Rebuilding LatAm Banking

0:05 I am excited to welcome Fernando from ARC, fresh off of $70 million series B, co-led by Sequoia and Founders Fund. So, Fernando, thank you so much for joining. >> Thank you for having me. >> Yeah, it's awesome uh to have you here. We worked together 5 years ago um in summer 21 in one of the COVID batches. The app was or your product was called Dollar App at the time. Now, you have rebranded to Arc. Um why don't you tell us a little bit about what ARC does and the current state of the business?

0:31 >> Of course. So ARC provides global accounts for people in Latin America where there's a massive um demand for dollar denominated financial services. Uh so you can imagine people who want to spend internationally, people who want to work for a company in the states while they live from a country in Latin America and get paid in dollars. Uh people who just want to have access to a global capital uh market system. So we use stable cons to build that infrastructure and provide that uh service to the customers. Yeah, I feel like here in the US we're so insulated from a lot of the crossborder currency uh issues and maybe um for people that are not as familiar with the problem like why is that such a big problem in Latin America and other places in the world?

1:09 >> So perhaps like I can give you some examples of customer personas and how they interact with us in compared to how they did it before. So imagine you are someone from let's say Brazil and you're used to traveling um and and when you travel you want to shop uh and and buy things just because you are not having a proper access to the US banking system. You may have to go through a horrible spread on every single FX transaction.

1:33 So what should cost you 100 will actually end up costing you 102 104 105. So that would be one example. Another one is if you think about it, there's many people who work for US companies remotely. Um, and and they need to get paid through, you know, direct deposit. And turns out that if you look at the remittance system, it's built for a percentage fee uh system, which is fine if you're sending a small transaction, but if you are receiving like, I don't know, $5,000 per month in salary. Like 1% of that is real money.

2:00 >> Yeah. >> Another good example would be people who want to be able to invest in stocks, ETFs in the States, uh, that is not to be taken for granted. So imagine if every time you need to invest in a in a in a stock in the states, you need to send a remittance. Uh you need to wait for whichever 3 to 5 days for it to settle and and and you're late to buying deep, right? So so all of these inefficiencies are kind of the problem that we're trying to solve when we started the company. In time we actually what we ended up realizing is that the opportunity was bigger. It was not so much only on the global financial side of the equation, but rather building a product for the top let's say 20 30% of the pyramid. Right? It's kind of funny because if you look at at fintech across the last few decades, most of the opportunity has been focused around democratizing access to effects, access to uh investments, access to credit.

2:47 >> Um but no one has done hey if we were to build a product for the mass affluent demographic, right? Not not necessarily the top.1% of the parent, but rather top 30 in terms of wealth, how would it look like, right? Uh so it turns out that the global class is having needs on crossber banking but there's so much more beyond that that that we need to tackle right. >> Yeah. So obviously a huge problem um and you guys are taking a unique approach but go back to the early days and um tell us more about your journey to actually starting ARC >> when I was in uni and at some point I I I fell in the rabbit hole of uh YouTube uh and found these videos of uh YC startup school you know and like have very old school videos of of YC which makes it kind of funny to be here today.

3:26 know and um I remember being like man like these people they're explaining in plain English in very simple terms uh how to build a company that transcends that impacts humanity and I was like it it just cannot be that simple no like uh yeah I was like there's no universe no they must be full of [ __ ] like it cannot be true no I should go to consulting nowhere people actually know um which is kind of funny to be here today right and but but anyway like uh I I spent a couple of years in consulting and then eventually I was like look like I to see how are these people who are actually changing the world. I I I got the courage to to quit and join what back then was a very promising startup called Revolute >> Mhm.

4:03 >> which was um you know a Londonbased uh fintech uh it was like I think it was like series D was 2019. >> Mhm. It's kind of funny because in reality it was like pretty early stage in many things when it comes to operating right. So I spent some time in in the growth team then moved over to what we call the special projects focused on making the company uh profile and eventually became the general manager of crypto and it's kind of funny because I I wasn't this sort of like expert in crypto right >> so so my job was yeah on the one hand like operating the business but also figuring out what was crypto right and and building my sort of mental model of the industry which eventually became something like sort of two orthogonal access one being the asset class right like Bitcoin ETH and then also like more like casino part of the equation Um but sort of orthogonal to it was the infrastructure.

4:47 >> Mhm. >> And for someone who has spent some time on payments, I was like wa we're comparing a local first system with a global first system. We're comparing you know trust the counterparty and ties reconciliations with you know an immutable ledger uh bank holidays and and which are manual process with a you know 24/7 fully automated system. So I was like with the conviction I was going to be a partnership you know. Mhm. >> It's kind of funny because with Michael Ralvaro like we had been working together since uh you know consulting at BCG >> and with Z.

