55X in 12 Months: The Clearing and Settlement Layer No One Is Rebuilding Till Now | George Davis, CEO and Co Foudner of Lorum

George. Pod === George: Ultimately you're mostly still clearing through the largest kind of six banks around the world, and no one has really attacked that infrastructure. And so we started the business for that. Monica: You have an amazing career as a FinTecher as a founder, and now you're touching a fundamental problem that it's infrastructure.

Usually I talk about Neobanking, a few times the infra, but I've never gone into the detail of clearing and settlement, that it's genuine infrastructure. sometimes I want to innovate and it's frustrating because the banks, for whichever reason, can offer me a solution that is not fit for purpose or it takes too long or it's too expensive and then I cannot because it doesn't make sense to do it. So today's topic, it's basically clearing and settlement and how it is a barrier to cross-border payments, which is big.

Can you tell us a little bit about your journey, just for context, and then we'll go deep into the topic. George: Yeah, sure. So, Lorum is my, my third business. So I started my first when I was 18.

I dropped out of university to start a machine learning business. Long story short, ultimately sold that business in 2019 and, knew Well, the founder at TrueLab,, in London, an open banking payments business, or at the time an open banking data business, and came on really to start playing around with payments and ended up really falling on, in love with that space. Became extremely obsessive with the infrastructure that sits below a payment experience, so ledgers, virtual accounts, central bank settlements, et cetera.

, And we really pivoted TrueLab into a payment business. It became the core, core business line of TrueLab, so I got to see a lot of scale with it. But equally felt a lot of frustration that, we couldn't really effectively monetize foreign exchange, cross-border payments, where really that's where a payment business makes a lot of its money. And, Ended up leaving to co-found a business called BVNK, in the cross-border crypto space.

Really trying to solve some of those cross-border pains with, with a stablecoin as an intermediary rail ultimately. And that business became really, really large. You'll have seen recently, with acquisition announcements, et cetera. But actually fundamentally saw that, A, crypto doesn't really solve this core problem and B, you are still reliant on core treasury and trade services with banks, and that these services really are the piece of infrastructure that haven't been rebuilt.

So actually back in the '90s, you would sit on top of a Citibank or equivalent, and their network was really, really good for when there were hundreds to thousands of counterparties of financial institutions in the market that used their product. But that has changed now. Realistically, you've got hundreds of thousands of financial institutions with hundreds of thousands to millions of customers, and these networks weren't really built for that. And the deficiencies in that will lead everyone to tell you that the system is broken because it costs these kind of systemically important banks the same amount to service you, whether you have $100 million or $100 billion.

They are gating their service. It's very manually driven. It's built in large silos. And everyone then turns to these regional community banks, these small banks that are effectively kind of misappropriating their charter to offer correspondence , services.

They are spending their time actually building lending businesses and often, especially in the US, they're mandated by law to lend, like they have a community reinvestment mandate, and so they have to lend. Like even if they don't want to, they have to make a certain number of community mortgages. They are bound by a, a certain range of loan-to-deposit ratios. And so you're bringing inherently transient money, and they're trying to lend 80% of it.

And so they're not very incentivized, A, to build you a very high velocity API-based clearing service because they want to keep your money on platform so they can lend it. But B, they're not really incentivized to build you the more complex treasury products that you would buy from a Citi, from a JPM, from a BNY, like the ability to hedge currency risk the ability to earn interest in money market funds, buy wholesale rates. Because if you think about the incentive of these banks they either wanna lend your money, so they want cash that they can convert to a loan, or they wanna shift it off their books so they don't incur a capital requirement for something they're not really monetizing effectively.

And so then you're asking them to custody a money market fund position, and it increases their capital, but they can neither lend it or shift it. And so this creates a really weird incentive i-i-in the market and, um, everyone will tell you because of these things you must rebuild in crypto, you must rebuild outside of the central banking system, and we actually believe that's fundamentally not true. The system works really well, it's that the participants are wrong. The participants are wrongly incentivized.

And so we set out to change that with Lorum. That's really why we changed... Why, we left BVNK to s- to start Lorum was all surrounded can we build really a global custodian clearing treasury services bank connected locally in these markets that's 100% reserve backed that can, uh, provide you all of these more complex treasury services that Citi calls treasury and trade, JPM calls JPM Payments. It's a large majority of what BNY does, and no one's really focusing there.

Everyone builds this kind of thin layer at the top, these remittance companies that just leverage the same services. Maybe they get innovative with netting their book off so that they can make a payment look and feel instant that isn't really. And then everyone builds those businesses again with crypto. But whether you are doing that, whether you're just submitting through your bank, you're all using the same treasury and trade service.

Whether you're 10 steps removed from Citi or you're a direct customer, ultimately, you're mostly still clearing through the large- largest kind of six banks around the world, and no one has really attacked that infrastructure. And, and so we started the business for that. We started in the Middle East 'cause it had no infra, but so much money moving. Some of the world's biggest remittance corridors exist in the Middle East or out of the Middle East.

