Shawn Flynn  01:17

So Osama, can you give us a history of yourself and your career?

Osama Beider  01:22

I don’t want to ramble anything so let me see how far back I’m going to go. I was born in Cairo, lived the first eight years of my life there then I moved to the US with my dad at the age of eight. He was doing his PhD here. So I grew up in Oregon, then I moved to California right after high school. Even in high school, I was pretty passionate about computers. I knew computer science was my thing. For my freshman year, I got my first internet account. I was fascinated by a local university which is rare. And by the mid-90s, I knew this was going to change the world so I spent as much free time as possible learning everything about the internet. I started at AT&T Wireless as a call center person to help pay for college.

And in my free time, I felt like my whole job is tech support would be to answer people’s questions through these eight binders, so I actually emailed somebody in IT if they had the original documents, put them in a search engine, made it searchable, and started using it to answer my questions faster. And I built like a small web application on my own PC. My boss wanted to fire me for loading unapproved software, that his boss when he saw the request to fire me thought, “Wait a minute, let me see what this guy’s got.” And it turns out that everybody around me had been using this application as well. And all of our stats were better than anybody else in the national call center so they gave me a full-time job building web applications at the time of internet applications.

Osama Beider  02:56

For the next two or three years, I was doing that until I joined Gateway Computers. They were in ’98, one of the largest e-commerce sites in the world. They’re doing a few billion dollars a year in e-commerce in the 90s, which is very rare.

And they were building one of the most complicated e-commerce businesses in the world because Gateway was a great mail-order company, where all the enthusiasts were computer users and all using the internet, so it made sense to buy online. And so being able to customize your own PC on gateway.com was a very popular thing and they were having trouble keeping up. So I went in there with a fairly large team to help automate the whole thing. It used to be you fill in a form, it gets sent by email to somebody who would call you back and tell you you did it all wrong, and redo it. And so we built probably one of the best e-commerce teams, with the best internet engineering teams at the time to do the whole thing without a human being involved. In fact, the order would go to the manufacturing floor and get built in 15 minutes later, ship out to the customer. And then that group of people ended up at eBay when eBay, in the late 90s, early 2000s was having trouble scaling. Probably one of the few companies that weathered the.com storm and did really, really well. And we’re scaling really big as the biggest e-commerce site in the world in the early 2000s.

Osama Beider  04:22

So I moved to the Bay Area to work for eBay and help rebuild all of the founders’ code so that it can scale. And after doing that, I felt like one of the most amazing rewarding experiences because the people was just the best people I’ve ever worked with at the time, really early pioneers of everything e-commerce, everything transactional. But after solving a lot of it, it became more of the same and eBay had just acquired PayPal, and it was a really small company, in terms of number of people, there are only 25 engineers or so. Most of the company was customer support people. They had a couple hundred customer support people and 25 engineers. But they had made such an amazing impact and I was fascinated by that. So I moved over to the PayPal side and spent the next nine years at PayPal, first being part of the engineering team that ultimately running most of engineering and product and a large part of the business unit. After nine years there, I felt like we had dominated online commerce. But I saw that consumer behavior was shifting quite a bit, and that people wouldn’t differentiate between online and offline much anymore. 

So I moved to Google to build a wallet that work in the physical world as well as online. We called it Google Wallet. It was very pioneering. We’ve figured out how to put NFC technology to better use and put it in a smartphone, integrated into the whole shopping experience and replace plastic with this path that you now see. A lot of people call it Apple Pay but Google did it first. It was at Google that I realized that the smartphone would only be half the story. To really change commerce, especially in the store, the merchant also needed a smart device. And that the consumer phone or tablet wouldn’t suffice in an enterprise situation like this. After a lot of thinking, I left Google to start Poynt which is basically a smart device for retailers. It is a drop-in solution that can run just about any application and leverage the data in an interactive way. And between the smart device and the consumer end, and a Poynt device at the merchant, magical shopping experiences would be created. And that’s what I’m doing now. I’m excited five years in. I have a lot of fun.

Shawn Flynn  06:51

So with that, I got so many questions for you. But just to start, let’s have a background. What is kind of the history of payments throughout mankind?

Osama Beider  07:01

Look, this is an important question because it turns out payments is very hard to change. And there’s a reason for that. In the last 5000 years of recorded history, it’s only changed three times, from barter to coin. So in the early days, people didn’t have a common way to exchange value. Your bag of rice for part of a cow. And so, coins were created as a common value and currency. And so we went from barter to coin and precious coin to begin with, but over time precious coin became really hard to manage, really hard to carry. And interestingly, not the best medium for credit. And so paper was invented. Paper currency, backed originally by… Backed by coin or precious metals, but ultimately not backed by anything. So we went from barter to coin, coin to paper, and paper to plastic. Plastic is actually today, we see about $25-$30 trillion of the world’s $80 trillion consumer spend is already in plastic.

Osama Beider  08:08

We’re on the verge of the fourth and maybe final change, which is a completely digital currency. It’s not a digital currency backed by the paper, or the idea of that came behind the paper as a standard of the dollar being a paper currency, but fully electronic from beginning to end. Bitcoin is an example of something like that. But I expect even governments to start issuing their own fiat currency. So it hasn’t changed very much. Only three times and we’re in the midst of a fourth. The most interesting thing is that that up until 70 years ago, only governments managed payments. And so the big change with plastic is private enterprise started standing in. Visa is actually as widely known a currency as any government currency, in fact most currencies. There are remote villages all over the world that accept Visa. Believe it or not, right? And that allowed private companies to help innovate in money. And it was necessary, this move to digital. It started out as the you know, the plastic bridge the way to digital, it started out as a way to do transactions online, enables online transactions for the most part of it. In fact, credit cards, e-commerce would have been a lot harder because governments are always slow to adapt to these things. So private enterprise, enabling payments 70 years ago, has made the internet transactional and business if you will. And paved the way for a lot of these other services to go digital.

