Good morning everyone. My name is Yachi, and I'm a crypto reporter for The Information. I'm really excited to be here today to talk to Rain, CEO Farooq Malik. In my experience covering cryptocurrency news cryptocurrency news , stablecoins have become the hottest news since the Genius Act was passed last year. And one thing that really surprised me in this category is the stablecoin card that's emerging and becoming popular.
Rain is a leader in this industry. I think you guys are one of the most valuable stablecoin-related startups right now . Rain recently raised nearly $2 billion in funding. So, I wanted to talk to Farouk to learn about their business model and why a stablecoin card even exists. So, Farouk, thank you for joining us.
Thank you for interviewing me. And it's great to be here. Thank you to everyone who came to listen. Perfectly. Well, let's start with the basics.
What is a stablecoin card, and why is it becoming popular? Yes, I mean, stablecoins are a new form of monetary transactions, storing money, sending money, spending money. And one of the things we realized early on was that they were incompatible with the existing ecosystem, right? So if you were trying to use money for your daily life, it wasn't really transferring efficiently between the blockchain ecosystem and the traditional financial services ecosystem. And so we understood that consumers or businesses use money mainly to spend it and buy goods or services.
And, um, they were locked into this blockchain system with no level of interoperability between them. And so we decided early on, “Hey, let’s start connecting this to the existing distribution network of merchants around the world that accept payment instruments payment instruments , and let’s allow tokens to be used for traditional transactions. And that led to what we now call stablecoin cards or stablecoin-backed cards or, you know, stablecoin payment products , whatever it is. And this has really accelerated the use of stablecoins for everyday transactions in addition to what they have traditionally been used for, which is trading. And so now we are seeing mass adoption by consumers around the world, where people want to use stablecoins as a means of saving, to have access to US dollars access to US dollars , euros or other developed market currencies that are issued as stablecoins, and they want to use that purchasing power internationally to pay for goods and services around the world; and they don't necessarily want to train the seller or his counterparties."
Hey, it's a stablecoin, here's how you need to set up your wallet to accept stablecoins accept stablecoins . “They just want to be able to easily tap a payment product or insert a card to enter a PIN and be able to complete a transaction just like they normally would. And so, I think that's the power of stablecoin-backed payment products that are emerging now, where for the consumer or the end user, their behavior remains the same, and the transmission of that transaction is now secured by stablecoins. So, I've known for years that some of the biggest crypto exchanges, Binance, etc., also have crypto also have crypto debit cards for users.
So what makes your card different? Are you targeting a different customer group? Yes, that's why we wanted to completely rethink the backend infrastructure. So when we were developing Rain, we wanted to think about what the future of payments would look like if we believe that stablecoins and tokenized money tokenized money are the future of money. And what all the different primitives must exist from a technical perspective to make this possible.
And so, when creating Rain, we spent a lot of time and effort to make it fully compatible with different... » blockchains. Today, we support over a dozen different blockchains on every major virtual machine. We support private and public blockchains. We support stablecoins issued by any number of major stablecoin issuers.
All of this works seamlessly in our stack. And then, in addition to that, we are now starting to support tokenized deposits and other types of digital money so that the existing infrastructure can continue to support the expansion of the overall market as it develops. And the big difference between us and what Rain has created, compared to what others have done in the past, is that crypto cards have historically been a fiat-based product, where you partnered with a traditional issuer, and you, say, Binance or Coinbase, whoever, settled in fiat currency 5 days a week. Now we all know that stablecoins, like 24- stablecoins, like 24- hour money, are 24- hour money, are 24- hour currencies. There is no difference between a workday or a holiday.
And if you are calculating 5 days a week, there are 2 days of risk each week there are 2 days of risk each week that your counterparty takes on , and you have to post have to post ...working capital. So, in the future, we have to think smartly about the fact that working capital needs to be eliminated, we have to significantly compress it, and we have to be able to pass that advantage back to our customers in the form of greater capital efficiency. So, today, Rain, 100% of today, Rain, 100% of our customers' transactions are settled directly with us on the blockchain. We settle 100% of the settle 100% of the payment volume with our counterparties in card networks, 100% on blockchain.
Rain recently launched payout and payment capabilities. All this happens 100% on the blockchain. So for us, our view was: Rain and our clients should drive a clean new adoption of stablecoins, a clean new adoption of blockchain technology, a clean new adoption of people into the ecosystem that runs on stablecoins, instead of just providing, uh, a facade on top of a solution for fiat infrastructure or a licensed fiat organization with a cryptocurrency brand cryptocurrency brand . I think we've seen a lot of this, and we realize that there's no technology there. If this is the business you're in, there's no moat, right?
