Cryptocurrency & fintech brain food with Sardine’s Simon Taylor

Join Sardine’s Simon Taylor in this episode of Crypto Legends as he serves up a dish of Cryptocurrency & Fintech Brain Food.

Simon Taylor’s Fintech experience has led to him becoming a prominent figure in cryptocurrency,  web 2.5 and web three. In this episode of crypto legends as he shares his transformative journey from a software engineer to becoming the co-founder and Head of Content & Strategy at Sardine. Simon, also an advisory council member and founder of the Global Digital Finance Body, delves into the intricacies of the financial services sector, crypto, and the challenges of creating a global financial services infrastructure in the era of Web Three.

Discover how Simon navigated the world of finance, his insights into Barclays’ initial reservations about crypto during his tenure as the head of Crypto R&D, and how banks are now embracing it. Learn about the risks and rewards associated with crypto and how it can benefit organizations. Simon also explains the concept of Web Two Five, a crucial bridging layer for institutional adoption in the Web Three world.

This discussion also covers the importance of collaboration between industry experts, regulators, and governments to establish regulatory frameworks that protect consumers while fostering innovation. Topics such as jurisdictional differences, the ICO boom 2017, potential regulatory responses, self-hosted wallets, privacy concerns, and MiCA legislation’s principles on safeguarding and stable coins are touched upon.

In the latter part of the discussion, Simon shares valuable insights about the payment industry, including the startling fact that 50% of card transactions get declined. He emphasises the importance of understanding compliance for a better payment experience. He praises his team at Sardine for their role as a fraud and compliance platform that aims to reduce fraud by leveraging data insights.

Don’t miss out on this opportunity to gain a deeper understanding of the finance and crypto world from an industry expert. Tune in to learn more about the future of finance, the role of trust within the crypto industry, and the potential solutions to create a consumer-centric approach to address money transfers across apps.

Q&A

This Q&A has been edited for clarity.

Sophie
Today’s guest is the advisory council member and founder of Global Digital Finance Body, Head of Strategy and Content at Sardine, and fintech chef serving as finance gigs, a weekly serving of fintech brain food in the form of the eponymous newsletter. Do I need to present him? Simon, it’s a privilege to have you with us today. Thank you so much for joining.

Simon
Thank you so much for having me. It’s good to be here.

Sophie
Awesome. So we have a lot to cover, and I hope we will have time to cover everything. But first of all, let’s go back to the beginning, to the legend. It all starts with your tech to Fintech Pivots, which you describe prominently in your most recent newsletter on Twitter payments, something we will get into later. First of all, you speak cynically about your original tech position at Tis.
You say it quite bluntly. You talked yourself into the job but couldn’t deliver. You go to the bathroom, you’re scrolling the news, and you have a Eurocan moment. Can you discuss what happens?

Simon
Sure. So I guess in 2008, the global financial crisis, I decided to quit my job at British Telecom. This was a big realisation. So I had testicular cancer in 2000, late 2007, and early 2008. And as with many things, it forces you to reevaluate what you want from life. And I was very fortunate to recover quickly, but I didn’t want to work as a software engineer anymore. I started to think about the world a little bit differently. I thought I could be an entrepreneur, and I thought launching into that in West Yorkshire, in the north of England, where there was no real entrepreneurial scene back in the day, was a great idea. The reality was I ended up building a couple of lifestyle businesses that didn’t pay me as much as the salary from my previous job, so I closed those down and had to get a job.

Simon
And the job I got was indeed working for TSYS. I didn’t know anything about cards and payments, but I knew enough about software and mainframes to be dangerous. And it turns out that once you understand mainframes, you kind of understand enough about financial services to be dangerous. And so I got this job, but I’d got this job and a bunch of the folks there were all ex-army blokes. And these army blokes knew that I had kind of talked my way into the job. And so they were like hazing me and making fun of me to try and get me to admit I was full of it. And I didn’t because I didn’t have the emotional maturity to do that at the time. So instead, I would hide in the bathroom and scroll Twitter on my BlackBerry. And one day, I discovered this article that said Jack Dorsey launched a nutty new startup called Squirrel.

