DAPPCON 2024: Introducing Banking 3.0 - Separating Bankers From Banking - Marcos Nunes

Transcript

good morning everyone and uh thank you guys for being here I'm very excited to talk about banking 3.0 it actually glues everything that we've been working for the past two years for those that only believe that we were doing card we now see what else can you do with the instrument that we're basically putting out there so we're in a mission to build a borderless banking platform creating interoperability and composability between trade F and web3 making global banking cheaper faster and simpler so I've been in payments for more than a decade I'm old and what I've

observed is actually fintax you know even when they're transforming payment or disrupting they're still offering siloed bundled Solutions built on top of Legacy systems and at the same time you have web 3 creating new ways of doing things but of course is still far away from the Homer Simpsons or my dad user which makes it very difficult to get to that billion users so as a result we end up having citizens still blocked or locked in the traditional Bankers so the banking

evolution in banking 1.0 Bankers realized running banking was very costly and they kept open opening branches all over the the globe you know representing their brand ultimately Bankers used technology to leverage profitability and then we saw banking 2.0 which was finally then technologists understanding that Bankers were not doing a great job but they could basically build a front end which was a lot better A lot simpler even though connected in Legacy offers making

the life of users better but then we're in the era of banking 3.0 where ownership is given back to those that should hold it so effectively users regain control of their money and they will finally start banking without those traditional Bankers so it is time to separate them one from the other Bankers from banking what the heck do you mean well everybody should have access to financial rails and users should have a choice to use or not the bankers that they want to

use or have their own custody of their own funds no longer having to use the mattress maybe I should that tell that to my dad as well um so Global retail Banks I probably very common to all of you in this stage but let me remind how difficult it is and why we do not have Global Bankers in fact if you actually look it out there and research it's blast in the hand of Bankers that might hold a full banking license in all countries available and why because Financial regulations defer on a country basis and you need lots of rules around

custody of funds rules around moving funds and especially for clearing and settlement of those funds in inter banking clearing well that leads me to the second point which is the payment rails you have different types of currencies and different times types of systems that needs to be liquidated in order for those Banks to operate locally and then fine finally you have also users which defer some users are very used to instant credit some users are not in need of that instant credit yet even though technology apple pays and the Google pays and the YouTubes uh out there are decreasing the

distance between users globally you still have different behaviors survival need for credit and luxurious need for credit right so imagine that complexity to bundle that and say I am a bank that is able to do all of that to the community level I'm not even talking country level makes it quite difficult and even when they do so Bankers they normally choose that very profitable layer which is the one paying the highest interest on money uh borrowed and providing of course zero right off to them or nearly no uh uh um

uh um oops um lack of payment of those those uh uh financial instruments and therefore making them focusing on a very specific Target rather than doing for all so we saw the trajectory of neobanks out there here's a little bit of the evolution from the past three years you see monzo basically partnering up with wise to offer a better offer so a Neo Bank partnering with a money remittent partner and then effectively getting a cheaper solution to the user and then

you have revolute hitting 25 million users but all in all if you look all of these initiatives it's nothing truly new and on the other hand we have our community accelerating extremely fast making complex topics a lot more my dad proof which is complexity around wallets and keys and uh assets how they being transacted but again organizing themselves in separate groups and in one hand you have a crypto

user very willing to do very complex things in order to close the loop for banking payment transfer investment and on the other and a very spoiled Group which is not willing to learn a lot more than just give me an account where I can put my money and I get return on my investment if I have one or if I need credit that I do so with the lowest interest rate possible we need to basically make sure this is merged how are we going to merge that if we basically do banking 3.0 so new banks are trying to develop the

global accounts traditional Banks claim that they offer Global accounts with the separation of asset management and treasury management from banking we can actually do Global accounts so what is an account right I have a money transfer coming it can be through a deposit it through you know an employer payment and then it sits a digital balance of that money and from that balance you have instruments to move that money out which is a cart which is a wire transfer or

something uh or like a withdraw of cash in an ATM okay so what is the new core banking account then given the infrastructure that we have out there well now we use blockchain which means we have assets which are no longer Fiat or let's call them digital cash digital money then you have euroes GBP thanks to monium and we have us DCS and U uh Euro's the circle or XD s die and uh from noses right now those are pegged against traditional currencies

