Eike Post: We are here today with Pablo Ruiz. I met Pablo at a conference where he was explaining about the cryptocurrency evolution and about PayPro, his company. I can honestly say after being two hours there with a room packed with about 50 interested investors, when I left the conference, not only was I very interested in PayPro, but I talked to several of the other attendees and they were all very interested. I think this has to do with the fact that PayPro, different from the other ICOs that we see, actually is a company with founders that have experience, that have worked on the company for over two years and that have already received investment from angel investors, as well as from Telefónica, from Wyra. I’m very happy to welcome today Pablo Ruiz. So, Pablo. Welcome.
Pablo: Thank you very much, Eike. It is my great pleasure. Thank you very much for your time.
Eike: Great. Pablo, to start, I’d like to ask you to introduce in one or two minutes to the viewers what is PayPro.
Pablo: PayPro is a decentralized financial marketplace that allows any financial decentralized application to offer its services to our community.
Eike: Okay, good. Nice summary. I know that PayPro is not just an idea; it actually exists. You have been working with your co-founders on PayPro for more than two years, so can you tell me about PayPro and your background before you came up with PayPro?
Pablo: We started with Gabriel who is my business partner, and he’s co-founder with me on PayPro. We started to talk about making something in Fintech. Almost four years ago, perhaps a little bit less, but it was almost four years ago, and the goal we had in our mind was to create a technology bank. We all know that banks, they all have legacy systems or their technological infrastructure is very weak. We think that diminishes the user experience, so we thought that improving banking through technology was something that, at least there was a need, and using technology was the key to unlock that niche.
So the thing is that, by then, Ethereum didn’t exist as it exists right now, or let’s better say that there wasn’t a platform that allowed to create applications on blockchain. Bitcoin was starting to explode. In a nutshell, what I would say is that the technology wasn’t at the point where it is right now, neither was our expertise, even though Gabriel came for banking. He has a 10-year long career in banking, and also our financial resources wasn’t as strong as we needed it.
But that’s why we decided instead of starting by creating a bank, we decided to create a payment tool that allowed self-employed people and small businesses to make payments in 25 currencies, saving up to 90% on hidden bank fees, so it was a model that already existed and it was the first step for us in order to get into the banking industry.
Eike: Was PayPro something similar to TransferWise?
Pablo: Yes. It was very similar to TransferWise, but we were addressing a different market segment by then that they were not addressing. They are addressing it today, nowadays, but not by then. More than a market opportunity, it was a strategic opportunity for us, I would say, because that enabled PayPro and Gabriel and I to make our first step into the field of banking, let’s put it like this.
It was quite successful. I mean, for being a less than one year old Fintech, payments Fintech, we were dealing with five hundred thousand euros per month which was a good milestone. We were regulated by the Financial Conduct Authority as a payment institution. We had more than 100 companies working with us, and we closed two funding rounds. In the last one, Telefonica, the telephone company, invested in PayPro.
Everything was going quite good, but it was in the beginning of this year that we saw that we have to evolve for a number of reasons. It was the moment for us to evolve and to start thinking again about making this bank that we had in our mind a few years ago. This is why we started to think about all of this.
The thing that happened was that I have been always very enthusiastic about blockchain. I was already an early investor back in 2012, not only in Bitcoin, but in Ripple and Ethereum and many other solutions. Ethereum for me was the breakthrough because Bitcoin in my mind was a very good solution to payment networks and banking systems, actually, but Ethereum showed us that blockchain goes beyond Bitcoin, goes beyond the banking industry. Ethereum is capable of disrupting any industry by allowing anyone to build blockchain-based applications for an industry, so we started to dig into that. What we saw was that, actually in banking though, many applications are using Ethereum as a way to offer traditional banking services, but with all the advantages of blockchain.
That gave us to think because at the end, from our perspective, a bank consists of two elements. One, a portfolio of services, and two, customers and their money, so we thought if we could put an application, in this case a decentralized application where anyone can join and offer their services, from another decentralized application, we have the first element. We have this portfolio of services that we are not offering.
On the other hand, we just need the wallet where anyone can store any popular cryptocurrency and any token ERC20. That was it. With all these things together we would have what we need, what we’d been looking for, but in a decentralized way.
Eike: Now, you’re already getting into the product, into the solution you’re offering.
Eike: If I understand correctly, you have been working almost four years thinking and working on PayPro. At first, it was more a payment solution, and now it has evolved. In the beginning of the year, you went fully into the blockchain, and it has evolved into, if I understand correctly, a wallet plus a marketplace?
Pablo: Sure, yes.
Eike: Okay, alright. We already know that you and Gabriel are the two main co-founders. Is there any other co-founder on the technical side, maybe?