Simon
And I was like Jack Dorsey, founder of Twitter, doing something called Squirrel. It’s going to be in finance. I work in finance. This feels really important, and I don’t know why. For my whole life, I’ve had this. This feels important; I need to share it. Things like an alarm that goes off in my head and my heart, and my soul. And I was like; I’m going to just send it to executives. And I sent it to the head of Sales for Europe, and instead of firing me or telling me off, he said, you should meet this guy. John was the head of Product and Sales for a good chunk of the European business. And he said, Simon, I’d very much like you to be our head of innovation. And that started me down the path of learning about financial services. We launched the second mobile banking app in the UK market in 2010 with Capital One, and that’s how I was then brought into Barclays to do mobile and so on.

Sophie
Thank you so much. And actually, I wanted to move into Barclays. It’s 2014, spent in Blockchain, R and D. By all accounts, that’s early to be working in crypto, especially with a bank like Barclays. Who did you and Barclays get into Blockchain again?

Simon
Funny story; it’s all personalities. I must check my privilege as a white male here. I think people definitely opened the doors to me in so many ways, as John did at Thesis, and similar things happened at Barclays. So, yes, initially, what I was doing was working in their corporate bank, helping them deliver mobile payment solutions, but I very quickly figured out that whilst I learned a massive amount doing that was not my natural home, and was asked to join the team setting up Barclays Rise. And many listeners will know Barclays Rise is a global fintech platform and was partially behind companies like Alloy and Chain Analysis and helped them get their start. So it wasn’t that big at the time, but I was on the founding team of that during that time as well. I think Ethereum’s White Paper got launched. Now, I’ve always been interested in crypto and Bitcoin.

Simon
I think I picked it up in 2008 and 9. I was always a video gamer. So going back to 99, 2000, I was building my own desktop machines, I was getting the latest Nvidia card, I was building my own machines, and I’d sort of toyed with Bitcoin a little bit in 2010. But even by that time, the electricity costs for an individual were somewhat higher than they were in terms of profit. So I kind of put it down and went, well, that’s interesting, but it’s not really for me. And so came back when the Ethereum White Paper launched and just got obsessed, and I was like, something about this makes sense. Again, that significant alarm went off. I must tell people about this. I don’t know why; I don’t fully understand it yet, but this feels really significant. And so that’s what I did.

Simon
I started telling people like Derek White, the Chief Digital Officer, and Michael Hart, the CTO, and we did things like invite Vitalik Buterin before anybody knew who he was to speak to the bank. And I was very fortunate that Michael Hart, the CTO, just went, this is so important, Simon. This is now your job. So over dinner, a glass of wine, and a very nice steak, he said, ” you’re the new head of crypto R & D, ” and pointed at me. And that’s how careers can change. So I’ve had these moments in life where that significant alarm and taking the risk really put me there. And being head of Crypto R and D in a bank, it was really about learning. It was about talking to the teams, understanding what they did. So I was getting an education. I’d go talk to the trade and working capital team; I’d go talk to consumer finance; I’d go talk to capital markets, fixed income derivatives.

Simon
I would understand all of their products. And then, we’d have a conversation about how crypto DLT blockchains might be able to help them in the future. So there was an education on both sides, and it was really useful. But also, being the crypto guy at a bank means you get rolled out in front of regulators and governments to go explain this stuff. So now I understand their concerns and, at the same time, have to explain them to them. So you become a great explainer. So I was very fortunate to have that opportunity, really. And it was a good old time.

Sophie
Yeah. And specifically so early on, it’s pretty unbelievable because banks are only just now beginning to dip their toes into crypto again, perhaps more than before. What would you say were Barclays’ reservations about crypto at that time? And what, if anything, has changed? And if you don’t want to talk about Barclays, let’s talk about banks in general.

Simon
Yeah, well, I think the answer is the same for both; ultimately, first of all, is this going to add any risk to the business? Is this worth doing? It looked an awful lot like it at the time, especially since it was full of darknet markets. Why do we want to go anywhere near this stuff? And actually, when you get close to it was about examining the technology. Could this be cheaper, faster? Is this a threat? There were genuine questions, and I think they were open-minded questions. But ultimately, this is an at-scale, tier-one bank that does not need to add more risk to its business. And so, ultimately, they are in the business of being stable. They are in the business of not falling over, and they’re in the business of not doing more things to annoy the regulator. However, very thoughtfully, what it was at least able to do was understand the risks enough to prevent the ones that were already happening.

