Where Stablecoin Cards Go Next

Transcript

Good morning everyone. Um my name is Yi and I'm a crypto reporter at the information. I'm very excited to be here today to talk to Ring uh CEO Farooq Malik. Um, I will say from my experience covering crypto news, stablecoin has been the hottest news uh since the genius act was passed last year. And one thing that really surprised me within this category is stable coin back card which are emerging and becoming popular. Rain is a leader in this space. I think you guys are one of the highest valued stable coin related startups at this point. um rain raised funding at close to2 billion dollar valuation recently.

Um so I wanted to talk to Farooq to really learn about what is their business model and why is stable coin back card even a thing. So Farooq thanks for joining us here. >> Thanks for uh being here to interview me and it's great to be here. Thank you all for coming to listen. >> Great. Well let's start with the basics. What is a stable coin backed card and why is it becoming a thing? Yeah, I mean look, stable coins are a new form of transacting money, holding money, sending money, spending money. And one of the things we realized early on was that they were not interoperable with the existing ecosystem. Right? So if you were trying to use the money for your daily life, it really didn't transmit

effectively between the blockchain ecosystem and the traditional financial services ecosystem. And so we realized that consumers or businesses the primary use of money is to spend it and purchase goods or services with it. And um it was trapped in this blockchain system without an interoperability layer between. And so we decided early on that hey, let's start connecting this to an existing distribution network of merchants around the world that accept payment instruments and allowing for the utility of tokens to be able to used to be used for traditional transactions.

And that has led to kind of what we now call stable coin cards or stablecoin backed cards or you know stable coin payment products whatever it is. And that has really accelerated the utility of stable coins for day-to-day transactions in addition to what they were traditionally used for, which was for trading. And so now we see massive consumer adoption around the world where people want to use stable coins as a store of value to be able to access USD or euro or other um sort of developed market currencies that are issued as stable coins. And they want to use that spending power internationally to pay for goods and services around the world.

and they don't necessarily want to have to educate the merchant or their counterparties to, hey, this is a stable coin. This is how you need to set up your wallet to accept a stable coin. They just want to have the ease of being able to tap a payment product or insert a card to put in a pin and be able to consummate a transaction the same way they would normally. And so I think that's been the power of the stable coinbacked payment products that are now coming out where for the consumer or end user their behavior stays the same and the transmission for that transaction is now powered by stable coins.

>> Um so I know for years some of the biggest crypto exchanges Binance etc. they also have crypto debit card for users. So how is your card different? Are you targeting a different set of customers? >> Yeah. So for us, we wanted to reimagine the back-end infrastructure completely. So when we designed RAIN, we wanted to think about what is the future of payments going to look like if we believe that stable coins and tokenized money is the future of money and what are all the different primitives that are going to need to exist from a technical perspective to make that possible. And so while building Rain, we spent a lot of time and effort making it fully interoperable across different blockchains. We support over a dozen different blockchains today, across

every major virtual machine. We support private chains and public chains. We support stable coins issued by any number of major stable coin issuers. All of that works seamlessly across our stack. And then in addition to that, we're now starting to support tokenized deposits and other types of digital money so that the existing infrastructure can continue supporting the expansion of the overall market as it continues developing. And the big difference between us and what what Rain has built versus like what others have done in the past is that crypto cards historically were a fiat enabled product where you were partnering with a traditional issuer and the let's say you're you know Binance or Coinbase whoever you were settling in fiat currency 5 days a week. Now we all know

that like stable coins are 24-hour currency. There's 24-hour money. There's no differentiation between a business day or a holiday. And if you're setting it 5 days a week, every week there's 2 days of risk that your counterparty is taking and you have to post working capital. And so in the future, our thinking was is that working capital should eliminate should compress significantly and we should be able to drive that advantage back to our customers in the form of more capital efficiency. And so RAIN today 100% of our customer transactions settle with us directly on the blockchain. uh we settle 100% of payment volume with our counterparties at the card networks 100% on the blockchain. Rain has recently launched payout capabilities and paying

capabilities. All of that is happening 100% on the blockchain. And so for us like our viewpoint has been Rain and our customers should be driving net new adoption of stable coins, net new adoption of blockchain technology, net new adoption of folks into the stablecoin powered ecosystem instead of just providing uh a veneer on top of a fiat infrastructure solution or fiat licensed entity with the branding of crypto. I think we've seen a lot of that and what we're realizing is that like there's no technology there. If that's the business you're in, there's no moat, right? There's no differentiation. The only way that you'll be able to compete is on price. Whereas, if you have a technology product, you can compete in a