And, the market really was built around commodities, and so you don't see a lot of complex banking products, and it's an area where correspondent banking is relatively poor. And so we had to build a lot of the infrastructure for our banks and our partners. We used to clear... I always say on these that I used to clear payments with paperwork, with wetting, couriering the paperwork to branches- ...

'cause there was just no, no infrastructure. I mean, there wasn't client money products. So you couldn't really even try to hold money with a bank as a fintech effectively. There was, a handful of products that were very much geared towards wealth management, maybe buy now, pay later, but not much.

And that's given us a really strong monopoly in the Middle East to the point we now clear for some of the largest names in the world, some of the largest banks in the world. But our business really just blew up when we went global. We launched dollars, and that product grew at 200% month on month last year. Wow.

And, uh, we 55X'd our business in a year because it was just so Such a powerful change for us, and we started to launch services outside of clearing in the cash management space, in the custody space to help FIs really manage the money that they hold, um, versus just moving it. And I think this concept of building this 100% reserve-backed institution really resonates with a lot of customers because they can really trust our incentive as this kind of neutral central clearing house to support their business.

Monica: That's an amazing, amazing intro. And just for everyone to follow with the conversation, because we'll have all sorts of people listening, I want to step back a little bit. So basically, we have consumers. We have, let's say, fintechs, whether you serve SMEs or consumers.

Then you have companies that power products like remittances. And then behind the remittances companies, there's always a bank, that it's the Citibank or the big five banks in the world. You are disrupting at the bank level, at the Citibank level. At the bottom of the stack.

Yes. Yeah. Which is amazing. Can we - before we go deeper, can you explain in plain English what is clearing and settlement?

George: Yeah. So clearing, you can think of clearing as a fancy word for payments. Clearing fundamentally is the settling of some transaction on behalf of other parties. It's being this neutral settlement piece in the middle.

So instead of being what I call like an opinionated payment business, where actually you own the consumer and you are - you're relying on other banks to actually settle this money on your behalf, we are the on your behalf piece. Clearing is the piece that is done by someone that you trust that can actually move that money over a central bank rail into the end bank account of your account holder, your end user, et cetera. It's a very, very established function of equities markets.

So, when trading securities, you always use a clearinghouse that is a neutral party that takes one side's money and delivers the other side's equities in exchange. And, uh, it's something that has existed in payments for a long time but has been consumed by the large banks. And so it's not a phrase you hear so often other than I think, I think really ClearBank in Europe socialized the name again. And, um, then you started to hear the words clearing much more and it - but it's always been a core function of treasury and trade within - inside these large banks, is that that's how they facilitate the movement of money or the settling of a transaction between two of their customers or of their customer's customers in this case.

Monica: Exactly. So in this case, your customers are financial services institutions that move money George: Yeah, they are always FIs or what I would call a quasi-FI, like a, a business that does so much money movement that they've effectively had to become a, a, an institution without looking to be one, like a payroll providers, gig economy companies where their core model involves the exchange of money at such velocity that they have to look and feel like a, a, like, like a payments company or someone.

Um, and so we never really serve anything direct, even direct to corporate. We always direct to FI, and we allow them- Mm-hmm ... basically the building blocks to operate their financial service for their end customer. Monica: Amazing.

And then if we were to summarize the pain point that we're sol- that you're solving for, speed and cost I'm assuming. Can you expand? George: Yeah, I think it depends, which speed and which costs that you're talking about, I think. Because I think you could incorrectly look at this model as like solving for instant payments or solving for making things cheaper generally.

And actually, I think the biggest thing that we're solving is access. Access. It's actually that today, if you want to buy these services as a mid-market financial institution or a smaller payments business or anything like that, you have to work with a smaller bank with worse technology who's actually using the bigger bank. And so when you are going to them, you're getting a lower quality of service, and you're often not getting a full, uh, like a fully addressable service that you would get directly from a Citi or a JPM.

And it's often purely just a clearing and account relationship. It often doesn't come with any form of treasury management. It's really hard even for a PSP to add interest on the funds that they hold, for instance, because these services are very gated. And so if you are an institution in the US, you have great services because actually the OCC in the US has a mandate for the banks to not debank local companies.

And so, they generally will take on business, whether it's small or large. But outside of that, even some of the biggest European banks, for instance, struggle to get good correspondent relationships with US banks because of this debanking risk everywhere, because they're uncomfortable with nested flow, with flow that is on behalf of another institution who's doing it on behalf of another customer. And so giving access to nested financial institutions has been one of the biggest drivers for the growth in our business, is that we are set up so that we can give a smaller FI who has another FI as a customer or, or a customer who has a customer access where normally that would be a compliance nightmare.

It would be really hard to manage. These banks don't like to take it on. And so I'd say, like the first thing is, is really access, whether that be to more complex treasury services that you find from big banks or to more complex currencies like the Middle Eastern currencies where they were more difficult. And then I would say beyond there, our customers can build a more instant experience on top of us if they want to.