with zero volatility or very little volatility whatever you choose okay then you have the smart accounts Pioneer like safe have built the account obstruction and then you have decentralized kyc and kyt ensuring that every data now is migratable by the way this is the dream to regulators and we keep talking about regulators and in European Union for instance there's something called open banking what's the objective of open banking data belongs to the user it's portable and if I want to have credit from different financial institutions they should be able to

access my score but the incentive today doesn't allow you to do so because the financial institution that is serving you will no longer have that need to no longer have you so why would I share the data so it's a very conflicting Point okay so let's break it in capabilities so we have the card capability thanks to Visa we have Visa money sent which means it's an instrument for you to get money in and on the money out Visa created something called multicurrency where users can spend multiple types of

currencies like domestic transactions if I hold US dollars I can spend US dollars if I hold Euros I can spend Euros if I hold Brazilian R I can spend Brazilian R virtual cards of course Apple pay Google pay and you have cash withdrawal okay so card capabilities are set account capabilities they're also set we have instant payments cash in and on ramp which means connected with faster payments UK sepa European Union pxs Brazil and given an account

number you are now with an account and the same goes in the way out then you have additional capabilities which is paying bills and local direct deits and then you have finally a web three capabilities which is very familiar to this room you can basically go from onchain bridge swap your tokens transfer funds and then offchain them in a similar manner so yes it is set it's ready it's live and I am been I have been living on

chain for the past three months paying my bills just by basically doing exactly the way I used to do with Barclays so I get money directly from an iban issued by monium that money becomes eoe that Euro sits in my account and then I go and I spend those Euro e at the point of sale Oh Marcus there are taxes and blah blah blah guys money coming from iban from an employer it's already deducted taxes so it's effectively an account but what other capabilities can you use I

actually pay this garage rental with iban transfer I send eoes via ibun uh burned by monium Fiat in the account of the garage owner oh but you also have money on chain yes and then I Bridge swap get my eures and then I get it into my account so effectively what are we missing then in order for this to be Global since we have the separation of asset from banking we got to go and integrate as many Clearing Houses as

many countries as many plugs we can so so then those that are in custody of funds either because of stable issuance or maybe a centralized exchange maybe binance maybe a bank it's not up to us to Define who is going to win in fact hopefully everybody wins because that means the entire 8 billion people in the world have an option it's all about optional so Geographic roll out I need to make sure in every single country we're plugged what does that mean if I'm in Europe I get an iban if I'm in the UK I get a sort uh uh code and an account if

I'm in Brazil I get a px key if I am in the US I got bank branch Plus account associated with my blockchain address and then if I want to do instant payment I am connected to the new faster payment mechanisms for those that are not aware one of the highest cost in banking and payment are associated with collateral because 6:00 p.m. in a given country you have the cutting line for the interbanking transactions and it only reopens next Monday with all this faster payment initiatives you can actually do

it 24/7 365 days a year so by being plugged there then having local methods like direct debit sepa or PX invoice boletto wirs fed now we can basically offer all this staes to be connected and digital assets to be connected to local markets so you have card schemes you have licenses and a bunch of other complexities that will make it extremely challenged to roll out this but we are in the process of doing already right now we

have live two countries and Europe is a country in the eyes of implementation right because it's one regulator that you can passport throughout 29 countries or 27 um then the moment we had Brazil we have three countries and three routes which means a Brazilian user can actually pay or transfer funds to the UK the same for Europe but the moment you at the fourth country you now have six routes because

effectively you can basically transfer balances and funds to all those destinations and exit in all those destinations what am I saying wise revolute new bank which is the largest Neo Bank in the world with a over 100 million customers we compressed all their hard work for the past 10 years and we roll out in the past year every they have been fighting for all the difficult licenses banking licenses they have been fighting for

were able to do it in a much easier way simply because we're not touching funds because we decided to separate Bankers from banking I'm in the mission of providing access I'm not in the mission to make youth on top of people's money eventually those missions can collapse but let the world decide if that's the way to go so by basically implemented what I just said we're saying we're creating banking 3.0 in Europe in the UK now