lot of different ways. >> Um, can you describe to us the profile of your core customer group? Who are they? Which countries are they located in? How do they even uh come across ring cards? Yeah, I this has probably been the most surprising thing to see over the last year or so is that even before some of the regulatory clarity started coming into the United States with the passing of Genius, we were starting to field inbound from some of the largest companies in the world that were already thinking about stable coins as a way to improve their capital efficiency, increase the access for their products and services to a larger customer base and use stable coins as a more efficient way to actually uh service a global customer market and so we now have

started transitioning a lot of our customer demand into that side of the market. We see tremendous amount of demand from very large public traded companies, from banks, from institutions around the world that are marketplaces, uh, remittances companies that are looking at stable coins as a way to differently enable their business in a fundamentally new and modern way where they're able to actually reduce the cost of servicing their clients significantly while increasing the addressable universe of clients they can service with stable coins. So today, Rain powers programs in over a 100 different markets. Today we're seeing pretty broad consumer adoption and B2B adoption across most of those markets. Um the other interesting thing about this is

that while many people think that you know stable coins are primarily being adopted outside the United States, the largest source or largest destination of all consumer transactions or B2B transactions that we are seeing in the market are all ending up in the US. They're all ending up at US merchants, US customers, US bank accounts, US u economic participants, which is in many ways flying in the face of what a lot of people expect. And while we see strong adoption in Latin America and Africa and Asia, uh we're also seeing massive adoption in the United States where instead of it being a stable coin enabled solution, it's just an embedded financial services product that can be launched faster. It can service more

clients and it can it's a lot more effective and modular than your alternative solutions. >> Um I like that you mentioned your stable cards are also being adopted in the US. I think when I cover the story of stable coins, most of the real world uh use cases are happening outside of the US for now. And yesterday we heard there's this JP Morgan executive who mentioned that oh we don't really see demand for deposit token uh within the US. So tell me um and explain to us what are the use cases exactly in the US, who are using it and what what kind of uses are you use cases are you trying to build out?

We're seeing a lot of really interesting use cases. I mean, one example that we we're giving these days is we have a new client. They've been building a payroll solution, right? And so, everybody here has probably heard of earn wage access or payday lending and things like that. But this is an actual payday pay payroll disbursement product where the employer is actually dispersing your payroll on an hourly basis as you acrew it. So, if you're making $30 an hour or $15 an hour, every hour, 15 stable coins go up into your wallet with a payment instrument attached, you can withdraw that money at any time. You can go back into your bank account if you want. And that's not a debt product. That's not money being advanced to you by a third party. It's not money that is being lent to you in in advance of your paycheck

that that's going to be paid back through a paycheck. It is your paycheck. And that is only really possible with stable coins because it's 24-hour money. Like jobs are 24 hours. People work on holidays. People work after banks close. And they haven't had this alternative to be able to access and utilize their money. Right now with stable coins, we're seeing this really advanced company build this really interesting solution. And it's really interesting to see, right? It's a real world use case. There is a multi, you know, tens of billions of dollars of economic value that is extracted uh currently from workers by debt products. And by reallocating the same use case back to

employees or employers, they're they're helping their employees keep more money in their pocket. They're helping employees actually save money instead of, you know, get stuck in debt. And so there's a really interesting thing to see there from a financial invasion perspective. Another really interesting use case we're starting to see is that where we're working with a very large travel platform. They have people that you know do various activities on their platform. They've historically been a place where people earn money, right? So the money gets earned over the few weeks or a few months or whatever it is. Then you're pressing a button and then you're withdrawing the money into your bank account and that's when you're able to start spending on the various things you need to actually fulfill what you just

sold to the end user. And now this platform is embedding payments and that balance as a stable coin balance into their platform so that as you earn that money that money becomes accessible and spendable by the actual um you know tour guide or you know host or whoever it is and so that's another interesting use case and then adoption for that is domestic adoption. So one of the things that we're starting to see a lot is that this like diversity of use cases where historically like for the last whatever 3 4 years the perception of stable coins was oh this is for dollar access this is for dollar access for people around the world. The reality is is that stable coins are fundamentally better system because they're 24 hours because they're

programmable because they're nonfgeable. And what that means is that the working capital cost of operating a product or service is significantly lower. And if you know everybody in here, if you ever operated a business, if you reduce the working capital required in your business by 50%. That's the difference between profitability or non-profitability. >> Um I know Rain also partners with some of the crypto native protocols to issue cards for them. Um so that their users can spend stable coins more easily. So can you give us a sense of how much of your user base is a cryptonative group versus non-cryptonative group?