But actually our job is to get you the best rates. And so instead of focusing on how can we emulate an instant payment, we allow our customers to do that because they ultimately have the end account holder as their customer. So if they want to emulate a faster experience with their own treasury, they can absolutely. We're gonna give you the absolute best rates to do it with.

We're gonna give you wholesale treasury rates so that you can build margin on top of those so that we can be a kind of modular building block for your business. And so we're not monetizing to a consumer level the spread so that we can justify the usage of our treasury. We're actually giving you the best wholesale rate of the day, and then you can use that to manage your treasury enough to build an instant experience on top of us. And, that's also been a very powerful thing for us because it allows our customers to really monetize, and look at us as a profit center versus a cost center inside their stack and so the combination of access and these great rates is what really makes it possible for our customers to build good experiences.

But we do a lot of large value payments. Where this fits the best is that we work with import-export financing businesses and payroll providers through to platforms, et cetera, where actually they're moving quite substantial amounts of money, and the rate really matters. And, um, often these smaller banks sitting on top of a medium bank, sitting on top of a large bank, sitting on top of Citi, they've already put so many spreads on that you really just cannot get a decent rate out of them.

Whereas we can - we manage our rates directly with prime brokerages. We are running a quite intelligent treasury at a lot of scale because we're doing so many of these large payments that we can actually afford to offer a very, very tight rate on, on currency that, that allows our customers the best opportunity to monetize that. And then we can also give you access to a tokenized money market fund, so you can earn interest, and we can allow you to pay out those funds in, uh, five, six different markets instantly over, over payment schemes in those markets when, when funds are there.

That combination really helps our customers build amazing experiences, and they'll use those BLOXX to modularly make that experience w-whatever it needs to be for them. Like if we're working with a, a remittance-style business, they're often gonna be creating local accounts in the name of their payer, of their originator in every market, so that they can collect in the name of the originator and pay out in the name of the originator to make it a really premium experience, and they're gonna use our rates in the middle to be able to monetize their product.

If we're working with an import-export business, they're - they really care about what I call a very high-quality payment, where actually you need to make sure it arrives exactly when you say it will with all of the principal intact. So all of the money you sent is still there when it leaves the Swift Network, which is, um, a more common problem than you would expect, so that it isn't still the same balance when it gets to the other side and is in the currency on the invoice for currency control, et cetera.

And, um, there they're using more of those parts. They're gonna be using not just the virtual account piece, but a lot of the i-intermediary kind of infrastructure to settle those payments out. The same for payroll. You want it to come in the name of the employer.

You want it to come exactly when you say it will. You want to make sure the employee gets all of the money that they're meant to get 'cause these things can really affect an employee's ability to get credit, et cetera, or the livelihood of those employees. And it's a very high-stress sort of payment. Uh, and if you're doing that from abroad, it can be very difficult.

And so it's always this kind of high-quality payment that we really focus on. We're less focused on What I call like throwing $100 over the wall in a remittance. It - where it, you know, it doesn't always matter, if it comes in the correct name, you just need to get that money into that end bank account as fast as you can. Whereas we're really much more of a high-quality infrastructure piece that, that can do that, um, but also can be used to - for much more kind of complex payments where there's a lot of security involved.

Monica: That is amazing. There's founders who really know their stuff. You're one of them. I'm like, "He knows everything, George: all the details."

I'm very, very obsessive. With everything I got, I'm very zero or 100. I'm either interested or I'm not. So...

And we try and hire people as well that are extremely obsessive. It's a trait that we, we look for, for better or for worse. So- Yeah. Monica: Yeah.

And I want to touch on that later, later. But, uh, I loved like you speak, of course, like a founder, but you speak like a technical PM that knows their stuff really, really well, and that's amazing to see. I'm like, "That is cool." I like that combination.

So I want to step back 'cause people are listening to us, they may not be as technical as you. If let's say I am a PM in a payroll company or remittances company, the thing that probably caught everybody's attention was revenue-making line, revenue generator. How do you suggest PMs to think about the framework or the questioning that they need to do in order to reach to someone like you using this solution? George: So I think you could look at - you can always look at payments as a cost center and the movement of money as a cost center, because it - that's the, the simplest, kind of almost laziest way to look at it.

Because you are going to someone like us, and you are paying a fee, and therefore it is a cost. And yes, it's a, it's a cost of goods sold for the product line, um, because you're monetizing a transaction fee with your end customer, presumably. I think it's when you start looking at the combination of foreign exchange and, uh, and clearing and the account that you start to see actually how can I shift fees around in a way that feels or near free for my end customer but actually can be a major profit driver for me.

And I think FX is one of the most exciting places to do that because you - for us, what we see is Different customers have different sensitivities to different parts of the fee stack. Though some customers will want the lowest possible transaction fee because that's what matters to them, and, uh, foreign exchange is not a revenue line for them, and so they would rather have worse rates and, uh, better fixed fees. And, and especially you'd obviously see this if you're not doing any conversion do- uh, in the flow.

