0:00In the last 3 months, we've had this huge leap from agents being what I would call spectators to agents being actors because they effectively have arms and legs, which are payment credentials.
0:09Amazon recently blocked Muse and there are many reasons for this. You can either be antagonistic to agent commerce or you can be highly receptive. What's happened with the rise of, you know, Muse and Instinct is once they have access to payment credentials, their utility increases. So, we sort of have kicked off what I kind of call the wallet wars where every wallet is now rushing to connect to the agents.
0:34Everybody who's listening to this podcast, I almost guarantee you have a credential that's stored at VGS.
0:39The largest online merchants, the largest neo banks, and the largest frontier labs all use VGS to secure payment credentials. It's a really formidable position to be in. Where do you think VGS is going to go? I think we are.
0:55Hi everyone. I'm Alex Rampel, partner at Andre and Horwitz and I'm here joined by Terry Angelos and I'm very excited about being joined by Terry because uh Terry and I started a company called Trial Pay in 2006. Um long long time ago, 20 years ago.
1:1020 years ago. Alex looked very different.
1:12Yes. Uh you look the same. So I I think you're insulting me and I'm complimenting you and hopefully not the other way around. Um but today, this is the really cool part. Um, I one of my first investments here was a company called VGS, which stands for very good security. And some people might not get that that's actually a pun or a joke because one of the most famous cryptography uh companies was called PGP, which is pretty good privacy. And obviously, it's very good priv. It's not just pretty good privacy. It's
1:41incredible privacy. It's unbreakable privacy because that's how you know it's very hard to uh to factor very large composite numbers into their primes. And pretty good privacy is actually very good. So that was kind of the original name for very good security. So I I led this investment a long time ago. Um trial pay got bought by Visa. Visa under your leadership invested in VGS and now you're you're back and you're the chief strategy officer and board member alongside me at VGS.
2:09Yeah. Uh it's been a you know very fun and you know incredible journey and um I think uh if you look at VGS today it's a it's a payment infrastructure business.
2:20Um we secure credentials for about a third of all um e-commerce by by GMV. Uh and we have you know the largest online merchants we have the largest neo banks and the largest frontier labs all use VGS to secure payment credentials. And I think today, you know, part of the reason why we want to talk about Agentic Commerce is because VGS is uh involved in helping agents get those credentials,
2:48helping wallets hand those credentials to agents and also to merchants who have to receive these credentials. And so we're sort of in the middle of these really interesting conversations and and and handovers between credentials.
3:03But maybe we should dig into what a credential is. is I mean credential is a is a fancy way of saying a credit card for most you know for for lay people. It gets a little more complicated than that when you really dig into it. But um you work with I I don't know which which merchants I'm allowed to say that you work with. You work with all the big ones, but like why don't we take it why don't we take an example merchant um that you work with kind of preAI pre-agented commerce and just explain what you do like why do they use VGS?
3:29What do they use you for and how pervasive is it? Yeah, let's assume we're working with like a very large um you know online ordering platform and so we have um you know that that company effectively uh has to store your credit card every time that you every time that a new customer comes onto that site and hands over um you know a credit card that company doesn't necessarily want to be exposed to that card number and so
3:58VGS is is involved in capturing that card, securely vaulting it and storing it. And every time that that the you know online ordering service wants to um you know transact with one of its processors, it goes to the vault and retrieves the information uh in such a way that the uh the online ordering company never actually has to touch the payment information. Now, one of the
4:26things that I think has made VGS a lot more interesting since the days that you first invested, it's been a decade of becoming sort of the most trusted vault online is that the card networks have also introduced a form of tokenization. So that in our days back in trial pay, we would actually store a 16-digit pen and we would like we would, you know, encrypt it.
4:49A pen is a primary account number.
4:51A pen is a primary account number, credit card number. It's the 16-digit number that you are, you know, you know, that you have on your on your card. We would we would encrypt it and vault it and then when it came time to charge someone, we might unencrypt it and give it to I think Chase Payment Tech back in those days. Today, that doesn't happen.
5:10Today, instead, what happens is rather than store that that that 16-digit um card number and use that, you actually go to the network that issued it. So, Visa, Mastercard, MX, Discover, and you say, I would like another version of this card that's actually domain bound just to my merchant domain, which is safer because if I ever get there's ever a problem, the only number that I have only works on my merchant domain and I
5:38am going to use this when I send it to Chase Payment. So VGS as a company vaults all these credentials on behalf of the of the merchant also gets all of the network tokens which is the primary way that these credentials are passed to the payment processor and to the network um and that's what we do today. And so um because of that complexity of interacting with the card networks and doing this across multiple processors.
6:07So actually here's a question for you Alex. If you're a merchant with over a billion dollars in GMV, how many payment processors do you have on the back end?
