Speaker: Austin Kimm is the Director of Strategy & Investments at Choise.com. Austin joins the community AMA to share B2B insights, discuss partnerships and more.
It's no secret that 2022 has been a difficult year, not only for the crypto market, but also for the general market. How do you think Choise.com actually navigates through this crisis, when many other similar projects have already shut down?
Let's go backwards a little bit then, because it's a very wide ranging question and you have to go through history to see where we are. So let’s remind ourselves Choise.com used to be Crypterium. We set up in 2017. There was a crisis and it was a big crisis in 2018. Me, much like everybody else, sold more crypto than we wish we did. So we’ve been through that crisis. The crisis, therefore in 2022, was not our first crisis. We had already navigated through one. The first crisis, however, was different. Let’s use the word crisis loosely for 2018. That was really just a market dip. 2022, I would say, was a crisis, because we had so many market failures. But the other difference between 18’ and 22’, I would say, was that 22’ difficulties coincided with economic difficulties, as well on a global scale. U.S. stocks were down, bonds were down and I think, from my understanding, that it's the first time in history that bonds and stocks were down simultaneously. So it was a different environment in 2022. But what was also clear, was that it wasn’t unexpected. It was a full-blown crisis and we all know most of the reasons behind that. But it wasn’t unexpected. And I think the 4 years between those two periods, we had learned a lot.
So the first thing to talk about is the business models of crypto companies. There are several business models. You’ve got layer one type solutions, which take a small fee for various transactions, for using their networks, etc. Then you’ve got companies like ourselves, Choise.com, which is primarily a transaction based business model. I’ll come back on to that. Then you’ve got the third type, which are, I guess, deploying capital to other sources, and in turn, filling liquidity needs that certain sectors will need and earning a return, in the same way a bank lends money to other institutions, individuals, there's an earning sector, so forget the layer ones right now.
Choise.com primarily, until the end of 2021 I would say, was a transaction-based business model. By that I mean if a customer doesn’t do a transaction, we don’t earn any money, so a huge percentage of our thinking time is on how to bring in new customers, how to improve the product and services, and to make sure we have the right products and services for customers, so they will use those services and in turn, generate a fee. And that’s all well and good when you are in an upwards market. Or even in a flat market. But when you are in an upwards market, you can even be blinded by the success. A lot of the success that companies achieve in an upwards market has got absolutely nothing to do with their own success. It’s just that they are in a market that is so dynamically growing, where you would have to be really bad not to grow.
So, of course, you want to grow faster than the market, and we are very, very, very happy with our growth at some point. In 2021, we were growing by 50,000 new users a month and there was very little marketing taking place. But as I said, you can get, I would say caught up in the euphoria effect and think that’s the way that everything is going to be like forever and ever, but we knew it was not going to be that way. And we anticipated that the crisis or the collapse that took place in 2018 was just around the corner. We needed to diversify.
Now, I would say that the crypto bull runs and bear markets, they’re roughly 4 years apart. Or even maybe even a little bit less than 4 years apart. And we can come on to this in a minute, when we’ve got to the Bitcoin halving, but it didn’t take a rocket science to see that historically, every 4 years that we’ve had these peaks and troughs.
So we had to start preparing for it and it was urgent for us to do so, because in a growing market, customers are much more… not just more active, but they’re much more, let’s say, aggressive in their decision making. They will buy, they will sell, they are trading left, right and center. They are quite happily spending money on their payment card. So if you have a debit card linked to crypto, and you go out shopping and Bitcoin went up 1% today and you spent less than 1% or even if you spent 1% on your card, you would look at your card and say “Oh Great. I went shopping today and I’ve got more money than when I started.” So everybody is very active.
So the difference I would say, between summer and a winter for a transactional based business, and there are many of us out there. Many, many of us. I would say Crypto.com, for example, is the most well known transactional model. Many out there. And the difference between a summer and a winter, is a factor of 6 or 7. And what I mean from that is, if we were able to generate $7 of revenue from the activities of a user during a summer, during a winter, you’re looking at $1. And even if you’re growing your user base, that is a dramatic change. And you can’t simultaneously just suddenly shed 85% of your workforce. You just can't do that. You have to maintain the customer support, the KYC team and all the developers, etc. So we’ve seen a lot of companies shedding staff. Companies like Coinbase and Crypto.com, etc. had been shedding staff, but it won’t have been enough to cover their losses. And you’ve seen quite a lot of those providing public information. They have generated significant losses.