They're, they're trying to obviously get their overall fees low. But I think when you work with a partner like us, there's a lot of opportunity to turn the FX side into a profit center because the rates can be so good. Like if you can achieve a couple basis points on top of the market or even sometimes nearly at market because we might be able to generate spread on the other side, it means that even if you're charging your customers a very complimentary rate, ten, 20 basis points, when a big bank may charge them fifty to a hundred, especially in the consumer space, sometimes two, three hundred, you've got quite a big gap, a big delta between what we're offering you and what you can offer the customer, and a very tight delta between what the market is offering and what we're giving you.

And I think looking at that properly is, is the right way to go. Most, most of - most fintechs when they build these products, they tend to actually just sit on top of bank rates. They don't do anything complex underneath the hood. You know, if they're processing in Asia, they're probably buying currency from DBS, and if they're very lucky, they're buying it from Standard Chartered.

And the same thing is true in Europe. They're probably buying currency from Banking Circle, which who is in turn buying currency from JPMorgan. And no one's really doing anything advanced with that, so they tend to take the rate and just add a spread on top, and depending on who your customer is, that might be bigger, that might be smaller. Um, with us, because we are a kind of core piece of infrastructure in the market, we see both sides of the market.

We can, uh, manage effectively a two-sided exchange where we have one customer selling, one customer buying, and we can use much more complex venues to execute FX, like prime brokerages et cetera, who are actually predominantly used to settle high-value currency trades for hedge funds and and other banks, et cetera, and apply that out to the smaller mid-market. And so we can give you much more attractive rates. And then it's up to our customers how they use that. Like some will append a big spread to justify the leverage of their treasury.

So if you are building like a Wise-style business, then you need to be repaid for the fact that you're holding hundreds of millions of dollars around the world to make instant payments, and so you're taking a lot of your money in spread. And lucky for them, most banks, most fintechs, they just... A good rate for them is to apply like the MasterCard rate you will often see is the rate everywhere. But you know, MasterCard's doing the same thing underneath.

MasterCard's got a rate on top. And so, um, with a Kind of a much tighter spread at the bottom. These businesses likewise can make a lot more money and still save their customers money and, and still be on the kind of good side of that transaction. And so I think it, it's about making that more intelligent and, and being - taking more deliberate decisions with how you manage man-manage currency and how you manage currency risk, and help you monetize way more and not just look at it as a back-to-back trade with your banking partner effectively.

Monica: Mm-hmm. Awesome. When we think about cross-border payments, SWIFT always comes in the picture. Where does it fit here and in your hypothesis?

George: Uh, SWIFT is just fundamentally messaging. You know, it's just a one way of talking to another financial institution. And I think a lot of people conflate the settlement of a wire, the settlement of a payment with the SWIFT messaging in between, because it uses a SWIFT BIC, 'cause it uses a bank identifier code that's registered on SWIFT. And so everyone will tell you SWIFT is broken, um, and it doesn't work 'cause SWIFT is slow, etcetera And that's not true.

What it is, is settlement banks on either side or in the middle are not delivering funds adequately. Um, and so it depends on the participant, like I said at the beginning, really. And so for us, SWIFT is a great rail, and we will continue to interface with our settlement correspondent banks in end markets via SWIFT as long as we can really, because as long as you can remove a number of hops and you can settle directly, we have no trouble with SWIFT. Uh, we are, we s- we, uh, settle directly in most of the markets that we operate in, but we still use SWIFT in the middle to rebalance, to move funds, to work with our correspondents, to interact with our correspondent partners.

And no payment model works without correspondent partners, and you often see stablecoins, um, used as a replacement for SWIFT. That's often the line that you see. But all they're really doing there is replacing the financial institution on either side. So you're taking it away from being what might be two large banks and two medium banks that are their partners on either side, and you're exchanging it for a crypto liquidity provider and a and then a s- and then their bank and then your bank.

And so you're still adding the same number of correspondents. You're actually just kind of de-standardizing the messaging for it. And, um, you end up creating a lot of the same problems. And so we really don't believe that SWIFT is the issue here.

It, it's the settlement bank that is the problem, and you're still having to use that even if you're liquidating a trade for now. And what you often see in the stablecoin world is if you're going, say, euro to Singapore dollar You'll often find that you go euro to dollar, dollar to USDC or USDT, and then often you'll sell USDT for dollars, and you'll wait for dollars to settle into Singapore or you'll use the LPs netted bundle of dollars that they already hold there, so same thing everyone else is doing outside of crypto, and then you'll buy Singapore dollars with the dollar.

And, um, all you're doing there if you, if you look at that fundamentally is just adding on extra spreads, extra stops in the same way Swift adds hops and it's just a different hop. You're just kind of replacing it for a different thing, and no one is really focused on how do we reduce those steps, how do we reduce those hops directly. Uh, and so and if you can do that with Swift, great, and we, and we do. Um, we, we settle usually with one hop everywhere.

Um, so I think, uh, it's a powerful way of messaging the correspondents, and it probably always will be, and I think people really conflate what Swift is with what the experience of an international payment is. And, um, and I think that, that doesn't do it justice. I think it leaves a lot of room for people to go around and solve the wrong things. Monica: Yeah, and I think when you touched about stablecoins I was like, people have approached me and we have these conversations, and then I'm like, "I still don't get it.