6:16Well, it depends. Uh there there are plenty that just have one, but but you are better. I mean, but this goes to the use case of of VGS, which is rather than being locked into one payment processor, uh you'd rather unbundle that and you'd rather be able to pick and choose which payment processor you use. But also if you if you have a kind of a a shared infrastructure that is storing credentials, what if one credential goes
6:46bad? Like what what if my I just had a Capital One card. Great example. Capital One bought Discover card. Yeah. Or Discover Network and then my my fancy Capital One cashback rewards 1.5% Visa card. It became a Discover card and every week I get like notifications from very sad merchants. we are unable to process your card. Why are they unable to process my card? Because that old card number doesn't exist anymore even though I have the same I still have a relationship with Capital One. I just
7:15got a new card number from them. Yeah, granted it's a little bit complicated. It's on a on a new network. Like there's also the possibility like merchants can't just say, "Oh, we've seen we know that this card became that card. One merchant cannot do that."
7:28But a large vault can do that. And then as as you know the um the actual networks themselves like Visa and Mastercard and actually Discover too, they have these account updating tools.
7:41So you could say, "Hey, I'm a merchant.
7:42I have all of these card numbers." And I think what is it every year like 10% of cards expire?
7:47Yeah. So about a third of all cards get turned over every single year. No, even more like like 25% mathematically because it's a it's a four-year expiration and another 5% due to you know in this case Capital One buying discover or fraud or or something else. So so you know back to that question by the way for a merchant of about of a billion dollars it's about three to five processors that that merchant will have.
8:12So now they don't have to uh they don't have to but they should point. That that is the average that we see you know you know across the but there's a reason for them to do that because you know different costs different approval rates different regions like you want to shard correct in in kind of computer science terms you want to you have all of your cards and if you just say I use the same processor every single time that's just not a good idea or it's not as good of an idea as I can have multiple processors but in
8:40order to do that I have to be able to securely send the card number to the processor that I've chosen. Yeah, that's that's right. And in fact, once you have multiple processors, then the job of vaulting and getting updates is multiplied by the number of processors.
8:56So maybe I have a 100 million cards in as as a merchant, but I have to store 100 million with Chase and 100 million with Stripe and 100 million with Brainree. And each of those vaults have to be updated at at their networks. And so what what VGS does is serve as an independent vault neutral infrastructure on behalf of the merchants for the vaulting and the updates such that the merchant can then send a Visa token to the merchant via Stripe, right?
9:25Um back to your kind of Capital One, you know, annoying Capital One uh issue. If you're a VGS merchant, that should not happen. So there are mechanisms when Capital One is switching from Visa to Mastercard to get sorry Visa to discover to get those updates. Um and certainly that's the case if there's fraud or something else and that's the role that that that VGS is playing.
9:48Yep. Yep. Exactly. So so hopefully everybody has a good understanding now of what very good security does um VGS does. So uh out of nowhere and this this was a good business years ago. I mean, I've I've been a believer for a long time and then this whole thing called Agentic Commerce showed up. Um, I guess how does the world change and you guys are at the center of this because again, I don't know I don't know what what companies that that work with you I'm allowed to say or not, but let's just say like a lot of AI companies have
10:17decided to to work with uh with VGS. And for what reason? Well, the reason is you don't if I say, "Hey, buy me flowers."
10:25If I go into my my little chat tool and say, "Hey, I'd like to buy flowers for my wife. It's Mother's Day." She'll get mad at me if I don't buy them, and she'll be happy if I do buy them. Please buy them. I don't want to give my credit. Maybe I do want to give my credit card number to we'll call it um chat app. Um but they don't want to store it. And then even if they do store it, they have to communicate it to the merchant. And how do they do that? And like the better option is you have a
10:53third party that already knows how to do this. Yeah.
10:56So you you take out of scope. I mean it's interesting like um I don't know if most of our audience knows what the PCI DSS rules are but that's the payment card initiative digital security system if I remember correct. Did I get that right? Um, so if you've heard of PCI compliance that says, well, if you're going to be a merchant and you accept credit cards, there is a document, I think last time I read it, it was over a 100 pages of all of the rules that you
11:23have to do and maintain in order to be PCI compliant. And why is being PCI compliant very important? Because every bank demands it. You cannot process credit cards unless you are PCI compliant. You cannot issue credit cards unless you are PCI compliant. That's why it's this payment card initiative. It's all the um you know, Visa and Mastercard might be enemies, but on this they agree you have to be PCI compliant. Uh one of the nice things that VGS takes PCI compliance out of scope. So you don't you basically say I can just run my
11:52business like a normal business. I don't have to follow these 100 pages of rules. VGS just focuses on that, right? Which kind of goes back to like I want to buy flowers for my my beloved wife and I want to have my chat application do that for me. Turns out VGS is pretty well positioned here just by being the backend infrastructure, but now can take a a pretty vital role in this this whole process.
