Marty Chavez, global co-head of the securities division at Goldman Sachs, and Will Gaybrick, chief financial officer and chief product officer at Stripe, engaged in a debate this week over the future of money.
While both agree it should be "programmable" in the next five or 10 years, they appear to have very different ideas of what that means.
Speaking at the CB Insights' conference on the future of fintech, Gaybrick said Stripe would like to see money stored and transmitted seamlessly across the internet.
“When you look at Amazon Web Services, Google Cloud, Microsoft Azure and the ways in which data and computer storage are in the cloud, money is not in the cloud,” he said. “It might feel like it is because you can go to your banking portal online and send a wire, and you can move packets of data around borders seamlessly. The internet’s core protocols were designed without borders in mind. The problem is, as soon as you bring money back into the equation, all the borders get grafted back.”
Stripe is building what it calls a global payments and treasury network, a TCP/IP for money. This will be a set of core transport protocols for money, a base layer of connectivity for payment instruments, banking integrations, and card networks allowing funds to move seamlessly in and out of balances.
But Goldman's vision is different, viewing the future financial ecosystem as a web of application programming interfaces. Chavez wants to move toward specialization.
“The big banks tend to be these vertically integrated monoliths," he said. "If you want to engage with a big bank in a capital markets transaction, you’re going to end up using all the services of the bank: front, middle, back all the way to the bottom.”
It’s similar to the computer hardware business 30 years ago, he said.
“If you wanted a mainframe, you would go to a vendor and buy your software, your disk drives and everything from that vendor,” Chavez said. “You couldn’t mix and match; there were no standards.”
Instead of providing everything, Goldman is deciding where it can be or aspire to be the best provider of some service, then encapsulating that service in an API.
“For us, success would be our competitors use that exact same API,” Chavez said.
Points of contention
Asked what he thought of Goldman’s API-centric vision, Gaybrick reiterated that Stripe wants to get away from using existing payment rails. He used the example of Stripe customer Shopify.
“Shopify is not thinking only about money coming in through its own bank accounts, it’s thinking about money coming through a vast array of balances of the stores connected to it,” he said.
But Chavez argued that storage of money is something that is critically important and concerns players like policymakers.
“Where is my money and is it going to be there when I need it?” he said. “This generally is something regulators care deeply about.”
Gaybrick said Stripe wants to learn from banks how to convey a sense of security. But he also said newer players like Stripe can offer value incumbents can't.
For instance, he pointed to Europe’s Strong Customer Authentication regulation, which takes effect in September and requires two-factor authentication for transactions. Stripe has been working with banks and regulators in Europe to fill in gaps and make sure the new authentication methods don’t destroy recurring models. For instance, if customers had to biometrically authenticate themselves every time they wanted to watch something on Netflix, they would probably stop using Netflix.
Chavez contended that a dollar bill has security built into it — and can't be easily replicated.
“It says it’s a Federal Reserve note, which means you can go to the Federal Reserve and demand that the Federal Reserve give you another dollar bill,” he said. “It’s a note that’s legal tender for all that’s public and private. That means that if you owe me money and I give you one of these dollar bills, and you refuse to take it, in the U.S., you’ve forgiven the debt. How does all this carry over to the new world?”
Gaybrick didn’t directly address that issue, but countered with a question for Chavez.
“I read recently that since 2009, there have been a dozen new bank charters,” he said. “Given that there is not a proliferation of new banks and given that Goldman became a bank holding company during the financial crisis, what role does Goldman expect to play in fintech?”
Chavez said Goldman has identified more than 100 activities where it could obtain market share and where its prior absence could be an advantage, because it can bring something new to the table and share it through APIs.
Gaybrick said Stripe’s goal of storing money in the cloud and transmitting it around the world over the internet is challenging and consumes enormous resources.
“We think of Stripe as an anti-incumbency platform. If you are Amazon or Google with thousands of engineers, you can build a lot of these services in-house,” Gaybrick said. “But if you’re two developers in a garage thinking about how you want to innovate in fintech, how you want to build a global platform or marketplace or any business where you’re putting money into the cloud, you don’t have the resources to compete.”