Brazil soon to come us maybe next country effectively you created the bank rails to any one out there so what happens to Bankers can they have access to this definitely I'm not here to decide if they should exist or not users will decide if they should exist or not black Barry was not chosen when Apple came in not up to us so if a banker wants to issue our card they can and they can turn it on and off money movement via blockchain so right now any Bank in the

globe can get the noses card as much as right now any wallet out there can get the noses card so but we can't do it all at once and we need to start somewhere right and this is a very important element we talk about capabilities and we talk about regulation there is always a light touch what is a light touch exactly how we started we needed someone to help us with the license someone to process the Fiat transactions someone to basically be our Godfather in the process from a

responsibility point of view very expensive setting to start and we knew it from day one we got a a lot of help from visa to take off if you that was actually extremely important but effectively we started we started with a partner that provided an account number we started with uh cards being issued in those two places but then as we move we want to go to a more complex capability getting licenses inside of nose's pay why cuz the more you you are in front of that regulator the more you can help

with the new world this is not different than what they have been doing for the past 100 years the only difference is we can provide more transparent and clear view on how to use this technology rather than the Legacy costly technology so as we move we can go from simple setting to more sophisticated setting giving users more capabilities because we're able to understand them underwrite them and provide better services that now do not re rely on interpretations then as you get more

mature then you move once again more capabilities now you are plugged into the local clearing and settlement houses of different countries and this keeps keeps going and going and going to the evolution that we can add a lot more countries a lot faster than anyone ever did it in the history of banking and payments so what we got right now last year we announced we got a card but it was never a card it was basically your first current account checkings account for the

Americans spending account you name it and that basically holds the capability of multicurrency USD GBP europee you name it then we integrated ibonds you can now pay bills using your I ibonds so let's you know ibang your transactions out then I heard V very very important uh person in uh coinbase saying that he never got such a great FX in a transaction when going to the

us we enable that and we also enable on and off pain uh ramp from noses chain as well as chain transfers and the funny aspect is we have not created additional cost which was the entire objective it was to leverage existing rails cost seted by traditional players but don't you want to eliminate all this transactions and all this cost I cannot guys but consumers can only by bringing billion people to this

world they will basically push existing costs that they are not willing to to pay anymore so maybe first time we're saying this out loud EA UK ready to go get your cards experiment we're coming soon this summer Brazil Argentina Mexico Colombia Australia Singapore Thailand Japan and Indonesia so we are going fast I need you to join us to transform the world's Financial infrastructure to

finally democratize banking worldwide thank you we have some minutes left I would love to get some questions from the audience so please pleas shoot I'll just ask everyone guys any questions we have on you hey uh great talk jul yeah it's me um Julian from safe uh so one question

other than interchange fee uh how do you intend to make money on the long run so there's several aspects um on the economics um you start on interchange fee there's crossborder fees multicurrency fees uh there FX fees so all of those fees are basically inside of already the ecosystem and we can basically tap on rather than charging the user just taking it back from what is being charged in the process so let's say there's 4% charge 3% 2% charge to the merchant and the fees varies depending if you're a domestic customer or an international customer and there are

sufficient well uh uh Revenue to be made in that part of the the the end our objective is to be as nothing fee possible to ensure that we get the adoption on the on chain side and hopefully if transactions are moving on chain the cost of transaction becomes even exponentially lower to the degree that you can increase profitability Again by not having to charge fees on the on chain side thank you thank you um any more questions oh two yeah upstairs thank you very much just a

quick one actually and awesome presentation thank you very much uh yes my question is like you mentioned on your slides like is on and off ramp for gnosis chain so I was like interested if you plan to actually enable more chains in the future to uh address more adoption yes thank you um you know that's I that's probably one of the questions I get the most um regardless where I go and there's many explanations to this uh number one like I said it's not the card the card itself is extremely easy to go to multiple chains right the problem that we are trying to resolve is this multic connections and rails to many countries out there and

those nuances is not only about the technical integration but the safety or security mechanism to avoid bridging and to avoid risks of transactions failing so when you go multichain trying to replicate all of those elements plus kyc kyt elements plus different types of storing elements it makes it extremely complex however we have been of course since they won thinking how are we going to expand to multi chains because definitely that's something that makes sense so the drawing that we have in mind and still of course not concluded and again I welcome you guys to help us fixing this

problem is by basically providing cards in different chains and then trying to bring from presettlement stage onwards back to noses because that would avoid lots of development outside uh this ecosystem which is again the main objective we need to make a strong ecosystem that can perform to the standard that interoperates among multiple Regulators out there so it's it's not a trivial answer and I wish we could just go in every chain and just simply you know deploy it but I think for now it would be great to have users coming in growing this with

