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Sebastian Kanovich

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44
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2022-02-24
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2022-02-24
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  1. “First of all, come over. The biggest challenge Uruguay has is that it's far away. Other than that, everything is nice, it's easy, it's a beautiful place to visit. People are welcoming and it's absolutely beautiful. I've had the chance to be in a few places in the world and this continues to be unique”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “This is something we say a lot that the local, we have all the background. We are not here just because of our efforts. We are here because we had a background that allowed us to get here. Being born in the family I had the luck to. That's a very lucky and a very kind thing. And we cannot give it for granted. Particularly when you see others that don't have that. And that's when you realize how much of a difference it's been.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “We were shy. We were shy when we were starting. We should have invested much heavier in 2016, in 2017. Being bootstrapped, it was tough for us. We wanted to be a US company. We said, how do we make sure we are perceived as a Silicon Valley company? And that was a mistake. We are who we are. We come from our own backgrounds and we can differentiate and build amazing companies from very different places. That's an obvious lesson. And in terms of investment, which is the flip side of that, one of the things that I see in Israel where I live, we're in Depala, where I spend a lot of time is that companies dare to dream big. In Israel, you see that all the time. And that's something the local had to learn. We started small. We didn't know we could be this big. It took us some years at the beginning to say, okay, we can really make an impact. We can create a huge company no matter where we started from. And that has been a lesson for us.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “I don't know. That's it for a censor. If I have two guesses, I think it comes from two places. The reason why I like what I do is because I continue to learn. If you're not humble to recognize that you're learning, it wouldn't make sense for me. I'm trying to find ways to learn more. And the best way of doing so is recognize it that you don't know that much and you're trying to find ways of being better. And then I think there's something of a personal background of where we come from and Uruguay being a small country and being used to trying to be this way.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Know if I've gotten better, but I do know that I've challenged myself systematically. I tried to make sure that every now and then I'm in a situation where I'm uncomfortable, where I need to learn. We went through the IPO process and obviously that was a heck of a challenge. Being ready to be a public company, being the CEO of a public company, that's definitely something I wasn't ready for four years back or even one year back. Putting yourself in those positions and making sure you're never the one holding the company back and being very transparent about it, it's extremely important. In my case, it has also meant understanding where there are functions are better if they are run by someone else. So our technology team is being run by Haku, who's our president. He runs it. And I trust Hako with everything. Part of that was understanding that he was much better than I am at doing that. When you have that low ego environment where people...”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “People are looking the same numbers that I am looking. And I think when you have those incentives aligned and you give clear guidance in terms of what's important and what's not, life becomes much, much easier. That's how we operate. But we are refining it, obviously, all the time.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “No, we are trying to make it as we go. We follow an approach of extreme responsibility, but also a lot of humility. Our background has defined us in that sense. We weren't supposed to be here, keeping that humility and keeping that ability of learning. It's extremely important for any leader that comes into the organization. We give our leaders extreme freedom for two reasons. One is because it's the right thing to do, but two, because we don't know. And we need them to make us better. So we expect a lot of our team. We are very clear about the fact that we are a professional team player. I love that concept from Netflix in the sense that we all need to be better all the time in order for the organization to be better. And part of that is giving people freedom. Go do what you need to do in order to make us better. And the other thing is that we've always been very basic in terms of the KPIs we follow. So we don't have a thousand KPIs. We want to know how much volumes we are doing. We want to know what's our revenue, what's our gross profit, how much we are spending, and therefore what's our EVTA. And those metrics apply to the whole company.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “The secret for the local is for it to be able to be extremely local, but at the same time standardized. That formula and how fast to do that, it's extremely important. And I think that's a place where we are never going to be good enough. Whenever we launch a new market, understanding the reality on the ground, understanding what are the frictions, but also being able to standardize that, that's a place where I would like us to be 10 times better. I happen to believe that the local doesn't have a market risk in the sense that we have all the underlying trends that go in our favor. There's all the secular trends, e-commerce becoming more relevant, emerging markets becoming more relevant. So for us, it's all about execution. It sounds super basic and boring, but that's where I want us to be better in our commercial efforts. I want us to make sure that our customer success team gives our merchants the best experience on Earth. We need to understand markets faster. It's a pure execution play.