There is no... right? There is no... differentiation. The only way to compete is on price.
Whereas if you have a technology product, you can compete in many different ways. Can you describe to us the profile of your core customer group? Who are they? In which countries are they located? How do they even find Ring even find Ring cards?
Yes, and this has probably been the most amazing thing to see over the last year or so is that even before some of the regulatory regulations started coming to the United States with the death of GENIUS, we started getting input from some of the largest companies in the world who were already looking at looking at stablecoins as a way to increase their efficiency, expand access to their products and services to a larger customer base, and use use stablecoins as a more efficient way to serve a global market of customers. And so we have now started to redirect a significant portion of our customer demand to this smart side of the market. We're seeing huge demand from very large public companies, banks, institutions around the world that are trading platforms, money transfer companies that are looking at stablecoins as a way to do their business differently in a fundamentally new and...modern way where they can actually significantly reduce the cost of serving their customers while increasing the target audience that they can serve with stablecoins. So, today Rain supports programs in over 100 different markets.
We are seeing fairly widespread consumer adoption and B2B adoption in most of these markets. Another interesting thing is that while many people think that stablecoins are being implemented mostly outside of the United States, the largest source or the largest destination of all consumer or B2B transactions that we see in the market, they all end up in the United States. They all end up in American sellers, US customers, US bank accounts, and participants in the US economy, which is largely contrary to many people's expectations. And while we are seeing strong adoption in Latin America, Africa, and Asia, we are also seeing mass adoption in the United States, where instead of a stablecoin-based solution, it is simply an embedded financial services product that can be launched more quickly. It can serve more customers, and it is much more efficient and modular than your alternative solutions.
I like it. You mentioned that your stablecoins are also being implemented in the US. I think when I covered the history of stablecoins, most of the real use cases are happening outside the US right now. And yesterday we heard one JP Morgan executive say JP Morgan executive say that we don't see demand for depository tokens in the US. So, tell me, um, and explain to us what exactly are the use cases in the US, who is using them, and what use cases are you trying to develop?
We see a lot of really interesting use cases. I mean, one of the examples we give these days is that we have a new client. They are developing payroll solutions, right? So everyone here has probably heard of payday loans or payday loans and the like. But this is not an actual pay-as-you-go pay product , where the employer actually pays your wages hourly as they accrue.
So if you make $30 an hour or $15 an hour every hour ...15 stablecoins go to your wallet with a pegged payment instrument. You can withdraw this money at any time. You can return to your bank account if you wish. And this is not a debt product.
This is not money that is advanced to you by a third party. This is not money that is lent to you in advance of your salary, which will be paid back through your salary. This is your salary. And this is only really possible with stablecoins, because they are 24/7 money. How work works 24/7.
People work on holidays People work on holidays . People work after the banks close. And they didn't have this alternative of accessing their money and using it, right? Now with stablecoins, we see this really cutting-edge company creating this really interesting solution. And it's really interesting to watch, isn't it?
This is a real use case use case . There are many, you know . There are many, you know , tens of billions of dollars of economic value that are being extracted from workers right now through debt products. And by redistributing that same use case back to employees or employers, they... employers, they...
They help their employees keep more money in their pockets. They help employees actually save money, rather than, you know, get stuck in debt. And so there's something really interesting from a financial innovation perspective financial innovation perspective . Another really interesting use case that we're starting to see is that we're working with a very large travel platform. They have people who, you know, do all sorts of activities on their platform.
Historically, this has been a place where people make money, right? So, money is made over a period of weeks or months or whatever; then you press a button and then withdraw the money to your bank account and that's when you can start spending on the various things needed to fulfill what you just sold to the end user. And now this platform embeds payments from that balance as a stablecoin balance into its platform so that when you earn that money, that money becomes available and is spent by the actual, uh, you know the actual, uh, you know , guide or, you know, host or whoever it is. And that's another interesting use case, and then the acceptance of this is acceptance of this is internal acceptance. So one of the things that we're starting to see a lot is a variety of use cases where historically, like over the last 3-4 years, the perception of stablecoins has been, "Oh, oh, this is for access to the dollar.
This is for access to the dollar for people around the world." The reality is that stablecoins that stablecoins are a fundamentally better system because they work 24 hours a day, because they are programmable, because they are not fungible. This means that the working capital costs for operating a product or service are significantly lower. And if, you know, everyone here, if you've ever run a business, if you reduce the working capital required for your business by 50%, that's the difference between profitability or unprofitability. Um, I know that Rain also partners with some crypto protocols to issue cards for them so that their users can spend stablecoins more easily.
