EVERY SPOKEN WORD
50 min read · 10,145 words- 0:00 – 0:56
Intro
- TATerry Angelos
In the last three 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.
- ARAlex Rampell
Amazon recently blocked Muse, and there are many reasons for this. You can either be antagonistic to agentic commerce or you can be highly receptive.
- TATerry Angelos
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.
- ARAlex Rampell
Everybody who's listening to this podcast, I almost guarantee you have a credential that's stored at VGS.
- TATerry Angelos
The largest online merchants, the largest neobanks, and the largest frontier labs all use VGS to secure payment credentials.
- ARAlex Rampell
It's a really formidable position to be in. Where do you think VGS is going to go?
- TATerry Angelos
I think we're-
- ARAlex Rampell
Hi, everyone.
- 0:56 – 9:48
What a payment credential actually is
- ARAlex Rampell
I'm Alex Rampell, partner at Andreessen Horowitz, 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 TrialPay in 2006. Um, long, long time ago. 20 years ago. Can you believe that?
- TATerry Angelos
20 years ago. Alex looked very different.
- ARAlex Rampell
Yes. 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 pri- It's not just pretty good privacy, it's incredible privacy. It's unbreakable privacy because that's how, you know, it's very hard to, uh, to, 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, TrialPay got bought by Visa. Visa, under your leadership, invested in, uh, VGS, and now you're, you're back, and you're the chief strategy officer and board member alongside me at VGS.
- TATerry Angelos
Yeah. 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. Um, 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 neobanks, and the largest frontier labs all use VGS to secure payment credentials. And I think today, you know, part of the reason why we wanna talk about agentic commerce is because VGS is, uh, involved in helping agents get those credentials, helping 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.
- ARAlex Rampell
But maybe we should dig into what a credential is. I mean, credential is a, is a fancy way of saying a credit card for most, you know, for, for laypeople. Uh, it gets a little more complicated than that when you really dig into it. But, um, you work with, I don't, 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 pre-AI, pre-agentic commerce, and just explain what you do. Like, why do they use VGS? What do they use you for? And how pervasive is it?
- TATerry Angelos
Yeah. Let, 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 VGS 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, in such a way that the, uh, the online ordering company never actually has to touch the payment information. Now, o-one of the things that I think has m-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, in our days back in TrialPay, we would actually store a 16-digit PAN, and we would, like, we would, you know, encrypt it.
- ARAlex Rampell
PAN is a primary account number.
- TATerry Angelos
A, a PAN is a primary account number.
- ARAlex Rampell
Credit card number.
- TATerry Angelos
It's the 16-digit number that you are, you know, you know, that you have on your, on, 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. Today 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, Amex, 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, if there's ever a, a problem, the only number that I have only works on my merchant domain. And I am going to use this when I send it to Chase Payment Tech. 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, so-- 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 backend?
- ARAlex Rampell
Well, it depends. Uh, so there, there are plenty that just have one.
- TATerry Angelos
Uh
- ARAlex Rampell
But, but you are better ... I mean, but this goes to the use case of, of VGS-
- TATerry Angelos
Yeah
- ARAlex Rampell
... 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 bad? Like, what if, what if my ... I just had a Capital One card. Great example. Capital One bought Discover card.
- TATerry Angelos
Yep.
- ARAlex Rampell
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 got a new card number from them.
- TATerry Angelos
Yeah.
- ARAlex Rampell
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."
- TATerry Angelos
Yeah.
- ARAlex Rampell
One merchant cannot do that.
- TATerry Angelos
Yeah.
- ARAlex Rampell
But 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.
- TATerry Angelos
Yeah.
- ARAlex Rampell
So you could say, "Hey, I'm a merchant. I have all of these card numbers." And I think, what is it, every year like 10% of cards expire?
- TATerry Angelos
Yeah, so a- about a third of all cards get turned over every single year. Like-
- ARAlex Rampell
No, even more. Yeah
- TATerry Angelos
... like, like 25% mathematically, 'cause it's a, it's a four-year expiration.
- ARAlex Rampell
Right.