So apologies for the very long intro, but we knew all of that was going to happen. It’s not like it was a surprise to us. The scale of it, sometimes, might still be a little bit shocking, but we knew it was going to happen. So we had to diversify and you have to diversify into businesses where the crypto winter/crypto summer doesn’t matter so much. It doesn’t really matter whether the market is going up or going down, because you are working in a business model where it's going to generate interest, it's going to generate activity and hopefully generate fees, irrespective of what the market is.
And as a result of that, we tested out into the market in 2021 with a B2B. The first version wasn’t great. We were using the infrastructure of the retail application. But over the last, let’s say 18 months, and definitely over the last 12 months, we changed the focus away from a retail, let’s say priority, to a B2B priority, and I will come back on to that.
It doesn’t mean that we are giving up on retail, because the market will recover and it will change. So they’re both really important, but what was very important during a time of a, let’s say of a transactional crisis, where you are only going to get $1 and $7 compared to 12 months earlier, we pivoted away and created a business model which generated actually much more revenue than we thought was reasonable to assume in our business plans and it’s really what kept us afloat. I mean, if we would have relied purely on a transactional business model, then I don’t know how we would have covered our expenses. It’s just not possible. As I say, it is a 7 fold reduction. But the B2B side has been absolutely fantastic and I guess that’s the reason behind this discussion now.
Moving on, actually to something that you also already talked about, which is basically the banking infrastructure, in specific the white label crypto banking. How big is that market and what kind of mark is Choise.com looking to gain from it?
Okay, so 20 years ago, you wouldn’t bank with anybody other than your High Street bank. In the U.K. that’s HSBC, Barclays, Lloyds Bank, etc. But the world has changed dramatically in the last 5 to 6 years. You’ve got companies like Revolut coming through, you’ve got neobanks growing all over the place, and you’ve got a lot of banks which are using the infrastructure of other banks, and what we see in everyday business life, is that most businesses are trying to take more control of the financial services part of their business.
So instead of just providing, I don’t know, if they sell tractors, or whatever, they may also provide some other form of additional support products. They may just have an alliance with some form of credit company where you can spread the payments over 9 months or whatever it is. But all of those are generating revenue for the main company. So when the tractor company says “We’ll spread the payments over 9 months” to use the Klarna or whatever system it is that they are using, they are generating fees. They are generating either some form of revenue structure or they’re making their customers more sticky or whatever it is.
There’s been a huge shift away from just relying and trusting your High Street bank, to being prepared to put money in institutions that 10 years ago you never heard of, provided that the service is good, the brand name is recognized, etc. So there’s been really a market push towards including, let’s say payment type solutions, card solutions, by a whole range of companies. And then when you get into the crypto space, that’s multiplied by a factor of how many times? 10, 20 times, even more times even more important.
So, in the last 4 years alone, there has been in the ballpark of 25,000 cryptocurrencies created. And every single one of those cryptocurrencies has a vision that it's going to be the next Bitcoin, or whatever. But as part of it, that token has a function. And to make the token really attractive, most companies recognize that the token has to have a value proposition outside their own ecosystem. So if all you can do is use the token inside a very small ecosystem, then it's pretty difficult to attract customers to own that token. However, if you can use that token in a much wider environment, then perhaps you can spend it on a Visa card. Exchanges, launching tokens – it’s a use case outside of the ecosystem, etc.
So what that means is, in the crypto space alone, there are thousands of cryptocurrencies out there, looking to create a purpose beyond their own immediate environment. Of course there are hundreds of tokens out there that don’t need this. They’re doing so well on their own, they might be, as I say, connected to layer 1 or something like that. But the vast bulk of them need to do something a little bit extra. And then outside the crypto space, you’ve got lots and lots of eMoney companies saying “Well, how do I compete with Barclays? How do I compete with Paypal, or whomever it is? Well, tell you what we’ll do, we’ll add crypto. We’ll allow our customers to work in the crypto space.”