So, can you give us an idea of what portion of your user base is crypto-native versus non-crypto- native? So, right now, I think about 50% of our clients fall into the cryptocurrency client category, where these companies are, and we include, for example, neo-banks that support stablecoins, etc. And also 50% of our customer base today is not really related to stablecoins or cryptocurrency in general. These are actually traditional financial services use cases that use stablecoins to, you know, drive addressable market, lower the cost of service, create more modular flexible solutions. It is very useful to know the distribution.
Let's talk about competition. Even in the realm of cards backed by stablecoins, there are still a few players in the market. I know Bridge is market. I know Bridge is one of them. So, what do you think about the future competitive landscape?
Are you trying to get into other lines of business? And do you see other companies that have n't historically been in the stablecoin card business also getting into your offering and your sector? Yes, that's a great question. So, we never viewed our business as a card business, right? Cards are a way for people to spend money.
For example, JP Morgan is not a card company, but they issue millions of cards. Hmm, just like we see ourselves as a technology and accounting business. So we provide technology that allows user accounts to do a variety of things, whether you want to store money, you want to spend money, you want to invest money, you want to send money. All of this is what we are doing today. And so it has never been more important for us to be the dominant piece in every part of the pie.
We don't want to aspire to be a payment flow company, do we? We don't want to take money from one market and distribute it to another. That's not where we really aspire to be, because again, in payment flows, business is largely dependent on the quality of your financial intermediation relationships. It's not about technology. And so we focused on developing the underlying technologies and having a best- in-class tech stack that allows our partners and customers to actually bring what they care about and get the best of everything else they need to run their desired solution.
For example, Raine was quite straightforward about our desire to be a reliably neutral player in the realm of technological capabilities, so that everyone can use the services of the institutional custodian of their choice. If they are an institutional custodian, they can do this. If they want to... If they want to... If they're a money transfer company, they want to own the last mile, they can continue to do that.
If they have a really strong opinion about, "Hey, I want to be on chain A with wallet B." This is also normal. We had several customers who started with wallet A and then switched to wallet B because wallet A went bankrupt or because they later had a better experience with someone else. We have also seen people switching from one stablecoin to another. Like, these are non-trivial things, and of course, in any course, in any good market there will always be a lot of competition, and we encourage more competition, like discussions, and more innovation.
And innovation is a very important byproduct of a competitive environment, and it's very important that more people think in people think in new ways about the opportunities in this space. So for us, it's really about how we continue to differentiate and how we continue to move the industry forward so that we can improve the user experience and outcomes for our partners. And we understand, and we're completely open to the fact that there will be certain parts of the stack where someone will do a really, really good job, and our customers should have the flexibility to buy or use that best-in- class service. He said that we have no ambition to lock people in a closed ecosystem. Um, and if you look at most tech developments in the past, you know, we've seen things like AOL, which was a closed ecosystem.
It doesn't exist in the same way today, does it? We've seen a lot of different types of apps like this, where there are a lot of benefits to a closed ecosystem closed ecosystem , a closed solution, and that's great, and it's great for the people who build it. Overall, this is not very good for customers. Therefore, it is very important for us to continue to be a company that strives for an open ecosystem and wants to work with as many people as possible. Um, speaking of competition, I know that historically cards are issued by banks are issued by banks .
Um, I personally got my credit card from JP Morgan Chase. Um, and I think one of the reasons Rain has been able to take off is because the banks, these big banking players, are not issuing stablecoin cards yet. So do you see a future where banks start getting into this business as well, and in a world like this, how will Rain compete or differentiate itself? Yes, it's already happening, isn't it? If you saw the news a few weeks ago, SoFi launched its SoFi USD.
We're starting to see a lot of banks starting to talk, and you've reported on this as well, where a lot of financial institutions are exploring opportunities like tokenized deposit consortia, stablecoin consortia. They are considering individual efforts to issue stablecoins. I think stablecoins. I think it will continue to grow because it is an exciting opportunity. And there are many advantages to being early and doing things right.
I think this will continue because many banks see it as an opportunity but also as a threat. And I think that's good for the system. What we see and what worries us is, “Hey, what’s going to happen to the thousands of financial institutions that can’t afford top tech talent? Who don't understand how they can get access to truly talented blockchain developers? How can we help them understand what the utility is for their specific customer base?