- TATerry Angelos
And another 5% due to, you know, in this case, Capital One buying Discover or fraud or, or something else. So sort of, 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. So now-
- 9:48 – 13:43
When agentic commerce changed the game
- TATerry Angelos
is playing.
- ARAlex Rampell
Yep. 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 decided 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," if 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 wanna give my credit ... Maybe I do wanna give my credit card number to, we'll call it, um, chat app. Um, but they don't wanna 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 third party that already knows how to do this.
- TATerry Angelos
Yeah.
- ARAlex Rampell
So 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 correctly.
- TATerry Angelos
Very good, Alex.
- ARAlex Rampell
Did I get that right?
- TATerry Angelos
Yes.
- ARAlex Rampell
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, uh, I think last time I read it, it was over 100 pages, of all of the rules that you have to do and maintain in order to be PCI compliant. And why is being PCI compliant im- uh, 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 of 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 business like a normal business. I don't have to follow these 100 pages of rules." VGS just focuses on that.
- TATerry Angelos
Right.
- ARAlex Rampell
Which kind of goes back to, like, I wanna 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-
- TATerry Angelos
Yeah
- ARAlex Rampell
... a pretty vital role in this, this whole process.
- TATerry Angelos
Yeah, I mean, I, I, I think You know, in the last three 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-
- ARAlex Rampell
Right
- TATerry Angelos
... 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. Just last night, my wife and I have been talking about getting a piano teacher for our seven-year-old son, and it's complicated because, uh, we ha- 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 ChatGPT 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 booked someone, uh, 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 payment credentials, their utility increases.
- 13:43 – 19:42
The wallet wars
- TATerry Angelos
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. And so, y- you know, right now, this is sort of companies like Stripe Link. They have about 300 million consumers who have an accounted Link. About a million merchants use Link. You have Shopify with Shop Pay, similar-ish, um, you know, consumer size, probably more like 1.7 million merchants.
- ARAlex Rampell
Right.
- TATerry Angelos
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, uh, how, how, how that's actually measured, but they have on the order of 30 million merchants.
- ARAlex Rampell
Right.
- TATerry Angelos
So these wallets are connecting to the agents, and I think are providing a lot more utility.
- ARAlex Rampell
So it's interesting, though, because wallet wars have been around for a while. So remember, uh, not, not to speak ill of our, our, of our old employer, remember Veemi?
- TATerry Angelos
Yes.
- ARAlex Rampell
Right? I mean-
- TATerry Angelos
V.me.
- ARAlex Rampell
V.me. But it was something before that. I forgot. They changed the name to Veemi. 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, "Ooh, I see flowers, I use PayPal," well, PayPal is better off for that.
- TATerry Angelos
That's correct.
- ARAlex Rampell
Um, or one of the things that we worked on at TrialPay 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.
- TATerry Angelos
Yeah.
- ARAlex Rampell
You 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-
- TATerry Angelos
Yes. [laughs]
- ARAlex Rampell
I think I have one here. I'll give a demo to our audience. Th- this is called a dead cow wallet. Um, it has lots of, lots of credentials in there. Um, but before Capital One would pay Samuel L. Jackson to say, "What's in your wallet?" Why would they do that? Because when you go to Chipotle, they want you to pull out your dead cow wallet and say, like, "I'm gonna pay with my Capital One card."
- TATerry Angelos
Yeah.
- ARAlex Rampell
Right? And that was the ... A- 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-
- TATerry Angelos
Yeah. 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 Chase and Amex, to prefer their cards on those platforms.
- ARAlex Rampell
Right.
- TATerry Angelos
So that's one war, which is like, "This is my card. I want to, 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, "I am a wallet that actually processes the transaction," the Shop Pays, the Links, and the, and the PayPals. And so we talked about how a checkout looks like a bit like NASCAR because you have-
- ARAlex Rampell
Right
- TATerry Angelos
... multiple different buttons.
- ARAlex Rampell
Pay with PayPal, pay with Google Check-
- TATerry Angelos
Right
- ARAlex Rampell
... remember Google Checkout came out?