>> Yeah. So currently I think about 50% of our customers are what would fall into the cryptonative category where these are and for this we're including like stable coin back NEO banks etc. And then 50% of our customer base today is actually non not related to stable coins or crypto at large. It's actually traditional financial services use cases that are being uh that are utilizing stable coins for you know advancing the addressable market reducing the cost of servicing having a more modular flexible solution. >> It's very helpful to know the breakdown.

Um let's talk about competition. Even within the stable coin backed card space there are a few more players that are in the market. I know bridge is one of them. So, how do you think about the future competitive landscape? Are you trying to get into other lines of businesses? And do you see other companies that are historically not uh running in the stable coin car business getting into into your offering and your sector as well? >> Yeah, that's a great question. So, we've never viewed our business as a cards business, right? Like cards are a way that people spend. like JP Morgan is not a card company but they issue millions of cards. Um the same way we think about ourselves as a technology and accounts

business. So we provide the technology to enable users accounts to do a variety of different things. Whether you want to hold money, you want to spend money, you want to invest money, you want to send money, all of that is something that we're enabling today. And so for us, like it's not it's never been that important to kind of be the dominant sort of piece in each different part of the pie. Like we don't aspire to be like a payments flow company, right? Like we don't want to be taking money from one one market and dispersing in another market. That's not something that we really aspire to be because again in payments flows like that business is largely about the quality of your financial intermediary relationships.

It's not about the technology. And so for us, we've been hyperfocused on like advancing the underlying technology and having the best-in-class technical stack that allows our partners and customers to actually bring the things that they care about and get the best of whatever else that they need to launch the solution they want. And so for example, RAIN has been pretty uh direct about our desire to be a credibly neutral technology technology enablement player so that anybody can use a institutional custodian that they like. If they're an institutional custodian, they can do that. If they want if they're remast, they can continue doing that. If they have a really strong opinion about, hey,

I want to be on chain A with wallet B, that's also fine. We've had a number of clients start with, you know, wallet A and then switch to wallet B because wallet A went out of business or because they just had a better experience with somebody else later. We've also seen people transition from one stable coin to another. Like those are non-trivial things and sure there's always going to be a lot of competition in any good market and we encourage more convers like competition and we encourage more innovation and innovation is a is a very important byproduct of a competitive landscape and it's really important to have more people thinking with new eyes about the opportunities in the space and

so for us it's it's really about how do we continue differentiating and how do we continue moving the industry forward so that we can drive better user experiences and better outcomes for our partners. And we understand and we are fully open to knowing that there's going to be certain parts of the stack where somebody's going to do a really really good job and our customers should have the flexibility to buy or use that best-in-class service. Like we have no ambition of locking people in to a closed ecosystem. Um and if you look at most technical developments in the past, you know, we've seen things like AOL which was a closed ecosystem. It doesn't exist today in the same way, right?

We've seen a lots of different types of programs like that where there's a lot of advantage to being a closed loop ecosystem, closed loop solution, and that's great and it's great for the people that build it. It's generally not great for the clients. And so for us, it's really important to continue being uh a company dedicated to the openness of the ecosystem and wanting to work with as many people as possible. Um, speaking of competition, I know historically cards are issued by banks. Um, I personally got my credit card from JP Morgan Chase. Um, and I think part of the reason rain has been able to take off is because banks, these large bank players, they're not yet issuing stable coin cards. So, do you see a future

where banks will also start to get into this business? And in that world, how would Rank compete or differentiate uh yourself? Yeah, it's already happening, right? If you if you saw the news a few weeks ago, SoFi launched their SoFi USD. Uh we're starting to see a lot of banks start talking about and you've reported about this as well where a lot of financial institutions are exploring like tokenized deposit consortiums, stable coin consortiums. They're looking at individual efforts for stable coin issuing. I think this is going to continue growing because this is an interesting opportunity and there's a lot of advantage from being early and getting it right. I think that's going to continue happening because a lot of banks see this as both an opportunity

but also a threat. And I think that that's healthy for the system. What we see and what we're worried about is like, hey, what happens to the thousands of financial institutions that don't that can't afford the best technical talent that don't understand how they can acquire access to really talented blockchain developers? How how do we help them understand what the utility for their particular customer base is? many of the banks that have talked about, you know, well, we don't see adoption for stable coins or we don't see adoption for tokenized deposits.