Osama Beider  09:43

And as a result, the mobile phone becoming the centerpiece of everything we do in life. There are a lot of things the first wave of the internet did for free and therefore limited it to a part of the population and part of our lives. That’s why we went offline versus going offline. But the mobile version of the internet not only made it available to us 24/7, but the internet had already become commercial, and therefore worthwhile for every industry to be involved in. And so it’s also created this democratization on both sides of spending and making money, the ability to, you know, do things much more conveniently as a consumer because you can spend money digitally without having to go get it first from an ATM machine, if you like… As well as the ability for anyone to accept money when it’s digital, no matter where that sender is. I mean, this was a huge idea behind PayPal, send money and receive money anywhere in 190 countries around the world. You literally took out a lot of middlemen because the basket weaver in a remote village can actually sell it directly and ship it to someone living in the developed world. And so we’re just at the tip of that, you know, being involved in changing consumer behavior in such a large scale. It is very exciting.

Shawn Flynn  10:29

Can you talk about your career starting at PayPal and the influence it had and how it’s revolutionized payments in general?

Osama Beider  11:14

It’s interesting because when I first joined PayPal, it was less about, and I didn’t even know we were a payments company. And it’s funny for banks to hear that now, when I tell them that we weren’t solving payments. We were solving for how difficult it was to buy things online. And in fact, I think that is the problem with the payments industry. They think they’re a business, when in reality, payments really shouldn’t be a business. And only recently has it become a business. But as you go forward, a business requires a value proposition. And it was successful as a business over the last seven years because there was a value proposition. And so as I researched history, the value proposition of payments turns out that it’s increase sales. And the proof in that is even the largest retailers in the world will pay Visa and MasterCard, to name a few, to accept payments when cash is free. So why is that? It’s because if they stopped accepting those cards, sales would drop. That’s the proof that it increases sales. Now as the world becomes more digital, it’s important not to because it’s so widely used now. It’s replacing cash. It’s easy to forget that it’s become a utility, and less of that value proposition of increasing sales. But as you look to the future, that is the most important value proposition anyone working in the payment space has to solve for a problem where buying something or exchanging goods and services is more difficult.

Osama Beider  12:42

It’s interesting in those nine years. I saw PayPal help tons and tons of startups solve for that friction of exchanging goods and services. That’s why it was successful. It started out with eBay, right? If I’m a buyer and seller on eBay… You know, eBay before PayPal, it’s interesting. 

People would send in envelopes of cash at each other. It’s weird to think about but that’s what was happening for the first few years of eBay. And not only would they send an envelope with cash in it to the seller, they would also pay their PayPal or their eBay fees with an envelope with cash. It’s just so odd. And why is that? Because even by the late 90s, accepting a credit card was hard. You have to go through a massive credit check with a bank. It took upwards of four weeks, sometimes months, big six months to get approved. Only 20 or so percent of businesses were approved to accept payments. But more importantly, eBay was a P2P marketplace, where it was all a bunch of individuals, millions of individuals selling stuff to each other. And they would never get approved. They didn’t have a business. They would never get approved to accept credit cards.

And so, enabling somebody like that to accept credit cards in 30 seconds was economic freedom and it enabled a large part of the internet, in fact, to push the credit card companies and the banks to lower their bar, or who should be allowed to accept credit cards. And it created several generations of other startups, like Square, like Stripe, like *inaudible* that also came into the space. And hundreds, if not thousands of others around the globe, that all said, “Hey, if Paypal can do it, we can do it too.” It’s very rewarding from that perspective, enabling, you know, millions of small businesses or sole proprietors to figure out how to take advantage of this thing called the internet.

Osama Beider  14:34

But back to this point of, you know, we weren’t we didn’t think we were in the payments business. We were just removing friction. I think that’s where everybody in the industry gets lost when you take for granted for making a lot of money on payments today, as compared to where this will go in the future. Because just like eBay as a marketplace had that friction problem, and had PayPal to solve it.  And PayPal solved many others… If you think about every other interesting use case, or magical service that’s come in the last few years, they’ve had to innovate on payments. And you know, the best or most recent example is Uber. It isn’t clear where that happens, right? You’re not even pushing a button anymore, just walking out of the car and paying. And so that’s part of the same idea of removing friction, and making the experience much better. And I think that’ll have an effect on almost every service in the future.

Shawn Flynn  15:31

So if you hadn’t worked at PayPal, do you think you would have ended up founding Poynt?

Osama Beider  15:36

That’s a very interesting question. I’d say, I probably would have founded a startup. I don’t know if it would be Poynt or not. I think a large part of this idea was in the back of my mind at PayPal, I knew that even in 2006, 2007, I knew this idea of online versus offline would go away. And I used to think a lot about… We know so much about a merchant. And we allow a merchant to know so much about their customers. By being in the middle of those online transactions, why can’t that transfer to offline merchants? You know, it’s very interesting to me that a small retailer doesn’t actually know their customers very well today. A restaurant or bagel shop, you get a couple of hundred customers a day, maybe 1000. The vast majority of those, you don’t know who they are, unless the owner is there day in, day out, every hour. And an online store and e-commerce became so popular because despite not having the human interaction, they tried to fill that gap with data. 

As a result, they ended up knowing a lot more about the customer than they ever did with the human interaction. And this is why Amazon is such a massive retailer today. They know their customers way better than any physical store retailer. They use this idea of filling the human interaction gap with collecting as much data as possible, so that they can know their customer better and serve them better. Now, that phenomenon hasn’t really happened at the small end yet. But all the technologies are available to make that possible. And so this idea of Poynt filling that gap also existed when I was at PayPal. I thought that I can do it through the consumer phone. So if you put the wallet in the phone, that you can give all that information to the merchant. Even that Google experience of trying to build the physical wallet first in a phone, to realize that you had to have a device at the merchant. So I’d argue I would have started a startup but I probably wouldn’t have known that you needed a smart merchant device, until I tried to solve it in the phone first.

Shawn Flynn  17:59

So in your 20-year career in payments, what else have you seen in this space?