Pablo: Yes, definitely. We have our CTO, Enric. Enric has been always — Well, he’s been working with PayPro for almost two years now. He’s also very much into blockchain. I mean, he started to work on blockchain in PayPro almost a year ago, and he’s been working blockchain-based projects for now almost two years I would say, and yes, he has a career of more than 10 years in development. He’s a full stack developer, and yes, he takes over all of the strategy of the company.
Eike: Alright. If you could summarize: the three main co-founders all have significant work experience in the area, all have at least two years experience in the area of blockchain. So it’s quite different, I would say, from 90% of the ICOs that I see which, unfortunately, according to what I see, are started many times by very young people without much work experience or experience in the blockchain, but that’s not your case. You’ve actually been working on PayPro itself together for more than two years.
Pablo: Yes, definitely. We all cover different areas of expertise. I think that’s what makes our team great. It’s a multidisciplinary team and that leads to success. I mean usually most of the team are developers. That’s great when you have to develop a tool, of course, but when you want to make a company successful, you have to cover many thoughts. In our case for instance, our company is 50% technological and 50% financial, so that’s why we don’t only need the CTO, we also need the CFO.
The roles are very interconnected, so that’s very important. I don’t have technical experience, for instance. Even though I can handle, of course, a conversation with my CTO, that’s not what I do. I’m more into strategy and the vision of the company. It’s always very important to have experience and a multidisciplinary team.
Eike: Okay, cool. Yes. I’m impressed by the team. Before, you mentioned a little bit about the product. As I understood, you got a wallet, and you got a kind of marketplace offering different kinds of financial services to clients, to customers. Can you talk a bit more about the problem in the market and how does PayPro help to solve this problem?
Pablo: Sure. I think that’s the key of course. The problem that we identified was with traditional banks gather all the information, so when it comes to any kind of negotiation, not only in banking, in any aspect of your lives, at the end, always who holds the information is going to be the one who wins on the negotiation. There’s not going to be an equilibrium, and this happens in banking.
I think a very good example of that is the subprime crisis. Banks were selling all of their toxic assets without saying. They knew they were toxic, and there weren’t saying anything, and clients were buying because they were recommended to do so. I think that’s the most dramatic example of how the bargaining power is not on the market side right now, but on the industry side.
What we saw, what we’ve been seeing is that they still think on centralization even though some of them are building applications using blockchain, still they believe on centralization because, at the end, they’re the ones who build the products, the portfolios of products and services that they offer to the public, to the clients. When you do this, it is something natural that the products and services that you’re going to be offering are going to be giving some benefits to you. It’s not going to be an equilibrated relationship, because you are the one who are building those products. You are the one recommending those products, so the client is going to buy almost anything you say.
The thing is that because we don’t think that’s good, we believe that decentralization, not at the technical level but at management level, is also important. This is how we want to give back the bargaining power to the market, by decentralization. Here is the problem, and here is a solution. Centralization against decentralization.
Eike: I actually worked for some time, more than 10 years ago, as a financial advisor, and I was an independent financial advisor which means I was getting a commission, yes, from financial products that I was recommending to my clients, but I would be able to distribute all kinds of products, almost all kinds of products, and I would be getting similar kinds of commissions on any product so that I would have similar incentives to sell a product.
Now, I think you might be going one step beyond in the sense that you’re not only making the independent, meaning you’re offering all the products, but you also want to actually have, as I understand, decentralized recommendations so that there’s not really an advisor. It’s not really you who’s recommending, but it’s the users that recommend, or how does it work?
Pablo: There are many drivers here for my answer, and most of them have to do with the product itself, that perhaps you want to talk about them later on, but I would say that if you want to look for advice within our marketplace, you would go through the community.
We’re building a rating system that not only ensures that products and services meet the market expectations, so basically that they’re not scam, but they also can recommend you. We can use lookalike tools and make recommendations following your, let’s say, taste, financial taste, and people, users, like you. All of this is done through a rating system.
It’s basically, if you look for an advisor, the direct answer would be the community would be your advisor.
Eike: Okay. Do the people that rate, and thereby recommend, they don’t have any incentives, they don’t get paid a commission, so that’s why you know it’s going to be totally independent, and it’s just going to be based on what they really think and not what makes them the most money, right?
Pablo: Yes, that’s it. That’s the key.
Eike: Okay, alright. Now, if I understand correctly, from the advice, you don’t get the money, so what is the business model that PayPro has?
Pablo: Having a business model on a decentralized application where decentralization goes beyond the technological development and goes to the management of the marketplace is against real decentralization, so we don’t have any business model here.
PayPro’s mission is just to promote the marketplace. We just have to promote the community to use the marketplace, and that’s our only goal. Of course, promoting the marketplace includes developing the first versions of the marketplace, but at some point, we won’t even do that. The community has to do that. That’s why we have a rewarding system, a rewarding program for its developers to develop our marketplace, but there is no business model. Otherwise, it would be very dangerous for the community.
