Ram Ahluwalia, Head Digital Assets Cross River

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Pemo Welcome Ram. Thanks so much for making it. I’m sorry we didn’t catch up at Money2020 . I hope you enjoyed it as most people did and I was wondering if you could tell me a little bit about PeerIQ and also about Cross River?

Ram Ahluwalia Sure. First off, thank you for having me. I did enjoy Money 2020 as well. It’s great to be back and see everyone in person. So, Peer IQ is a data and analytics business. You can think of it as the Bloomberg for loans for credit risk analytics. Our customers are asset managers. They are nonbank lenders and fintech and we had a longstanding commercial partnership with Cross River. For those in your audience that that don’t know, Cross River acquired Peer IQ about nine months ago and since I’ve been under the hood I have to say it’s really an extraordinary business. Cross River is a digital infrastructure bank for B to B to C companies, and we provide banking services to fintech companies, to crypto exchanges, and to lenders in the buy now pay later category and others and to really lead innovative companies. Those customers include Stripe, Plaid, Affirm, Upstart, Upgrade, Marlette, could go on and on.

Pemo And very impressive.

Ram Ahluwalia Sure, sure. So first off, our thesis around crypto is that it’s fintech 3.0 if you look at how crypto is transforming payments with stable coins. If you look at the total locked-in value in DeFi, which is now over 100 billion dollars, and you look at the new customer experiences that are evolving and how fintechs are adopting that, it’s very clear that crypto is transforming financial services. Within a crypto category there’s a sector you can think of as blockchain gaming and maybe one of the leading blockchain games out there is called Axe Infinity, which has been in the headlines the last couple of months, although there have been quite a few new games launched recently. What’s really amazing about this category is that you’re creating whole new economies with their own currency and their own avatar characters and heroes, and users can play to earn. They can earn a living by playing a game and this is very different than how gaming used to be when we grew up or when I grew up. You know you might play a game and you turn off the computer or delete the software and all your work is lost and now this is a new world. It’s a new format. You can build assets, inventory, and trade. And the assets you build, you have a property right too and it’s on the blockchain and it’s tradable and it enhances and enriches experience, and I think it’s taking gaming, which is a very large industry. It multiples the size of the entertainment or Hollywood industry. I think it’s going to create a lot of novel gaming experiences for years to come.

Pemo And I guess that leads into NFTs?  What’s your thoughts on NFTs? It’s been quite a craze for quite a few months.

Ram Ahluwalia Right? So, I’ll start with defining what NFTs are. So NFTs are non-fungible tokens and in the crypto space, the idea of it, NFT really started with how can you take a physical collateral in their real world. Let’s say a house or a mortgage. And attach it to a token and that token becomes a medium of exchange where you can convey value or enable 2 parties to transact on the blockchain and the advantage or the vision there is how do we take the pain and friction of transacting. If anyone’s ever bought a house before I’m sure you’re familiar with hundreds of pages of closing documents and you know dealing with escrow and getting wire transfers done. You know moving those transactions onto the blockchain and using NFTs is really a way to You know, improve the customer experience now what we’re seeing today. And NFTs have really started to shape culture and you’re seeing artists and the creator economy use NFTs to create exclusive access to artists. So, artists are reengaging with their fan base and in new ways you’re also seeing creators utilize NFTs to distribute their music or their artwork now. What’s really interesting about that is this you know, historically if say a music artist created a song, then there’s a long line of intermediaries that record labels, publishers, distributors, and so forth that capture much of economics along the way. So, if you and, if you’re a breakout artist, you’re not capturing the bulk of the value that you’re creating. What’s incredible about this NFT Market is that now, for the first time, creators can participate in the economic gains from secondary sale transactions and these creators can have a direct engagement with their audience and cut out intermediaries that are you know, performing, rent seeking, or you know servings and serving as a middleman, which is unnecessary in this new crypto market.

Pemo It’s very exciting stuff really? 

Ram Ahluwalia So defi is an extraordinary opportunity for banks for asa managers for savers. So I’ll start off with the finding defi defi stands for decentralized finance and if you’re a saver you can earn. 3 percent to eight percent depending on market conditions for lending on a fully secured basis on a decentralized blockchain. Let’s say a ethereum or Solana now if you compare that to the yield you get? You’re a local bank. You know I have my funds on a. And a large mega bank and I only earn point 5 percent each year. So in a negative real rate interest environment where we’ve seen inflation increase as well. Defi creates an alternative for savers. That’s very attractive as compared to what they can get. From the banking system. It’s also you know a great opportunity for community banks. So community banks are under increasing competition from fintech and neobanks as well as large money center banks that are investing tens and tens of billions of technology in online digital banking capabilities. There’s an opportunity for community banks to make dfi accessible to their end customer provided they can work out. You know the regulatory fRam Ahluwaliaework which is an open issue and have a good partner like crossriver to help them along that journey.

Pemo It’s very exciting stuff really? Obviously I’m quite old and when I was young, musicians and artists were being ripped off left right and center by agents and managers and yeah, all the middle people. So that’s really inspiring and a fantastic opportunity, and of course, the blockchain really has provided things that we never expected. Tell me a little bit about your opinion about DeFi and where we’re heading with that.

Ram Ahluwalia So DeFi is an extraordinary opportunity for banks, for asset managers, for savers. So, I’ll start off with defining DeFi. DeFi stands for decentralized finance and if you’re a saver you can earn 3 percent to eight percent, depending on market conditions, for lending on a fully secured basis on a decentralized blockchain. Let’s say an Ethereum or Solana now, if you compare that to the yield you get, you’re a local bank. You know I have my funds on a large mega bank and I only earn point 5 percent each year. So, in a negative real rate interest environment where we’ve seen inflation increase as well, DeFi creates an alternative for savers. That’s very attractive as compared to what they can get from the banking system. It’s also you know a great opportunity for community banks. So, community banks are under increasing competition from fintech and neobanks as well as large money center banks that are investing tens and tens of billions of technologies in online digital banking capabilities. There’s an opportunity for community banks to make DeFi accessible to their end customer provided they can work out. You know the regulatory framework, which is an open issue, and have a good partner like Cross River to help them along that journey.