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Really deeply ingrained in our DNA. We always cared about being profitable. We cared about serving our merchants. You mentioned the market cap. To me, that's a consequence. And it will continue to be a consequence. It will go up. It will go down over time. Both will happen and that's perfectly okay. What we should make sure is that we are building a business that's healthy, that manages to generate profits, that it's adding value to its merchants, that adds value to the ecosystem where it participates. And those are the pillars we really care about, much more than any PR or other stuff that I think are sometimes very distracting.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “First of all, it doesn't feel fast from the inside. Things take forever from the inside. We're always pushing for them to be faster. And when you do enterprise sales, the way we do, cycles are long. When we started the local, I was 25 and I was anxious and I'm still anxious. And I would like things to happen 10 times faster. I think the key behind the success, and I wouldn't call it fast because I see it as things taking time, is the fact that we always focus about doing the things that matter. We weren't out there doing stuff that was ancillary. We bootstrapped the local for the first four years of our history. So we didn't spend much time thinking about funding runs and PR announcements. We are a company that has been dedicated to operating its business. So you won't see us running our own funds or our own investments. We are running the local and this is what we are committed to. We stayed extremely focused in this idea of emerging markets. Those three key things have been extremely important. And we built it from a very different background than the average Silicon Valley company that has become”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Moment you do it once, you start the next iteration this is the next product you should be buying, this is how you should be thinking about which ride sharing company to use and we want to be able to provide infrastructure. We shouldn't be choosing winners. It's very tempting and it's something we haven't done and we are strongly committed not to do.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Been asked a hundred times to go to Germany or to the UK. Is it easy to do from an API standpoint? Very easy. Do we have the regulatory framework? Absolutely. Are we going to do it? No way. Part of that is saying, what are the use cases that are really complex that we're going to be able to solve? I'm sure that we could get some traction in that business. Is it going to be a differentiator? No, it's not. So we'd rather double down or invest in places where it might take longer, but if we get it right, we are differentiating. That's why we get much more excited about Bangladesh than we get about Germany because there's other APIs that are solving the German problem really well or the UK or the US problem really well. That's one lesson. On the second side of not going after your users, when we were starting, we got many of our merchants to ask us to send emails to our database saying promote our product. Today it's very easy to say no back in 2016 when we were starting. We said it might be tempting. And we understood really fast that that was not a smart decision. Many payments companies do that. We were always against it because”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Most of our business still comes from big enterprises. I think it's going to continue to be the case. Having said that, we do invest a lot of marketplaces. And we think of the marketplace as our customer. When you think of a marketplace, they are trying to give tools for all of their sellers or all of their ecosystem. And we think we have very strong offering in that ecosystem. But in our DNA, it's going to be more normal to go directly to the marketplace owner, to the Wix, to the Shopify, and say these are the tools we can provide for your sellers than going directly to the sellers.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “At the end of the day, when you're doing a deal with Spotify, there's two people sitting on the table, you won't be able to sit 50 people. We invest more on making sure that those two people will have the information, the context, be empowered to understand our product. Then we invest a lot in understanding our merchant needs. We've seen many industries. So we know how Spotify should think because we've seen it happening with Netflix, with HBO. We know how DD will think because we've seen it with Uber, with Cavify, within Driver, with Rapi. The same happens for retailers. So having the experience of understanding what drives the needs for each vertical and really understanding the reality on the ground, it's really important. The only caveat to this is marketplaces where we are powering thousands of smaller merchants that come through a marketplace that goes to your point of making sure that our product is easy to use and that we are top of mind for the next small Shopify seller that wants to sell into cheap. And that's a whole different set of needs and expectations from our merchants.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “We are slightly different in the sense that we are serving big enterprises. I would love to tell you that a developer inside Apple will make the decision to integrate into us and launch our solution across 30 emerging markets. It won't happen. That's not how our sale process works. Fundamentally, we deal with people on the finance teams and on the payment teams that are extremely savvy and understand this challenge very, very well. And they're looking for a partner to help them navigate these complexities. We are not in a situation where we need to go and explain the complexity. Our merchants do understand it really well. They see the pain point and they are trying to navigate. So we have a very small sales and marketing team, overall commercial team, it's less than 80 people as of today, including account management customer success. So it's a very specialized team, very high touch, and it's a team that really understands the complexity behind the payments where we operate. So our counterparts are experts and they're counting on us to be extreme experts on the markets where we operate. And that's the reasoning behind not having hundreds of thousands of salespeople.