- TATerry Angelos
Google Checkout, yeah.
- ARAlex Rampell
Along ... They were yet another ... But there were like, there are consumer wallets, and then there are merchant ... Like 'cause the interesting thing is that I could, 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-
- TATerry Angelos
Mm
- ARAlex Rampell
... 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 wanna store scraps of paper with like 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 wanna store your 16-digit, you know, credential and just keep it in scraps of paper in 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 wanna remember ... Like what was the original purpose of a consumer wallet? It's that it's 2:00 in the morning, I wanna buy flowers for my wife, my wallet's downstairs. Like I don't know where my wallet is. I wanna go pay on 1-800-FLOWERS right now, and if I just enter my PayPal credentials, they were a wrapper and linked to all of my, my kind of, all the credentials in my dead cow wallet.
- 19:42 – 23:51
Stripe as the AOL of agentic commerce
- TATerry Angelos
So think about Shoppay 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 agentic 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, for 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, and 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, walled garden approach. So, you know, a few examples here would be, um, if I use Stripe Link, Link's only available at a million 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 it found the lights at Walmart, which makes a ton of sense. Walmart has lots of inventory. And 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, made the purchase, and then they charged me, Terry, as, at, at a second transaction. This is a little bit how, like, DoorDash works today. You know, you, like, spend 100 bucks at DoorDash, and then the Dasher goes and-
- ARAlex Rampell
Right
- TATerry Angelos
... 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, actually, like, the, 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 Walmart."
- ARAlex Rampell
Right.
- TATerry Angelos
"Something, you know, went wrong." And they say, "Well, we don't see a Walmart transaction [laughs] here."
- ARAlex Rampell
Right. We see a Stripe transaction.
- TATerry Angelos
We just see a Stripe transaction.
- ARAlex Rampell
Yeah, yeah.
- TATerry Angelos
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 Amex card, called up Amex, and said, "Hey, I, I, you know, this transaction with the merchant didn't go through," but Amex only saw Stripe. So they gave them a phone number to call whoever this Link merchant is.
- ARAlex Rampell
Yeah.
- TATerry Angelos
The person called them, it went straight to the cellphone of a Stripe engineer, because Stripe's not set up-
- ARAlex Rampell
Right
- TATerry Angelos
... to run a chargeback, you know, sort of-
- ARAlex Rampell
Well, this is the main-
- TATerry Angelos
... you know, call center
- ARAlex Rampell
... 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.
- TATerry Angelos
Yeah.
- ARAlex Rampell
Right? Like, what if I, I paid for something? It's a trust mechanism. I pay you for something. I pay you for lights. You 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.
- TATerry Angelos
Yeah.
- ARAlex Rampell
And then there is 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 of, it's a bearer instrument. I pay you with crypto, I'm never getting that back. Which again, can be a, 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.
- TATerry Angelos
Right.
- ARAlex Rampell
That's, that's high, high utility, actually even for the merchant, because now I am, I'm much more willing to buy with a merchant knowing that if they don't actually deliver a product that works, I can get my money back.
- TATerry Angelos
Yeah.
- ARAlex Rampell
So that trust mechanism is very important. But again, if you, if you add all these kind of, um, interesting and very clever engineering steps,
- 23:51 – 29:45
The new agentic token standard
- ARAlex Rampell
it just, the, the, the, the purpose, it doesn't work as well.
- TATerry Angelos
Yeah. So in fact, th- this is, like, I think the right sort of direction of travel from the AOL ecosystem to the open standards ecosystem. The 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 Shoppay 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, a- um, addendum to the Walmart transaction, after I bought the chandelier, everything 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-
- ARAlex Rampell
Right
- TATerry Angelos
... had was the Stripe-
- ARAlex Rampell
It was a one-time use
- TATerry Angelos
... one-time use card.
- ARAlex Rampell
Yeah, yeah.
- TATerry Angelos
And part of the, you know, you mentioned, like, rules and norms, part of the 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-sell 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 Wal- you know, to, to this, to this new service. With 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 gonna spend no more than $100." That, um... The token is nothing more than a new 16-digit number.