I would argue hundreds of thousands of companies right now, looking to expand the economic environment by adding some form of financial service into their ecosystem. And a significant percentage of those companies are looking to connect it to crypto in some way. So the market, I think, is only really beginning and could be absolutely massive. Just because of the changing attitudes of the average person to where they’re prepared to use and spend money.
The last question that everybody wants to know. Your main thoughts on the market situation until the end of the year. So do you believe that B2B services can generate revenue, despite this current crypto winter?
So, the crypto winter and the generation of fees in the B2B sector are not necessarily 100% aligned. As I said, what’s important is to have a business model that is, to some degree, independent of whether it is crypto summer or crypto winter. We currently onboard approximately one new B2B customer every single week. Now, it takes us about 4 months to launch them from start to finish. There’s onboarding with our 3rd party banks, we are not, for example, a licensed bank, so we cannot provide a customer with their own IBAN. We need a 3rd party company that provides that.
But we are the glue that holds all those bits together. Some of the parts we do ourselves, but again, we don’t issue, for example, Mastercards to our customers, in terms of we don’t have the Mastercard license. But we work with a company that does, so I would say that we are like the glue that holds everything. And a lot of those customers are not relying on crypto summers/crypto winters. They’re relying on a significant user base that they already have, that they wanted to add an additional service to. And the average person on the street still doesn’t own crypto.
Now, the average person has heard of Bitcoin, but you know, there might be 300 million people who own crypto, but there's another 8 billion who don’t. So, it’s not dependent on the crypto winter or summer and after a customer launches, let’s say it takes them 4 months to launch, it then may take them another 2 months to really start getting the message out to their customer base. But once they get the message out, some of those customers are growing at a very nice pace. Now how did they generate fees? So what it is, our partners pass on fees to us and we pass on fees to the customer with a markup, of course. We don’t do it for free.
And then the customer, in this case being the B2B client, does exactly the same with their own clients. So for example, we might get charged, let’s say $0.50 a month to maintain IBAN accounts. We will charge the B2B customer, again these are not real numbers, but let’s say $1 to maintain an IBAN per month and they may charge their users $2. So every user that is using that particular service has generated at least $1 of income for the client and at least $0.50 of income for us, and it's got nothing to do with crypto summers or crypto winters. They have 20,000 clients, they have $20,000 worth of revenue, etc.
So what’s very important is the growth of this neo-banking sector. Not necessarily the crypto summer/crypto winter. And we’re seeing already, some of our clients generating fees well in excess of $50,000 per month for them, and if they’re generating that for them, then it's a similar number for us. So every single client has a potential to maybe be another Revolut. Now probably by another Revolut, they will go off and do it on their own. But for the first 5 or 6 years of Revolut’s life, they were using a bank called Modular. It took them a long time before they decided to do it themselves. And that’s the same ballpark we’re in. We are providing infrastructure to customers that would take them 3 years to build maybe $10M. So until they become the next Revolut, they rely on companies like us and some of them are going at a very fast pace.
So while I think we are heading towards the end of the winter, and we are definitely in a spring, I would call it now, and we think that the crypto summer will start probably in Q4 this year, our B2B is not reliant on that. So our revenue stream just gets bigger and bigger for us every time we add a client, it's an exponential growth on the existing.
It seems like those are fantastic numbers and it’s great to see that Choise.com has taken such a big part being an intermediary between something that could become super great and bring generally the entire crypto audience, maybe a new look into being integrated into more financial systems.
I would also like to add, if you would, why crypto is taking the lead in this and not traditional banking. Anybody who’s got crypto knows the traditional bank doesn’t like crypto. I mean, if you are still depositing a significant sum of money from your Coinbase account, to your Binance account, to your traditional bank account, they don’t like it and you can find yourself being asked lots of tricky questions, etc. But on the other hand, all the service providers working with those banks are interested in crypto. They see the future. So Visa’s made a big play for this. And Checkout.com, one of the biggest processors, they’ve made a big play for this. It’s always the banks, which are afraid of what’s going to happen with their regulation between buying, that stay out of this.