Simon
Because whether you like it or not, crypto was happening, and it was happening on the edges of the organisation. You just couldn’t see it. Being able to see it and being able to have an understanding and response to that was, at a minimum useful. But what we were able to do then was, yes, make experimental transactions, but also, the corporate banks started to look at, well, other clients here. What does a good client look like? What does a bad client look like who looks more like a money service business and is moving value? Who is a software company that happens to write smart contract code, and is there a meaningful difference in the risk between those two? Because if it says Blockchain in the title, it could be a software development shop and actually, is that a bad thing? So really, materially understanding the risk has very little downside.

Simon
And I think that the biggest insight for me is there is no downside to understanding this stuff more. The opportunity, I think, was always going to take time. One of my favourite sayings is that the banking industry moves in seven-year increments. So from 2015 to 2022, we found ourselves in a place where people have understood it, and not only have they understood it, I think the organisation has got it and kind of got its head around the fact that, okay, maybe we can’t build our own private blockchains. Maybe we need to work with this stuff. And so now you see the Bank of International Settlements, you see major global custodians starting to do really interesting things where they are looking at how to use the technology, but how do I make it comply? And that’s hard because compliance is extremely hard. You know, like those movies where James Bond is all like Mission Impossible, and there’s all the lasers, and you’re trying to get through all the lasers, and you don’t want to trip a wire.

Simon
That’s like trying to get something to live in a bank. It’s incredibly hard. So it will take them time. But the fact that they’re persisting says that there’s gold at the end of the rainbow here.

Sophie
Yeah, and I fully agree. And actually, it’s the next topic I would like to jump into. So just to finish off your history, of course, it then led you on to Co-founding eleven FS and the rest is history. But what I would like to discuss now is my favourite topic and your favourite topic of Web 2.5, as I mentioned to you. I remember when I read your newsletter, like fintech brain food. And when you mentioned Web Two Five and I was like, ha, Simon, I have a t-shirt like that, and I actually theatre Republic has copyrighted The World. But it makes so much sense. I think we are not quite there yet, but it’s definitely where the industry needs to go. And it starts with the banks understanding the risk and becoming comfortable with it because they actually also understand that there is no way back.

Sophie
Web Two Five is what is happening in the background and what needs to happen in the background for Web Three to take shape and be maintained. Essentially, Web Two Five is the bridging layer of trust necessary for institutional adoption and use. There’s so much about your areas of engagement that involve wealth. Two Five and I would like to start with GDF, which was established in 2018. I believe that you have co-founded or even incepted now. You have 300 global community members, including some of the most influential digital assets and token companies, academics, and professional services firms supporting the industry. Can you say why you started it? And specifically, why intra organisational initiatives a necessary part of the Web Three world?

Simon
Oh my goodness, yes. The wonderful thing about Web Three is it’s natively global. This is a global historically; financial services infrastructure was national, and then we sort of built these little connective bits of tissue, then sort of make it sort of work internationally some of the time for some of the use cases. Kind of expensive. It wasn’t built to be global, whereas Web Three is the opposite. It was built to be global. But the problem with that is governments aren’t global. They exist in jurisdictions. There’s no one world government, sorry, conspiracy theorists; there is no such thing. Like, just go look at China versus Russia versus India versus the US. There isn’t one. They’re kind of angry at each other right now. So that creates a problem that you see that there’s a race to the bottom in terms of regulatory jurisdictions. You have the US.

Simon
And Europe and China and India, and many big countries were trying to build their laws and regulations. But you have smaller states that are either immature or trying to attract business that may be a little bit more open, and sometimes that can be good for innovation, but sometimes that can be bad for compliance, bad for consumers, and can allow very large businesses to build up massive amounts of risk that ultimately harm consumers and harm the wider market. And so it was this insight that led to global digital finance during the ICO boom in 2017. It was fairly obvious that a lot of stuff being shopped around was really dodgy, and something must be done and that there was going to be a regulatory response. My fear at the time was that the regulatory response in 2018 would be a lot more severe than it is and look a bit more like the one we’re seeing now.