Osama Beider  18:05

That’s very, very interesting. It’s so many things, but I’ll try to divide them up. I think the most interesting thing that I’ve seen is how consumer behavior changed. You know, being in payments, you got a very broad view. Being on online payments in the earliest days,  in the early 2000s to now, I got a front-row seat to how consumer behavior changed as the internet came of age. I think about this often because I believe we’re in a unique moment in history that’s never existed before. For thousands of years, we had a world where the big and wealthy had more access to technology than the individual. And so enterprises, corporations, companies ruled the day. In fact, they told you what to wear and they told you what to eat. They told you what to think. As a result, we listened because we didn’t know any better. I think what’s changed, especially with the mobile phone, is we’ve taken something, technology, which was mostly available to really well, a small percentage of the population, the really wealthy, and democratized. Everybody has a computer connected to the internet every hour of every day. And in many ways that computer is more powerful than the early adopters of computers and technology that got stuck on those legacy systems from their early adoption.

And so it’s interesting that the consumer has more technology at their fingertips than almost every business or enterprise or government that they walk into. Giving consumers and individuals this freedom, not just to communicate, not just to make choices, not just to influence but to control everything in their lives. And as a result, I’ve seen consumer behavior change with that empowerment, to where the consumer is in control. They were more in control of everything around them. And so I saw the way they buy things change, the way they communicate things change, the way they’re influenced. In fact, consumers are a lot more influenced now by social media, you know, their friends or influential people than they are by a great ad. You know, if you look at the YouTube phenomenon where you have mass creation at a level we’ve never seen before, really high quality stuff getting produced by individuals. You have these YouTube stars where no major corporation had to sign you first before you became popular. Tweets by individuals that can move millions or tens of millions of people to do something. So it’s a fascinating time and I believe that it’s got ramifications for the next several thousand years that’s very different than the past.

Shawn Flynn  21:06

So going back to the methods of payment, tell me what are the disadvantages of using my credit card that I’m not aware of.

Osama Beider  21:14

Let me just first talk about why those advantages exist and then step back and talk about some of the disadvantages that I think are being solved. The reason these advantages exist, as I mentioned, you know, it’s the first time in private enterprise that they took the role of currency. And therefore, you didn’t have to have governments enabling innovation that takes a long time and often doesn’t happen. It opened up this board or in a way that wasn’t possible before. And it was probably the first real universal currency you know, before credit cards. If you traveled outside your country, you got to buy these travel cheque things, or exchange currency, which is very weird. Now you go anywhere in the world. In fact, I do a lot of traveling myself. I rarely visit an ATM machine. Why? Because my Visa card works just about everywhere. I don’t know… My MasterCard, Amex, every hotel, every restaurant, every shop, I don’t even have to think about it. In fact now taxis and Ubers. And we’re just talking about Uber. So this idea of making the global world a lot smaller. And now extend that to online, I can also buy anything from anywhere in the world without having to figure out that difference.

Osama Beider  22:29

And so for a consumer, it’s very, very empowering. For the merchant, it’s a little bit more difficult when it was early days, and very few merchants had it. The ones who didn’t accept cards were differentiated in a big way. But over time, as it replaced currency and everybody accept cards, that differentiation went away and retailers feel it’s a lot more of a tax than it is a value proposition. And so you know, that’s probably starting to scratch the surface on some of the disadvantages because those costs are a necessary part of the equation that make cards possible. 

And as a result, have actually made them available only to a third of consumers spend around the world. Two-thirds of consumer spend is still done in other ways, and for until recently, done mostly with cash. Now, interesting that 70 years in the card, general corporate credit cards, or cards, what you’re seeing come out of China and Asia is a very different phenomenon with these QR codes as the payment mechanism, because the idea of cards and the rules around accepting them and the rules around spending with them were a lot stricter and required a lot more infrastructure to be built that wasn’t viable in developing markets. And so those markets needed something else. In fact, building that infrastructure also took its own time. And there was a faster way. So use QR code payment mechanisms. Obviously, AliPay is the largest in the world. WeChat Pay isn’t too far behind it, but both of them out of China. There’s about 30 or 40 now payment methods around the world that are QR code-based, as opposed to card-based. Why? Because simply, the printing of a card is a cost. And in the US, you know, relatively speaking, printing a plastic card is fairly cheap. In developing markets it is pretty expensive. And some of these places like India and China are very populated. Printing multiple cards per consumer becomes a really expensive and time-consuming process. It doesn’t even align with the pace of progress that the internet brings because just printing and shipping a card that meets card standards takes days up to a week, where you can issue a QR code instantly.

Osama Beider  24:54

So this idea of cards not being natively digital, you still have to have this plastic even though you don’t need it, because the rules said… Prohibited card adoption around the world. And then the idea of the fees associated with cards was also prohibitive on the merchant side. The interesting thing is, as with all competition, as QR codes and different payment methods came out of the East, cards started changing even more rapidly. And I had some role to play in that in pushing towards NFC. So you get rid of the plastic. You know, when we first created Google Wallet, we wanted it *inaudible cards for NFC use that weren’t backed by plastic. We had a really hard time convincing banks to do that. They insisted that even though I can issue a new quad into the phone, I still needed to print the plastic and send it because those are the rules. That’s now since changed. It’s been nine years or eight years. It’s changed and actually issue a purely native card and the fees are starting to change, especially  in the developing world. Many of the developing countries have also come up with their own schemes to compete with Visa and MasterCard.

 There are local schemes like India has RuPay. China has China Union Pay, and their fee structure is way lower. And so it has created this competition between QR code and cards, that I think will end up changing both because QR code also has its own problems. Think about paying with a QR code like you do with Starbucks, for example. You have to turn on your phone, open an app, find the place in the app where there’s a QR code, open that QR code and then scan it. A card is a swipe at actually, you know, one second swipe. It’s really fast, and NFC is actually even faster. You know, those things will matter. As I mentioned, we’re in this age of super convenience. Everyone wants things to happen faster. And so I see cards changing to becoming a lot more virtual natively, or digital natively. And QR codes morphing with NFC and I think what we will ultimately find is each get better at the convenience part. But it also reinforces why the device at the merchant side needs to be smarter. It now needs to accept QR codes and cards. And not just swipe and chip, but also tap. I need to be able to use any payment method at any merchant. That is like the golden rule of payment methods until there’s enough places for me to use it, it’s not really relevant.

Shawn Flynn  27:35

For some of these emerging countries, a lot of the population is currently unbanked. Can you talk a little bit about bank versus unbanked advantages, disadvantages and kind of who could win in this situation?