A lot of the banks that were talked about, you know, "Well, we don't see the implementation of stablecoins or we don't see the implementation of tokenized deposits." “Interestingly, inside Rain we have a tracker that measures the volume of stablecoins entering these financial institutions. And many of these institutions, which publicly state that they see no demand, are the source and destination of billions of dollars in flows. Er , in stablecoins that go into stablecoins or start out as stablecoins and eventually convert to fiat money. So there's this data gap, right?
And as more people start to realize that this is something they can't afford to wait, you know, wait 5 years to figure out, I think people will start to realize, "Well, I mean, I need a plan," and they'll turn to people who have data that will help them understand, like, what are their customers using them for? What do they want? What do they feel? You know, why would they use something off-platform when they can use it on-platform? We've seen this happen many times in many different industries, right?
For example, if you look at…In some of the largest debit card programs in the United States, they are not offered by banks. They know for sure that they are issued by the bank, but they are not promoted by the bank. Banks have been redirecting customers to these platforms for years, and still haven't figured out how to actually retain my customer? What do they really want? Right?
So some banks understood this, some did n't. There are banks that are still not on Zelle, they still do not support RTP. So, financial institutions need to overcome a fair number of problems. And for us, for example, Rain is primarily a technological partner. So if anyone here works in a bank and wants to figure this out, we're happy to help you figure out what your customers are doing.
And we also have a technical solution, so if you want to license the technology for this, we are happy to do that as well . Hmm, I also want to ask about your relationship with Visa and MasterCard. Apparently you are a member of... Visa's basic membership. So explain to us what that means.
Is it difficult to access? Hmm, is it hard for other people to get access so we can understand how important it is for your business to have these relationships? Yes, I know. We just announced that we have also joined the MasterCard network as a principal member in addition to our Visa membership. These are complicated things, but they're not unique, are they?
Visa and MasterCard have tens of thousands of member issuing institutions around the world, and they have built a fairly large member distribution base that provides access to over 100 million merchants worldwide for billions of users. And that's non-trivial, isn't it? So this is a really interesting partnership for us. For us, a big part of why we wanted to partner with both of them was what we saw from our customers. Our customers right now are mostly people who come in and say, “ come in and say, “ Hey, I have an existing application with network A or network B.
I want to explore stablecoins for all or part of it, and I would like to work with Rain.” " work with Rain.” " Before, if you worked at MasterCard, we would, you know, ask you, would, you know, ask you, 'Hey, maybe you should come back and ask for permission to do a pilot program or something like that.'" But now, you know, it was very difficult because they said, “Well, we spent 10 years building this relationship. We don't want to ruin our relationship just because we can try something new try something new ."
“And now we meet our customers where they are, right? If they are a Visa partner, and they are a long-standing Visa partner are a long-standing Visa partner , that's great. We are here to support them. If they are a long-time MasterCard partner, that's great too. We are here to support them.
And we're very fortunate to have great relationships with both networks. And we think both organizations are really driving innovation and adoption of this technology, um, in the long term, right? I mean, this is something we all benefit from. Hmm, I want to ask a last minute question about agency fees. I've been seeing this new concept of hype in cryptocurrency for a while now.
I know it's still a very early stage. There is not much implementation yet. Hmm, so what are your plans for agency fees? What role will you play? We started seeing the same thing with stablecoins a few years ago, right?
Stablecoins were ubiquitous. They were gaining popularity gaining popularity , but no one used them for payments because they were not connected to a payment scheme. The agents were the same. A few months ago, we started looking into this issue and realized, "Okay, agents are a computer, it's trying to do something for you. Every major retailer has purchased anti-bot attacks.
There are CAPTCHAs everywhere. There are all these things that are set up to prevent transactions by agents or bots. So it basically doesn't work, right? That's why Rain is working hard to create tools and capabilities to connect agents of different types in every major agent payment protocol to existing payment rails, whether it's ACH, wire transfer, RTP, or Visa or Mastercard card payments. We recently announced our agent control layer, which gives each user the ability to delegate spending authority where it cannot be ignored.
There's no money to ignore them, and we were able to deploy this on a large scale." We now have a few dozen companies building these solutions, and the best part is that if you look at the data, none of this transaction volume is reflected in the data, right? Because it happens through traditional payment systems, and I think that's the magic of what we've been able to create here, and our clients can implement these solutions to serve their clients without even realizing that all these things are agency payments. We have someone who has created a whole AI concierge system where you write, "Hey, I want to book a table at Via Carota." The agent pays for it with a credit card issued by Rain, and you just show up and you just show up , go to your table, and don't even know that all this was done for you by the agent.
Perfectly. Well, we can always talk about more, but I think this is the end of our conversation. Thank you all for being there, I hope you find this useful. Thank you.
Automatic transcript — names and jargon may be misspelled.