5:12 >> So you met before Revolute that >> like we've been working together for our life like so we've been suffering each other for long enough already you know >> and and also with Zach um who I met in in in Re my my co-ounder and CPO we had been like in parallel brainstorming ideas on on starting something like we we had the the idea of of becoming entrepreneurs like for for quite some time. you know and um so so when when you know there was this conviction around the the platform shift on on on blockchain again not so much as an asset classes rather as an infrastructure for banks to be operating on at at scale my brain snapped back to when I was in in consulting in Latin America >> and I knew that all my colleagues were you know traveling with plenty of cash in the suitcase when they were going to the states >> which you know my first reaction was like what the hell like who would be traveling with 10 grand of cash in the suitcase or whichever no and turns out that um you know access to dollar is something that you may take for granted in the states Um but but it's something that in many parts of the world is a luxury >> and and that's like a perfect insertion point uh to build on a platform shift.

6:06 No, by by starting with with with that need no but it's kind of funny because we were not really that aware of of the whole situation. In fact um you know with the first investment from YC we grab a flight to to Mexico City >> and I remember um I'm going to sound like a not the smarter person here, right? But we went to a shopping mall and started to stop people asking do you want to buy digital dollars, >> right? And so people were like a bit scared of us like what are these two up to noise? Anyway, but uh funny story, right?

6:32 >> Did you sell any? >> Uh well, we didn't have anything to sell, right? Like uh we're trying to, right? But uh but preempting like we didn't have the product yet, >> right? >> Um but uh but what we did learn there is it's kind of funny because you only learn these things like the tough way >> is that it was not only about access to the dollar, but the utility of it. >> Why did people want it? What's the job to be done of dollar? No. And that people wanted to travel and spend internationally. uh people want to receive uh transfers. So it was more of what is the actual use case, what is the actual need, you know.

7:01 >> Okay. So you got this idea um from seeing all the infrastructure that you were building as part of Revolute and then tying that back to your own personal experience. >> Um >> what convinced you that this was actually going to stick and actually going to work? Like did you know this during the batch when when you were so early and you were interviewing these people and trying to figure it out or did that come much later? I >> I just knew it was a massive problem.

7:21 Mhm. >> Um I knew that it was worth solving because I had seen what people were doing. We see people doing weird stuff around a big problem. There's always something there. >> Yeah. >> But we're completely clueless. I I think like maybe like every founder has their own story, but we were not like so hyper rational. Oh yeah, this is what we'll do. This it was more like the FFO sort of framework. No, we knew that there was something >> and and that if we spent enough time understanding it and and going to a root cause of of what customers need, we'll be able to solve a massive problem, you And do you remember what was your focus during the batch? You were obviously very early. I remember you were trying to build the first version of the product and and even going live is you know a big challenge for a product like yours.

7:58 >> Initially we were thinking that it would be like more store of value sort of the equation. >> Um and and and again like uh eventually what we realized is is is more the utility component. No. Um and that was game changer because once we realized that and and you know we got the courage not to hey like uh this is what we need to build this where we where we're headed and then reverse engineer all the steps to get there >> uh made our life way easier. No, but if you think about it, building a a fintech product is not something that straightforward, which is like very painful to be in the cave building that for a few months, you know, because you cannot get so much customer feedback and if you ship an MVP that is halfbaked, you're going to get a signal that may not be the best uh representation of of where the product should be going, you know?

8:40 >> Yeah. Do you remember how long it took you to actually get live with your first uh users? >> I mean, the the first product was only access to store of value was like pretty pretty straightforward. Um but again like the feedback was like look we we need to do things with with these um digital dollars right >> um which you know again it sucks no you go through all these ups and downs no >> but but I think like look if you're doing a proper truth seeeking exercise you get that and and and you ultimately learn what you're going to do right >> so I think like um >> it was like a bit less than a year to to have like the the first version of the product which included um uh virtual uh account details in the states an international card and then the the store value component. No. Um and that was like a the one when we're like, "Okay, this is this is working." I remember um a call we had, maybe you recall, I think I was with my co-founder Alvaro in Buenocides.

9:30 >> Mhm. >> And we're like very very worried like because we see that like like everything was compounding month after month, but it's not hockey stick. I'm like, "Oh, how does product market feel like?" And you were like, "No, guys, this is product market fit." >> Yeah. >> And we're like still with this like sort of imposter syndrome of what the hell is going on, you know? >> Right. And now it has continued. >> It has continued. And again, like that's how it works, right? Like you keep doing like all this tough things month after month, pushing yourself to be better.