- ARAlex Rampell
Right.
- TATerry Angelos
We 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, three months ago, this was at zero. It did not exist. VGS is by far the largest, uh, provisioner of these agentic tokens. We 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 agentic commerce evolves.
- ARAlex Rampell
Yeah, 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, and anybody who's in a vaulting business is kind of... 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.
- TATerry Angelos
Mm.
- ARAlex Rampell
Right? It's not like a one-way door, 'cause this... I... The way that I always thought about VGS is, um, there are these credentials that you store. So it's like you get these 15-digit Amex numbers or 16-digit, 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.
- TATerry Angelos
Right.
- ARAlex Rampell
So 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 wanna buy a hamburger," like, VGS plays a key role. It'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, very, 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-
- TATerry Angelos
Well, we have-
- ARAlex Rampell
... 80% of cards in America?
- TATerry Angelos
Yeah. I mean, we have, like, 10 billion credentials, um-
- ARAlex Rampell
That's a lot of credentials
- TATerry Angelos
... 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 now have to be sent to Chase, Stripe, Adyen, Braintree, Razorpay.
- ARAlex Rampell
Right.
- TATerry Angelos
Uh, that's multiplayer. With agents, uh, if you have a vault, let's assume you're, like, a large, you know, frontier model. I mean, h- h- here, here's a good example. You're a large frontier model. You're revolting cards in order to charge for your subscription. But 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.
- ARAlex Rampell
Right.
- TATerry Angelos
And so I think, you know, any business that is going from single player to multiplayer inherently becomes more interesting. I mean, even 1Password, right? Like, it's a, used to be a single player vault-
- ARAlex Rampell
Right
- TATerry Angelos
... and maybe I share my credentials with my wife on a few things, but now it's multiplayer because I'm trying to give it-
- ARAlex Rampell
Right
- TATerry Angelos
... access to multiple different parties.
- ARAlex Rampell
Well, this, this is a really complicated thing, going back to, like, the rules and procedures of what Visa
- 29:45 – 35:43
The three checks behind every transaction
- ARAlex Rampell
and MasterCard have done, which is normally I just have to vi- 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.
- TATerry Angelos
Yeah.
- ARAlex Rampell
Like, is this a real card number, right? 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 it, because there are actually, there are two ways of validating a card number. There's one, there is a, um, there's, like, a, a cyclicality check, right? You kind of add up the-
- TATerry Angelos
Checksum
- ARAlex Rampell
... yeah, this checksum, 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, is this an actual card? That's step one. Step two is, is the person that I am 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 how it used to be, you used to have to sign the signature-
- TATerry Angelos
That's right [laughs]
- ARAlex Rampell
... of the back of the card? Like I thought the first card that I ever saw that just got rid of that altogether was Apple. So 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, and they wanted to see my ID. They checked the signature. Why? Because they knew that the card was valid, but they wanna 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 properly, they're probably gonna not let you pay, right? So th- 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? Yeah. Does the person-
- TATerry Angelos
Or the agent
- ARAlex Rampell
... well, but this is tricky, right? It's like the card is gonna be valid. Like that, that part-
- TATerry Angelos
Yeah
- ARAlex Rampell
... solved problem. But the second part it's like what does that mean, right? Like i- is the person that I am interacting with is my interlocutor.
- TATerry Angelos
Yeah.
- ARAlex Rampell
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 these 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-
- TATerry Angelos
Yeah
- ARAlex Rampell
... where does the chargeback come from?
- TATerry Angelos
So, so I mean this is exactly what these open standards are, are, are, are solving for. So let's, let's take an example where I instruct my agent... In fact, this is a real, a real example. I was looking for a hotel, uh, for a trip we're making for my daughter's gymnastics tournament, and I said, "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 solved 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 Amex, and so there's a whole sort of mechanism there. The third question is like is the agent of sound mind? [laughs] Like did it get it right?
- ARAlex Rampell
Right.
- TATerry Angelos
And-
- ARAlex Rampell
Was it drunk?
