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Interview with Alan Safahi, founder and CEO of ZipZap
Last July, at the Inside Bitcoins conference in New York City, one speaker in particular made a comment that caused the loudest round of applause in the entire conference when he said: “This country was founded on a separation of church and state. I think we should also add separation of bank and state.” It was Alan Safahi, founder and CEO of ZipZap, Inc., a San Francisco-based start-up that aims to revolutionize international money transfers around the world.
Alan has graciously accepted to talk about his company, his vision and the future of digital currencies.
Juan: Please tell us about your background and how you got involved with Bitcoin.
Alan: I am a serial entrepreneur with 28+ years of experience with several start-ups under my belt in technology, telecommunications and financial services. I was an early adopter in the evolution of prepaid cards in the 1990s, so I have been part of the problem for the longest time! I got involved with Bitcoin in 2010 and have since been a vocal supporter and activist of digital currencies. I currency sit on the Advisory Board of Ripple (another digital currency platform) and am a founding member of Digital Asset Transfer Authority. My company, ZipZap, is the largest cash payment network in the world serving digital currencies, making it easier for consumers to buy Bitcoins locally in their neighborhoods using local currency.
“What really ticked me off was learning that the most disadvantaged customers in the poorest countries, who need money more than anyone else, were being charged the highest fees.”
Juan: What was the ‘eureka’ moment, the spark that led you to focus on virtual currencies?
Alan: Having been involved in payment processing for the past two decades, I felt that the current financial services industry was unable to properly address the needs of consumers in general, but even more so the needs of the unbanked, who make up over half the world’s population. What really ticked me off was learning that the most disadvantaged customers in the poorest countries, who need money more than anyone else, were being charged the highest fees. I thought something had to be done to narrow the gap between the rich and the poor which was widening at an increasingly rapid pace each year. The challenge seemed insurmountable until decentralized digital currencies like bitcoin came along a few years ago to make it possible for the first time to transfer wealth across the globe without the need of a third party. Although a person-to-person bitcoin transfer in third world countries may still be a few years away, the infrastructure is now available to make this a possibility. There are very few opportunities in one’s life to create something so big that can impact billions of people and save millions of lives with relatively little effort. So there really is no excuse for me not to get involved!
Juan: What are the opportunities you see for Zipzap, in particular, and for virtual currencies in general?
Alan: ZipZap is the largest cash payment in the world with 700,000 payment centers worldwide and growing to over 2 million locations in 50+ countries to take cash in and soon over 90+ countries to take cash out. Having built a network that allows us to have both the “cash-in” and “cash-out” solutions at a very reasonable cost, we just needed to build an infrastructure in-between that does not rely on traditional banks and money transfer companies like Western Union and MoneyGram. Bitcoin provides this bridge instantaneously, at no cost, and in a transparent manner. It is really the perfect way to transfer money globally.
Juan: Given that your focus is international money transfers, what about the regulatory aspects? What’s the nature of ZipZap’s business in the money transfer ecosystem? Do you need to be licensed in every jurisdiction?
Alan: ZipZap is not required to be licensed because we are a platform connecting licensed money transfer companies with licensed crypto currency exchanges.
“It would be a travesty if MSBs were to vanish because financial institutions, afraid of legal liabilities and other risks, cannot provide them with banking services.”
Juan: Let’s talk about the so-call ‘unbanking’ problem –the denial of banking services to MSBs and now virtual currency ventures. What will it take to convince traditional financial institutions to partner with virtual currency operators?
Alan: That’s right. In recent months, it has become quite challenging for exchanges and other Money Service Businesses (MSBs) to operate in various jurisdictions including US and UK due to increasingly tougher regulations and lack of access to traditional banks and bond providers. It will take an act of Congress to provide banks with immunity if they follow a standard set of procedures for compliance, which they all do anyway. The law is so broad today that banks choose to distance themselves from MSBs in order to protect themselves and their shareholders from compliance failures and reputational risk. MSBs provide an invaluable service to communities and fill a much needed financial services gap for the poor, unbanked and under-banked. We have all heard stories of people in third world countries suffering and some starving to death after their remittance sources dried up due to MSBs shutting down doors after losing their bank account and thus not being able to serve expats in the UK and US. It would be a travesty if MSBs were to vanish because financial institutions, afraid of legal liabilities and other risks, cannot provide them with banking services.
Juan: What is your approach / philosophy with respect to compliance and risk management (if you have any)?
Alan: Sound regulations are needed to protect consumers against such evils as money laundering, terrorism, child trafficking, etc. Compliance, therefore, is a necessary part of financial services and in my opinion a competitive advantage. If we do compliance right, we keep the bad actors away from our platform, which inevitably leads to less fraud and lower operating expenses. Not to mention that not going to jail is a BIG competitive advantage! At ZipZap, we have tried to build a compliance-friendly environment where all our associates work together to create good products that provide valuable benefits to consumers while protecting them against risk and fraud. This allows us to operate legally in every jurisdiction.
“Not going to jail is a BIG competitive advantage!”
Juan: What keeps you up at night or which are your top 3 priorities?
Alan: Compliance and risk management take most of my time, as well as the time of all other CEOs I know of in the payment processing and financial services space. I have been involved in payment processing for over 18 years and I have never seen compliance or risk management get any easier. It is a fact of life that you have to pay attention to constantly. My highest priorities today are: (1) Ensuring we are fully compliant in every country we operate in; (2) Managing risks to our stakeholders as we grow the business globally, (3) Educating regulators about sound legislation to protect consumers but not choke innovation.
Juan: What challenges lie ahead for Zipzap and for virtual currencies in general?
Alan: Like all other companies involved with Bitcoin and other virtual currencies, we walk a fine line between innovation and compliance. We wish to create simple products that enhance consumers’ lives and provide good user experiences but at the same time, we have to abide by a mind-boggling set of rules that vary from country to country (and state by state in the US). The challenge is to help governments streamline regulations to foster innovation while still protecting their citizens. It costs a lot of money to do this right on a global scale, but you need to do it in order to reach the magnitude of scale that allows you to compete with established players in the financial services industry.
“It is now up to the rest of us to show them that it is possible to serve consumers in third world countries and do well by doing good.”
Juan: What do you think is at stake if societies don’t adopt digital currency as an alternative to the established money transfer options?
Alan: This is a great opportunity to help the less fortunate people in the third world countries get out of poverty by saving up to $74 billion a year in remittance fees and reduce their dependency on foreign aid, which amounts to $133 billion a year. We can teach them to fish rather than giving them the fish. By reducing poverty in the third world countries, we create healthier, happier, better educated citizens who would become customers of our products and services in the future. Western Union and MoneyGram had an opportunity to join this movement but chose to stay on the sidelines. It is now up to the rest of us to show them that it is possible to serve consumers in third world countries and do well by doing good. It is not easy but it can be done. What M-Pesa did for Kenya, Bitcoin can do for the world.
Alan can be reached at: email@example.com or on Twitter: @AlanSafahi