I have an extra step." You know, why is it cheaper, faster? Like, I need to move my local currency to a USD account to then put in a USDC this the other, right? Uh, so I think it's like that bit of your explanation was also very informative, so that then we are aware of all the...

If we understand how the money moves, not at a consumer bank level, but at a deep level, then we can make better, more informed decisions as fintechs, as neobanks, as, as an ecosystem. And probably this conversation we are lacking in terms of understanding across everyone. Not everyone. The experts know it, but, uh- George: And I think if you need to move money into a really difficult market, like a dollar illiquid market, a market where it's really hard to buy dollars with your local currency, it can be great because it's an alternative form of value that you can exchange locally.

However, this only really works at a low scale, and now low scale is still billions. But if you think JPM moves $10 trillion a day, like this is the real scale of, of money in the world. And, um, those markets where they're currently dollar illiquid And stablecoins see a lot of success, I would say in the long term will become as illiquid with stablecoins, because the, the reason they're illiquid is governments hoard the dollars. They don't wanna hold their own currency.

The same will become true of stablecoins, and at some point you have to get those stablecoins into a form of local currency, and then you're really at the hands of the local market. You know, it's not set by the Federal Reserve what that rate should be. There isn't a common FX rate and so these markets tend to be very volatile, and you can find on any one day you may have a couple million dollars of liquidity, and on another you might have hundreds of millions to billions of dollars of liquidity, and it's hard to manage.

And the more people that come to the market, the more of these stablecoin companies that come to those markets, the more of that liquidity they're eating up. And so I think right now it does solve a difficult problem there. I think where I see the value in stablecoins over the long term, where they don't have this liquidity issue, is in markets where you don't have trust in your end currency. Hmm.

Argentina, for instance- Yeah ... where you don't actually trust your government with the local currency, and you don't trust them with your dollars. You don't trust the banks with your dollars. And so you need to hold a dollar value that is not inside that country, and I think that can be powerful.

I think tokenized bank deposits are exciting. For us, tokenized money market funds, tokenized fixed income generally is exciting because it allows the exchange of the value of whatever you are holding instantly. Um, but I think I don't, I don't buy the, um, the stablecoin sandwich, the fiat stablecoin fiat world. I think it doesn't solve the core problem unless you are in the highest, least liquid market possible, and even then you're playing a short-term game.

Monica: Thank you for saying that. Sometimes I'm like, "I just don't get it." And then I say, "Oh, maybe it's because I don't know enough." No.

It's because sometimes I'm like maybe George: it doesn't make sense for everything." And people are building very good businesses in it, but when you, when you look under the hood, often, often there's dollar settlement all over the place in there. Um, which is fine, and, and they are a payment business like any other using those rails. But I think it can be easy to not analyze well enough, like what is the foundational problem?

What is the - going back to first principles, what are we really trying to solve? Like, what actually is bringing this payment down in the end of the day? And if you don't do that, often stablecoins can look like a great solution until you go through the pain of trying to leverage them properly. And this is what gives way for companies to specialize in the exchange of stablecoins like BVNK, like Bridge, where actually you just want a partner to deal with it, and they've built really strong businesses just dealing with it for customers.

And, uh, but to use it as an end-to-end cross-border payment solution is, is difficult. Monica: I want to expand while we're in the topic of stablecoins, and then you just said BVNK. What you touched at the beginning of the pod, basically, you were a co-founder and then you decided to leave. Can you tell us a little bit more behind that story?

George: Sure. I mean, so when we started BVNK, Jesse and Don had a previous business, Coindirect, which was like Coinbase for Africa. It was like a crypto exchange for the African continent. And, um, we came on to co-found really what was gonna be a crypto bank at the time, hence the name BVNK.

And, um, over time that evolved into, into cross-border payments and, and that made a load of sense and, and we did really well with that, and we merged in Coindirect. And so it was always a very large business from the beginning. And I think at some point I had this itch of I wanna solve the real problem here. I think this does solve- Mm-hmm ...

a problem, but I want, um, the part of the stack that really interests, interests me is the bottom, is the fundamental change at the bottom, and I don't feel like I'm solving that, and I need to go do this for myself really. So it had less to do with BVNK. I mean, we had a - we got a lot of scale really quick because we managed to, uh, build out great payment services and merge in great exchange capabilities from the Coindirect time. And so we got to scale really quickly without really always having to think about what is the core issue here.

And, and, and really the motivation behind BVNK was less about solving this payment pain and more about taking the opportunity of this new form of currency and, and what it, what it can be used for. And I think my passion lies with solving this piece at the bottom, and I, I love enablement business models. I always have. I love a, like an API-based business.

You know, I want to enable other people to build great products. I'm not a consumer product person. I don't have the ability to do that. And I think often even SMB products like Airwallex, et cetera, that - they are consumer products.