So what that means is, we’re not actually competing against what I would call the traditional giants right now. They are staying out of this, as they have no interest in providing these types of solutions. And for the solutions that we provide to be of interest, they can’t just be crypto or just banking. They have to do both. So since the banks don’t want to do crypto, but the crypto would like to do the banking, it gives us a window of opportunity that we might never see again.
Because once the regulators finally decide what they’re going to do with this, then the banks will probably say “Oh. We could have a go at this, now.” But in the entering, we’ve got a window, 4 or 5 probably years before that change matrealizes, where we can effectively bring both crypto and fiat into one space. Providing it to many institutions, whether it be a tractor company, whether it be a multi-level marketing company that the banks just won’t touch. So it really is, I would say a summer for this type of product, rather than worrying about whether it's a crypto summer or not. The product itself is in a summer phase.
Will the Visa cards actually be available in more countries or introducing Mastercard or Unionpay, maybe?
Okay, so Visa card, Mastercard, Unionpay, they’re all pretty much the same concept. They build payment rails and they work with banks to, let’s say authorize institutions, but 9 times out of 10 its a bank, to issue those cards and they have their various licenses to use those payment rails. Visa was the first in the game to make a play for this, and then Mastercard came onboard a couple of years later. Visa, I think I chatted to their head of operations for crypto about 8 months ago and they said they had close to 100 crypto projects now, around the globe. Which is a lot, but it's not when you consider it to, say other cards. Non crypto cards, it's probably 10,000. So, it’s still very, very small. Mastercard will be much less than that and Unionpay will be much less, again. We launched with Unionpay. We were the first company, we think, to launch with Unionpay, but Unionpay, without trying to create some form of diplomatic incident, it’s connected to China and China’s attitude towards crypto changes, depending on the wind, I would guess. So it’s a questionable card to pin your payment solutions on.
So, that really leaves you with Mastercard and Visa. As I said, they’re both very open now to crypto programs. However, Mastercard and Visa, as I said, rely on banks, using their licenses to issue it. And you would think that Mastercard and Visa have, you know, more power than the bank and in many ways, but that’s not the case. So, in the U.S., as an example, anybody who follows this space will probably know that Metropolitan Commerce Bank was the go to bank for all crypto payment programs. So you may have a Visa card, and the Visa card might be branded Choise.com or Crypto.com, or whomever, but ultimately it’s underneath the license of Metropolitan Commerce Bank. And Metropolitan Commerce Bank withdrew their support for these types of programs. They will continue to support the existing cards that they issued, but they’re not going to issue any more. And that makes the United States a very difficult market right now.
The second issue that you’ve always faced with cards and any card program, is because you’re relying on a bank within the infrastructure, that means you need a different bank for each geographical region. So Metropolitan Commerce Bank, for example, is not really authorized to issue cards to someone in Japan. They are a U.S. bank issuing cards to U.S. citizens. So right now, it is very difficult to foresee an environment where you would launch maybe one Visa card for the whole, whole world. And historically, that was not a problem because using, going back to Revolut, Revolut started as U.K. banked, but only wanted to issue U.K. cards. Once they get to the U.S., they want to issue U.S. cards. But in crypto, it is very different. And in crypto, you really do want to have a global card. Because most people, or most companies have customers from multiple geographies. They’re not just U.S. citizens and they’re not just U.K. citizens. They are global. So they want a global card.
Now, the program that we have designed, we believe is the only global Mastercard available anywhere in the world. For crypto, that is. There are, let’s say non-crypto cards out there, but the one that we work with, we believe is the only globally issuable Mastercard. And it’s important to understand how we do that. I’d like to give an analogy. If you are, let’s say Microsoft, and you gave an expense account to your 100,000 employees, all the way around the world, you don’t want to have 50 or 100 Visa programs and having to pay bills in every single country. So Visa or Mastercard, a long, long time ago, came up with the concept of, effectively a club or a special employment-type concept, where your users, in this case, employees, can have one card, no matter where they are in the world. Our program manager, in this case, has been running clubs for the best part of 15 years. So they have been issuing club cards for a very, very long time. And the card, effectively, is just part of a wider range of services.