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Yes, ideally, we would hold local currency for a second. That's what we ask our treasury function. Then reality on the ground requires sometimes for us to have longer positions, but there's never going to be a situation where our traders are going to say, no, we're going to hold our position in reales because we think on Monday we're going to have a better break. No way on earth.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Are not currency traders, so we are not taking positions in foreign currencies. We don't want to guess or bet what currency is going to go up and what's going to go down. That's not our business by any means. We are purely transactional business where we want to make sure that transactions are flowing. And therefore, the key factor for us is liquidity. It's the ability of exchanging that given currency to dollars or euros and back. That's where we focus, making sure that if we collected pesos, we can get dollars. And if we have dollars, we can get NIRAS or Reales or whatever it is that we are trading. We don't take positions. We don't try to guess what's going to happen next week. Every day we collect funds in local currency and we expatriate. Every day we collect dollars and we repatriate. And that's done automatically. And that's also a place where investors have been challenging us for years now. We don't know what's going to happen. That's not our business. Our business is purely transactional and we want to make sure that we are in that business and not on the trading, if you will.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “I do agree with you that over time, the cost should go down. As fundamentally, there's no reason why there should be a high cost of moving funds around. As you said, these are bids moving from one place to the other. But you also need to think that you need to give an incentive to the network to operate. If you use the more extreme case of a cash method in Mexico, it's called Oxo, or in Egypt, it's called FORI. They are operating branches. They need to give an incentive for the cache store to be able to collect and discourse. If you move to that extreme case to a bank account, a bank-to-bank transaction, that cost should be lower. And when you look at the most innovative stuff like what's happening with UPI in India or Pix in Brazil, they're following very much the reasoning you're saying. This shouldn't have a cost. This costs a tax on the society overall, and we should bring it down. And we are seeing that our cost of prosing payments continues to go down because the nature of the business requires it to be the way.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Traditionally, the banking system or banking products, in many cases, they thought of payments as a loss leader, where we give this for free and we make money on credit or we make money in other places. I think for payment company, it's well understood. There are sometimes challenges in terms of if you are expanding into all these markets, why don't you subsidize the early adoption? And that's something we are strongly against. We want to make sure every business of ours stands on their own legs. But most importantly, we don't want to wake up one morning and saying, oh, our merchants did great. We are so sad. We want to avoid that no matter what.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “For every FX transaction, we call it fx fee. For us, both of them are interchangeable. For every transaction, if we are going to be collecting VRL or NIDAS, we are going to apply a spread on that transaction. So if you want to take $1, there's a fee for processing, there's a fee for effects, those two our two sources of revenue, there's a cost of processing that transaction, which we call processing costs, and that gets into our gross profit, which is the clean margin that each transaction provides. At the local, we're always taking a stance that every dollar needs to be processed at a profit. So every single dollar in our platform contributes to that margin. And the reason we've done that is we believe that it's really powerful when your incentives are aligned to your customers. Every morning I receive a report on who did what volumes yesterday. And every time I see a customer doing, well, I'm happy because I know that number one means more growth for them, but necessarily independently of where it is, no matter what's the payment method, it's not matter what's the geography, no matter what product, that has contributed to our margin.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “This is one of the things I like about payments. The unit economics are super simple. For every transaction, there's a cost of processing that payment, which essentially the funds that get paid to the payment method for doing that service they're offering. If it's a bank transfer, what do you need to pay the bank? If it's a credit card transaction, what do we need to pay the acquires, the issuers, the networks for that payment? So that's what we call cost in our gross profit line. What are sources of revenue? Two sources. One, it's a fee that we charge the merchant. They'll pay for every transaction, a percentage fee, or a fixed amount depending on the business case. Very similar to what a credit card transaction does. And then there's a second source of revenue, which only applies to cross-border transactions, which is the”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “The use case we're expecting that geek economy or remote workers economy has definitely surprised us. We learned that whenever the infrastructure is there, new opportunities come up. Canva, Australian company being extremely successful in India. I would love to tell you, Patrick, that we saw that one coming, but that wasn't part of the plan where we launched. We say, okay, there needs to be an infrastructure into India. Someone is going to use it. I couldn't have bet that it would be an Australian company.