Monica: They are, they are consumer products, yeah. George: Yeah. And, um, I mean, I love this enablement, this infrastructure, and I felt like there was a way for me to enable to the nth degree at the bottom of the stack and, and wanted to solve that. And my co- co-founder James and I have worked together for 14 years on, on these problems.

I mean, um, we have a 20-year age gap. I, I was a 14-year-old software engineering intern in London when I met James, um, at a, a company that was a subsidiary of Bank of New York. And James was really lumbered with me, and we did four years of me doing part-time engineering whilst I was still at school. And- Mm-hmm ...

uh, I brought him to start my first company. I brought him to Tula to build payments there. I, uh... he, he then became VP of engineering at, at BVNK.

And through that time we just developed the same love, the same obsession for this part of the stack and the same frustration o- over not being able to solve it or having to focus on things that we felt didn't solve it. And, um, so it was just really clear for us when we saw this opportunity that we needed to go and do that. And I firmly believe this is a, this is a $100 billion business line to, to build. Um, the opportunity is far larger than, than a couple hundred million dollars, a couple billion dollars.

I think to these banks, this unit is worth $80, $90 billion of their valuation. There's a chance to build a truly huge business here, and no one is playing. And for as long as your competitors are BNY, Citi, JPM, Stanchart, I think you're in a wonderful space to build because these guys are asleep at the wheel. They're always gonna have more money than you, but they're never gonna move as fast as you.

They're never gonna be able to rebuild their stack, and that's really exciting to me. And so, I just couldn't really resist doing that. We have shared investors with BVNK because we've built such kind of a rapport at the time, and we had such a good understanding of how actually this could be an enabler for BVNK. It would not be a competitor, and it enabled a very, very smooth transition into doing this.

Monica: Amazing. So I'm going to totally deviate. You are clearly super smart. Uh, you've got the passion, you've got the technical, and you're tackling a huge problem statement.

There's - It could be awesome to understand, I think there's people working in the industry that they are like, "Argh, I'm so frustrated about..." And then just like fill in the blank. And then they are like, "Oh, I think if we were to do this, it solves it," or if you think about it that way. But many of these guys and girls, they - I don't...

the right word is they don't - is not they don't have the courage. You did - You saw this, and then you were like, "Oh, yeah, I'm just going to go and build it." Like, if it was so easy, what is that mindset that people like you and I working in the industry when we have this idea of, "This is broken, I want to do it," what's the mindset that goes For your mind as a very courageous founder to do this, to be like, "You know what? Do it," instead of, "Oh, I'm competing against city," or, "It's a ton of money," or, "It's hard.

I don't have the funds, I don't have the team." It's very easy to say, "I don't have all of this." George: I think being a founder is not for everyone. No.

And really it's kind of like a... It's an abnormal way for your brain to work. I think you have to have a little bit of an unhealthy brain. It has to be a little bit broken for you to perceive these things like this, but I'm a dreadful employee because of it.

I think in first principles a lot. Again, it's something I look for in our team a lot. And I have this ability to drill down into first principles very quickly, and doing that inside someone else's organization can be frustrating because, look, I know exactly how to solve this problem, and we're wasting all this time on this other piece and, uh, not getting it. And not having that control was always frustrating to me.

I'm very impatient as a person. I'm very obsessive- Mm ... as a person, and these traits really help me. They sound like they're all negative words, right?

Impatient, etcetera But that impatience really drives me, and I think I saw that even when I went to university and I hated it because I was just sat still. I didn't want to be sat still. I wanted to be solving things, and I'd done it- Yeah ... for four years part-time, and I just wanted to get out and continue doing it.

And so I've always had this complete pull for doing my own thing and solving these kind of difficult problems. I think you have to be extremely motivated by it. You have to be very obsessed. Like, there's no way to solve these problems without it taking your entire existence.

And I love things taking my entire existence. It drives me, it gives me energy. Um, but... And I d- I think, like, work-life balance is such a toxic phrase even in this world because there is none for this.

Yeah. Like, it needs to be your life and you need to love, love that and live for it. And I think if you can find an a big enough problem that you feel you really know how to solve and you have that drive, it can be amazing. Fantastic.

The worst founders, I think, in the world are ones that apply, some technology and try to look for a solution. Like- Mm ... look for a problem for - that they've built a solution for because they just want to be founders. And I always advise people, like, never do it just because you want to be a founder.

Do it because you're in pain not solving it and you're bored not solving it. If I'm not challenged, I'm inc- I get bored very quick. And so the journey of being a founder is phenomenal for me because it changes every single day through ups and downs at whatever size of scale, and I'm so driven by it that I will grow with each piece of that. Yeah.

Um, but if that's not you, then- Solve this for someone else, right? Find who is solving it and influence them internally, because some people are great employees, and there's no shame in being a great employee. Like, it would be really hard to build this business if I had a business full of founders. Monica: Oh.

George: Um, but it's not always, it's not always the right way to solve the problem is, is it's not always to, to go and be the founder unless you feel you have some kind of outsized ability to influence that, um, that market. But then I would also say when you're not a founder, you can tend to look at things and think, "Oh, that's, lined up so well, everything's perfect, such a smooth journey." And I think that stops a lot of people when it shouldn't, because it's really not a smooth journey.