Osama Beider  27:48

That’s another fascinating part of the next decade. I think we will see by the end of this upcoming decade like 2030,the whole world becoming this Question of unbanked goes away. But let me go back to your question first. What does it mean to be banked or unbanked? Two-thirds of the world or a little bit more are still unbanked, meaning you don’t have a bank account. Now, if you go back 100 years, it didn’t matter, because everybody had physical currency: paper or coin. That’s how you interacted in a commercial way with your community. 

As the world becomes a lot more digital and as a lot of these services become digital, if you don’t have a bank, it’s a lot harder to get a digital payment method. And therefore you’re kind of left behind to go wait in line for things and they still pay for it physically. I’ll give you the best example U ever heard is about 10 years ago, I was in Kenya. I was looking at the first example of an emerging market adopting digital currency en masse. M-Pesa, Safaricom was the local phone company owned by Vodafone in Kenya and they have accidentally created what became a challenge to cash in a country that wasn’t that advanced. And it was fascinating, the whole world went to go look at why that was. And very quickly, something like within the first five years, close to 30% or 40% of GDP was already on this digital currency. And so I went there as well to look at it. 

And what I realized why the adoption by poor people en masse, it turns out, it’s expensive to be poor. Why? The country had the whole country had something like 500 ATM machines. If you are a poor person living in a remote village, and you ran out of cash, and you wanted to actually get cash out of your bank account, if you were lucky enough to have a bank account, you traveled something like 12 hours by bus to go get cash out of an ATM machine. And if you think about it, that’s a day worth of lost wages. That’s expensive. All of a sudden, this new service comes in where somebody can send you that money digitally to your phone and you got 12 hours back. And it wasn’t the only example. If you wanted to pay… And I know it’s hard to relate in the US. If you wanted to pay for your utility bill, you stood in line to pay by cash. If you wanted bread out of a bread line, you stay in line, you know, and those lines could be up to an hour-long. And so a lot of your life as a poor person, and the only cash, is waiting in line for things or traveling to do a transaction. So the first set of services that came along with this was the ability to pay your utility bill through your phone with the cash you just got, which saves you not only going to the ATM machine but also getting back that hour from paying utilities or whatever.

Osama Beider  30:50

And so a lot of the past required in every country around the world… Central bank said if you will hold money on behalf of someone you must be a bank. And if, especially in these developing countries, very few people, sometimes upwards of 80% of the population, didn’t have a bank account. You couldn’t do the services. What M-Pesa had done was they use the vacuum of the central bank. There was something going on in government around 2008 and they used that vacuum to launch the service quickly, without the central bank clamping down by the time it was popularized. The bank would have riots if they shut it down so they left it open. But it created this concept of you don’t have to have a bank account to hold currency. A lot of governments around the world started issuing either banking like or payment licenses to hold currency to mobile operators or third parties. As long as you know, somebody would vouch for you or had enough money to be credible, but it allowed the ability to create these services that replace a bank account. If you fast forward, like I said, it’s hard to say these people will be banked. 

Banks don’t know how to do things on the cheap. A lot of these accounts are not profitable on their own. Because the way a bank makes money is taking in lots of savings, and lending that money out, and maybe paying you something on those savings. So if you don’t have money, you’re barely surviving, they really don’t want you to make money on. And as a result, you know, the cost of maintaining a bank account, we call it the DDA, the cost of maintaining a bank account that moves money in and out that they can’t lend isn’t that valuable, and it’s higher than the money they’re going to make off of you. So they’ve resisted banking you. A lot of these new services make money on the commerce of how you use that money. And as a result, everybody uses money no matter how poor you are. If they can make money on the providers of those services, in some way or on the data, and as the services become more digital, the ability to offer more of those services and make money for them providers creates a unique opportunity for everybody to have something that looks like a bank account from a service provider that isn’t a bank. And a lot of challenge is getting governments over this, enabling non-banking players to provide banking like services. But I would also say they’re careful about it, because one of the most important jobs of any government is to control money supply. And if you lose control over your money supply, that has huge consequences. But I think there are enough patterns now around the world where this has worked out, that the momentum is in a really good trajectory for humanity.

Shawn Flynn  33:47

How is Poynt capitalizing on this new technology?

Osama Beider  33:52

So we’re definitely very interested in the markets where this is happening in real-time. India I think will have…  Just like the US in 1957, creating the general-purpose credit card, and that turning into Visa and MasterCard, changing the way the world spends money over the next 70 years after that. I think India is now in the best position to define this new world of digital currency or what is the successor to the credit card. One, because it has a huge population. Two, because it’s in the middle of this change from cash to digital. Three, because it’s an emerging market. It understands the value of financially enabling every single individual in the population. And fourth, because it looks like China did 10 or 15 years ago, in that economic growth curve. So it will create patterns that I think that other two-thirds of the world are more likely to follow, as it happened with the US 70 years ago.

Osama Beider  35:15

Poynt is right in the middle of that. By the end of the year, we will launch our service there. It will look very different than it does in the US, in that it’s a lot more about enabling a merchant to accept any form of payment. It’s weird. India is in the middle of this change, but they have lots of card holders. They have almost a billion card holders. They have lots of QR code, wallet holders. They have lots of cash. Cash is still king over there. It’s in the middle of that transition. And it’s an enormous democracy. Lots of people, lots of sellers, lots of buyers, lots of suppliers, all benefiting from not just removing friction by digitizing payments between consumer and merchant, but even more interestingly, because the supply chain is also developing rapidly, digitizing the supply chain as it gets tied to payments. Imagine, you know, one of the most interesting things that I think should be happening because all that technology exists, but has never happened in the US or Europe because of legacy, is think about it….

We hear this all the time. I’m a small retailer, doesn’t manage inventory as well as Walmart. Walmart has it to the last decimal, they forecast weeks and months out. They understand consumer buying behavior because they have so many data scientists and analysts, and so on. They do that inventory management as a science. But if I’m a small retailer in Palo Alto, I don’t have that sophistication. The biggest problem that merchants often have is they don’t order inventory well, and they always run out. But that should be completely solvable if they had a very simple application on the system that takes their credit card payments, to understand what they sell out of, and automatically order it for them. They should never be able to run out of stock. But that means the whole supply chain also has to be figured. And the whole supply chain already has digital payment mechanisms. And but if you go to India, a lot of this stuff is being developed right now from ground up and the ability to tie payments to the supply chain and automatic ordering. So this is an example of something we’re partnering with in India that is very exciting.