9:54 No. >> Yeah. >> And and eventually you you get there. >> Yeah. >> And talk a little bit. I'm sure there's a lot of people that are watching this that um feel that imposttor syndrome themselves. They see a video like this of, you know, successful founder building a successful company. And I think maybe what's special about you is you would probably respond to that and say, "We we're not successful yet. We have not done anything yet." But you know to I think a lot of the people watching um they probably aspire to be in the position that you're in and have the company that you have built to this point. Um how do you overcome that imposttor syndrome and and be able to find the confidence in yourself that actually you know you can do this just like anybody else has?

10:29 >> Yeah it's kind of interesting know because if you reflect on it maybe here in Bay Area is kind of very normalized because everyone knows many people who uh you know have gone through a startup have started their own startup and and been successful. Um but that's not something that you can take for granted in many parts of the world where where we don't have like so many uh cases of successful entrepreneurship in technology that are close to us, right?

10:49 But but I I guess like there's sort of two answers I could give. One answer is there's something a bit positive in always feeling that you're under threat and and you're fighting for survival, you know, and and you know at the end of day like feeling always like you're the caveman and there's a lion waiting for you outside. Yeah. >> Um that you know always >> helps you to reset expectations. >> Yeah. and all the time have this like sort of survival experience.

11:12 >> Yeah. >> That I'm not sure if it's intentional or rather like a you know kind of like the the result of years or decades know since I was a kid. Right. >> Yeah. Where does that come from for you? Because I I think that is actually a quality of some of the best founders is they're just perpetually never satisfied because human nature is I don't know you guys have grown to more than 10 billion annualized volume and I think a lot of people would be like >> wow we're doing really good maybe we can chill out you know like that's like the natural human instinct I think >> but also the people that get to that level don't operate that way >> and I see that in you and yeah I'm curious like >> how do you find that in yourself? It's an interesting reflection like um we've gone like through all these you know stages and >> we've never really celebrated milestones. Yeah. And and and you know we're happy about it but we've never thrown a party.

11:58 >> Y >> and it's interesting because if you think about it the reason why we're happy when these things happen when these things um come to be true is not so much that we got there but hey if we got here where are we going to be in 12 24 36 months? >> Um and it's like it's like an interesting dynamic. No it's hard to tell where it comes from. I think probably my sort of intuition will be being comfortable with enduring pain.

12:22 >> Mhm. >> Because at the end of the day like uh look like every week as a founder you need to reset the bar and say look all of these things that we did great last week they no longer matter. We're not going to discuss them. We're going to discuss the true three things where we need to do better. >> Y >> and and you really need to do that every week. You need to build a culture that enforces that everyone is doing it this way. Yeah.

12:42 >> Right. And and the moment that you get satisfied, right? like a you no longer think in this way and you're no longer going to keep compounding. >> Y >> um and it's kind of interesting because you know I have this like sort of theory that you know companies get as far as they want eventually and everyone who stops growing at this exponential pace at some point is because they decided not to know. Yep. >> Which um might be like an oversimplified narrative, right? Um >> I think it's true, >> but um >> there is a component to that because um you know companies I think are only as ambitious as the founders, right? And so you have that sense of urgency and you're perpetually never satisfied and always looking at what is the future next thing that we're going to go towards >> and how do you drive that amongst the rest of your team to make sure that everybody else operates that way? You mentioned the culture like how do you create that in the culture of the team?

13:26 You know, it's kind of funny like we we not so long ago we did like the first culture exercise >> and um you know when we were doing it we're thinking of culture first like you know the temptation is to think about it as the you know who you would want to be. >> Yeah. >> But then at the end of the day like people converge with who they are. >> Yeah. >> So if you do that like you're going to get to something that is is not really aligned with how people behave.

13:47 >> So instead of that with two like the most senior people in the organization who've been already for some time and and they they know how we operate right and we asked them hey what are the non-negotiables? >> Mhm. It's kind of funny because what we did is the three of us the founders like like for the first part of the session we couldn't really speak. >> Yeah. >> And you had to sit there and listen to everyone saying which are the non-negotiables >> and eventually we landed with these four traits that you know if if someone doesn't really you know live by those four traits it's like thrown out of the window you know >> I think it's one of the most beautiful things that has happened to me in the company because I was like whoa like without me speaking these people are saying exactly the the right things. No choosing unreasonable uh ambition which has like two interesting components. The first one is the idea of unreasonable ambition and then the second one is choosing right but let me start with the first one. You think about it every company eventually when you scale like maybe in the early days not so much.