We all, all kind of bumble around trying to work it out in the beginning. Um, and you just don't see that because the best people really sprint at doing it. And if you feel like you can accelerate through that learning, I think you can be a great, great founder for these problems. But you, you really have to put energy into having no ego of being wrong, pivoting all the time, like being extremely highly adaptable.

And, uh, when, when you do that, I think you can have a great opportunity. Monica: There's two things that kind of stood out. Can you expand on the... When you meant - when you said you, you can sprint through this pain, basically, what does that mean?

George: So I think some people tend to labor over failing. Whereas I always say to the team, like, "I'm wrong so often, I'm desensitized to it." I am actually excited to be wrong, um, because, uh, it's, it's - doing this well isn't about being right all the time. I think you need to be right on the macro.

You need to understand the big picture and do well at the vision and understand where you need to get to, and then you need to have no opinions on how to do it right on the micro level, on the small things that you do day to day It's totally fine to be wrong at those things. Um, and I think as long as you have the ability to learn you're wrong, change your mind, and have no shame over the fact you've changed your mind, and then just move on to the next thing, next thing, next thing, you're really well.

The people that labor over, "Ah, but I thought it would work this way. Why was I wrong?" They have that shame. Maybe they're defensive about it.

It doesn't work, and it's something that's kind of a mandatory trait for working at Lorum really, is you need to be able to drop the ego and just embrace being wrong. Like I'm - as I say, I'm wrong so often, it doesn't matter to me. Like, it's totally fine to be wrong, but it's the fact that I will pivot my entire view on how to do that thing in seconds when I learn it's wrong, because all I care about is achieving that- outcome. I don't really care how we achieve it.

And we even drive this into our goal setting inside Lorem. It's actually I really - I couldn't care less about what tasks you're gonna do to achieve your goals. I ca- I care about what are you gonna do to achieve, like, outcomes. Like, what are the outcomes you're gonna move?

Because then you're not locked in. Like, I don't wanna lock team in to do this list of 10 things over the next three months to achieve our goal when it might be the wrong 10 things. Actually, you work out the 10 things, and those 10 things can change every other week if they need to, provided you're moving that end outcome. I think that outcome focused and being able to go through the pain of being wrong about how to achieve that outcome and excited that you've learned how to do that process is very, very important.

Monica: I love it, and I think I could speak with you for three hours or so. Can you expand on - you said about obsession, and you look at your team. Everyone you hire, you look for the obsessive trait. George: Yeah.

So, and I would say there's, there's two ways to look at obsession. Like, I think there's two forms of it. There's a very hungry form of obsession that we love, which is like I just really wanna solve this problem. And I don't always look for people that are obsessed with the problem we solve.

I kind of mostly only care about your capacity to be obsessive more than anything, 'cause it tells me a lot about how your brain works and the way, the way you work. And it - and again, just like being a founder, you need to be just a little bit broken to be that obsessive. Like, uh, it's not a balanced way to live your life, but that's fine. And, and I always say to people, like, working at Lorem is not gonna be for 99%.

It's gonna be for 1%, and that 1% are gonna really love it. And we can't build a company around what the other 99% will love. And so we look for this really obsessive type that just can't sleep till they've solved the problem, and that problem might be completely external to what we do, um, but it's that capacity that's important. I think where obsession can be dangerous is you can be obsessed with doing things the right way, et cetera, and, and that can slow you down.

And so, we sometimes frame this more as like a hunger for something versus, versus just purely obsession. But yeah, I think that obsession is required for you to be highly adaptable. And I would say the most important word in our culture is adaptable. It's adaptability.

It's our ability to pivot really quickly, our ability to learn and change our mind. And being obsessive with the end outcome means you really don't care how you get there. You are just obsessed with getting there. And so we're gonna learn, we're gonna pivot, we're gonna change our mind quickly.

We're gonna have no ego with these things because we wanna be the best at what we do, uh, as quickly as we can possibly do it. I think that's the only way we grew 55 times last year because we have a team that is obsessed with getting things right and getting them done, um, and, and they're not opinionated about how we get them there Monica: I don't know if this question makes sense to you, but how did you learn to think like George: that? I don't know exactly how I learned to- Yeah ...

to think like that. I think, I think I've always been that way. I've always had, like, a spiraling brain. As a child, I was very anxious.

I struggled a lot with anxiety as a child and a teenager. And, um, I think it was another way that that feeling was manifesting. It's the same thing, right? Like, you can spiral on the good, and you can spiral on the bad.

And I learned to channel, channel this energy into what I do, and I think it, it... What was a massive inhibiting factor in my childhood, something that really gave me very poor mental health as a child, became my superpower at work because it meant that I could really dive in, and I would be quite intensely self-critical until I got it right as well. And, um, that's why I always say I sort of feel like you have to be a little bit broken because I, I was broken. I was a child that was really, really anxious and relatively unhappy, uh, as a, as a younger child.