Simon
And my fear with that is we would throw the baby out with the bathwater. Instead of having the Internet where the approach was first to do no harm, we would have an approach which is kill this thing, kill it with fire. And that is my worry. If it’s financial services, when it’s people’s livelihoods, something must be done. We must protect people’s livelihoods. We might break the innovation, but at least we didn’t end society and completely kill the economy in the process. So that was the founding story, and I called a few folks like Joe Lubin, Dave Rutter, Blithmasters, and to my surprise, they said, yes, I’d love to get involved. And so that was kind of the genesis. Since then, we’ve merged with the Global Blockchain Business Council, GBBC, so we’re now a division of GBBC. Sandra Rose is a wonderful president of that organisation.

Simon
And so, ultimately, the goal is to raise the bar at the international level and say two things. One, there are standing laws in your jurisdiction, and you must comply with those. But there are laws and rules that we, as membership, believe need to be built because this industry is developing so fast that risks are emerging. So what you see is that Global Digital Finance, or GBBC Digital Finance, developed some best practices around the safekeeping and custody of digital assets that have now widely been adopted, not only in the kind of membership, but they find their way into things like the Mika legislation. So we’ve been able to sort of front-run a lot of what becomes regulation by demonstrating best practices ahead of time. And I think that’s really important. A lot of people say we need standards, but nobody goes and builds them. So this was the idea, get the industry nerds together, get them to build the standards, get them to build the operations and get them to react ahead of time.

Simon
We’re very fortunate to be an IOSCO affiliate as well. And we have a very open door policy to really understand and hear the concerns of the global regulators as well as the national level and acting as a bridge sort of between them and really trying to squash the arbitrage that happens between jurisdictions.

Sophie
Yeah, I couldn’t agree more with the global essence of what we do, but also the need for people to get together to actually drive the industry forward, but in a way that kind of makes sense. And don’t leave everything to actually like the people outside to tell us how things need to happen.

Simon
People want regulatory clarity, but you might not like it when it shows up unless you do something about it. And so you have to understand your own risks and manage the ones that are outside. Because regulators have this concept of the perimeter, and inside the perimeter, they can regulate, and outside of it, then they are not allowed to do things. And this is what annoys people about regulators sometimes, as they can only act within their perimeter, and something must be done. There’s a lot of political pressure on them to do it, and all they’ve got is a hammer, and they’re not hitting a nail. They’re hitting you on the head with it. But that’s all they can do. So you have to figure out what’s going on outside the perimeter. It’s in the industry to do it.

Sophie
Yeah. And so, like GDF, his work has several working groups, and one of them talking about working collaboratively with regulators I would like to touch upon is MICA, global financial institution sanction and Compliance and ESG. Speaking of MiCA, it sounds obvious, but Web Three is waking up government stakeholders. Perhaps they thought they could get around it, but clearly, that’s not happening. What does the regulatory landscape for Web Two-Five look like? That is an environment of trust that’s both an upgrade of Fintech and a more cautious interpretation of Web Three. Disintermediation. According to you. Yeah.

Simon
So I don’t hate MiCA at all. In fact, I think Mica is actually not bad. I mean, if you look at its core principles, one of them is safeguarding.

Simon
Good. Okay, this seems like a good idea. One of them is for stable coin issuers, making sure you have adequate reserves of at least X compared to Y. Yeah, I like that. That’s a good thing. Like, I’m not against this. A lot of the things in there, we even managed to avoid something horrible, which I think that my fear was we would require self-hosted wallets to perform full KYC. And I understand why. Because of the fear around sanctions and the fear around anonymity in a global world. But the thing with an unhosted wallet or a self-hosted wallet is it might not just be me doing it. One, I need the ability to have cash in the grey economy below a certain amount. The vulnerable sections of society need that, and that’s why cash still exists. But two, how do I KYC a bit of software?

Simon
If the software could really be autonomous and move value around the world, who’s the legal owner of that? And should that always be the same person? Can it not be instant? The innovation you cut off if you acquire that is really deeply concerning. So I think the world should have privacy and the world within sensible limits, and the world should have that, and so Mika accommodates that. So it’s not that bad. I do think we are out of the juvenile phase of go; everything’s easy. And it’s now in that awkward we’re in that awkward early twenties of crypto where, oh, I’ve got a job, and I got bills to pay, and this is kind of hard, and who am I? And I’m at the lowest rung in the ladder here, and there’s this giant financial services industry out there, and they make so much more money than me, and oh wow, I don’t know anything, and I keep getting told off we’re in that phase and it’s time to mature and that’s okay.