- TATerry Angelos
You know.
- ARAlex Rampell
Yeah.
- TATerry Angelos
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 card network did everything right.
- ARAlex Rampell
Right.
- TATerry Angelos
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 ho- this is a hotel reservation at this amount." It's hard for me to know the, if you got the, if you got 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.
- ARAlex Rampell
Well, it's this idea of delegated authority.
- TATerry Angelos
Yeah.
- ARAlex Rampell
Um, 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 adds that I'm going to give you? I will take on..." Because if, if the merchants are smart, they're not gonna 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.
- TATerry Angelos
Yeah.
- ARAlex Rampell
You delegated authority to either an AI agent or your human assistant or your wife or whatever. Like it- 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 TrialPay.
- TATerry Angelos
Right.
- 35:43 – 39:47
Why Amazon blocked Muse
- ARAlex Rampell
here.
- TATerry Angelos
Yeah.
- ARAlex Rampell
I mean, maybe if I can ask a, 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, 'cause the agent, you can't monetize an agent's eyeballs because the agent doesn't have eyeballs. But I kinda 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 Luddite 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 SKU is when they, they get your eyeballs and they-
- TATerry Angelos
Sure
- ARAlex Rampell
... 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 ac- by the way, at the same time, helping the antagonistic ones filter out the agentic commerce is also highly valuable.
- TATerry Angelos
Yeah.
- ARAlex Rampell
Because again, sometimes they have a reason to do that. But if I can make it so that, you know, ChatGPT service is like, "Yeah, you should buy here," and I make that as simple as possible, it just, it goes without saying, like, I'm probably gonna get a lot more transactions than somebody that inserts 15 CAPTCHAs and says, "In order to proceed with this," and then Muse is gonna say, "Hey, interrupt your, your nap. You gotta go do these 15 things." No, no, no, you're gonna go with the one that is receptive to AI commerce.
- TATerry Angelos
Yeah. I mean, I think this is one of the most fun, um, [lip smack] uh, sort of fronts to, to watch in, in agentic commerce, and I think we're gonna 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 under the Shopify umbrella, which 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 [chuckles] on the, 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, I know we sort of have a different view on this, of how open banking, you know, was rolled out, which 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, 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."
- ARAlex Rampell
Right.
- TATerry Angelos
"And my APIs limit what information I give you. They tokenize the bank accounts."
- ARAlex Rampell
And I might charge a lot of money for that, yeah.
- TATerry Angelos
And I might charge you some money for it. So actually, I think the interesting question is w- 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, and in fact, this is what happens. If I go to a Best Buy and I wanna buy a flat-screen TV, I assume there'll be a salesperson there with an agenda, and he or she will say, "Well, let me show you some flat-screen TVs." Now, their job is to help me, but their job is also to get a commission.
- ARAlex Rampell
Right.
- TATerry Angelos
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." [chuckles]
- ARAlex Rampell
Right.
- TATerry Angelos
"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 gonna be a fascinating battle or, or communication,
- 39:47 – 47:09
Over-hyped vs under-hyped
- TATerry Angelos
and in the end, I think consumers probably win. But we don't know what that's gonna look like going forward.
- ARAlex Rampell
Right. Well, maybe on that, like, what do you think is overhyped versus underhyped in terms of everything that's happening? I mean, in general, my rule of thumb is that Silicon Valley overhypes things, but then the rest of the world underhypes things.
- TATerry Angelos
Mm-hmm.
- ARAlex Rampell
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 shit, how is this real? Because they tried it three years ago and, uh, like, you know, I, I just bought a new Tesla, and I remember I had a, 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 all. It was a joke. Uh, 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.
- TATerry Angelos
Yeah.
- ARAlex Rampell
Right? And I feel like a lot of that is playing out with AI right now, where if you, if you had tried ChatGPT with all the hallucinations and everything in 2022, you're like, "Oh, it's a cute toy for, like, writing poems," um, but, or doing my homework in English class or something. This is not gonna actually buy things for me. This is not gonna write co- 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?