And, uh, that same energy actually just made me really grow as an adult, uh, in, in the work world. And, um, when those kind of barriers were taken away and I could reposition that energy onto it it be- it became very strong for me and, and, and it, it really helped me manage my life, you know, because I had something to obsess over other than myself, really. And, um, I think it's hard to teach. I think you need...

It- it's, as I k- as I keep saying, it's, it's a little bit broken, so it's not like the way the human brain naturally works, I think with everyone, is to just embrace being wrong and sprint at being right. A lot of people like a lot more structure, and you have to embrace a lack of structure to think that way because things aren't just gonna go exactly how you planned. They're... It's gonna take a, a windy route to wherever you're going, but you're still going, and that's what matters.

And, um, I think you need people that have some of these core traits like the obsession like the flexibility, the adaptability, the kind of curiosity to learn. These things allow you to operate in this way, but if you are not just inherently curious about everything that you come into contact with, it can be really hard to embrace the learning culture so well. Monica: This is so interesting because it's more on the personal side. You're kind of describing me with a podcast.

Sometimes it just doesn't make sense, right? But I've never seen it as a trait. It's just what I do, right? Yeah.

And I hadn't thought that people are not that curious or that obsessed. But George: you're right I'm sure you have to be super curious to do this because you need to be able to just get really excited about what someone's saying and ask more questions. And I think that same process is what you have to go through building a company. You have to just keep constantly going, "Hey, that's interesting.

I'm gonna ask more. I'm gonna look more." Monica: Yeah. So I'm very conscious of time.

What's next for you? For Lorum. George: I think at the moment for us the big focus is just scale. You'll see in the press we've applied for a, a banking license in the US with the OCC.

And that's a very important part of the next, next year at Lorum really, is how we scale that up and how we, how we build a truly global banking business now and not just the payment side. And so we're very excited about the things we can do there, the cash management side of our business, all of this FX, derivatives, uh, interesting products, et cetera. These are all really, really important parts of our future, but we're on a very, very long journey here. Like, if we're gonna build an $80, $100 billion business in this space, and I truly believe we can with the incumbents that are there, this is a 10-year-plus journey from now, and, and we're really still at the very beginning at year...

or now year three we are in. And so, I think we've got a long, long way to go, and I wouldn't pretend I know exactly what route that will go, um, based off of our conversation here. But, um, I think we're very, very clear on what we're building and, and really that is this kind of new era Bank of New York, Citi, et cetera, um, treasury products, and, uh, that is gonna be a really long journey. Monica: That's what I was thinking, like coming back full circle.

At the beginning, we explained all the participants in the chain, and we were like, well, you're disrupting the Citis. So did I get that right and I understand that you're getting a banking license, and you'll be basically doing corporate banking and- George: Yeah, Monica: absolutely George: be a Monica: competitor. George: We're, we are getting a specialized type of license, hopefully, which is, um- Okay ... which doesn't do lending, which fits with our core thesis really very well.

And so that application with the OCC is really important to the future of, of what we're building here. Um, whether it be in dollars or not really, it's that first step towards actually becoming a real player in that world against these Citi, BMY, JPMs, et cetera. Monica: Amazing. And currently Lorum operates globally.

George: Yes. We have team across Singapore, Dubai, uh, Switzerland, London, New York. Monica: So customers can come to you wherever they are based. And the new bank, it's only for Financial institutions, your customers could be financial institutions based in the US or they can be anywhere George: Our core business today really is selling like a dar- dollar correspondent service to places that don't have dollars.

Well, even Europe struggles for dollars, et cetera. And so really this banking license allows us to really own the dollar stack if we achieve it versus being reliant on others, which is really important. Um, but it doesn't change the target of customer. I think like the US market is, is interesting, but actually I think people often mistake mistake this for saying, "Well, the US is the market, so we must go there."

Exactly. When actually, when you look at the aggregate markets around the outside, that's actually a much bigger space, and I think it's really underserved today, selling US financial services to a Asian business, a Middle Eastern business, a European business, et cetera. And so that's really how we use that. But should we achieve this banking license, we'll be we'll be owning fully the dollar stack, which is very, very exciting for us.

Monica: So the neobanks across the world can come to you now. George: Absolutely. Monica: It sounds like a very exciting business. George: Thank you.

I Monica: think so too. A super opportunity. I'm like, amazing. Congrats.

Well, it's been a pleasure speaking with you, George. All the very best. I think, yeah, it's like we only spoke for one hour, and we hadn't met before. I think you're amazing in so many ways.

You're the type of founder, because I speak with many people, and there's a few here and there that I'm like, "Yes, that's the type of founder I would love to work with." It's not that I would love to work with you, but it's more the, the energy, the vision, like the product, the thinking process, all of that. I'm like, "He's cool." So yeah, it's super cool.

Well, thank you for the George: kind words. Monica: Yeah, it's super cool. Awesome. I'll let you go.

Thank you very much, and all the very best. George: Yeah, thank you so much. Monica: Thank you, everyone. See you next week.