12:15Yeah, I mean I I I think you know in the last 3 months we've had this huge leap from agents being what I would call spectators to agents being actors. And how do they act on my behalf? Well, if you give them a payment credential in a safe way, right, I can go from recommending the flowers for your wife to buying the flowers for your wife. So, like I'll give you an example. Like just last night, my wife and I have been talking about getting a
12:44piano teacher for our seven-year-old son. And it's complicated because we you have to know our schedule and he has soccer three days a week and we want someone who can come to the house. We have to know the schedule of the piano teacher. And you know, I asked chat GPT about this a while ago and I got some recommendations, but just last night I asked an agent and it did the entire transaction task for me. It found a bunch of people, asked me a few questions, checked the schedule and
13:12booked someone for, you know, for the very first lesson. So that is infinitely more useful than dumping yet another task on my doorstep. So, so agents have all of a sudden become significantly more helpful and useful because they effectively have arms and legs which are payment credentials. And so what what's happened with the rise of you know Muse and Instinct uh and Town and other AI agents is once they have access to
13:40payment credentials their utility increases. And so we sort of have kicked off what I kind of call the wallet wars where every wallet is now rushing to connect to the agents. And of course as an agent I want a wallet that has sort of two things. One the the most number of consumers that already have a credential at that wallet and a wallet that has a very broad merchant reach.
14:04And so you know right now this is sort of companies like Stripe Link. They have about 300 million consumers have an account at link. About a million merchants use link. You have Shopify with Shopay similarish um you know consumer size probably more like 1.7 million merchants right then you have PayPal which has got you know over 400 million accounts depends on how you kind of you know sort of you know h how that's actually measured but
14:33they have on the order of 30 million merchants. So these wallets are connecting to the agents and I think are providing a lot more utility.
14:41So it's interesting though because wallet wars have been around for a while. So remember uh not not to speak ill of our of our old employer, remember Vime?
14:51VM me. But it was something before that. I forgot. They changed the name to Vime. But there have been many attempts like why why were there wallet wars 10 or 15 years ago? Because it turns out that being the default stored credential for a consumer, right? Like if I can if I can get trained in a Pavlovian way where it's like oh I see flowers I use PayPal. Well PayPal is better off for that.
15:12Um or one of the things that we worked on at Trial Pay was how does a Visa It's very good for Visa. It's very good for Visa's issuing banks if the default card in your Uber wallet because Uber is a wallet too. Yeah.
15:24You can store eight different cards or credentials within Uber. being the top of wallet is very very important because when digital wallets came out like I I kind of like to think before digital wallets you had what I like to call dead cow wallets you know an actual I think I have one here give a demo to our audience this is called a dead cow wallet um has lots of lots of credentials in there um but before Capital One would pay Samuel LJ Jackson to say what's in your wallet why would they do that because when you go to
15:53Chipotle they want you to pull out your dead cow wallet and say like I'm going to pay with my Capital one card.
15:58Right. And that was the whereas for when digital wallets emerged, it's like I'm shop pay, I'm PayPal, I want to be your default. And then actually what the interesting thing is like within that wallet, there were other credentials and those guys were competing to be the number one. Like if if you recall at at at Visa when we were dealing with Uber and Airbnb, there was tens of millions of dollars paid by the issuers. So like
16:24Chase and Ammex to prefer their cards on those platforms. So that's one war which is like this is my card. I want you know I want to sort of you know promote this to the to the to the top of wallet. You're talking about the actual network war where Visa and and we helped Visa become a default card at at at Uber and now you have this other layer, this abstraction layer of IMA wallet that actually processes the transaction, the shop
16:52pays, the links and the and the PayPals. And so we talked about how a checkout looks like a bit like NASCAR because you have multiple different buttons.
17:01Pay with PayPal, pay with Google check.
17:03remember Google checkout came out along they were yet another but there were like there are consumer wallets and then there are merchant because like the interesting thing is that I I kind of think of VGS as a merchant wallet to an extent I mean like it's it's a strange metaphor to use because a merchant isn't paying for things a merchant is receiving payments but like once I receive the payment like where where do I put it especially if I'm billing this customer again and again and again and again for PCI reasons and whatnot I don't want to store scraps of paper with
17:32like your se that that secret three-digit code that of course is not secret because it's on the back of your card, but I need it to process it. I don't want to store your 16digit, you know, credential and just keep it in scraps of paper and like my my my uh original um cash register. Like I need something to go receive that for me. On the consumer side, it's like I don't want to remember like what was the original purpose of a consumer wallet?
17:56It's that it's 2:00 in the morning. I want to buy flowers for my wife. My wallet's downstairs. like I don't know where my wallet is. I want to go pay on 1800 Flowers right now. And if I just enter my PayPal credentials, they were a rapper and link to all of my my kind of all the credentials in my dead cow wallet. Like that that was the purpose back then. But what I find interesting with all of aentic commerce is it's kind of the same thing.
18:20It's like, you know, you're you're it's still 2 o'clock in the morning. You know, you you still want to buy flowers for for your wife or something bad that you did or, you know, Mother's Day or whatever.
18:29Something good, Alex.
18:30Something good, right? you know, always always time to buy flowers. I mean, make sure we're sponsored by 1800 Flowers, so make sure to buy there. Um, so you want to go buy and your agent doesn't have access. Like it it's the same problem, right? It's like the agent could say, "Hey, Terry, where's your credit card number?" And that's more work and more friction versus it has access to it in the same way that you just gave access to all of your cards, all of your bank accounts to PayPal to reduce the friction when you were doing things manually 15 years ago.