Shawn Flynn  37:37

Does a merchant have any advantage over Amazon right now?

Osama Beider  37:41

It’s hard to say right now, I’d say small merchants have an advantage over Amazon right now for a couple of reasons. But I do think this will change in the near future. The biggest mistake people make or merchants make is assuming that Amazon is in the retail biz, that they’re in the business of buying and selling stuff. And it’s a mistake because Amazon doesn’t make money on buying and selling things, you know, back to our example of payments isn’t really a business. The Amazon strategy has been commoditizing retail, so nobody can make money on it. And as a result, they’re in a better place because they make money on what they’re really good at: logistics. That’s why your Amazon Prime account is for, you know, they subscription you pay on Amazon Prime. That’s how they make money. And their goal is to get everything down to zero. And if they sell things for their cost, and everybody else does that, most people can’t get down to their costs because they buy it massive scale. And as a result, they’re gonna have the best price and always get the customer. 

And even other big players who can get down to their costs are wondering what business they’re in because they’re not making money. Meantime, Amazon makes money on things like Amazon Prime things like AWS for developers, things like advertising on their digital services, because they have so much data. You know, the best ad is when I know exactly what you want when you want it. If I’m always buying from you, then you know exactly what I want. So then charging for advertising to use that data to avail suppliers, you know, pay me to help you sell better. So they have, they give away retail for free. And then they make money on all these adjacent services. It is what the internet was built on. This idea of a platform business that says don’t make money on your core, separate your core from your business. So if your core is search, do search really well and give it away, and then go into the advertising biz. And so this is or if your core is social media, people interacting, you know all your friends in the same place and having fun and then make money on advertising apps. And so if you look at every internet platform, it’s made money on something other than its core business, or its core… Separating the core from the businesses, no core business.

Osama Beider  40:07

And so how do you compete against that? The interesting thing is back to what I said about consumer behavior change. The most fascinating thing is consumers are more likely to pay for experiences than for commodities. So they’re willing to pay a premium or willing for you to make money on a great experience. Less so on a commodity. It’s why they search Amazon for the lowest price. But if you give them a great experience… You know, why do people go buy a very expensive Apple watch? It’s not cheap. Why do you even go buy it from the Apple store? 50% of Apple sales happen in their stores. Why do people go to the Apple store? They can buy it online and have it shipped? They can buy it from Amazon and have it shipped? Why do they go to the store? Because the store offers an awesome experience and Apple stores are always packed. Why? Because they focus on an experience you feel. You feel something special when you walk in there. And in fact, that’s not by accident. Apple spent a lot of time perfecting a recipe. And you going there not to buy things. 

In fact, internally, they’ve divided up the store into three parts, the part that sells you stuff, the part that gives you support, right, the Genius Bar and the part that gives you education, and go in there and learn stuff. Right? And the reason they did that is because their goal is to bring you in to have fun, and then they traffic to all sorts of you will buy stuff on the way up, and you’ll probably pay a higher premium for that. Why do people visit Starbucks? Not for the coffee, you know. Yes, we’re we’re a little snobby in the Bay Area about our coffee. You know, it’s not the best coffee in town, but they’re all over the place. Why? It’s the experience, right? Whether it’s because you like to hang out on fancy couches with a lot of other hipster people. You know, or run into people or like doing work with music playing in the background. Whatever it is, it’s the experience. So people will pay for experiences. Retailers can’t make money on commodity in the age of Amazon selling it a lot cheaper. So if you create an amazing experience, people will come and pay you more for the same good. Look at some of the successes out there. Some of that experience that you pay for could be Warby Parker, how I buy my glasses, getting educated about the different types of glasses, and that’s actually a great price. But why go into… why do they have stores? Because buying glasses becomes an experience. You go learn, you go pick. It’s a fun process. I’ve done it. And so a lot of that experience, though, interestingly, back to the example I gave, has to take what we learned online and build on it, not be instead of.

 Osama Beider  42:53

And the thing that we learned most about e-commerce is you can learn a lot about the customer even if you’ve never seen them. And knowing the customer is fundamental to building a relationship. And a big part of an amazing experience is a great relationship with your customers. You know, in the era of big box retail over the last 60 years, that got lost as retailers became about volume. If you look at how big box retail stores are laid out, it’s like a cattle farm, you know. They have an entrance, they have aisles, you walk through like a maze, and then they have checkout lanes to wait, to pay them for. And we’re all mice going through your cattle, going through these things. And then you know, following the process, handing our money over and moving on, is not a fun experience. The worst part of that is they know nothing about you, and they could care less about knowing nothing about you 20 or 30 years ago, as long as you hand over your money. It’s all about volume. And that works when you can make a tiny bit or a little bit more than a tiny bit on each transaction or each item. If that goes to zero, and then people start wondering, especially now empowered with the phone, “Hey, do these guys even care about me? Do they even know me?” Those who know you better will start serving you. Or servicing you way better. “Hey, have you looked at this? Hey, we know you like that. We know you bought this and this goes with it.” Those become really, really important cues. 

And new generations care about them way more. So those who focus on collecting data and using that data to deliver great experiences in the store, no matter how big or small you are, you will succeed and I’d argue the smaller you are, the faster you can move there. Look at Amazon trying to move there in slow motion. They buy Whole Foods. If they’re this massive, amazing retailer online and they’re making lots of money, why buy a physical store retail? Because they realize that online retail is only part of it. You’re never going to capture experience retail, full experience retail online. People want human interaction. And so giving them that amazing experience in store will work. They’re taking those low moves because they’re a big massive company. Every small retailer can move there faster on the back of a great technology, as well as a philosophy around delivering good experience.

Shawn Flynn  45:18

Other than Poynt, who else is in your space? Who’s your competition? I’ve heard of names like Square and Clover. Are they considered competition or?