14:35 It's sort of a model right like an sort of FPNA model where you input resources you output more resources right but if you operate in that fashion you're never going to compound exponentially. So part of the job of the founder is to think on how do you add some entropy to that model >> to go to a direction where the only way for you to achieve it is to transform who you are. >> Mhm. >> Right. And if you set a very rational objective for you >> you're never forcing yourself to change who you are.

15:00 >> Y we see this a lot with the the goal setting during the YC batch. A lot of times the instinct is, well, I'm talking to this many customers and if I close this many, they kind of project forward on the path they're already on rather than picking something that is extremely ambitious and they're unlikely to hit and then it forces a flip in their brain that goes, "Oh god, I just committed to that thing. How am I possibly going to do that?" And they have to start thinking outside of the current box to figure out how to get there.

15:26 >> But here I go to the second part, which is the most beautiful, which is choosing. >> Yeah. >> Like this is not something that comes natural to people. >> Yeah. >> It's a choice. and and and and this vow is about that need to renew every week. >> And if at every point in time you stop choosing unreasonable ambition, >> you're cooked. >> Yeah. >> Um and you become like a sort of FPNA company that sets a target that is reasonable to grow and which are 10% year-over-year know and and and you're no longer going to be a company. It is transforming who you are, you know.

15:53 >> Yeah. What are um some tactical ways that you kind of drive that and permeate that throughout the company? like how do you manage the goals of the company or you know different teams within the company? >> Like there's two components like the first one which is maybe like a bit of a cliche but it's hiring for culture. >> Uhhuh. >> Right. Like uh and and and you know like still like a relatively small in the in the grand scheme of things like uh but um it's kind of like a humbling experience when you hire people that are way better than you at specific things >> and and and and you need to absorb this knowledge. you need to absorb these things that improve the way you think about operating and and cascading across the whole organization, right? So, so part of it is like that is very important is the the the hiring for culture um piece. But then again, we try to be extremely output oriented. So, basically and maybe like there's many companies have been successful being like input oriented companies.

16:45 >> But what we try to do is we set a northstar for the company uh like one metric that we define as success criteria. Um and then we try to cascade it down into different things that if they are all true like it ties up to to to the main north star of the company. No >> what's your northstar metric for the company? >> So we're looking at core MAU which is people who are engaged with us to a level that is um representative of a deep relationship right >> um >> so not just signed up one time but like actively using the product in meaningful ways >> and then we can scale down into all the components that need to be true >> for that metric to go up. No, you have hey the growth component uh the the breakdown into every single one of the of the products. No.

17:26 >> Yeah. >> Um and then we try to make sure we have this hardcore orientation around your number. >> So actually one of our values is also um on your number. I >> I think we have observed that accountability very often matters more than specific knowledge you know. So, so like in in the conventional way of structuring an organization is like more like function you have all this weird situation in which the end to end uh process is not owned by anyone.

17:51 >> Yeah. >> Whereas if what you do is like hey you own the end to end number >> um people actually figure out especially great people you know. >> Yeah. >> Um so we try to make sure everyone has their own number >> and they have to figure out you know >> so every single person in the company has a number. >> So again we're getting there. I mean when you're getting started like uh it doesn't really make sense. Yeah.

18:08 >> Uh but but slowly we're we're moving into into that direction. Oh, sometimes like hey this team has this number. >> Uh but but then eventually you go cascading it down. Sometimes it's not a number. It's like hey you need to deliver this feature by this date, right? It's more like a binary >> uh type of outcome. >> But we try to make sure that everyone has accountability. Um which is like the beautiful part because then eventually every small part of the company is per se a startup. Yeah. Right. uh and you create this compounding uh element where you know you have like all these small group of people that are working on uh you know multiple product lines uh multiple businesses right and and each of them treated as their own child to to an extent right >> right maybe that kind of leads me into you started as dollar app and you rebrand rebranded recently as arc um talk about what went into that and and maybe how the company has evolved to to make that necessary to happen now >> you know I was thinking you before the story of when we you know with with the 125k from YC we went to Mexico people wanted dollars and and like we didn't really understand fully >> um all the nuances around it. But that had like two problems. The first one is that it became pretty self-limiting, right? You know, how do you tell your friend that the best way for you to you know uh invest in in US stocks is dollar app or the best way for you to you know um save in Brazilian is is is dollar app like shouldn't be app right.