18:58Yeah. And look, I think the word wallet is is a bit overused. There's sort of different versions of it. One is the the digital version of your of your dead cow wallet, which is that it just stores the payment credential. And when it go to when you go to a merchant, you hand that credential to the merchant. All right?
19:16That's kind of what Apple Pay does, right? when when I shop at Apple Pay or so when I shop at a store with Apple Pay, Apple is effectively giving my Capital One Visa card effectively tokenized in the wallet to the merchant. The merchant receives this credential and it decides whether it processes it through Chase or Adin or Stripe or Brainree.
19:38Then you have wallets that actually take care of the transaction for you. So think about shop pay or link or PayPal where the wallet is in fact transacting with me collecting the money from me and remitting that back to the merchant. And what's happening with Agent Gente commerce is we're sort of getting this this the sort of you know blend of the two and it's such a new ecosystem that it actually has parallels for me back to the early days of the internet. And uh
20:07for those people who were around in the sort of AOL era, Stripe in many ways is like the AOL of Agentic Commerce. Um, and I I mean that as a as a compliment in the sense that they've figured out how to make agentic commerce just work in a way that's a very kind of, you know, uh, sort of, you know, world garden approach. So, you know, a few examples here would be um, if I use stripe link, links only available at a
20:35million merchants. So, it's great if in fact the item that I want is available at one of those million merchants, but very often it's available at some place where there isn't a Stripe link connection. So, a good example was I think two weeks ago I had this event at my house. I wanted to buy some outdoor lights and I asked Instinct to go and help me find these lights and I found the lights at Walmart which makes a ton of sense. Walmart has lots of inventory.
21:02And the agent went loaded the cart and when it came time to pay, link didn't have a connection to Walmart. It link has my card, but it can't just give my card over to the agent and over to Walmart. So, Stripe did something pretty interesting. They purchased the chandeliers on my behalf. They issued their own uh actually this is like a a Visa virtual card, one time use card.
21:29made the purchase and then they charged me Terry as at at a second transaction.
21:34This is a little bit how like Door Dash works today. You know, you like spend a hundred bucks at Door Dash and then the Dasher goes and and and pays the restaurant. Um, but in the case of this Walmart transaction, this is the point about it sort of being the AOL, it worked just great. Like I actually like the the the item showed up, the transaction went through, I was charged the right amount. But if there's a problem with the chandelier, typically I call up my bank, Capital One, and I say, "Hey, I had this transaction with
22:04Something, you know, went wrong." And they say, "Well, we don't see a Walmart transaction here.
22:09We just see a stripe transaction." And in fact, you will find this pretty pretty funny. I know someone who uh in the sort of testing phase uh did this exact flow on their on their AMX card called up AMX and said, "Hey, I I you know, this transaction with the merchant didn't go through, but Amx only saw Stripe." So, they gave them a phone number to call whoever this link merchant is. the person called them, it went straight to the cell phone of a
22:37Stripe engineer because Stripe's not set up to run a chargeback, you know, sort of Well, this is the main like one of the reasons why Visa and Mastercard have such impregnable positions is because they intermediate everything and they set the rules and chargebacks are very important. Yeah.
22:53Right. Like what if I I paid for something? It's a trust mechanism. I pay you for something. I pay you for lights.
22:59You don't deliver the lights. Like, oh shoot, I don't have money anymore. What do I do? No, no, no. You actually have rules by which I can kind of lodge a complaint and then there's a central intermediary that helps um you know adjudicate those complaints in a way that is you know more more or less fair that both parties agree on. I mean it's part of the problem like this is why crypto cool but like it's kind it's a bearer instrument.
23:23I pay you with crypto. I'm never getting that back. Which again can be a bug or a feature but for your lights example like what if the lights don't work? you want to have Visa and Mastercard in the middle. That's that's high high utility actually even for the merchant because now I am I'm much more willing to buy with the merchant knowing that if they don't actually deliver a product that works I can get my money back.
23:44So that trust mechanism is very important but again if you if you add all these kind of um interesting and very clever engineering steps it just the the the purpose it doesn't work as well.
23:55Yeah. So in fact this is like I think the right sort of direction of travel from the AOL ecosystem to the open standards ecosystem.
24:04The card networks have actually come out with a new type of standard. They're called Agentic tokens that will allow a wallet like a Stripe link or a Shopee or a PayPal to hand over a credential to the agent in a safe way and then have the agent hand it to the merchant in such a way that when that Walmart transaction occurred, it's my card. In fact, like one sort of, you know, um addendum to the Walmart transaction after I bought the chandelier,
24:34everything was fine. I got an email from Walmart to say, "Hey, Terry, you paid for delivery." It was like $6.99. Why don't you sign up to Walmart Plus and here's an offer. If you sign up today, we will credit the delivery toward your Walmart Plus subscription. So, I said, "Great." I hit the button and of course the transaction failed because the card that they had was the Stripe one time use card. And part of the, you know, you mentioned like rules and norms. Part of
25:03the norms of e-commerce is that Walmart spends a lot of money to get me as a customer and then they have the right to try to have a relationship with me, upsell me, cross-ell me. And in this case, because we were using the sort of AOL version, they weren't able to easily uh allow me to subscribe to all, you know, to to this to this new service.