us and eventually we can actually walk towards multi- chains approach but again people have an idea for it would love to get it so please ping me on it thank you next question thank you Marcos for a great talk for for customers in Emerging Markets like like Indonesia or India who can't kyc how how can how can we onboard them into nosis pay um that cannot kyc now you got me there what do you mean with cannot kyc like people who don't have an an ID people who you know don't have a bank

account people don't have access to you know mo most traditional forms of you know proving their identity okay now I got you um so the reality is most of emerging markets that we've been tapping that we are expanding there are users that we can board the majority of the users actually we can on board the offer that we're going to those markets are normally reason why those people are leaving their countries and you know trying to bring money back so it's remittance as an angle and payment as another angle meaning I don't trust my currency or it's too volatile and therefore I would like to hold usds zeros or whatever and

then spend at the point of sale with the best conversion or the minimum conversion at the time of the transaction so I have not experienced sufficient uh issues on the onboarding for instance Indonesia that's a very specific question um but Brazil Argentina Mexico we we've been exploring a lot uh tient Singapore I mean and basically we actually have mechanisms to onboard disguise and and this is this is what we're going after I'm certain that in 2024 we're not going to solve the global problems but the mechanism should enable us to accelerate forms of validating people and making sure you are eligible to have a

card um we have time for one last question maybe we can do two very quickly one here and yeah yeah I have a question about regulations uh what you what are your mechanisms for uh crypto assets uh spending as Fiat like because it can be money laundering so how help me a little bit better with your question so what do you mean so my when you have crypto assets you bridge and then you start uh spending as Fiat from Fiat it's clear but what are regulations talking about that okay it's a very interesting point uh are we spending Fiat or spending Euro East and is Euro e

Fiat so there's a very clear understanding that euro is is digital money not Fiat and therefore when you're spending with the card you're spending digital money I think this will evolve there is a a very difficult Gray Zone at the moment and we're happy to be in the gray Zone and help to provide Clarity and therefore we can operate as someone that will not touch fund because it's digital money and we don't touch the digital money ourselves so I see this problem evolving over time and I see that MAA and other Regulators are trying to understand what they're going to do with it but for now

it's regulated we're not trespassing we had the approvals of everyone and basically you're safe to use the product we had a final question in the other side sorry yes um yeah I mean absolutely lovely presentation and I'm also a user of nosis Spar and it's awesome um so to your sorry you're a great guy yes I am thanks uh to to your earlier point about uh removing the challenge about the multi-chain uh support um so if you did not have to rely on uh the nosis safe smart account but another secure maybe a hard wallet or something wouldn't that

be like a big uh Unblocker for uh making it multi-chain I mean of course there is the uh faster settlement and stuff involved but would that uh is that I mean do you have some constraint saying that okay it has to be nosis smart account okay so let me answer in two ways first of all I need to make a disclaimer Stefan is my co-founder the specialist in the noses sorry in the chain side but let me answer from a bit of a history data that you don't know we started this project as a joint venture between the previous company that I was part of and noses and then we basically spin off what was the first project a

hardware wallet that could pay at the point of sale without having any interaction on chain to make a decision and basically just informing the decision was made between the hardware product and the point of sale that was basically you could have funds in multiple places multiple chains and you could basically do it it is so difficult to scale first of all in numerous touches in the back of your product like of your phone basically okay password tap to phone okay do you allow this transaction tap so you have so many things you got to do prior to a transaction

imagine a Homer Simpson or imagine a little bit chubby uh doctor which is my dad that you know has no idea about technology having an you know grabb the phone I mean my dad still write the password in the back of the card so please don't tell anyone and uh so it would be impossible we are talking about a billion users we had to think from that angle backwards I think the multichain it's not a far away problem to be resolved is just that we need a little bit more maturity we need more users we need transactions you know like we have a lot of people that hold their cards today and still have questions about taxes how difficult it is with the

tax part and stuff like that so um there's lots of myths that needs to be removed on the current setting and hopefully we're getting more and more comfortable with to then scale this product and hopefully then go to the next change with a a a way that we're not removing users and transactions from the chain rather making a settlement where we are relying that connections with the traditional world are in place everybody's comfortable and we can then make sure we're all move to a new world together with that thank you very much for your time sorry that was too early but see you guys out there thank you that was amazing Marcos thank you