For instance, we were saying that we have a marketplace where any decentralized application can join the marketplace. If we manage the market because we had any kind of interest over the marketplace, which ultimately would be the only way to monetize the marketplace, there would not be any guarantee for the community for us trying to corrupt the system because we could be saying to other decentralized applications, “Look. If you want to join, you have to pay me. If you pay me, first of all, this cost at the end of the day is going to be paid by the community,” so this is against the community. If I have any kind of filtering system, you don’t know what applications I might be putting onto the marketplace, so that would be against the community.
This is why we cannot have any direct interest. This is why, for us, owning tokens is so important because we need to keep funding the company in order to keep promoting the marketplace. It’s still at the beginning.
Eike: Oh, okay, interesting. Because basically what I have seen in ICOs is that the founders that are doing an ICO, they have an operational company, and they get tokens, and their incentive is usually to make the company as successful as possible and maybe also to make the tokens or the currency go up because they get tokens, and they’re founders, they’re shareholders of the company.
The founders can benefit in two ways. If the company is very successful, they hold a share of the company, so they make financial gains with that, and second, if the company is successful, probably also the token would be successful, and they can also gain with the token. If I understand correctly, your interest is totally on making the token successful because the company is not going to make that much money in the model that you have because everything is decentralized, so it’s just about having the token being used, and if the token is being used, that would also provide the financial gains and the financial revenue so to say to be able to reinvest in the project. Is that correct?
Pablo: Yes, that’s right. The company makes no money. As founders or shareholders of the company, we don’t receive any dividends from the operations of the company. The only way that the company can keep promoting the marketplace is via selling tokens through this ICO or afterwards, and that’s it. The capacity of the company to keep financing the marketplace would depend indeed on the price of the token. This is why we have to ensure that the marketplace goes always up in terms of everything. The token goes up, and we can keep financing the company,
I would say that, as a shareholder of the company and as CEO of the company, I only have two economic interests on PayPro. One would be my salary, of course, and two is of course the tokens that I will receive the day after tomorrow might be worth something, so it is on my side to decide whether I want to monetize those tokens or not.
Eike: I actually think that’s good for the investors because as an investor, what I don’t want is that the company is very successful, but the token is not successful, and that of course can happen. In your scenario of PayPro, you’re saying, “Well the company is not going to very successful because the company itself doesn’t make much money, so we have to make the token successful and of course the investors in the ICO, they’re investing in the token so the interest is aligned.”
Pablo: Yes, definitely. We are all on the same side. This is also a way to guarantee that decentralization happens at all levels.
Eike: What is the current situation of PayPro? I understand you already have a first version of the product, at least of the wallet, and you are building the marketplace, or what is the situation there?
Pablo: We are currently building the first — the wallet. The wallet plays a very key, important role, not only in the strategy of PayPro but I think for all of blockchain. The thing is that we’re building a wallet that currently can only hold bitcoins but the day of tomorrow we will be allowed to hold most popular cryptocurrencies and all ERC20 tokens.
This is very important because this provides us with two things. First on the one hand from a strategic point of view, by offering this wallet to the community, we will offer a solution that still doesn’t exist. We find many investors, many people in the blockchain community, but they already hold multiple tokens, multiple coins and so on, and the only way they have in order to store all that value in the same place is just, well, they cannot do that. The tools there are out there in the market are still very technical. They’re not ready for the mass market. They’re very difficult to use. The user experience is the worst. We’re going to be using a tool capable of doing that for the mass market with no marketplace involved.
Our strategy here is to offer a solution to a need that already exists so that we can make users join PayPro. By doing this, whenever we have ready the marketplace, what will happen by the way we think by summer of 2018, we will be in a position where we can go to any decentralized application and say, “Look. If you join our marketplace, we already have this number of users that are using the application because they already find value.”
For us, making first the wallet not only responds to technical reasons but also to commercial reasons. I think that’s the thing. On the other hand, even if we don’t think on the marketplace, having the market is very important because our vision on blockchain is that our community, our ecosystem, is going to be entirely tokenized. Everything we see, everything we hold in our life, is going to be tokenized ranging from our nation ID or our passport to the property of our house.
I think all of this is going to be represented by via tokens thanks mainly to the small contracts, so we need somewhere to store all that value. The PayPro wallet is going to meet this need that still doesn’t exist, but definitely now the trend is going directly towards that points.
Eike: Okay. You see a need for the wallet that you’re building independent of the marketplace, and you think that, already with the wallet, you can get a critical mass of users. Is that correct?
Pablo: Yes, that’s correct, but let me elaborate on your first point. it is true that the wallet in the beginning is going to be meeting a need that already exists, and is totally independent from the marketplace.