25:25With the new Agentic standards, what should happen is if any of the wallets don't have a relationship with the merchant, but they have my card on file, my Capital One uh Visa card, that should be uh um tokenized with the agent. There's a whole process by which the agent says, "I'm about to make a transaction. I'm a verified agent. I'm going to spend no more than $100."
25:50That um the token is nothing more than a new 16-digit number. Right?
25:54We give that safely to the agent. Agent gives it to Walmart and then Walmart runs the transaction, but it's my card that is being charged and that preserves this ability to have a follow- on transaction. It preserves all of the rules around chargebacks. And so, you know, 3 months ago, this was at zero. It did not exist. VGS is by far the largest uh provisioner of these agentic tokens.
26:20We do it for the for the agents. We do it for the wallets. We do it for some of the merchants and this was, you know, zero three months ago. Now we're doing a few million of these tokens per week. So I expect that as we make this transition from the from the walled garden to the sort of open standards, this will be the way that that Agent Commerce evolves.
26:41Yeah, I mean it's it's one of the reasons why this like kind of long I I mean this as a positive, but like VGS has a very boring business of why is it boring? Because we have a vault. I mean, anybody who's in a vaulting business is kind it's not a it's not an exciting business. Like your job is to be not exciting and be safe and be secure and it's like things go in the vault and then every now and then things go out of the vault, right? It's not like a one-way door because this the way that I always thought about VGS is um there are these credentials that you store. So it's like you get these 15digit AMX
27:11numbers or 16digit, you know, Visa, Mastercard Discover numbers, you store them, you give back like a, you know, a token. This is not a crypto token. This is just like here here's something that you can use and then there are verbs that can be performed on those credentials, right?
27:25So if I am, you know, a big burger chain or something hypothetically, uh we don't know which one, but like you work with a big burger chain, right? Like uh I I I I have a consumer app that has, you know, tens of millions of users. I know that whenever that user says, I want to buy a hamburger, like VGS plays a key role.
27:47It's a very boring role, but I retrieve and charge, right? So, I retrieve it with the purpose of sending that to a payment processor and saying, "Charge Terry $9 right now, but I never have to touch that credential again." You know, ve very, very boring business. But you've gotten to I mean, what what percentage of cards do you think you've seen or touch or store? It's probably what is it 80% of cards in America?
28:09I mean, we have like 10 billion credentials. Um, it's a lot of credentials. Um, I I think you you're touching on something really interesting, which is vaults are going from single player to multiplayer, and that makes them a lot more valuable. So, for example, put aside agents, the fact that merchants have multiple processors means that the vault at VGS is effectively the the vault for each of those processors, right? because the the the network tokens stored in that vault
28:38now have to be sent to Chase, Stripe, Adion, Brainree, Razer Pay, right?
28:43Uh that's multiplayer with agents.
28:47Uh if you have a vault, let's assume you're like a large, you know, frontier model. Here's a good example. Your large frontier model, you're revolting cards in order to charge for your subscription.
29:01But now the agent wants to use that same transa that same credential to make a payment. And so the vault used to be single player. It used to be just to make sure that you could pay for the subscription. But now you can effectively give that credential according to these open standards to the agent. It's now multiplayer, right?
29:23And so I think you know any business that is going from single player to multiplayer inherently becomes more interesting. I mean even one password, right? like it's a used to be a single player vault and maybe I share my credentials with my wife on a few things, but now it's multiplayer cuz I'm trying to give it access to multiple different parties.
29:40Well, this is a really complicated thing going back to like the rules and procedures of what Visa and Mastercard have done, which is normally I just have to there there are almost like three steps to a transaction. I kind of think of number one is is this identity real, right? Like in general, like is this a real card number?
29:59Right? That's important. But wait a minute, I can have a real card number and you're a thief. It's still a real card number. So, kind of step two is once I validate because there actually there are two ways of validating a card number. There's one there is a um there's like a uh cyclicality check, right? You kind of add up the Yeah, it's check some, right? Um but it's this mod 10 check of the credit card number. Is it valid? But that doesn't mean it's a real card, but it means that it's like a valid it's in the valid universe of cards. But I can go check with the bank.
30:27Is this an actual card? That's step one.
30:29Step two is, is the person that I'm interacting with the valid owner of this card? So, like if you if you went to a jewelry store 25 years ago and you wanted to buy something for $15,000, they'll take the credit card number, they'll take your credit card, your piece of plastic, but they'll do two things as well. Remember, it used to be a you used to have to sign the signature of the back of the card. Like I thought the first card that I ever saw that just got rid of that alto together was Apple.
30:54So the Apple card, I mean, even though they want you to use Apple Pay, if you get the physical Apple metal card, there's no place to sign on the back. None. But they would also say, "Can I see your ID?" Like, I remember I bought uh I bought something very expensive one time. Uh might have been jewelry for my wife that I sometimes buy flowers for as well. This was probably 25 years ago.