19:26 >> Um so it it became like pretty self-limiting. Then the other component which I think in in Hansen might be the most interesting right if you think about our old brand right like it was in a big chunk articulated around financial inclusion right like you cannot have dollars now you you can have like a dollar >> so the name is dollar right if you go to our old website the tagline used to be something like >> the world has borders your finances don't have to >> so we are a Latin American company that includes you in the US right what is kind of funny is that if you look at our customers it's mostly top 30% of the pyramid in terms of wealth as I was saying before right so it's people who travel who have like a global lifestyle uh who work for international company who like to invest these people they don't want to be included >> so it was like a brand that was completely misaligned who with who was our customers >> um so anyway like that was kind of the the the story you know like I think like at some point you need to uh start becoming really good at at marketing and at distribution at scale >> and if you don't have a good brand for that uh you're going to be in a in a really poor position at scale >> yeah that was obviously a big milestone with with the branding um and change, but what are some of the other milestones um along the way that you've hit or what have been some of the inflection points that have have gotten you to this point? Mentioned earlier you're at over 10 billion in in annualized volume, which is like a crazy number to think about. Um what were some of the milestones that stand out to you along the way to get there?

20:46 >> Like it's kind of funny because uh again like back to my point from before, we don't really you know we we don't stands out, >> right? No, but but actually I'm thinking more of the emotional ones. >> Yeah. I remember one in the early days that you know maybe people who are right on the batch can probably reflect on this. I was sending manually an email campaign you know. >> Yeah. >> Which we've all done that know like downloaded a CSV right >> and um I remember I saw an email and I was like wow this rings a bell and it's like a like first name last name of of a friend of mine from uni that I hadn't spoken to in years.

21:16 >> And I went to to his LinkedIn and I see that he's living in Mexico City and I was like what the hell no. I was like and so I I DM him on LinkedIn. Mhm. >> He's like, "Hey man, are you living in Mexico City?" >> And he's like, "Oh yeah, I moved here from Spain, blah blah." I was like, "Well, and you're using dollar app." And he's like, "What the hell?" I didn't even have my LinkedIn back then, right?

21:35 He's like, "What the hell? How do you know that?" So, okay, let's go for a beer tomorrow and I can tell you more. No. And I think it's all these like inflection points that make you realize, well, there's real value, give you the confidence. know but but but not so much I would argue on the on the >> you know um numbers component which we we throw a party because we got here >> but ra this like >> you know sort of >> situation in which everyone's all the time thinking about the future in the company everyone is using like no one is using the real production app we're all on test flight with the with the version of the app that has not yet been >> you're always living in the future >> well intentionally right >> yeah how do you keep that bar high do you vet people throughout the hiring process for those core values that are so important to you or if you let the wrong people in then it's never going to work out.

22:19 >> Like there's two type of companies companies that try to maintain the talent bar >> and then companies say hey this is the worst the talent bar is ever going to be and they try to just improve it. No. And and this like sort of question they always ask like hey is this person better than 50% of the organization. >> Mhm. >> Uh when you're hiring no. So, so anyway, going more through the process, the way we do it is we define the things that correlate with people being successful.

22:41 >> Mhm. >> For every single role in the organization uh and we make sure we test them. >> What are those things for you guys? >> Yeah, depends a bit on the role. Um in the case of engineering for example, you need to do a live coding session. >> Uh in the case of journalists, not like people like work in strate operations in in product, uh we we focus a lot on problem solving. Mhm. >> And one thing that is kind of interesting is that um if you look at the world of corporate or even big tech, very often problem solving is focused more on the solution part. I think that in a startup or in a fast changing environment is much more the problem standard.

23:14 >> Mhm. >> And and then the truth is that if you really understand a problem well and you're able to go deep into the root cause like a monkey can build a solution, you know, but but what is very very complex is understanding deeply a a problem statement, you know. So we often look for people who are exceptional at understanding what is exactly the root cause of the problem statement who are very analytical. No. Um and are willing to go dirty and keep asking why iteratively until they really really understand the problem statement. You know which is very rare because people are not trained to operate in this fashion. Yeah.

23:43 >> And and and we like that's a pretty good predictor of success in the in the company. And of course the cultural component know that something funny you can do is just like ask people to tell them tell you their story you know. Yeah. And you can see if there were you know back back to the sort of point on the on the values like were those people choosing unreasonable uh ambition uh are those people solving the real problem back to the point I was saying before are these people owning their number are these people raising the bar to themselves and to others constantly >> so so you can you can get those things if you ask someone to tell you their story you know >> yeah you're live in a number of countries now right is it four >> four already >> yeah four countries I know that's always something that is a challenge for founders is figuring out especally especially, you know, if you're location based or you have multiple different types of customers, how do you expand to each of those? Um, like go into a new market, um, figure out how to roll out, what's the playbook for all of that?