Osama Beider  45:29

No, no, you’re not. You’re not often a lot of people compare us to them. And there are lots of similarities. But there are very important differences. Let me start with similarities. We all offer some way to accept payments. We all do it on the back of a smart device. And we all leverage data to try to make that process better. Where it differs is in a few areas. Number one, we are the only open independent player. What do I mean by that? We aren’t trying to make money on payments, both Clover and Square do. We want to be the operating system, the smart operating system that works at every retail countertop in the world, regardless of who gives you your payments process. Both of them require that you get payment processing from them, which also means that you can never leave them. You’re stuck with them forever. It’s kind of like your electricity provider is also your landlord. So yeah, that may be nice. But in that scenario, they can turn off the electricity, maybe you can get electricity from somebody else. 

But if you did, you can’t really find competition for that electricity. If they doubled, tripled, quadrupled your stock with that price. For us, we are for merchant choice. We want you to have your choice of bank. We also want your choice of applications. If you don’t like the way the Square app does something, you shouldn’t be stuck to the Square app. You shouldn’t be stuck with the Clover app. So we provide this openness across the board. You can have any bank, you can have any payment method, any processor, any application running your business, any hardware. We, as an open operating system, we work on multiple hardware providers. And we believe this is not just important for the merchant, but is also important for the industry. Because if you think about why mobile phones became so successful as ubiquitous as a computer, it used to be long ago that every phone maker had their own operating system and therefore their own apps. And so if you bought a Nokia phone, you’re stuck with the apps that Nokia provided. If you bought a Blackberry, you were stuck with the app Blackberry provided. 

And what’s changed in the last 10 years is it doesn’t matter which phone you buy. You have access to all the apps and very similar to Windows, Microsoft Windows a few decades ago, you actually… The more operating systems you have the worse it is. For the PC windows allowed lots of applications to happen because they were, for the most part, the only operating system, at least for console. And in the mobile age, Android and iOS, you know, those two, okay, most developers built for both. But if we had 20, it wouldn’t work as well. And so in the retail space, we think there should be one standard, one open standard. And that’s what we’re pushing for, one open Android standard. As opposed to, you know, having Square over here, Clover over here, Poynt over here, and *inaudible over there, Verifone over there, we think all of everyone should be running the same and that’s what we’re pushing for. And that’s probably the biggest difference.

 Shawn Flynn  48:40

What have been some of the successes and hardships that Poynt has faced with getting into the merchant stores?

Osama Beider  48:47

You know, this is a space that’s not for the faint of heart. Two players dominate the market today, especially in the US and Europe, Verifone and *inaudible*. They’ve dominated since the beginning of credit cards in the US and Europe. And while there are many players that have come and gone since, it’s really hard because it was almost a closed club. You have to know a lot about building an enterprise device that accepts payments. We like the payment terminal because it’s the most necessary device that any merchant can have. So if you think about why the consumer phone was so successful, sorry, why the iPhone and smartphones were so successful… They weren’t the first to try to put a PC in your pocket. Blackberry Mobile Palm tried before them. The reason they were successful is they convinced you it was a phone first. And everybody needed a phone. And so if your phone can do other stuff, that sounds pretty good. We came out at the same way. Instead of convincing every retailer in the world no matter how small that they need a tablet, or computer on their countertop, we come in with a nice looking payment device. They’re going to buy a payment device anyway. We don’t need to convince them then. You know if it happens to include a computer or tablet, that’s awesome and it looks nice. Then we start showing them apps.

 Osama Beider  50:02

The challenge with that is the payment industry had created these payment terminal devices by reducing functionality to increase security. Because the more apps you have, the more opportunity for risk from a rogue application to steal something. And there’s a lot of sensitive data, especially payment data. So the hardest part by far was creating a device that’s open to third party applications, but just as secure as these dumb devices, dumb single purpose devices that were secured by doing one thing, and one thing only: payment. And that wasn’t just technically difficult, because after we got over the technical hurdles, the industry didn’t know what to make of us. From a rules perspective, we looked weird. And they didn’t want to approve weird because it sets a precedent. And so there’s a lot of politicking we have to do to convince the industry that this was good forever. It took us three years to do it while we were building the technology. Then after that, one of the biggest differences we have from Square… Square goes after direct distribution, they go after the merchant directly in competition with banks.

And what I realized was one of the reasons smartphones were successful was that Apple and Google didn’t try to become your phone company. They worked with the phone company who distributed the phones. And I didn’t want a piece of the market. I didn’t want to steal a few merchants from their business. We want to be the standard globally. So our model was to work with banks, as opposed to work against banks. And that’s a lot harder because you have to start at the top, the biggest banks in the world. So we walked into Chase and said, “Hey, I want to do business with you.” “How long  have you been doing this?” “We just started.” “Do you realize we’re working with 40 year old companies? They’ve been doing this forever.” “Yeah, but we think we can do it better.” “Really? How many merchants you have?” “None.” So the awesome thing is we still convinced Chase and *inaudible, two of the largest payment processors on earth to do this. A lot of it was just how amazing the solution was. And that got us a lot of credibility.

 Osama Beider  52:08

But I’d say even those pale in comparison to, you know, building hardware is very different than building software. My whole life I had built software and software, there’s an undo button. Right? You can actually just say, “Okay, let me redo that and roll it back out on the website.” Hardware, you know, that’s a month, multi-month cycle. You can’t undo a piece of hardware. You know, it takes a year to put out a decently working device. And if you made a mistake, it’s another year to fix it. And it’s very, very expensive. And so, figuring out how to apply iterative, the internet age old iterative development model, you know, learn, iterate, learn, iterate… Learning how to apply that with hardware was kind of challenging, because I didn’t want to let go of that. We knew the best products are built by coming up with a thesis, building it quickly, putting it in front of people and watching them use it. And using that feedback loop multiple times to make it better and better and better. That’s how you build great software. We knew that’s also how you build great products in general. But we didn’t know how to apply it to hardware and it took us lots of money, and a few cycles to get there. The result, though, was a game-changer that the whole industry has now rallied around as an approach for how payment devices will look and operate in the future.

Shawn Flynn  53:33

For people at home, who are listening to this and who may not have a visual in front of them, can you talk about the physical device? And also could you give an example of a customer using Poynt?