So what we are able to do is, we can issue a Mastercard anywhere in the world. And it is a very attractive card, has very high value limits, it has very good transactional rates. For example, you can spend $100,000 a day on this card, if you are rich enough. Which is not typical in crypto space. However, it is also difficult to issue a card from say, the U.K. to someone in Japan. Or from wherever it is from somewhere else on the other side of the world. So the logistics of it are a little more complicated. So right now, the Mastercard program I just described, is only in the B2B. Because what we are able to do there is effectively work with our B2B customer, and let’s say he wants 5,000 Mastercards with his pretty face on the card, no problem and effectively, they’re distributed to him and for him to distribute in a further way. However, we are looking at how to bring that Mastercard program available into the wider world.
A very long answer, so it’s unlikely to see a wider Visa card program in the very near future, because that requires a separate integration for every single country, but it is very likely to see the Mastercard program, with some very nice features, being expanded into almost any market, including actually the U.S.A., which is not really easy to do right now, for the reasons I’ve given. But for the Mastercard program, I don’t see a reason why we won’t be able to do that. So that’s planned to be rolled out this year.
There was actually a recent event hosted by Choise.com in Miami and it had some pretty cool guests. Also U.S. Presidential candidate Robert F. Kennedy Jr. I am just now really curious. Are there any other upcoming events that Choise.com is planning to attend or to arrange?
The purpose behind this AMA was to talk about the B2B, but a side part of B2B is servicing institutional, high net worth clients. And although our Application, our App, I’d say is pretty cool to use, it’s nice, etc. Let’s be honest, institutions don’t deposit $5M in an app. They just don’t. That’s not how it works. And high net worth clients are the same.
So we have a very different approach to that and what we have been doing is we pick out the main events. We don’t, at this time, really spend a lot of money going to the event itself. So, for example, this was connected to Bitcoin: Miami. If you wanted to take maybe a 20ft by 20ft stand to Bitcoin: Miami, it’s probably $100K, you know, with all the additional. So rather than do that, we’ll spend $10K and host a party. And we’ve got a team of people who’s rolodex is just quite ridiculous.
We’ve got a guy called Tyler. Tyler is an ex baseball star. I don’t know a lot about baseball. Brits don’t really follow baseball, but he’s an ex baseball star. He also runs a poker club. It’s a very prestigious poker club on a yacht. And you know, footballers, let’s say high net worth rollers, they love all these types of things. That then links to the institutions which those people are using to manage their money. So, your American footballer, or whatever, he’s probably earned tens of millions of dollars in his life. It doesn’t just sit in a bank account, it’s managed by Fund A, or Fund B, or Family Office A, or Family Office B, etc. So we are able to now, really change the focus and at this particular event, as you said, we had 2 NBA stars.
I will be honest, I chatted to them both and I didn’t know of them from Adam and I never met them. All I can say is that one of them was very big. So I guess he was a footballer. But, we also got Kennedy to the event. Kennedy’s little speech about his support for Bitcoin, was put on Twitter. I think it had 600,000 views, etc. and that was just through connections.
So we’ve got 2 business angles. The first one is B2B, which I have been talking about, but the second one is supporting the high net worth and institutional investors. And to do that you have to host the right parties, you’ve got to have the right guests, and we brought on a team of basically sales people and support specialists, whose job it is to target those. And it’s all about relationships. It’s not about turning up at an event and spending $100,000 on a stand. These high net worth guys don’t run around looking at stands and picking up leaflets, etc. So yes, you will see more of these events, more of these parties. Most of them are going to be U.S. based right now, because that’s where a large proportion of our customer base will be. So, Sebastian, if you send me a message, you can send it to my Whatsapp which is, or Telegram, which is @AustinKimm and I’ll keep you in the loop for the next party and hopefully you can attend.
I just wanted to ask if you guys had any plans for any more index tokens or like Bitdriven and the wallet?