Sophie
Yeah, I totally agree with your perspective. Anyway, working hand-in-hand with regulators and governments is how we will reach mass adoption because it’s how you bring trust. I love the fact that you’re bringing up safeguarding because what we see has just happened with things such as FTX, et cetera. Safeguarding is here to protect the people, and it’s by protecting the people and for the people, knowing that they are safe, that ultimately crypto adoption will come.

Simon
If I can just briefly add as well, I think so long as we can be open to the how, we’re very stringent on what safeguarding must be done. What kind of technology is emerging? So one of the things Vitalik made a really good blog post on proof of solvency and how you might be able to do that with a bit more anonymity and privacy. Cool. Let’s investigate that. Because privacy is a big issue for Europe as well. So the problem with crypto is the transparent nature of the ledger means if you KYC everything, you could have a privacy nightmare. What happens if there is a big hack and all of the KYC that’s required on an open blockchain suddenly becomes available in the public domain? That is going to be a privacy nightmare. That makes what Facebook and Meta have done in the past look absolutely tiny by comparison.

Simon
So we have to keep these two forces in tension. Yes, we must manage sanctions. Yes, we must manage illicit financing flows. We need KYC as one tool in our arsenal to do that. But privacy can be much worse if it’s completely gone.

Sophie
Yeah, I totally agree. I would love to. Now jump into Sardine.

Simon
Jump into the Sardine can. Join us. It’s fun. The water is lovely.

Sophie
Can you tell us more about it for the people that have been following you for four years, followed by fintech brain food as well? Can you tell us about Sadin, what it is, why you joined it? What made you think this mission was worth making the jump?

Simon
If you look at everything I’ve done in my career, it’s understanding the infrastructure of financial services and all the things that are broken. It’s understanding compliance and all the things that are broken. And it’s a real belief that Web Three presents a truly global, truly transparent and transformative alternative financial system. I believe that. I believe that to my core. But if we’re ever going to get there, we need to make it work, and it needs to just work. And the thing that really excited me about Sardine is the track record of the Founder Soups. So he led data initially and then fraud and data for Coinbase, then went and did the same at Revolute whilst they were doing crypto and has been at the front line of understanding where the body is buried and what’s and everything that could go wrong in the on the off-ramp between fraud and crypto at some pretty well-established places.

Simon
And then his frustration was that as a fraud and compliance team, you’re always a cost; you’re seen as a tax on doing business. You can never build a platform that would really deliver the results the business wants. And so that was what Sardine was initially designed to do. But the second realisation is if you understand fraud and compliance, you can actually create much better business outcomes. You can make transactions much more likely to get approved by good customers. There’s this thing in fraud called the false positive. So the false positive says that to catch one bad guy, you might need to stop ten good guys. And so ten good guys are like, what the heck, this is terrible, my transaction didn’t work, you guys suck. And when there were a lot of VC dollars around, and there was a lot of marketing budget, heck, I don’t want to stop any customers, I just want to acquire more customers.

Simon
And fraud is a price I’m willing to pay. The market’s a little bit different now, so fraud is not a price I’m willing to pay. And the regulators are really starting to look very closely at scams, hacks and everything happening in peer-to-peer payments, generally authorised push payment fraud. We’re seeing it in the US with Zell and Cash app and Venmo and peer-to-peer transactions. There are so many scams happening in crypto generally, and the on-off ramp is always the weak bridge, and again, it’s always done in a way where each individual actor is fighting their own battle, and it’s very hard to get people together. So Soups goes and builds this amazing fraud and compliance platform. Then he signed some of the biggest companies in crypto and Web Three, and also Blockchain.com, but also companies like Wealthsimple Bricks. He starts to see this incredible data set of what’s happening in Fintech, crypto and the bridge between those and MetaMask and Brave and all of these organisations that are now clients.

Simon
And you start to build this incredible data set about where the problem is. And when you build that incredible data set, what can you do? You can start to reduce fraud for everybody, you can start to identify the bad actors, and you can start to collaborate as an industry on reducing that fraud overall. Why is all of that important? If we’re ever going to get to Web Three, we need to trust it. And so we needed an on-ramp that was safer and that was faster because, frankly, the on-ramps don’t work. It’s a coin toss. Sardine data shows that across the industry, 50% of card transactions declined. It is a coin toss whether or not you can get into crypto in the first place. People say UX is being fixed. It’s not because the problem is the infrastructure, not the experience.