It's an interesting thing because internally at RAIN, we actually have a tracker that measures the amount of stable coin volume that is ending up at these financial institutions. And many of these institutions that publicly say that they don't see the demand are the source of and destination of billions of dollars of flows uh in stable coins that end up in stable coins or start from stable coins and end up as fiat. And so there's just this data gap, right? And as more people start realizing that this is something that they don't have the luxury of waiting for, you know, waiting five years to figure out, I think people will start realizing, well, I mean, I need to have a plan. And they're going to come to the people that have the data

that are going to then help them understand like what do their customers use it for? What do they want? What do they feel like? You know, why would they be using something off platform when they can be using this on platform? Like we've seen this play out lots of times in in a lot a lot of different industries, right? Like if you look at some of the largest debit card programs in the United States, they're not offered by banks. Like they sure they're issued by a bank, but they're not marketed by a bank. And banks have been hemorrhaging customers to these platforms for years. And they've still never figured out like, oh, how do I actually retain my customer? What do they actually want? Right? And so some banks have figured it out, some banks have not. There's banks that are still not on zel. They're still not RTP. So

there's a non-trivial amount of challenges that need to get overcome by financial institutions. And for us, like RAIN as a technology partner first and so if anybody's here works at a bank wants to figure this out, like we're happy to help you figure out what your customers are doing. Uh and also we have the technical solutions so that if you want to license the technology to do the thing, we're happy to do that too. Um I want to ask about your relationship with Visa and Mastercard as well. Obviously you're a member of the Visa principal membership. So explain to us what that means. Is it hard to get access? Um is it hard for other people to get access so that we can understand uh how important it is that your

business have these relationships? >> Yeah, I know we we just announced recently that we also joined the Mastercard network as a principal member in addition to our membership with Visa. These are difficult things but they're not unique right like Visa and Mastercard have tens of thousands of member issuing institutions around the world and they are they have built a pretty large distribution base of members that provide access to over 100 million merchants around the world for billions of users and that is non-trivial right and so that's a really interesting partnership for us for us a big part of why we wanted to partner with both of them was really about what we saw from our customers. Our customers are now mostly people that are coming in

and saying, "Hey, I have an existing program with network A or network B. I want to explore stable coins for all or part of this and I would like to work with RAIN." In the past, if you were with Mastercard, we would, you know, ask you, hey, maybe you should go back and ask for a waiver to kind of do a pilot program or something like that. But now, you know, and that was very difficult because they were like, well, we spent 10 years building this relationship. We don't want to have to ruin our relationship just for because so we can try something new. And so now we meet our customers where they are, right? If they're a partner with Visa and they've been a long-term partner with Visa, that's great. We're here to support them. If they've been a long-term partner with Mastercard, that's also

great. We're here to support them as well. And we are very fortunate to enjoy great relationships with both of the networks. And we think that both organizations are really driving a lot of the innovation and adoption for this technology um in the long term, right? I mean, I think that that's something that we all are going to benefit from. Um I want to spend the last minute asking about agentic payment is for a while I kind of see as this new hype concept within crypto. I know it's still very early stage. There's not too much adoption yet. Um so what are your plans in Agentic payments? What kind of role will you be playing?

>> We started seeing the same thing play out that we saw in stable coins a few years ago, right? Stable coins were pervasive. They were getting adoption, but nobody was using them for payments because they were not connected to the payment scape. Agents were the same way. Like a few months ago, we started looking at this. We realized that okay, agents are it's a computer. It's trying to do things for you. Every major retailer has like bot anti-bot attacks. There's like captures everywhere. There's all of these things that are set up to prevent agents from transacting or bots from transact transacting. And so it's fundamentally broken, right? And so Rain has been working a lot on building tooling and connectivity for agents of various different types across every

major agentic payment protocol into existing payment rails, whether that's AC or wire or RTP or it's card payments on Visa or Mastercard. We just recently announced our agent control layer which gives each user the ability to delegate spending authority where it cannot be elucinated. There's not money available to get elucinated away. And we've been able to deploy that at scale. We now have several dozen companies building on those solutions. And the best part about it is that if you look at the data, none of this transaction volume shows up in the data, right? Because it's going over traditional payment rails. And that's I think the magic of what we've been able to drive here. And our customers are being able to deploy these solutions to

service their clients without even the clients knowing that all of this stuff is agentic payments. Like we have somebody that has built an entire AI concierge where you text and say, "Hey, I want a reservation to via Kuroda and the agent will go pay for it with a credit card issued by Ira." and you'll just show up, you'll go to your table and you won't even know that all of that was facilitated for you by uh by agent. >> Great. Well, there's always more we can chat, but I think uh that's the end of our conversation. Thank you everyone for being here. I hope you find it helpful.

>> Thank you.