31:12And they wanted to see my ID. They checked the signature. Why? Because they knew that the card was valid, but they want to make sure that I am the actual owner of the card. And then number three, and you probably only see this in Vegas, um, but it's like, are you of sound mind to make this transaction? So like if if you went to a to a casino in Vegas and you pass, you know, number one, card's valid. Number two, it's like, yep, here's your ID, here's your signature, it matches entirely. But there's step three, it's like if you've had 15 drinks and you can't even speak
31:42properly, they're probably going to not let you pay, right? So this was kind of like the old world. And if you bring that metaphor to the new world, well, it's like, well, is the card valid?
31:52Yeah. Does the person agent?
31:55Well, but this is tricky, right? It's like the card is going to be valid. Like that that part solved problem.
31:59But the second part, it's like what does that mean, right? Like is the person that I am interacting with, is my interlocutor? Um, I love that word. Is is is the person that I'm interacting with, are they the valid owner of this card? It was always a hard problem to figure out on the internet because I can't like signature picture like what does that mean? You're an IP address and maybe I've seen you before and I've checked your login, but now I have an agent. And then that part three is pretty important as well from a liability perspective because you do see
32:28these anecdotes on on X and whatnot of people that are on instinct. They're like, "What do you mean you spent $900, you idiot?" And like who where does the chargeback come from? So, so I mean this is exactly what these open standards are are are solving for. So, let's let's take an example where I instruct my agent. In fact, this is a re real example. I was looking for a hotel uh for a trip we're making for my daughter's gymnastics tournament and I
32:54said go and find um a hotel uh in San Diego and and don't spend more than you know $500. So the first question when that when that agent is provisioned is to your question is like is this a real card? That's a solve problem. The second one is is the request for the agent a valid request and the way that this works with the networks is that agent actually has to be registered with Visa or Mastercard or AMX. And so there's a
33:22whole sort of mechanism there.
33:24The third question is like is the agent of sound mind like did it get it right?
33:30And was it drunk? you know, exactly. Did it hallucinate? Um, and so, um, that part I don't think we fully understand yet because if there's a mistake that the agent makes and the the cart network did everything right. They validated that this is your agent and your instruction. In fact, part of the way these agent these these new standards work is you give it context. You say, "I'm buying a this is a hotel reservation at this amount. It's hard for me to know the if you got the if you
33:59got the actual dates right. If there's an error there then that dispute mechanism is sort of unresolved. But I think we will we will get to that point and probably the agents will have to take on some responsibility.
34:12Well, it's this idea of delegated authority.
34:15Um but it's how do you how do you like who is liable? How does this change? I mean it might be something where if two agents are competing for your business like hey Terry please use me. I'm Muse or please use me. I'm Instinct. What is one of the value ads that I'm going to give you? I will take on because if if the merchants are smart, they're not going to be like I don't give a crap that like you got the wrong hotel room or you did this. It's like you told you gave your card, you delegated authority
34:43to either an AI agent or your human assistant or your wife or whatever. Like I don't care. I need to know if I'm accepting payments for something that there's no excuse at the end. I mean, this was called for uh for for those that know this term friendly fraud. Once upon a time, there's this concept of I can buy something. We used to see this at trial pay.
35:03I spent $10,000 on virtual gems. My wife and I share the I didn't actually do this. Just for disclosure, but let's just say I did. I spent $10,000 on virtual gems for some stupid game. The credit card bill comes due at the end of the month. I'm like, "Honey, I never spent $10,000 on that wasn't me. I don't know." like and you you refuse the transaction not because you didn't get the service that was offered but because it's so embarrassingly terrible.
35:27And merchants had to deal with this all the time.
35:31And in many cases like the the the banks would say, "Well, if it's a $10 transaction, it's not even worth fighting it. We'll just give it to the consumer every time." Which created moral hazard. But delegated authority gets really tricky here. I mean, maybe if I can ask a different question because this is probably the more important one. Um, you saw that Amazon recently blocked Muse and there are many reasons for this. It's mainly that Amazon is an advertising company and they want you and your eyeballs going to their website. They don't want your agent because the agent, you can't
36:00monetize an agent's eyeballs because the agent doesn't have eyeballs. But I kind of think of it as you can either be antagonistic to agentic commerce or you can be highly receptive to agentic commerce. And I don't actually think I think it's an oversimplification to say anybody who's antagonistic is is a lighteyed and they're gone. It's like well Amazon has a reason like a real financial reason to be antagonistic because advertising is is so much more lucrative for them than just selling things. Like the highest value skew is
36:29when they they get your eyeballs and they sell the eyeballs. But I guess how do you think about this this kind of playing out? Um because it feels like being enabling technology for merchants to be receptive to AI commerce is highly highly highly valuable. And but by the way at the same time helping the antagonistics ones filter out the agent commerce is also highly valuable because again sometimes they have a reason to do that. But if I can make it so that you
36:59know chat GPT services like yeah you should buy here and I make that as simple as possible. It just it goes without saying like I'm probably going to get a lot more transactions than somebody that inserts 15 captures and says in order to proceed with this and then Muse is going to say hey interrupt your your nap you got to go do these 15 things. No no no you're going to go with the one that is receptive to AI commerce. Yeah, I mean I think this is one of the most fun um uh sort of fronts
37:26to to watch in in Agent and Commerce and I think we're going to get multiple different versions of this. We have Amazon which I think has many reasons to to to block agents as you said they're effectively you know in the advertising business. You have Walmart which is very sort of similar right now hasn't you know hasn't taken that step and in fact you might argue that if you are one of the largest retailers on earth with the best last mile delivery that this is all good for you and then you have the series of merchants that are sort of
37:55under the Shopify umbrella which are a lot of small businesses that really this is probably a new like vital channel so maybe there's like fear on the Amazon side maybe there's greed on the Walmart side and maybe there's like you know no choice on uh on the SMB side and each of these actors or each of these merchants are going to experiment with with how they deal with agents. I think this reminds me a little bit I know we sort of have a different view on this of how open banking you know was rolled out
38:24which is do I have the right as an Amazon customer to delegate my login to an agent and does Amazon have the right to say no? This is what happened with Plaid and you know Chase and and the banks and in the end what tended to happen was there was this like long negotiated settlement where the likes of Chase said hey you can access you you you do have the right to this information but only on my APIs and my APIs limit what information I give you.