So Bitdriven… I love the concept of index tokens. They’re not a new concept. My background is in insurance and basically, insurance companies work with indexes all the time. And I’m actually a bit surprised that index tokens haven’t been a bigger part of the crypto investment environment, because it’s not a difficult thing to do when you think about it. You create a token, you create a pool with tokens inside, you constantly keep reweighting it, and then you have an index. However, from a legal perspective, index tokens have taken on a different framework. And I’m not the legal expert as to say what you can and cannot do. I just know that indexes themselves have a very tight regulatory environment. So you have to be very specific about that.
The Bitdriven, I think, is a fantastic concept. I will be putting, when it goes live, I will be putting some of my own money in that one.Because I do believe in the Bitcoin halving story and I do believe, and I think we all intuitively know that when Bitcoin goes up, the market goes up. When Bitcoin goes down, the market goes down. You could argue maybe the market goes down and Bitcoin follows, but I don’t believe that to be the case. We’ve seen the Bitcoin halving and we’ve seen what that does to the markets, and we also know that some coins are more correlated to Bitcoin than others. And that’s when, I think working with 3rd parties, in this case it would be Choise.com, but there are other companies out there, I think that will be doing something quite exciting in this space, because they have the AI, they have the resources to be able to spot these trends that the average person can’t spot because he just doesn’t have the time to do it.
I love the Bitdriven concept, I do believe in the story behind Bitcoin halving, and I know that we’ve got the tech, etc. to be able to spot those trends. Whether we add any more, I think we need to see how Bitdriven works first, because Bitdriven is quite a big bat. I don’t mean from a financial perspective, but I mean from a resource perspective. We’ve put a lot of effort into this particular concept. If it's a success , then yes, absolutely.
The other thing I’m really interested in, which might not be the same question, but it's connected, is security tokens. Now, security tokens, in a way, are a little bit like an index token, in that it is linked to some other asset. And security tokens, again it’s a licensing problem, but there’s going to be a huge explosion of, I would say timeshare-type logic applied to physical assets. So we’re working with a company that is currently doing security tokens around artwork. And they’ve got some, and I don’t mean $10,000 pieces of art, I mean $10M pieces of art.
They’ve linked up with some of the major galleries in the world. They’ve got property portfolios, they’ve got vineyards and I think tokenization of that is going to be a very exciting feature. And again, because it’s so regulated, you’re not really seeing that at the moment in the Binances, or anything like that, because it’s a very specialized space, but we are very actively developing something in that space. So, Bitdriven might be the only, let's say, index token for the next 6 months, but I would hope you might see something in the security token space, because I think, in a similar way, it’s a very nice concept.
When eventually will B2B be burning CRPT? If yes, when? It’s already been 2, 3 years, and if not, why?
Okay, so it’s a very fair question. So, right now, let’s go back to the CRPT token. I’m probably one of the top 20 CRPT token owners, so I obviously earned a lot during the ICO days, etc., so whatever pains everyone else feels, I feel it as well. So, We all know the price of CRPT has, you know, is not where we would like it to be. We’ve had periods in the last, say a couple of years when the token has dramatically increased, and that is really due to things that have been outside of our control. Things like launching on Coinbase. Now, I say that’s outside our control, of course we wanted to be on Coinbase, but whether we get onto Coinbase or not is outside of our control. It’s up to them. So we got on Coinbase, the token went up to $1, or something in those ballpark, and we gradually dropped back down at the time.
The reality is, the CRPT token burns relative to transactional revenue. And as I’ve already mentioned, transactional revenue is down a significant percent, so the CRPT is not burning. And even if we were burning, it would be burning such a significant percentage, of the total, it would be insignificant. So let’s say we were burning 200,000. It would not have a direct impact on the supply and demand. We don’t have that many tokens as a company, so we can’t really influence it.
So, going back to your question, the only thing that will really change the price of CRPT is the success of the company, relative to the amount of transactions. And the CRPT has two functions inside the B2B. So the first part is, every single B2B client is given an option to dramatically reduce the fees that they pay, by buying CRPT and locking them in. Now, that has a similar impact on the marketplace as burning them, because they have to go out and buy those tokens off the marketplace and then lock them away.
That has been happening now for the last couple of years. I’ll be honest with you. Not that many customers take that option, so we’ve got more than 50 B2B clients and maybe 1 in 10 take that option. Most of them say “No, I’ll pay the fee.”
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