What To Do About It: Abra | Bill Barhydt

I want to talk to you about how I'm taking that anger and what I'm doing with it now. So what I realized from all that work I did at Boom was that if I was going to play the game the way the government had set it up— remember, I had just launched that service into more or less 2 markets, Haiti and Mexico. It took me 6 years to get it done. Now, it's a big planet, right? 200 countries, $600 billion in remittances. 7 billion people. Cross-border commerce is about to dwarf remittances for the first time. If you wanna make those services accessible to everyone and you try to do it in the same way we were doing it at Boom, it would take me 30 years to get it done. I might actually be dead by the time we would get it done. All right, so obviously I needed a different approach. I needed an approach that would keep me out of jail but— and solve the problem, Right? And obviously, as a result of keeping me out of jail, be perfectly legal. So I needed to create— and this, I literally spent a year trying to figure this out. So I wanted to figure out a service that for the first time— now remember, when we started Boom, we were on iPhone like 1.0. It wasn't even the 3G iPhone yet. And so it was all text at the time. So now things have changed. So now my thinking has been a little bit different. In Philippines, where I spent a lot of time, in rural Mexico, even in places like Ghana, the number of people who are buying Android phones versus feature phones is approaching 100%. The carriers don't even sell feature phones anymore. So even if you don't have data turned on, they'll still only sell you a smartphone because the cost of a low-end Android phone to them is more or less the same as a feature phone from 7 years ago. So now what if I could develop a model where you could send money from any smartphone in the world to any other smartphone for free? Basically the holy grail of what I was trying to figure out 10 years ago, and using the cash in your pocket. But again, I couldn't figure out how to do it in a way that didn't create the same challenges with all those 3-letter acronyms that I had when I was trying to solve the problem in Haiti. So again, after— a year of going back to the drawing board, we finally figured it out. So we've created a new service called Abra, and I'm gonna give you a little insight as to what we're doing with Abra, and then I'll stop talking and we can talk about anything else that you like. But I think you might get some insights out of what's gonna happen, I think, in banking going forward when I show you how Abra works. So let's think about the problem for a second. If you want to basically move money around for consumers in 200 countries and not deal with all those, not only the US version of those acronyms, but the versions of them in 200 countries, there's a few things you can't do. You can't hold consumer funds. You can't touch consumer funds when you're moving them around. You can't be a bank. You can't be a money service business. Well, if your goal is to solve the problem of making it cheap or free to move the money around, And you can't do any of those things, it's almost impossible to reconcile the two. How could you help consumers move money around if you can't touch the money? Right. So on the surface, it seemed like this was an insurmountable challenge, right? Because one, there's no way we could be a bank in 200 countries. But on the other hand, there's no way to move money today without actually taking possession of the money. Well, it turns out that there is. And I'm not gonna spend too much time on the tech, but we've taken the Bitcoin technology that you know, and the blockchain technology that you're probably familiar with, and for the first time have turned it into a consumer-owned banking service. And what I mean by that is, is with Abra, we've figured out for the first time how to allow consumers to store their own money on their own phone, in dollars, euros, pesos, and yen, not Bitcoin, with no paper in a vault. And what I mean by that is when you're using PayPal and you see the balance on your phone, that represents a certain amount of cash in a vault at a bank somewhere. That is not happening at Abra. So when you see $200 on the phone, there is not $200 in a bank vault, but you physically own $200, which is counterintuitive. This goes back to The derivative stuff I learned at Goldman Sachs. So if I wanted to— if you wanted to put $200 in your pocket, uh, there's 2 ways you could do it in theory, right? One, I could hand you $200 and just put it in your pocket. Obviously you have $200. I could also give you $200 worth of something else and you can put it in your pocket. You might agree to that, but the problem is, is if I owe you $200 and I hand you $200 worth of gold, well, what if the value of gold falls by 50%? By the time you sell the gold. Theoretically, I'm asking you now to take the volatility risk of that asset, right? And plus it would be unethical for me to paint $200 on the screen if I'm holding $200 worth of an asset whose value is going up and down all day. So Abra has figured out how to use very sophisticated financial engineering in the background to fix the value of the underlying digital currency in real time without Abra ever touching the digital currency. So it is the digital equivalent of me handing you $200 worth of gold, but me also handing you a put option to fix the value of the gold the moment that I handed it to you. And this uses smart contract technology tied to the Bitcoin blockchain. And nobody has, to my knowledge, figured out anything close to this before. This is light-years ahead of anything in the market. Our cost of foreign exchange for moving euros to dollars or pesos to dollars is less than those correspondent banks that I talked about before. It's a huge breakthrough. That allows us now to pass all those cost savings on to consumers. Just the last couple of minutes, just to give you some insights. This is how the app works. So in addition to the huge challenge of how to not be a bank in 200 countries, if you create this digital currency that represents real euros on a phone, how do you get the digital euros on and off the phone in 200 countries? So this, it turns out, was as big of a challenge as the first challenge, meaning how do you not be a bank? So when we thought about it, it turns out there was really only one way we could solve this problem. in every country in the world. So remember when I talked about Haiti before, what we did there is we actually went out to partner organizations all over the country, literally in small villages where the address would be the 3rd tree by the 2nd rock in the middle of the village, right? And they would have a little NGO office set up to hand out medicine or give MFI loans and things like that. And we would sign them up as agents to take deposits into your Abra account and pay out money. Similar to what M-Pesa is doing in Kenya with their airtime agents. So now the problem with that was it took us over a year to sign up 30 of them. And it's a big planet. And Haiti is, by global standards, a very small place. So we would need a model that would allow people to effectively do that on their own, meaning that Abra didn't have to be in the middle of that. So we created this idea of a teller, not a bank teller, but an Abra teller. An Abra teller basically allows anybody with a smartphone to effectively act as an ATM machine for everyone else. So now you can buy and sell digital currency to and from consumers to effectively process deposits and withdrawals anywhere in the world and set your own fee for doing it. So it's like the banking version of Airbnb. Yeah. So we haven't even begun to market the service yet. When we announced it last year, within about 90 days, we had people preregister in 90 countries to become Abra Tellers. And the response has been astounding. And so we launched the service as a trial in the Philippines a few weeks ago, and the response has been really, really awesome. People who are doing— running their own businesses, making clothes, making furniture, are actually using Abra to accept payment now. We have people who run BPO services out into the archipelago where people will work remotely who were having to give up a big piece of their salary to receive their pay are now receiving those funds via Abra, and we've already got tellers set up all over the country, thousands of them, who are basically processing deposits and withdrawals.