38:51They tokenize the bank accounts and I might charge a lot and I might charge you some money for it. So actually I think the interesting question is I think we may have plenty of opportunities or or plenty of merchants who just welcome agents. We may also have merchants who have their own agents. Uh in fact this is what happens if I go to a Best Buy and I want to buy a flat screen TV. I assume there'll be a salesperson there with an agenda and he or she will say let me show you some flat screen TVs. Now their job is to help me but their job is also
39:21to get a commission. Right? So we might have in in the case of Chase and open banking it was much more a case of like security and control. In the case of Amazon it might be I am an opinionated API. I have an opinion on what you should buy Alex based on many many different sort of you know data points about you. And then my agent may have an opinion about what I want. And so that's going to be a fascinating battle or or communication. And in the end, I think
39:49consumers probably win, but we don't know what that's going to look like going forward, right? Well, maybe on that, like what do you think is overhyped versus underhyped in terms of everything that's happening?
40:00I mean, in general, my rule of thumb is that Silicon Valley overhypes things, but then the rest of the world underhypes things. So, you know, everything here, every conversation is AI. Um, and it feels like you go to Iowa, nobody's talking about AI, but then you show it to them like, "Holy how is this real?" because they tried it three years ago and uh like you I just bought a new Tesla and I remember I had I had an old Model 3. I think this is a good metaphor for what we're talking about. Like I had an old Model 3 in 2017 with self-driving didn't work at
40:29all. It was a joke. Eventually got, you know, got a different car and now it's like it actually works, but I was skeptical because I was used to the 2017 thing. Yeah. Right. And I feel like a lot of that is playing out with AI right now where if if you had tried chat GPT with all the hallucinations and everything in 2022. You're like, "Oh, it's a cute toy for like writing poems.
40:48Um, but or doing my homework in English class or something. This is not going to actually buy things for me. This is not going to write code. It does all these things right now." So, I guess what what do you think is underhyped versus overhyped in terms of everything that's going on?
41:01Yeah. So, maybe maybe I'll start with with with overhyped. Like I don't think we're going to get a bank run on savings deposits where agents are going to sort of maximize yield and move my money around between different accounts. I mean a perfect example I am a very happy you know Mercury personal account uh customer. I'm also a Chase customer and you know ideally I should put all my savings in mercury where I get a very
41:28good savings rate and then at the last moment when I have to make bill sort of pay bills I'll move I'll I'll move over the the the cash to you know over to um over to my existing bank Chase but their bill pay just works better and it's it it has more integrations and I have more kind of setup. So I I think there's enough friction in in the world where we we won't see some of the crazy volatility in in financial services. Um I think maybe what's underhyped
41:58there is a lot of demand that is unmonetized. Um and this is both at the sort of part of the world where you could expect more GDP. An example of this is we actually have a group cycling WhatsApp group and we have a person on that group who every I don't seems like every six months when you know our friend Seth comes up with a new recommendation for what tires to get because he looks at rolling resistance and every time he does this I'm like oh I should remember to buy those tires cuz
42:28they're safer but I only buy it you know every sort of you know two years. If my agent was in that group chat, I would be buying tires every time Seth makes a new recommendation. You're dramatically undermonetized on your on your bike equipment, Alex. If the agent could find things that could help you with cycling and just bought them for you, there's more GDP coming out of Alex on cycling, right?
42:53That is underhyped. Um, at the same time, agents are going to save us money. So like you know there's probably many places where I'm either I I have some subscription and it's just been a hassle to cancel or I did some trial and I forgot about it. So I think agents will simultaneously save us money maybe use that that savings to to help us buy you know buy sort of you know new new items.
43:19So I I think we are have yet to experience the always on nature of these agents and as far as I can tell human desires and needs are infinite. So there's always something else that I will want and so I I I think that is that's maybe on this kind of antagonistic versus um consiliatory or whatever the opposite of antagonistic would be here.
43:42I mean, a lot of what people are very excited about with the agents is it gets something for you that is intentionally hard and is not really subject to the laws of economics. The laws of economics are like, you know, the cure for high prices is high prices.