24:34 >> What have you found in expanding to all these different countries and actually making it work in each one? >> Yeah, it's a discussion we I've been having since the very very early days with um, one of our first investors, Ernand from Kazak, know that, you know, invested right at the end of the batch. No. >> Yeah. >> And uh, and he's been sitting in the board since then in the company. you know he he has like these two success stories that he's seen one is Marcato Libre which he was a co-ounder and then Nubang that they were like one of the first investors if not the first investors actually >> and um and two very different stories no one that was you know doing many many things in parallel one that was like very very focused on on on the key bets no and >> both were wildly successful no so so it's hard to say like this is the right model this is the wrong model or or vice versa no so again go back to people you know tend to behave in a way that ties up to who they are. So in our case, the way we try to approach it is we try to do more things than than you know than a new bank in this case that was like super focused surgically on credit in Brazil for a very long time.

25:34 >> But we try to have the market pull from us. No. So we try to do hey what is the minimum we need to do to to you know get something out of the door and test that the market wants it and how customers behave with it and then double down. I don't know there's sometimes that you you know that there's something there and you need to be way more top down than bottom up when it comes to it right and and you know like actually going back to the point in the early days we knew that people wanted access to uh a dollar denominated financial system right >> and and you know if we had gone like oh people don't want the the you know store of values out of the equation you can give up no but but you know that there's something there so you need to keep keep going there so you need to apply those two those two mindsets >> you like you know you're expanding to Brazil right um which you launched Um, do you send a small team in there to kind of be the team that's going to go in and launch this? Do you take your your current, you know, larger organization and and have everybody focus on that? What what's the use of resources to be able to make sure that it's successful out of the gate?

26:30 >> If you look at what we do, it's kind of interesting because you have the demand side and then the infrastructure, right? So, if you look at the demand side, it's kind of interesting because our target customer, it's very similar in all the markets. There's always people who want to travel, who have a global lifestyle, who want to invest, right? So, it's not that different when you compare like our customers in Mexico from our customers in Brazil, Argentina, you have some local flavors.

26:52 >> Yeah. >> Um, but roughly speaking, it's it's very similar in terms of of the needs that we that we solve for them. >> But if you look at the infrastructure from a regulatory side, uh, from a payment side, it does change a lot. So, so a big part of the work is putting in place that infrastructure and then eventually also we have the component of cracking the go to market. >> Mhm. >> Um that can be a bit different in every in every market. But the good thing is that our customer type is more or less the same.

27:20 >> Mhm. >> I I go up to this point that accountability is what matters most. So we always try to have one person that is accountable for that specific one. No. >> Y. >> So in case of Brazil, we hired Leo who's our general manager leading the the the country and he had to figure out the whole thing, you know. So you bring in the general manager, they're they're the responsible person >> nowadays. Yes. Back in the day for Argentina, I went there, right? I figured out how to buy an animal license that we, you know, like we found like a good deal and then like build integration with with the engineering team and and and launch, you know, like uh but but effectively like one person needs to have that as a success metric >> and live and die for it. Yeah.

27:57 >> Yep. You don't like to celebrate the highs, but I'm sure the lows stick with you. Um, what's something that like any kind of tough moments? I think from the outside it looks like you've just been on this this amazing rocket ship. >> Um, what have been some of the the challenging moments that stand out to you over the years? >> It's interesting. I'm not sure if we really dwell so much on the bad moments to be fair like if you do that like uh building a startup is going to be a nightmare. No, you need to have like thick skin to to to an extent. But there's been like so many moments I I that I would like bear very tough. I remember again like we're in the batch in in in 21 >> like a pretty good bombing in in the market, right? It was good for crypto.

28:34 It was good for Latin America. It was good for fint techno. >> So we are like a cool kid in the playground. >> And man, you remember what happened, right? Like uh like crypto was suddenly a, you know, red flag. Latin America was suddenly a red flag. Fintech was suddenly a red flag. No. >> And uh like it's it's it's nonobvious moment, you know. >> Yeah. But a kind of interesting thing is that at the end of the day the the the interesting take is that all these things are not so much a point of what is the current reality but rather what is your time horizon.

29:04 >> Mhm. >> And you're very long-term minded. the fundamentals of the opportunity, the quality of the team didn't really change, you know, >> but it's always hard in a world in which you're fighting for survival to remember that you're playing a multi-deade game, you know, and and and where you are today is actually like almost meaningless compared with where you you're going to be and you want to be in in two three decades from now, you know.