- TATerry Angelos
Yeah, so maybe, maybe I'll start with, with, with, with overhyped. Like, I don't think we're going to get a bank run on savings deposits where agents are gonna 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 good 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, there 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 know, 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 'cause they'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 [chuckles] 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.
- ARAlex Rampell
Right.
- TATerry Angelos
That is underhyped. Um, at the same time, agents are gonna save us money. So, like, you know- Uh, 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. So 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 [laughs] always something else that I will want. And so I, I, I think that is, that's underrated
- ARAlex Rampell
Maybe on this kind of antagonistic versus, um, conciliatory or whatever the opposite of, uh, antagonistic would be here. I 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.
- TATerry Angelos
Mm-hmm.
- ARAlex Rampell
If it's really hard to get a restaurant reservation because you have to call at 7:00 AM, well now everybody has a tool that calls at 7:00 AM 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. Like it's, it's, you know, it's so crowded, nobody goes here anymore kind of thing. So, 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. It's because of the asymmetry.
- TATerry Angelos
Yeah.
- ARAlex Rampell
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 phone tree. I can't wait for the other side to say, "No, I have to talk to Terry. I ain't talking to Muse."
- TATerry Angelos
Yeah.
- ARAlex Rampell
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 Codex because it turned out Comcast is blocking Muse.
- TATerry Angelos
Mm.
- ARAlex Rampell
They know the IP addresses or something, so it won't let you log in. So I just have ChatGPT, you know, Codex, Astra, like log in on my computer does everything, but I'm waiting for the day when Comcast says, "We know this ain't you."
- TATerry Angelos
[laughs]
- ARAlex Rampell
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-
- TATerry Angelos
Yeah
- ARAlex Rampell
... I mean by the asymmetry. It's like the small number of insiders have this tool.
- TATerry Angelos
Yeah.
- ARAlex Rampell
But you know what? It's not gonna ... You can't scale that infinitely because the world is going to adapt.
- TATerry Angelos
Although I do have news for Comcast, the GPT, Astra, and Alex are about the same, uh, sort of foe.
- ARAlex Rampell
Yes, yes.
- TATerry Angelos
So, so be careful if you, if you get him on the phone. Um, 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.
- ARAlex Rampell
Right.
- TATerry Angelos
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 and sometimes I overshoot it. My 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. A g- 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 that gets me ... You know, I, I'm only using the card where I get points, the whole points reward ecosystem fa- falls apart. So 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'll 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.
- ARAlex Rampell
And maybe what, what are you kind of with all of these themes, like what, where do you think VGS is, is
- 47:09 – 50:15
Where VGS goes next
- ARAlex Rampell
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 formidable position to be in and it's been growing remarkably just because like, yeah, you need a, every merchant needs to store the credentials of the consumers that they work with. But like where do you think is the most exciting, uh, of everything that we've talked about for VGS's future?
- TATerry Angelos
Yeah. 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 eras as sort of becoming the most trusted store for credentials across the internet. A 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 vault. 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.
- ARAlex Rampell
Right.
- TATerry Angelos
And each network has created multiple network tokens that represent the vault. If you were just storing the information, it'd 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.
- ARAlex Rampell
Right.
- TATerry Angelos
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 ecosystem players. And we're sort of starting to do that now with agentic 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 ta- that you sort of talked about earlier. So, and, and, and all, all of these combine. So all, all of these combine. We'll continue to be a vault, we'll continue to add services, and as we add more services on more merchants and on, on more issuers, we continue to get this network effect where you can broker credentials a- you know, among the parties. And I think agentic commerce is just fuel into that ecosystem.
- ARAlex Rampell
Well, Terry, this is, uh, this has been fun down, down memory lane. Um, one of these days we should do ... Do we ever d- I think we actually did a history of Trial Pay one a long time ago.
- TATerry Angelos
Yeah. 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-
- ARAlex Rampell
Yes
- TATerry Angelos
... for your wife.
- ARAlex Rampell
Yes. I think that, I think that's a great idea. All right. Well, thank you very much.
- TATerry Angelos
Thank you for having me.
Episode duration: 50:30
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