43:55If it's really hard to get a restaurant reservation because you have to call at 7 a.m., well, now everybody has a tool that calls at 7 a.m. And therefore, uh, the first five people that have the tool, now they have an amazing tool. the last five people like no no no no like it's it's you know it's so crowded nobody goes here anymore kind of thing.
44:15So um how do you think the world changes because it feels like right now this is the weird this is the weird position that we're in is that a lot a lot of the early wins if you will the consumer successes are around like oh it saved me money it did this because of the asymmetry. Yeah, right. Like a very small number of people have the tool. The merchant or the counterparty has no idea what's going on. I can't wait. You know how like as a consumer I've been trained to say, "No, no, I want to talk to an agent or press zero." Or it's like you can look up how do you get out of the stupid
44:45phone tree. I can't wait for the other side to say, "No, I have to talk to Terry. I ain't talking to Muse." Yeah. Right. Like wouldn't that be funny? You call Comcast, you're like, "I hate you. You suck. Your service is terrible. You went down 10 times. This is I do this all the time." And then but I of course have uh I actually do this with codeex because it turned out Comcast is blocking musees.
45:04They know the IP addresses or something so it won't let you log in. So I just have chat GPT you know Codex Astra like login on my computer does everything but I'm waiting for the day when Comcast says we know this ain't you right? Like put Alex on the line because I'm not giving something to his agent. And that's going to because right now again that's what I mean by the asymmetry.
45:24It's like the small number of insiders have this tool. But you know what? It's not going to you can't scale that infinitely because the world is going to adapt.
45:34Although I do have news for Comcast. The GPT Astra and Alex are about the same uh sort of foe. So So be careful if you if you get them on the phone.
45:43Um yeah, I mean I think you're pointing out something that that we have yet to appreciate, which is what happens when you actually read the terms and conditions and go to the edge of what is allowed and disallowed. So, you know, an example, the other day I was looking at flights. I wanted to buy a flight that was on the edge of the price that I could pay that would get me an upgrade. And that's a kind of a hard thing to do. Sometimes I overshoot it.
46:11My agent did that perfectly. Um or um you know, sort of any any case where it's very difficult to uncover the terms and conditions. Like a good example might be what happens to rewards? Like rewards on cards are only there because I get you this very sort of big headline reward on dining, but then you also spend it on fuel. And if agents are intermediating all of our transactions and I'm only getting points on the card
46:41that gets me I'm only using the card where I get points, the whole points reward ecosystem falls apart. many many of these things could start any anything with a with a sort of breakage model in it is going to start to fall apart and then we will have to have new terms and conditions. So maybe that's better, maybe that's worse. I don't know, but it'll certainly be be different.
47:03And maybe what what are you kind of with all of these themes like what where do you think VGS is is going to go? Because I again I find it so interesting because it's the world's most boring business around it's this giant vault that stores all of the payment credentials for like most like everybody who's listening to this podcast I almost guarantee you have a credential that's stored at VGS because you interact with the merchant that uses VGS for storage of credentials. So that's a it's a really
47:31formidable position to be in and it's been growing remarkably just because like yeah you need to every merchant needs to store the credentials of the consumers that they work with but like where do you think is the most exciting of everything that we've talked about for VGS's future?
47:47Yeah. So uh I think there's sort of three eras of VGS that are kind of overlapping and compounding and you talked about the first era which is the vault. This is 10 years as sort of becoming the most trusted store for credentials across the internet. Very hard business to to to execute on, but that's you know that's the sort of privileged position that the company's in. The second era has been what you talked about sort of you know information going into and out of that
48:17vault. So that's a third of those credentials have to be updated. That's become very interesting and complicated because each network has their own standard for how you update their credentials and each network has created multiple network tokens that represent the vault.
48:34If you were just storing the information be one thing, but you have to store it and uh get a uh a series of tokens from the networks um so that so that the data is effectively you know refreshed right. The third era is what we call the network era which is this this role of uh brokering the credentials among multiple parties in a way that makes sense according to the rules and that adds value to to all to all of the
49:04ecosystem players and we're sort of starting to do that now with Aentic commerce. Um there are other cases where VGS is actually working with the banks on the tokenization front. So if you're if you're tokenizing the cards and you're storing the cards, you're on both sides of this of this ecosystem, which allows you to do some of the information swaps that that you you know that you that you sort of talked about earlier.
49:28So and and and all all of these combine all of these combine will continue to be a vault. We'll continue to add services and as we add more services on more merchants and and more issuers we continue to get this network effect where you can broker credentials you know among the parties and I think agentic commerce is just fuel into that ecosystem.
49:49Well Terry this is uh this has been fun down memory lane. Um one of these days we should do did we ever I think we actually did a history of trial pay one a long time ago.
49:59Yeah I think we should we should redo it. It was it was one of the first podcasts that we did, the the studio wasn't, you know, wasn't as nice. But I think what's consistent between that first podcast and this one is you should be buying more flowers for for your wife.
50:12Yes. I think that I think that's a great idea. All right. Well, thank you very much.
50:15Thank you for having me.
