. Everybody was, "This is the Uber of dog walking. This is the Uber of banking. This is the Uber of whatever it is." We also wanted to be the uber of money with this stupid idea of basically becoming this mobile application. But what we didn't know is that we don't know anything about finance. We were engineers, cloud computing guys with a successful business that exited before, and then we went into the world of payments and we stumbled into every single shit show that exists on planet Earth when you deal with banks or financial institutions.

When you are a developer, you think, "Oh, fuck the bank. I will build this API. I will do this." No, you can't do anything. At the end of the day, there is always a clerk that sits behind a desk, that has a fucking fax machine, and he will tell you what you can do and what you can't. We stumbled into every problem that is possible by trying to build this application. We needed to get regulated. We didn't know what it means. We needed to get a compliance officer. We didn't even know what compliance means. Nobody was willing to open a bank account for the company. We started a company, the name of the company was Cash Dash. We went to the bank to open a bank account. The bank said, "We cannot open a bank account for you." I said, "Why not?"

He said, "You have in your word of the company name the word cash, which means you're doing money laundering." I said, "What the fuck are you talking about? It's the name of the app." Nobody was willing to bank us. We stumbled to another problem and another problem, and nobody was willing to do foreign exchange for us, and nobody was willing to do card issuing for us. We went through this uphill battle for a year and a half trying to build this application. We actually build it. We launched it in the UK, and then like a year and a half after we launched it, and we spent basically every single energy that we had in our body in doing things that are not the core of our business, dealing with regulators, with banks, compliance officers, fax machines, and a lot of other things.

We looked at each other and said, "Listen, it doesn't make sense." How can it be that in 2017, back then, there are no platforms in fintech? Every single company had to build this use infrastructure from scratch, and it looked to us like building a data center. If you look at yourself today, there is no way you're going to buy a server, and put it inside a rack, and connect the server and start using it. You're going to AWS, you're going to Google Compute Cloud, you're going to Azure. But back then, in 2017, that was the equivalent of what people had to do in order to build financial applications. They had to build this huge infrastructure, beg for banks to bank them, do this compliance, KYC, KYB, all these crazy words that engineers don't want to deal with. We looked at each other and said, "Listen, it doesn't make sense. Let's pivot the company to a platform play. Let's build the platform with APIs that basically will allow engineers to build on top of us applications in a very simple way."

I can tell you that what we've built in a year and a half only in the UK is Cash Dash, today as Rapyd, which is an API company. Other developers can build on top of us similar products in four to six weeks and build it in 106 markets across the globe. That's the difference in scale. That is a huge, huge, huge difference, especially when you want to build what you actually want to build and not shits that the bank want you to build. Now we're standing in front of a new era, a new era which we call Fintech Powered Super App API Revolution. Today, you see a lot of stuff about fintech. When you hear about the fintech evolution, there are a lot of apps that suddenly offer you... Issue a virtual card and start using our card, do a payment with our application, Samsung Pay, Apple Pay, Google Pay, Amazon Pay, you have Revolut, you have a zillion other things. Everything emerges as a type of an app that wants to basically take you as a hostage inside the hub and start using financial applications that are offered not by your bank.

This is a new era that we call the Fintech Powered Super App. Now, what the fuck is fintech. People always talk about fintech and there is this sentence everywhere of fintech investments and fintech investors and fintech companies. But fintech is a lot of things. I think this slide does an amazing job in actually explaining what fintech is, because fintech can be lending companies, fintech can be a new bank, fintech can be somebody that does currency exchange. Fintech can be investment companies, fintech can be a retail bank like a Revolut, and fintech can be payments. There are a lot of other things that can be around fintech. Even, for example, you can say insurance companies are fintech, the new age. What is a super app? There is also this war that is running around the market, the super app. Basically, if you just take one part of fintech, for example, I will drill down for a second into payments. This is an evolution of payments between 1999 to 2022 as you know it.

In 1999, payments was a very bad experience. You would've been redirected to this page where you need to put your credit card or debit card number, and maybe the payment will go through and maybe it won't. There was a second wave of this evolution. It was what we call the fintech APIs, that provides you APIs to do a much sleek and embedded checkout experience that you don't need to be redirected. You actually get to a very sleek experience. You can put your card on file, and then there will be subscription-based payments. Now in 2022, we're already in an era of embedded fintech, that suddenly you have Apple Pay, you have Google Pay, you have Amazon Pay, payments inside your browser. You don't even know that you pay. In Uber, for example, you order the cab or the driver, you pay embedded. You don't even know that there was a payment. This is basically the new era. Super apps are basically apps that are not, by definition, fintech or payments or finance-related apps, but they're starting to sell to you financial services.