Simon
You have to understand compliance to get a better payment experience. It takes so much effort to make this look effortless. And so, in order to get there, you needed to really solve that. And I just add to all of that Soups is just a lovely guy. Everybody I met from Sardine, I just wanted to cuddle with them, and I was going to learn so much about what the US payment infrastructure looked like in Latin America. And as much as I loved the journey at Eleven FS, it was too much to say no to. I really had to go learn this. And it felt so mission-aligned to everything I’ve done historically that it was a no-brainer for me.

Sophie
There are many things that you have just said that I would like to pick up on. So, first of all, like the LinkedIn update of Soups. Oh my God. I am just such a big fan of all the knowledge he’s sharing all the time about fraud. You see that he has been on the front line, but it also brings, I think, a lot of better understanding to people like us about how it’s happening. Because it’s happening, and I think people don’t understand the magnitude to which it’s happening.

Simon
Oh my God. The other thing that I found is that in Sardine, people would just drop these knowledge bombs that I was like, oh my God, I want to tell everybody about this. You know, that little alarm that goes off that is significant, that was happening every 10 seconds. Adi, one of the co-founders, said that 90% of the fraud coming in most fintech companies is from their own customers. I was like, what? Yeah, no-friendly fraud is the biggest issue. I’m like, why didn’t I know that? I’ve been in Fintech for a while. I feel embarrassed. I should know that. Or then there are little things that the data science team discovers. It turns out that if you can, one of the things Sardine does is it understands the mobile phone, the device, and it can take all of these little signals off the device.

Simon
Suppose you can listen to what’s coming through the speaker on the device. Fraudsters sound different to regular people. Don’t know why. They just have different patterns, and we obfuscate it, and we manage privacy, but they sound different, like fraudsters sound different. Another thing if you’re dealing with somebody that has full KYC as a person over 60 turns out where they hold their device matters because a person over 60 may not have their reading glasses on, and it should be further from their face, and it should look like they’re holding it like this rather than upside down on a table. Little things like that. These little clues, you add them all together. There are thousands of these things, and I just found them fascinating. Every day is. Like a spinal cord, and it’s incredible. But they tell you what, as soon as you think you figured something out, the fraudsters come up with something else.

Simon
They are the true entrepreneurs. Like, you cannot sleep on this. You have to keep pushing the boundaries to get better. And I’m sure there are a million things that they’ve figured out and that they’re laughing at this podcast about.

Sophie
Yeah, no, totally. So, like, guys, go and follow soups to be enlightened about what fraud is about and actually how to take care of it. We are in the last part of the podcast. I would like to talk about the future. I very much think you’re a visionary in Fintech Infinite and, basically, Blockchain and crypto. You have been talking about it for such a long time, but also with prophecies that actually have been fulfilled and exist. You have created this amazing newsletter. So the same. If anyone here is not yet on the Simon newsletter, please go and subscribe. It’s Fintech Brain Food. And also it’s really nice to receive it during the weekend because it’s like a good time to actually be able to sit and think. But now I have you around; I would like to actually discuss a few topics. We will talk about it again. Web two five, the Future and its Relationship to the Internet of Value. But let’s start with what if Twitter did payments? I know our team at Chat Republic really loved this newsletter. It was really a chin-stroking article. As clear, what if Twitter made payments? You have diagnosed the critical issues in the payment space and the point departure while leaving all the particulars up for discussion. First, let’s start with the beginning of your fintech career. Your point to the fact that, at the time, NEFT payments were all the rage.And, of course, today, we are almost helpless without things like Apple Pay or even contactless cards. But you say, no, the future was digital payments. Something like what PayPal was doing at the time, but a more open loop. Can you say a little bit more about why you tax?

Simon
Yeah, payments want to be open-loop, but it’s so much easier to build a business that’s closed-loop. What do we mean by that? PayPal. I can pay anybody in PayPal so long as I’ve got their email address and they sign up for a PayPal account. Great. What happens if I don’t have a PayPal account? What if I live in a country where PayPal doesn’t operate? So ultimately, the only thing that really is frictionless is probably US dollar bills. Like, they’ll go anywhere, and somebody will accept it somewhere. We need the equivalent of that for money, but it needs to sort of almost be interoperable. Hence the Internet of Value. That’s what people are trying to kind of create. But the problem with the Internet of Value is it only works in this new bubble. It works in web three. It’s not backwards compatible. And so, the web two five versions would need something that links between them.