The marketplace cannot exist without the wallet because in the marketplace you’re going to be dealing with everything ranging from investment opportunities, so shares or any kind of utility or security token. You’re going to be buying houses, selling your house, buying a car, buying insurance for your car or any kind of financial product or service, you’re going to be capable of buying from the marketplace, so you need somewhere to store all that value, and that somewhere has to be the wallet. The marketplace and the wallet cannot be in different places; they would have to be together otherwise the user experience gets absolutely diminished.
Eike: Okay. Now, I have a question about the marketplace. If you’re talking about cryptocurrencies and about bitcoin, we’re talking really about a global audience, anybody of all over the world would be potentially interested in such a marketplace. As I see, currently, the scenario in the financial industry, it’s very much slit into countries, so I don’t see a lot of Portuguese banks offering services- mortgages to Spanish customers. Vice versa.
How do you say that? Do you see that it’s going to be a truly globalized marketplace, or do you see it’s going to be several countries that will have their own providers and customers?
Pablo: I would say that there are two drivers here. One is the legal driver, the legal aspect of any financial company offering financial services. We have to see how regulation evolves during the next years. For instance, some regulators are already regulating on ICOs, so we have to see how all of this evolves, and this is going to be a very important driver in order to answer your question, that I personally cannot say anything in that regard because we’re still trying to regulate the ICO, so we’re far from that point.
The second point is that it’s true at the same time, following your example, that Portugal, for instance, and Norway are not at the same moment in terms of blockchain adoption on the economy, so that’s going to play also a very important role, but if you ask me how the marketplace is conceived and how we see our marketplace performing, I would say that the marketplace is 100% made to deal on a global ecosystem.
I think it would be amazing if we could put financial suppliers competing against Italian financial suppliers, and there is no problem with that. Of course, you always make your products according to the specific needs of a very specific segment, but that’s great about blockchain. That’s one of the great things, and I don’t think that is a problem. That is actually an advantage, that we have to take the opportunity. That’s how I see it.
Eike: Yes. I actually agree. I’ve been wondering why it is that if I’m in Germany, and I’m talking to a financial advisor, he’s only able to offer me German insurance coverage from German providers even though all of the providers within the EU have to provide health insurance for every country, so every kind of health insurance coverage has to be for every country of the EU. Potentially, I could buy a health insurance provider in Spain, in Hungary or anywhere else in the EU, and that would have to cover me anywhere in the EU, so it would be great if in the future I would be able to go access global providers from anywhere I am.
Pablo: That’s it. I think that not doing this is against the client because at the end, you cannot take advantage as a company of economies of scale, so as a company I think it’s better if your services can be offered anywhere. Of course, again, that’s going to make suppliers think again of how products and services are built. Do you really need an international assistance insurance or do you just need the medical insurance that covers you everywhere you are? That’s the difference.
Eike: Okay. We discussed the team, the product, the company, so specifically about the ICO; the ICO is coming up. When is the ICO starting, and how much money do you hope to raise with the ICO?
Pablo: I’d like to explain something before that. I think the problem with utility ICOs that I see is that much people see utility tokens ICO as a way to fund your company, and that’s the problem. When you want to distribute tokens throughout the community, you have three ways to do that: proof of work, adding value to the community by, for instance, fixing a bug, or via ICO.
Because on our marketplace, we need to transact all operations with just one token, which is our token, our utility token, the PayPro token. It’s PYP. That’s the three letters that we just identified. We’re using the ICO as a way to distribute our token because we don’t have minors, and our reward program is not so much powerful in order to distribute all of that. That’s why we’re doing an ICO, indeed.
Our ICO is going to start answering to your question. Sorry for this first introduction. It’s going to start on January the eighth, and it’s going to finish on February the fourth. Presales starts on January eighth until January 15th, and main sales goes from January 15th to February fourth, and we’re giving a 35% bonus for those investors who enter into the presale with a minimum investment of 15 ethers.
Eike: Okay. People can invest with ethers.
Pablo: Yes, 15 ethers, minimum investment on the presale and zero point ethers is a minimal investment on the main sale.
Eike: Okay. You said how much money do you hope to raise?
Pablo: Yes, sorry. I didn’t say that. 20,000 ethers.
Eike: Okay. That would be currently worth how much money in let’s say dollars or euros?
Pablo: It depends on when the viewers watch this conversation, but right now it’s around nine million dollars.
Eike: That is a good a mount of money. How do you plan to spend that money, and over what time frame?
Pablo: We have a five year economic plan. The thing is that our structural costs are going to be very low because we rely a lot on our community in order to develop the technology, so whereas it is true that we’re going to be needing a good technical team, a core team that leads the community towards where we want to go, we’re going to be relying a lot on external developers working on PayPro, on PayPro’s platform.
In order to reward them, we’re going to be using tokens, from PayPro. That’s why our bond rate is a little bit low in comparison to other players. I would say that 60% of the funding is going to be used for development and 40% on marketing and promotion.