Osama Beider  53:46

Let me start with the way we thought about design. You know, when we came to be in 2013, as a company, it was just an idea. I had walked around to a bunch of retailers to look at what devices looked like at the time. And I remember walking into a Tiffany store in San Francisco and I didn’t see their payment terminals. I asked somebody, “Hey, do you guys have a payment device?” She looked at me weird and said, “Yeah.” I was like, “Can I see it?” And so, it turns out that this was a manager and she walked, walk me over, and kind of at the back of a corner where she had her little countertop and kneel down, open the lowest drawer, and pointed to conventional payment device. And it looked like a brick. You know, that’s what it looks like. It is like a plastic brick with a place to swipe your card and a screen. And I asked, “Well, why do you have it down here? Why don’t you use it for customers at every transaction?” But it’s the ugliest thing in the store. And so I promised her that I’d come back with something that looks amazing. And so from that point, I also knew that looks matter. Retailers care about their impression on the world, every customer walks by, they want to make an impression. And Tiffany’s was arguably one of the best at this, but looks matter.

 And as a result, we went to work on obviously the technology in parallel. But we hired one of the best designers in the country, told him to build a payment terminal, they actually didn’t know. Because they were used to building consumer stuff. They were like, “Huh? A payment terminal? What does that look like?” They did a lot of research, we worked a lot together. And we said we didn’t know what good looks like yet. We took down a lot of requirements on how to make this better. But at the center of it was it must look amazing, not a brick. This interaction between consumer and merchant was important as opposed to a merchant only interaction. And so it looks like an awesome tablet with artistry for where the paper roll goes. Probably the next most important thing is it is two-screen We added a consumer scream to the merchant screen, so it becomes a digital interaction. And one thing we didn’t realize until we started testing it, when you ask for tip, it’s really weird when the consumer puts a tip, they don’t want the merchant to look at it immediately. Just weird. It’s kind of like I don’t want to be embarrassed even if I paid you more. 

And so this private thing, or if I entered my pin for a debit card, I didn’t want you to see that. So this idea of swivelling didn’t make sense because it felt like I’m sharing something private. Or if I rated you, right, so that second screen for the consumer, they get to rate the interaction, and so they may not want the cashier to see it, even though the owner will see it when they run the report later. And so, but it felt like an interaction piece. And we get a lot of feedback from our merchants that their consumers start seeing them differently, just because they put this device on their countertop. They see them as forward looking and see them as advance. They see them as lit as the kids say. Woke. The other thing we did was, you know, we did three different versions of the device to pilot merchants before we said, this is it. Let’s put it out to market. Let’s actually build the final one. And that worked heavily in our favor.

Shawn Flynn  57:22

What happens with cash in hand businesses when everything goes electronic? And what I mean by is, I’ve often heard that restaurants might have two sets of books, the ones that pay taxes on and the other one, are they going to be pushing back on introducing a product like yours where everything is tracked?

 Osama Beider  57:40

And it’s a great question because I’m fascinated at a couple of things. Number one, that was the biggest prohibitor to credit card acceptance in the early days. While yes, it was hard to get a card acceptance account, many businesses also avoided it because they felt like the government would know exactly what they did. And they do. There’s no way around it. But over time, it became more expensive not to accept that credit card.

 Because the amount of business that you lose if you didn’t, than the value of keeping your, your money off the books, if you will, and especially in a retail operation, I could argue like consulting business or yard work or things like that, it may be different, but I still got it to be honest. Because at the end of the day, that person paying has a huge role in validating currency. But if the person paying doesn’t have the currency you accept, it often means they will not buy. And so as consumers become used to digital payments, it becomes nearly impossible to avoid. And so I think that it just goes away. It’s kind of like trying to avoid paying taxes. Once the numbers are there, you can’t really avoid it.

Osama Beider  58:56

The second reason it’s fascinating is while the US was one of the earliest adopters of cards, and therefore doesn’t see this problem, because the market automatically is going to cards and therefore the numbers are showing up. And while you may have flourished with a second set of books is not worth it. If you lose… Sorry, maybe I’ll give you a stat. In our numbers, we show something like 85% to 90% of a merchant’s sales are cards. So you might be able to force half of your customers to pay cash instead of card but you can’t force 80% or 90% of them to. And a decade ago, it was probably 60%. And a decade before that, it was probably 30% so it was easier to say cash only if you want my product. You can almost never do that anymore. And any business that is still doing that is literally losing at least two-thirds of their business. It’s crazy. And they see that the minute they accept credit cards, in fact, I remember about five years ago, In and Out Burger started accepting cards. I mean In and Out Burger is one of the places I was willing to go and figure out where to get the cash. It is In and Out Burger. Why would they go do it? Because they were realizing even In and Out Burger was losing money by not accepting card.

Osama Beider  60:19

The other reason it’s fascinating is if you look at countries like Brazil, or China or Russia, even though they had been largely cash economies in the past, they’ve solved this cash problem with the second set of books by introducing the need to have a printer that’s certified by the government for receipts. They created a printer called a fiscal printer. And this fiscal printer has a memory module kind of like you know, flash chip or flash memory. And it was certified meaning if you took it out, they find you and you know had the whole wax label thing that you can’t tear, whatever. But anyway, that held every transaction you ever did, and every receipt you ever printed, and in conjunction, they rewarded consumers to report you, if you didn’t give them receipt, or if the receipt was off. And in China, the extreme was, it went into a lottery and you could win lots of money by reporting people. And so it disappeared within like a year and a half, and everybody was paying their taxes, and a lot of this was to pay the taxes. And so it’s very solvable, you know, this problem of even with cash. It’s just more expensive to solve because that fiscal printer and every one of those countries was like a $200 or $300 item that you have no value for. Cards is actually a cheaper way or electronic payments, digital payments is a cheaper way because it’s inherently counted. I have to pay that $200. Governments are dead set on doing this, whether you go digital payments or not, is every single one of them realizes that there’s a lot of money to be made off of retail. So what happens to those businesses? Unless you’re a drug dealer and like doing something illegal, I think cash goes away.

Shawn Flynn  62:06

Are there any situations where digital currency could actually be a negative? So for example, maybe in the Caribbean, there’s terrible hurricanes, tornadoes, and power is out for days, months, maybe a year to rebuild the infrastructure. What happens in a situation like that when everything goes digital?

