SaaS Interviews with CEOs, Startups, Founders
763: He's Raised $18.5m To Help Banks Use Open API's, Makes Money From # of API Calls
26 Aug 2017
Chapter 1: What is Token and how does it fit into the open banking landscape?
hard work, luck, hire the right people. He's been a part of many, many high-tech companies too with multi-billion dollar valuations, seven really high-tech companies now taking a bet on this token space, really taking advantage of the stick that was applied specifically to European banks with the deadline coming up in six months called PSD2.
Chapter 2: What challenges do banks face with API integration?
His token approach allows banks to basically not only monetize API calls, but really bring themselves into the 21st century. He also obviously makes a cut of that. The more banks that use them, the more API calls, the more money he makes. They raised over $15 million, team of 20 folks between San Francisco and London, four or five banks integrated so far.
That number is increasing rapidly, though, as European banks look to comply with these new laws.
Chapter 3: How does Token's business model work with API calls?
This is The Top. where I interview entrepreneurs who are number one or number two in their industry in terms of revenue or customer base. You'll learn how much revenue they're making, what their marketing funnel looks like, and how many customers they have.
Chapter 4: What is the significance of the PSD2 legislation in Europe?
I'm now at $20,000 per talk. Five and six million. He is hell-bent on global domination. We just broke our $100,000 unit sold mark. And I'm your host, Nathan Latka. This is episode 763 coming up tomorrow morning. You're going to learn from crypto thought leader Jack Peterson.
He's raised a lot of money, 5.3 million in his initial token offering on the Ethereum blockchain to help you bet on future events. Hello, everybody. My guest today is Steve Kirsch.
Chapter 5: How does Token ensure security in its API architecture?
He's the CEO of a company called Token, a Silicon Valley startup company developing a modern platform for open banking. He's pioneered several core computer technologies like optical mouse, internet search, span filtering, and secure identity, and founded seven high-tech companies, two with billion-dollar market caps. Those are InfoSeek and Frame Technology.
He received his BS and MS in electrical engineering and computer science from MIT in 1980. Steve, are you ready to take us to the top? I am. You were doing this before I was born, so I can't wait for this. Tell us what Token is and what the business model is. How do you make money? So what we do is supply open banking software to banks.
Chapter 6: What are the limitations of blockchain technology in financial applications?
So I'm kind of like the Bill Gates for banks. So just like Bill saw computers, they needed an operating system for people to use them. Banks have the same problem. There's no real API that works across all banks. And so what we do is we go to a bank, give them our software, and –
It's very similar to me going to a hardware manufacturer and saying, hey, here's an operating system you can run on your hardware. In this case, it's going to banks saying, here's some open API banking software you can run on your bank so that anybody, any developer can access the bank in a secure way.
And give me an example of a bank that's using this and how they're using it, a real life example. So we have it live with Fedor Bank today. The problem is that most banks don't have an open API where you can do things like move money.
Chapter 7: How did Token secure its first bank partnership?
But Fedor did. And so we got access to their API. We hooked it up to our system. And so now you can use our APIs online. to drive the APIs at Fedor. And as we add more and more banks, you'll be able to use the same APIs across all banks.
So it's going to make interacting with the financial system much easier for developers, something we've never had before in history, because banks have always been very close to APIs. So they've been super open to people, but not to apps. I mean, how do you get to imagine the initial question on this thing? We're trying to sell it into a security, right?
Chapter 8: What advice does Steve Kirsch have for aspiring entrepreneurs?
I mean, why or how can you convince them? How do you convince them to adopt you? The banks, it's actually more secure to adopt us than to do it themselves and open it up to these regulated third parties. And the reason is we spent a lot of time creating an end-to-end secure system. architecture that's based on digital cryptography and there are no shared secrets.
And so it's very, very difficult for somebody to spoof the system and to authorize something because basically it's signed by the hardware in the user's cell phone, and that digital signature is then verified at the far end by the bank. And so there's nothing that can be done in between to tamper with the transaction.
Whereas most banks are using, for their own APIs, they're using OAuth2, which is just horrible from a security perspective. Steve, does this have elements of, I mean, what we're seeing take off right now in crypto? I mean, are there blockchain elements built into this? We have a shared ledger that we use for instant payment capability that we're developing.
And that does not use – when people refer to blockchain, typically they're talking about Byzantine fault tolerance type of consensus. There's no real need for that consensus.
uh in a lot of financial applications uh and for something that needs to perform really quickly uh meaning super low latency uh and very high throughput uh the technology for blockchain is just not appropriate because you just don't have the time to get consensus it's very very slow
Yeah, I mean, the Bank of England did an experiment with Ethereum, and they found that they could get like five transactions a second. You know, because the problem is that when you make a transaction out of your central bank account, that it better finalize, which means it's got to talk to all the parties before it can say, OK, great, we're at consensus next. Yep.
And until that happens, it's not going to accept the next transaction because it has to have a consistent view of the world. And take me back to the backstory here. So what year did you launch this company in? We launched the company a couple of years ago. So what, like 2014? 2015. Why do you laugh? It was late 2014. It was like October 2014.
I get the sense there's like a good story there based off your facial reaction. No, no. Come on. What is it, Steve? What happened? No, you can't. Did you spin it out of something or – No, no. I mean, it started as a, hey, let's, you know, banks are really behind the times. It would be great to bring Bitcoin-like technology to banks.
And so we started approaching banks with, hey, you know, here's an upgrade to your technology. And wouldn't this be cool? And they said, yeah, come back later when you have 100 banks on it and we'll take a look at it. Yep. And what is, have you decided to bootstrap this or have you raised capital?
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