29:27 So, so it's very hard. No, because you need to all the time be putting yourself into the context of hey like uh when you're in a low uh things are not that bad. Yeah. >> And in in three years from now uh we'll have forgotten this. >> In three decades from now look like the only thing that matters is the fundamentals, right? >> Yeah. So what is the future for art then the next 5 to 10 years?

29:46 >> We're just starting to scratch the surface when it comes to building a product for the for the mass affluent um demographic. One of our new products for example is is pretty cool. uh we're starting to release um slowly is the prestige card. Uh so basically we've rethought how credit cards work >> um and and effectively what we realized is that um in many cases credit cards have a relatively low uh credit line and very high APRs.

30:11 >> Mhm. >> And it's kind of interesting because if you if you look at how the you know the people who are in a private bank relationship uh manage their finances, they'll never borrow at 25 let alone 54% APR, right? But I do take margin which is a you know maybe sulfur like which are federal reserve rate plus which are 100 bips whatsoever. No. So we've built a credit card using that same logic. >> Uh we designed a way that you will never be liquidated right like I know we discount assets a lot uh for you to have a credit line but still if you have like whichever 50k in S&P 500 you can get a 25k credit line. the rate if you if you decide to to finance your your your purchase is like 8%.

30:52 >> Yeah. >> So instead of designing a credit card for people to have a heart attack when it comes to to paying and and otherwise I'm going to get a 50% APR which which is common in many markets in which we operate. >> Yeah. >> Actually the smarting to to to finance your purchase and and keep your money in the S&P compounding for the long run. So like that's just one example of of the direction which we in which we want to go.

31:12 >> How are you guys using AI within the company right now? So when it comes to the capex piece, first and foremost, it's kind of obvious that more than 90% of the code that we produce is already done with with AI, >> which again like probably these days like something that's almost for granted, right? Um beyond that, one thing that is also very interesting is that we have this tool called back office where everyone builds um mini apps, right? So whenever we think of building a new process, doing a new marketing campaign, um everyone's expect to be able to build those tools >> um including nontechnical people, right?

31:43 Yeah. um pairing with engineers sometimes more autonomously, right? You know, instead of going and outsourcing things, build it in house uh in a way that tailor very specifically to how we run the company. So, those were like tools to to invest capital in more in more efficient ways. No, on the operating side, again, like kind of obvious, but there's sort of two things that are very interesting. One is building an support agent. >> And it's kind of interesting because it can already take a very meaningful chunk of of the work >> and allows our human agents uh to be focused on the case that matter the most that are most complex uh instead of the the parts of the of of support that are less relevant. Right.

32:21 >> You've got millions of users to support as well. Right. So it's the thing that enables you to scale. >> Correct. And it's also very interesting when it comes to to f crime and all the AML part of the equation because not only it's more efficient which is the the you know the classic um train of thought but also you can do things now that you could not do before. >> Yeah. >> So if you look at how traditionally you would think of the ML component no because you cannot scan a huge number of transactions in real time because it's impossible even if you wanted to to hire such a big team to do it right. It's not a matter of efficiency it's just like you can do it in real time. You usually would go with a solution that maybe like you apply limits on the accounts and then when you hit that limit then you go into a review, right? You have like a small team reviewing everything that was flagged by a machine learning model, right? In this case, you can actually have the machine learning model, a big team of agents that do the first pass and that they then they escalate to the humans who are actually managing the team of agents, right? And that's great because then you don't need to be so restrictive on the limit side of the equation because you do have the bandwidth to do all these checks.

33:18 >> Yeah. and you have the the external part of the of the equation know that um we're starting to to build into it. Uh one thing that makes me very excited of of building in the in the next few months is the idea of creating a bot uh you know sort of private banker assistant for you that you can forward you know PDF send this wire for me send my to my friend you know and then having like an approval mechanism similar to what you have like in 3DS with with credit cards in the app for transactions that are below a limit. No. So so we we always try to think of of these two things and encourage it across the whole um organization. you recently rebranded from dollar app to ARC. Uh what was the motivation for doing that and why did you pick the name ARC?