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “On the payout side, we've launched our payouts product, so the ability of a merchant to sell funds to a user when Uber was expanding into Latin America. And essentially, we went with them. They said, we have this need to pay out thousands of drivers. Banking system doesn't work. They were sending wires before that costs of money, and they take forever to hit the account. So they told us, we need the funds to hit the account every Wednesday in local currency, and you cannot miss. The first week, we did it manually. I still remember to this day, we paid 700 Uber drivers in Argentina manually. So that's a very clear or extreme case, if you will, of an infrastructure powering and opportunity. We've launched our issuing product, giving merchants the ability to issue cards to their users. And we are seeing crazy adoption in places where we wouldn't have thought of before. We are seeing a lot of traction on the remote workspace where more and more people in emerging markets are working for global companies. And one of the things those global companies are trying to do is give their users a financial product, which essentially it's a credit card with their salaries and hopefully some benefits. When we launch issuing that was”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “It's coming from Latin America. Today it's obvious, but four years back was crazy. If you look at Sheen or Shopi, which are retailers, they are killing it all across emerging markets and they've grown like crazy. We do expect US companies to struggle a little bit more in China. We do expect Chinese companies to struggle in the US, but we do see them booming in the emerging markets. That's a playing field, if you will. And that's where we're expecting all of their growth to come.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “I'm always worried on overplaying our role. We are a payments company and we build infrastructure. And the great things that are happening in this space are entirely because there's great companies thinking of these markets. The role we have to play is making sure that those opportunities can happen. We are not a merchant ourselves. We are not here to sell goods to users or to pay out a creator. We do want to make sure that those transactions can happen. What I've seen, and I know there's this whole concept of deglobalization, but we are still seeing that merchants recognize that their futures are outside of their home countries. We started serving US companies and at some point four years back, I had the chance to go to China and we said, okay, for every Google, there's going to be a counterpart in China, for every Facebook, there's going to be a TikTok, for every Uber, there's going to be a DD, our bet was that both of them would be relevant. But most importantly, that they would be relevant in the markets where we operate. If you look today at where the growth is coming from for a company like this,”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “Or they'll do WhatsApp messaging and commerce and they'll drive maneuver and they'll get a wrappie. All of that complexity exists and regulators understand. So they're more and more open to say, how do we cater for this? How do we make sure there's a regulatory framework? There's a way for these companies to be able to thrive and us as a regulator to be comfortable. Understanding those two things has been extremely important to us.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “To me, the biggest lesson has been the importance of treating regulators as grown-ups that are trying to do the best they can in the markets under the conditions they operate, sometimes us from a payment standpoint or from a technology standpoint, we want to move fast. We want everything to be obvious in 30 seconds. We forget that people in the regulatory bodies have a very different set of incentives. They want to understand exactly what is it that's going to be processed and making sure that you raise their comfort level and you continue to invest in that education process. It's something that we've learned. In many countries where we operate, we are working with the regulator to build the regulatory framework. This is how a regulatory framework should look for a company like Google. These are the things you should take care of. This is how you should think of taxes. And I think over time, they get to see us more and more as an environment. The thing that has happened in the last few years is that some of the merchants for which we process have become ubiquitous in the markets where we operate. Users won't live without Facebook, without Google.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  28. “Magic happens for users. If you look at the innovations that you've seen in payments, it's typically an easier way of getting on board or an easier way to getting a merchant account. Is that crazy to do? Absolutely no. But you require to understand what can be done from a regulatory standpoint and then have a great technology that allows you to power them. That's a sweet spot. That's where we want to be. And that's what would get me excited.