Pemo So, wow, yeah, it’s very, very exciting stuff there. I’m very interested in all the kafuffle that Facebook is coming out with, and I know you’ve got some opinions about that. Do you want to talk a bit about the metaverse of Facebook?

Ram Ahluwalia  Sure, let’s look at the news that we have seen that you know Facebook is rebranding to meta and Facebook clearly is focused on the innovation in crypto so take a step back a few years ago Facebook announced their intentions to launch the libra currency that didn’t go anywhere due to regulatory scrutiny. They’re attempting to relaunch that under a trade association, or another organization called Diem and now the metaverse. So, what is a metaverse? It’s a virtual reality where individuals can interact. They can represent themselves as avatars and there are about nineteen crypto metaverses that are decentralized and one of them is Ethverse, goes on and on, so Facebook, now Meta, is betting the future on the metaverse and if you look at today, anyone that has kids that plays or interacts with Roblox or has seen their kids use Fortnite. You’ll recognize that newer generations are spending. Think the statistic I saw is sixty five percent of their time online in these new Mediums and so that’s the future. It’s not going to happen overnight. It’s a journey, and I think it’s really extraordinary. You know as a bank or as a fintech company when you look at the metaverse. You have homes that are being bought and sold for seventy-five thousand dollars apiece, you have galleries, you have shopping malls, you have lounges. And you know we think of that as commercial real estate or single-family homes and banks finance commercial real estate and single-family homes as well as artwork. It’s start of early days, and it’ll be very interesting to see how Facebook competes with these nineteen and growing other decentralized you know metaverse communities.

Pemo So I read an interesting article the other day by the founder of Second Life and he feels that it won’t succeed, from his experience because obviously you know that was quite a few years ago. 

Ram Ahluwalia You get them on the head. There’s a generational aspect to this so on Facebook I’m old school also and I’m dating myself by saying that I still use Facebook, and I guess I’m increasingly part of the Boomer crowd. My parents are there as well.  And you know I’m also on Instagram, right? So, we’re also on Instagram but the younger generation is on TikTok or Snapchat and it’s a different experience. It’s a different mode of expression of creating a different kind of community and audience. And you’re going to see more of that specialization of niche markets with products that are focused on these audiences as opposed to one large monolithic social media company that attempts to be all things to all people. And so that’s what the metaverse represents. It is in a bet on the future and you’re seeing it today. You know there’s your gaming I mentioned Fortnite, for example. Second Life is a great example of how this concept began some 10 plus years ago.

Pemo Yes, so really, I think though that the positive out of this could be all this exposure, particularly since you know the crisis last year of the big Tech companies. Their misuse of power is probably a nice little summary to say. Do you think that this will affect people like Facebook, I mean companies like Facebook, because they definitely haven’t been doing the right thing as regards to privacy and security? You know, looking after the people that contribute to their platforms.

Ram Ahluwalia It’s a great point and this is a good transition to web 3 as a topic. So, there’s no question that all of the big tech companies are under scrutiny for all the issues you raised. The big tech companies have access to data through cookies, through mining email content searches, keywords, IP addresses, and they’re monetizing that in different ways through ads, through offering services, such as in-home devices that cause consumers to give up privacy. What’s interesting about crypto is that there’s a new model emerging and in this new model, consumers are in control of their identity. Their identity is linked to a virtual wallet. In fact, they could have multiple virtual wallets and multiple identities or pseudo identities. And the reputation can follow them on this virtual wallet, and they can choose to permission certain providers to have access to their data. And you know, think back to the Equifax credit card breach some time ago as well, there are all sorts of ways big tech and other companies are monetizing consumer data in ways that consumers are just fed up with and crypto is a new model that gives them economic sovereignty and control. Imagine, for example, if you have an email in a web 3 service meaning it’s decentralized, it’s built on a blockchain. It’s not intermediated by a large, big technology company. I mean then send you spam, and they’ve got to pay you ether tokens for the privilege of sending you an email, for instance, or an advertisement.  These are just some of the ways we can think about how user experiences, you know, can be transformed.

Pemo: So really, we’re going into a whole new age. Thank you for opening the door and letting us look through that. And is there anything else you’d like to talk about as far as where we’re headed because you’ve obviously got a lovely bird’s eye view of that.

Ram Ahluwalia  Sure, the future is dynamic. It’s an exciting time to be alive and live through this change. I think if you want to break into crypto now, it’s an extraordinary time to join an organization like Cross River or others and be a part of that change. I think it’s causing us to rethink how we relate to one another. I think some of these trends were accelerated with Covid as well, and new business models are being formed. They’re new ways of interacting for communicating, for trading, for transacting, for doing banking, for consuming content, for distributing content. Crypto is changing all of that. It hasn’t felt like this since the emergence of dot com technology and there was a lot of hype around that. But it clearly has transformed how we live and work today. I’m sure crypto has gone and will continue to go through these cycles, and there’s a lot of promise in, you know, what I see from this vantage point. 

Pemo A brave new world. Thank you Ram. This has been totally interesting and entertaining. Appreciate all your overview and hopefully we’ll get you back on the show down the line. Okay.

Ram Ahluwalia My pleasure and thank you for the great questions.

Pemo Bye. Thanks.