Simon
And that’s what I try to describe in that blog post, how would you link between all of these payment systems? Because payment systems are complicated. They all have their own rules, and they all have their own things that can go wrong. It’d be really hard to build direct integrations with them all. And there are lots of good companies that try and do this, like P Pro and Rapid and acquired by Visa and many other payment companies. That’s kind of where they make their money. But nobody knows all of the things all of the time. There’s no simple, elegant, abstract infrastructure. There’s no connective tissue that’s consumer friendly. And so what got me really excited about Twitter potentially getting into payments in 2009 is the fact that back in the day, it was almost SMS-like to message somebody.

Simon
They were the originator of the handle, but they were the originator of the hashtag. But you could also do something where you could DM somebody. You would type the letters DM space into Twitter, into the tweet, and it would go as a direct message nobody else would see.

Sophie
I didn’t know that, actually.

Simon
Yes, and so you could type that in the BlackBerry app DM, and it would go into. Nobody else would see it. So it was purely text-driven. It was protocol in the truest sense. And they had an open API. And I was like, well, that makes sense. Wouldn’t that be the abstraction that you’d stick above all of the payment types? That’s consumer friendly. And then the payments networks would build up to it rather than it building down to you, which is kind of how the Internet works, right? You just say I don’t care how you work, just follow the TCP IP stack, and you’re good to roll. Like you figure the rest out yourself as long as you follow these rules. Kind of makes sense. So when Square came along, they debuted the cash tag, which is sort of using the dollar and then a name to send each other money.
Simon
And so, cash tags become an interesting way of starting to move in that direction. But that was nice, and it was simple, but it felt like it was missing the developer piece of the story. And then it was Ben Milm, the founder of Duala, who wrote just the most incredible blog post on how we would create a very simple typing and standard function call for different types of value transfer abstracted from payment networks. And so, I linked to the way he does that with value type and value transfer. And if you put those two pieces together, you would have this chin-stroking utopia of an interoperable global payment system. Now, there are a bunch of problems with that. You’d probably need the Web ThreeC consortium to come in and make it a standard that all browsers adopted. You need to get the big tech companies to adopt it.

Simon
Like, holy crap, are there issues with that utopia? But it would work. Sometimes the right answer doesn’t happen. In fact, most of the time, it doesn’t. But it’s really interesting to think about it, and maybe it inspires somebody somewhere to build something. So that was kind of the idea.

Sophie
Yeah. And your crucial insight was in this newsletter about the consumer’s centre of gravity from the payment technology side. Whether it’s Ibans, XPay, Open Finance, or Web Three addresses, there’s competition for sole user attention, but it’s the opposite for users. Their centre of gravity is everywhere. And that’s nowhere you can discuss what it looks like and what to call your counterintuitive solution.

Simon
Yeah, like addressing a human rather than addressing an account. We address where money lands, and we assign a user to an account. We say this account is where the money is, and you are the user that owns that account, rather than you are a user, and those accounts connect to you. But I’m going to address the money to the user, not to the account. So the user then becomes the centre of gravity. If I can just app message Sophie and say, I want to send Sophie at Sophie $50. Bang. That might work in certain apps, but it doesn’t work across apps. That is the experience the world needs. And I don’t know how we will get there. There’s probably going to be a ton of standard work that GSMA or some consortium involving Apple needs to do to get that done in a decade or whatever, but, oh, my God, wouldn’t it be better?

Simon
And that’s the insight. The consumer is the centre of gravity. The user is the centre of gravity rather than the account. And so often, when we’re building a business, we build it down to the user. They are the client; we are the server. Whereas what Web Three gives you is the potential to reorient that and make the consumer the centre of gravity. And if you think about it that way, you start building services differently.

Sophie
Thank you so much. Simon, you’re a crypto legend. I really enjoyed this conversation, so thank you for taking the time to share all your insights. I think the background, like, all the things you have created, GDF, fintech brain food, all of that contribute a lot to our industry. And I’m sure I’m not the only one to think of that, so I hope everybody will.