33:59 >> When we started we knew that you know there was a massive demand for uh dollar denominated financial services in in the region. Um so you know the obvious thing was to name the company after that right and and go with with with dollar app and the truth is that it worked in the early days um but now it has become very self-limiting. So if we launch uh investments in stocks in the states uh how do you tell your friends that is dollar app the right company for for doing that not the right product if you're going to I don't know uh save in Brazilian how do you tell your friends that is dollar app the right app to do it right so it really didn't serve the purpose um anymore the second one is more aligned on the brand the ethos and what it represented for customers so if you look at our old brand it used to be around financial inclusion right So uh you cannot have dollars now you can have digital dollars therefore dollar up if you go to our website the tine used to be something like the world has borders your finances don't have to right so we were a Latin American company that would include you in the in the US but again if you look at our our customer uh profile uh really to what um what we were speaking about before um it's people who are on the you know on the wealthier side of the equation it's people who like to travel uh people who you know work for a company abroad who work in finance and technology who invest that group of people they don't want to be included like if I try to tell you hey I'm going to include you like that might not resonate with you so not only the name but rather the ethos of the brand was off was around financial inclusion uh instead of about the future and the excitement of of a better financial life >> and it's not so much running away from it but rather where you're going >> so it was a a funny exercise and of course like uh it took us a pretty long period of name uh because we knew we could blow it up, right? Even coming up with a name was not that obvious, right?

35:49 >> Yeah, it's hard, right? How did you come up with the name? >> The first thing that we thought is, hey, we need to have something that doesn't have already a very strong meaning. >> Mhm. >> Um because it's very hard for you to own that word if it's already in use. Like a very good example would be like water. No, like man, like water already means something in your head. It's very hard for a company say, you know, like we're water. No. for people to think about you the first time they hear the word, right? So, we wanted something that didn't really have like a strong usage, a strong meaning uh so we could become the owners of the word.

36:21 >> At the same time, we wanted something that could have positive connotations, right? And ARC is a beautiful word because uh on the one hand, if you think about it in in Portuguese and Spanish, it sounds like architecture. You're building your financial life. It also sounds very similar to arc connecting two dots or even the arc where you store uh your things, right? So you have like all these positive conations in a lateral way. It's also short, it's punchy, uh you can even use it as a verb eventually. So it had all these beautiful things. No, but at the end of the day, like our sort of conclusion was what mattered the most was not so much that it was a perfect name, but rather that it didn't have any of the of the of the problems of of the old name when it comes to being self-limiting to being hard to architect the right ethos around it. Um, so that was kind of the the process. Now, >> what kind of impact did YC have on you?

37:09 >> And the impact was was massive. We wouldn't be here if it wasn't for YC. Looking back to the early days and thinking about yourself, you know, thinking about applying to YC and and going through the batch, is there any advice that you wish somebody had given you or that you would like the the next generation of founders coming up now to to be thinking about >> in the context of YC? There's two things that were super interesting. One, the first one is making us believe.

37:32 >> Mhm. >> Which uh man, we had a very very rough idea. We knew that the opportunity was big and and that was a pretty clear I would say. >> Yeah. But but still like very often it's so nonobvious when you're in a good position in a great company like like Revolute is no and and we're in a very privileged spot and but we still didn't have the courage to do it and I remember like getting the call from Delton back then like uh we'd love to invest and I was like these guys they're so stupid why why would they give us money know and that was like the first reaction like a few hours later I was like well these people they know what they're doing no they have like they've backed like some of the most impressive companies in history right yeah so the There is something right and then the other thing that has been like a constant you know you guys have this habit of slapping entrepreneurs in the face with truth like kind of back to I was saying before with you know the Y startup school videos right I remember like I know like all the lectures were like sort of like very obvious things and that's what make them like so so amazing right because sometimes it's very hard to outline in very plain terms things that are obvious but are really really important >> actually remember in in in another call we had um like we were like so lost back then and you said this thing like uh guys what I like about the product is that it's obviously the best product out there >> and and and again like it was like wa we hadn't stopped and thought about it you know >> and all all these times when you know you have all this chaos around building a startup know that that clarity of thought is not to be taken for granted you know >> and and all those pieces of advice of that receive from you guys again I would go like not so much in the direction of the specific advice but rather helping get the clarity of thought, you know, >> and and being able to find this clarity of thought is is non-trivial.

39:13 Eventually, you you manage yourself to to be able to do it. No, but in the early days like uh you you guys were super helpful for for that. No, from getting the course to do it from, hey, where are the fundamentals and making sure you you know the time direction which in which you're going, no? >> Yep. And sounds like you um you've built a lot of belief in yourself over the years, too, which has been really amazing to see.

39:33 >> Yeah. >> Very cool. Fernando, thank you so much for joining and sharing your story and uh giving us a peak behind how you've been building such an ambitious company. >> Thank you for having me, Aron. My pleasure.