The best example is Alipay and WeChat from actually Asia that are messaging apps that turned into these huge financial application apps that do payments, lending, banking. Everything is embedded. There are a lot of other good examples that we'll see. Now, the implication of this era is basically that every developer needs to know fintech. There are several important points, that fintech, when you integrate it into your software, it becomes much more a personal relationship between you and your client. The ability of your client to actually ditch you, and churn, and leave to somebody else goes down significantly, because when you start having some kind of a financial relationship with your client, it's pretty much becoming like your relationship with your bank. It's not that easy to replace your bank. It's not that easy to replace somebody that provides you financial services. By basically taking different type of fintech services, that we will take a look at them in a minute, you can create a much more tighter relationship with your clients, gain much better cross-sell and upsell opportunities, and generate significant revenue streams.

Because in the past, people looked at fintech, or at payments, "This is an expense. I need to pay somebody 2% for every payment that is done because that's the business." But if you reverse this equation and you actually start embedding inside your own application fintech applications, you can make money because you're the fintech. You can be the one that is charging the 2%, 1%, 5%, depending on what your business is, and start generating new revenue streams. Now, the historical problem of making money when you're building software pretty much changed significantly in the last five years, because if you look back in the last 10 years, every developer that was building something, he thought that he's going to make money in one out of two things. By the way, the gentleman in front of me was a great example for it. Either some kind of a subscription-based payments or embedding fucking annoying advertisement inside your app.

Advertisement was a way. People thought they can make money by putting advertisement inside application services and stuff like this. If in 2022, you're basically trying to sell advertisement inside your app, it's pretty much dead on arrival. Now, you see all these news that are coming out about advertisement revenue going down, and it is true. There is no way already to make money in advertisement unless you're Google, Facebook, or one of these giants. You cannot make significant money out of it. You see that the Facebook revenue is going down, the YouTube revenue is going down, and pretty much, developers are shifting their revenue models in order to try and make money in different ways. Now, this leads me to this chart, which is super important to understand, the history of the internet and why are we standing and talking here today. Because in the past, there were no conferences for developers.

There was a conference for ERP, a conference for CRM, a confluence for any other software that somebody might solve, but the market changed and shift because everybody understands that the business is actually developer-oriented business. If you look at this slide, you understand the history of where we started from. The internet created the connectivity that you can take basic stuff that you do on a day to day basis and start doing it online. It doesn't matter if it is shopping or something else. That was the internet. Then came cloud computing and software as a service. Instead of installing software on a computer inside a data center that you own, you suddenly pay subscription to somebody. You don't care where it is and you start using this software. Then came mobility. Everything changed into the mobile applications. Everything is running on mobile, seamless, easy to use, and et cetera.

And then comes in the fourth generation, which is the fintech, the place that basically financial services comes in and creates this new evolution, and new revenue streams, and new opportunities of how actually developers can embed financial applications. There are a lot of companies that basically provide access to this. If it is Rapyd, if it is Tribe, if it is, for example, Banked or Finix, it doesn't matter who it is. All these companies basically provide you these infrastructure capabilities to take, and embed, and build applications that you can monetize on as the fourth generation. Now, fintech is increasing significantly the value to provide customers further lock and customers stay inside your ecosystem. Keeping customers, not having churn, and basically having this reoccurring revenue streams with clients is super important, and this is what financial applications do. You might not like it as a customer when the bank is doing it to you, but as a developer, that you need to monetize on your application and you need to build some kind of a relationship with your client, there are a lot of ways to do it.

The best way to look at it is actually Shopify. It is truly an unbelievable example because everybody knows Shopify. People know that if they want to build some kind of an eCommerce store, they will go to Shopify. But Shopify is not an eCommerce SaaS company. Shopify is an eCommerce company that makes money from fintech. 66% of the revenue that Shopify has is coming from fintech. They build a huge ecosystem around the basic offering that they have of, "Let me allow you to build your website." They now have this offering of payments, business accounts, corporate cards, lending. Everything is built around this huge offering that is called Shopify. If you look at Shopify today, nobody really cares about, "Okay, I will pay you $15 or $20 a month for running a website."