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  29. “This is a new one. I'm not trying to retire on 31, so let's start Having said that, if you don't control your technology, you don't have a chance. So I would be looking at strong technical teams that understand innovation in payments happens right in the middle between the financial world and the technology world. I think that's a lesson that some of the companies we named before and hopefully we as well understand really well. If you're just good at technology but you don't get to understand the real problems, regulatory frameworks and the reality on the ground, you're going to be a nice technology that no one is going to be adopting. If you just understand regulatory frameworks and you understand the financial system, but you're really bad at technology, you're a bank. Great, but not what gets me excited. If I were to back a company, I want a company that understands really well the framework on which they are operating from a traditional perspective, from a regulatory financial perspective. And hopefully they have a technology innovation that helps navigate that. Not technology per se, but something that is really solving a pain point in that sense. Companies that find that balance are the ones that make”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  30. “What's going on on the ground that they set up an entity, they set up the initial operation, and then the operation team kicks in. And they're the ones running the business on a day-to-day basis. You'll see people from the local city in India taking care of the India operation, but everything from a product and technology perspective, it's done from a consolidated standpoint because we want to keep that holistic view.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  31. “have an expansion team whose sole responsibilities whenever we launch a new market setting up our own entities hiring our country manager that is always our first hire understanding the regulatory framework understanding what are the payment methods that need to be offered and once they have that package we consolidate that into our productive we don't localize our productive we do have people in product sitting everywhere but the product team we do a very adamant effort to make sure that it's one team we don't want the local in India to look and feel differently from the local in South Africa or different from the local in Mexico that's why we insist so much in this idea of one api one of the challenges payments companies sometimes have is they start to aggregate platforms one on top of the other so if you're a global company and you want to operate with them they tell you look if it's Latin America you have one API if it's Africa you have a different one if it's Southeast Asia you have a different one we are obsessed with the idea of making sure that wherever we are doing business our merchants can navigate so expansion teams need to make sure that we understand”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  32. “Yes, absolutely, there's a trading function. So there's two sides to it. One is the ability to expatriate the funds in markets that have capital controls. So Brazil, it's an open market, but there are restrictions in terms of what you can do depending on the amount you sell. So for every single transaction, we want to expatriate from Brazil. We need to report that to the central bank. All of that reporting is done automatically. So once we get that okay, which is done automatically, then we have our own treasury function. Essentially, they bundle the millions of small transactions that we've got. They exchange that into dollars or euros and they expatrate those funds and sell directly to the global companies wherever they are. The same process happens multiple times a day in every market where we operate. Any given day, we're going to be trading 30 plus currencies multiple times a day to make sure that our merchants are getting their preferred currency in wherever they decide to do so.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  33. “Great point. We don't interact with the end user. An easier example of this is we pay out many of the Uber and Digit drivers across the emerging markets. Every Wednesday, they get the payment. What will happen in behind the scenes is that Uber funded us, so they settle funds into us and they called an API saying these funds need to go to driver number one. These funds go to driver number two, and the driver will see into the bank account X amount of pesos or dollars or Nairas in their bank account under the overname. So they'll never know that the local was the one pay.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  34. “Of putting VR, they'll say MX for Mexico, and the whole logic will apply to the local market where they operate. All of that complexity with Ritostra.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  35. “Subscription, they paid 100 BRL. This is how much tax it's going to be paid. This is how many dollars you're going to be receiving should you decide to get dollars. This is our fraud screening of that transaction. The same will happen for every single payment method. So for that credit card transaction, you'll see exactly the same messaging as for the Pix one, as for Voleto installments, and all of that complexity, all of those use cases are captured under this same API. Two more complexities that we capture under our technology. Number one, if Google, instead of wanting to collect from a user, will be dispersing to a YouTube creator the same logic applies. So instead of them calling up collection, they call it what we call payout. And essentially they're sending the funds through the banking system in this example in Brazil. The other complexity that we also capture under our API is that if that user, instead of sitting in Brazil, is sitting in Egypt or in Mexico or in Chile, exactly the same technology will apply. So there's no additional integration work whatsoever from a Google standpoint. All they need to do is change the configuration.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  36. “Let's use the Google example in Brazil. Google wants to collect from their users for ads, cloud, YouTube, and play. And they want to be able to accept local credit cards, so locally acquired credit cards. They want to be able to offer installments. They want to offer a thing called PIX, which is a central bank sponsored payment method, and they want to offer bullet. Bullet is a cash method where you go and you pay in the counter with cash. What we do is we give Google one single access point, one single API, and we'll tell them you integrate into this API and you're going to have access to your user wants to pay with installments. We are going to route that transaction dynamically to the acquirer. And we're going to have the ability of preventing fraud because we understand the dynamics behind that. We're also going to be able to navigate that information and send it to the tax authority to understand exactly how much tax that given transaction needs to be paid. Once that transaction settles, so once a user actually paid, we're going to collect those funds. You're going to get a notification, which is standardized through the API where we are telling you user A bought their user.