 Osama Beider  62:27

You know, I was thinking about the New York outage last week. I don’t know if you heard of this. They had a power outage for six hours, New York City, you know, the whole city went into emergency mode. Hundreds of people stuck in elevators and medical devices going off and all kinds of things. But I’ll argue that digital money is probably the last of your worries when the power goes out. Yes, it’s a problem, especially if it goes out for any long period of time, like days or weeks. But I think we have way, way, way bigger problems if that’s the case. 

So I don’t think it’s a power outage. What we lose with digital, you kind of touched on this with the tax, second set of books thing. I think the problem bigger than tax is privacy. Who knows what you bought with cash, you get total anonymity. That’s what you start to lose with digital money: total anonymity. Arguably, governments don’t want you to have total anonymity. Their argument will be, well, you’re sharing information with the government is still private. I think that’s the argument that will keep getting made. And I think most of the population would say it’s not private.

But that’s the biggest *inaudible*, there is no privacy, really, because you’re sharing it with multiple providers along the way. And you’re depending on all of them, including the government to keep that information secret. And so today, you could arguably hide your transaction from everyone except for yourself. When money goes to completely digital, there are ways to still make it completely anonymous. I’d argue that there are forces, especially government, that are completely against it for valid reasons. And that’s the debate. And with Bitcoin, as you can see, you could still make digital money, as an example anonymous. We could trade wallet QR codes or what have you, or Bitcoin codes. But my bet is the government forces, all of that be at least known to it, and then the question becomes, how private is it once the government is in. But that’s the biggest downside: you lose your anonymity.

 Shawn Flynn  64:42

With all the data that’s being collected on everyone through transactions, how is this data really being used right now?

 Osama Beider  64:48

The last 10 years is defined as the industrial age, right? The last century was defined as industrial age and oil companies and oil as a resource was probably the most important resource, and the biggest form of energy, or most utilized form of energy. And oil companies became the biggest companies in the world. In 2000, the top five companies in the world were all oil companies. You fast forward to the last year, the top five companies in the world are data platforms. You know, there was a *inaudible* on this, but data has become the world’s most important resource to mine. The interesting thing is while oil is a finite resource, like most natural resources, data is actually being created at a rapid rate. In fact, every year, more data is being generated or created than all of history. And so what that does as a resource is very different than oil is create a lot of noise. 

What’s good data and bad data? And the difference between data and information, and I’d argue 1% of that data is valuable. And the rest of it is noise. And separating noise from data will become one of the most important skills over the next century. Taking that valuable data, organizing it, building on it, complex data structures, to be able to act on it in monetizable ways will be the best way to make money over the next century. And you already see this starting to happen. I think Google, Apple, Amazon, Facebook, they all get this and they’re amassing large, massive amounts of data, turning it into because you know, when you amass that amount of data, how do you store it in a way that you can quickly act on it, crunching through all of it, to make every decision becomes impossible, summarizing it, if you will, attaching it to a user and figuring out what to do with that data for that user. 

The moments that matter so that you can make money. Advertising, obviously, is the one that we keep seeing, ads get better and better and better. Predicting consumer behavior, predicting what are called those super conveniences that people are willing to pay for as amazing experiences will be another. Solving problems that used to consume manhours in large amounts, or solving problems that have a low fault tolerance. So *inaudible* you can make mistakes, detecting cancer, detecting medical anomalies early enough. That’s where a lot of the energies are being put now.

Osama Beider  67:46

And interestingly, the opposite of it or the downside of it, that same technology is being used for evil, and how that gets regulated after the first few mistakes occur, as it usually happens. I think it’s about the change everything we know about technology. I’ve always looked at human progression in phases and it’s interesting to divide human progression or even the impact of the internet in two phases. 

You know, in the first age, the first chapter of the internet, it wasn’t really commercial at all. It was all scientific and educational. The second chapter, you have to put a user interface on it. The web came about and made it consumer consumable. Maybe not yet commercial. Third age, it became commercial and people started buying. It wasn’t just brochure with advertising or pretty websites, but people actually transacting. Fourth chapter became ubiquitous, not just going online and buying stuff, but also always in your pocket. And it started to branch out. We had social media, the ability for individuals to act as large enterprises and telling millions of people things immediately without going into a studio or going on TV or… But then this next chapter is really interesting because a lot of what we did with technology so far was to automate things the same way faster. We took what we used to do by hand or what we used to do normally and automate it. But this new one is no longer automation. It’s more use data to do things we’ve never done before. So as opposed to the car moving you faster than a horse, it drives itself. That’s kind of cool and then I don’t have to do it anymore. It will do it.

Shawn Flynn  69:42

Why have you made payments your career and then to follow up with that, what is the best way for people to find out more about Poynt?

Osama Beider  69:53

I don’t know if I made payments my career. You know, it feels weird to say it. I followed a passion. I guess I didn’t know I was in payments when I first got in. I don’t think of things as payments or non-payments. It’s something that I invested a lot in, but has a huge impact to humanity. A unique moment in time where that impact is exponentially growing. I found that that experience that I’ve built up was unique enough to the point where if I don’t do it, I’m not sure who will. And that’s exciting. It feels like I’m doing something that I can look back 20, 30 years from now, and my grandchildren will be proud that I made an impact. I’m having a ton of fun doing it. That’s what I mean by following a passion. It’s just I keep getting more curious, like what’s over here, and what if we did this and what if we did that? So there is no real master plan around it. It’s just I’m having a lot of fun on fixing some really big problems.

Shawn Flynn  70:59

And what’s the best way for people to find out more about Poynt?

Osama Beider  71:03

Best way is via https://poynt.com

Shawn Flynn  71:08

Osama, thank you for your time today. And I also want to thank Alan Tien who is the man that made the introduction that allowed this interview to happen. So Alan’s information is also in the show notes, aka “Money Never Sleeps.” And I look forward to having you back on the show. Hopefully, in the future when we have some more announcements on Poynt.

Osama Beider  71:27

Very cool. Really excited that we did this and I’d like to ask to thank Alan as well.

Shawn Flynn  71:32

Alright, thanks.

Outro 71:33

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