Everything moved into the payments, and the payments part, and the fintech part around the Shopify offering is only continuing to grow and grow and goes up and up. It's an amazing way of looking in what is a super app. An app doesn't have to be a mobile application. It's just an application that you build that can sit anywhere, and this is how Shopify basically keeps on clients because as soon as you're a Shopify client, and you're using all these business accounts, payments, corporate cards, there is no fucking way on planet Earth you will move to WooCommerce, you will move to Wix, or whatever it is. You're going to stay inside this ecosystem, and you might use some other companies to use for specific things, but Shopify is the ultimate experience of how you go into a specific market with an offering that is very narrow.

I will help you to build an online store, but then all the money is made from all these surroundings. Now, it's not the only example. There are a lot of companies that actually use fintech as the lower bus of making the money. There are messaging applications. Now, for example, Facebook and WhatsApp are doing WhatsApp Pay, and you have Alipay and you have WeChat, and Viber is now going into Viber Payments. You have social media that is making money from fintech. You have gaming companies that make money out of fintech. Logistics, for example, Uber, Grab, Gojek, whatever, DiDi, pick a mobility company. They're making money out of fintech by offering endless number of financial services, either to their drivers or to the consumers. Even eCommerce companies are actually making money from fintech by offering either corporate cards, virtual cards, loyalty cards. They offer their sellers seller protection, buyer protection, lending, business bank accounts, endless number of offerings, and it's not even their core business.

They have a business, which is the top part of what you see in the slide. At the bottom, you have the fintech that comes in, that in the past, again, people saw it as an expense, but today, it's actually a significant revenue generator. Now, the super app recipe, if it exists, it actually starts with four points that are quite simple. Getting to the first point, of course, is the more complicated piece. But basically you need to find this service that provides something basic that clients come in and do in a high frequency, that they come back again and again and again to use it as the starting point of your recipe. Then the acquiring the users, collecting their data, and basically analyzing the data, of course, is an important element. Then you add financial services, wallet, credit, payments, bank transfer, whatever you want, and then the engagement with the users creates this repetitive model and you can upsell and cross-sell new services.

Basically the third step is always putting in this financial services applications into this repetitive model, because this is how you make money, not form ads and not form subscription. You need to find that niche spot that you can put somebody and give him a service that he will use repetitively, and then because it's a financial services, then his relationship with you will become much tighter. The most important thing, at the end of the day, is a sentence that was said by the Gojek head of engineering, but still, it's super important to understand that, "Once you're handling money for a user, you can build a castle of services within the platform." You're basically surrounding the user, and the user is not going to live. At the end of the day, that's part of what we're trying to do. We're trying to build something to help people, but to keep them around so we can actually make money out of it as part of the bigger picture of what the company does.

Now, Rapyd, as a company, does it in quite a lot of ways. Like I said, we're an API-first company. We're developer-driven. We have a community that you're very open to join,, has quite a lot of educational content. We have quite a lot of fintech courses, and we even run significant hackathons. We have currently a big hackathon that is running in parallel to this discussion that is called Hack the Galaxy, where the winner is actually sent on a spaceship in 2024 to space, and it's not a joke. We're actually doing it. We bought eight tickets on the Elon Musk spaceship that goes out in 2024. I urge you to go and participate in this hackathon because it has some amazing prizes around it. As part of the hackathon, as a prize of trying to build stuff, you can actually learn how fintech and fintech application work. We also have a booth outside with quite a lot of our engineers that came in from Tel Aviv, that can teach you a thing or two about fintech if you have an interest.

Generally speaking, I encourage you to start building, because at the end of the day, this is the reason why you're here as developers, in order to build stuff and not in order to either get sold stuff on marketing material and other things. As important, and as everything I said, we have a party tonight. Tonight at 8:00. In every conference that Rapyd attends, we're bringing what we call the Rapyd, the Moment event. It is basically a music event that we're bringing to every single one of our exhibits. Tonight, at 8:30 PM, we're bringing it to Zadar. I have to tell you, by the way, that for me, it's super special to speak in this hall as a basketball fan. I've seen a lot of games of my home team, Maccabi Tel Aviv, playing historically against Zadar and other teams, so it's quite amazing to see the flags and other stuff. But we have this party that we're bringing into Zadar. It starts at 8:30 PM. You can scan the QR code in order to register and get more information, and also stop at the Rapyd booth in order to register there.

Just to show you what it's all about, the next slide is actually a video that we took from our last event in Berlin, in the WeAreDevelopers Conference that we attended. Take a look at what you can expect for tonight. (singing)

Thank you much, everybody, and see you in the exhibit hall in later tonight.

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