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  37. “Is like Adian or Stripe will be serving a very similar role but in Western Europe or in the US. They haven't gone to emerging markets”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  38. “So you see the local in Latin America, which is where we started. You'll see us investing really heavily in Africa, in Southeast Asia, in India, because those are typically the places where this problem we see, it's more important and it's more complex.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  39. “Are an API business. What we offer our merchants is the ability of navigating all of those complexities under one API. Don't see ourselves as a protocol in the sense that for a protocol you would assume that there's adoption without the protocol doing any active effort. Or you said the standard and then the community builds it. That's not the case for us. We need to go and build the pipes into all of these countries. But yes, fundamentally, we want to add a level of abstraction from a technology standpoint where no matter where these users are sitting, companies should be able to reach them. The only caveat is that us as a company at the local only get excited for emerging markets Are looking generally at the places where we think this challenge is the most relevant”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  40. “Need to be fixed, that kills the whole business model for some merchants. So, how do we fix those things? Tax reporting is super complex in some of these countries. How do we integrate the tax authorities to make sure that the right taxes are being paid automatically Expatriation of funds. How do we deal with effects in countries which are extremely complex in terms of currency controls? Are looking to have the building blocks that make commerce happen. as it should in the US or in Europe or in”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  41. “Friction. So, what we do is we make sure that infrastructure is there. Fundamentally, we want to make sure that independently of where the user is sitting, our merchants can be able to accept and disperse payments And that should be absolutely transparent. What we do at the local is generally building infrastructure. That's what gets us excited in the sense that we have no agenda around the user saying I bought from the local. We want the user to say I had a great payment experience in Amazon. And if we are powering that, that's great news for us. We know how it should look when it works okay. We know when we go into the market what's broken and we are trying to fill the gaps. If payment methods do not support recurring, which is something we see again and again, this idea of being able to charge the same user systematically.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  42. “When you fly into a new place, first thing you'll see is that people pay with whatever local payment method they decided that it's relevant. In the case for India, when I was first there, it was cash, then it became UPI, which is a state-backed payment method. And typically you'll see that infrastructure for local use cases works relatively well. If you are a kiosk and you want to accept UPI, things work relatively okay. If you're a local company and you want to accept UPI, things work. The challenge starts when your user or you're sitting in India and you want to buy from Spotify or from Netflix or from Google. Where the friction starts because suddenly those funds need to be expatriated to California, to Europe, to China. Or the opposite fl Payout into a UPI account. All those steps none of them should be complex on their own”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  43. “Well, that's great news for the user because now I can go and pay with whatever payment method I want. It's very challenging from a merchant, from a company perspective, because suddenly you need to accept hundreds, if not thousands, of payment methods. So what we've seen or what gets me excited and what keeps me going is there's a problem that shouldn't be broken fundamentally, but it is today. What gets me excited is whenever we fly into a new country and that has happened multiple times, we say, wow, this is really complex. There's multiple frictions here. We should be solving it.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source

  44. “First of all, thanks very much for having me. It's great to be here. Payments has become exciting. It wasn't this way when we started. From day one, I always felt the same. Payment is not rocket science by no means, but it works, but it's sometimes broken on the edges. And what we've seen is that things that people give for granted in places like the US, Europe, even China that a user can go and buy from a company and that company can go and pay from that user. It's not the case when you are sitting in Nigeria or when you're sitting in India or when you're sitting in Brazil. So if anything, we've seen that people are demanding more and more use cases that require international payments, but those payments are completely broken. And they're not broken because there's something fundamentally broken about. It's more about building the infrastructure, making sure that those pipes connect to each other. The other thing we've seen more and more is that payments are a very local trend. So if you're a user sitting in South Africa, you have a very different behavior from the user sitting in Mexico or from the user sitting in India. And if anything, we are seeing that becoming more and more local.”

    2022-02-24 · Invest Like the Best · Sebastian Kanovich - Powering Emerging Markets Payments - [Founder’s Field Guide, EP. 56] · IDENTIFIED FROM THE TRANSCRIPT · source