The $100B Niches Hiding Inside Payments

**Max Levchin** (0:00)
The card payment interface is the singular best user interface ever created. It is the world's largest market by any stretch of imagination, and there are no niches in payments that are smaller than $100 billion.

**Alex Rampell** (0:11)
Once you go really big, the numbers get small, which is strange. There's a lot of volume, but the large volume revenue opportunities in payments tend to be the smaller dollar amounts.

**Max Levchin** (0:23)
There's always an opportunity to use another form of payment delivery device to satisfy a basic need. Convenience just trumps as the total amount you're trying to send goes down. The best user interface ever created is the credit card. This may actually be finally up for renegotiation, because AI is already there. It's just that you haven't yet trusted your agent to do as good a job as you would.

**Erik Torenberg** (0:46)
There's something else that you're surprised has not happened yet.

**Max Levchin** (0:48)
I went to some cryptography related conference and presented a new idea in digital payments and was literally booed off stage. Because it was certainly not anonymous and the big innovation of Paycall was, what if we don't care about anonymity at all? And in that sense...

**Erik Torenberg** (1:04)
Payments may be one of the oldest categories in tech, but Max Levchin argues there are still no small markets inside it. In this episode, I sit down with a16z general partner, Alex Rampell and a firm co-founder and CEO, Max Levchin, to look back at how payments evolved over the last 25 years and where the next major shifts may come from. They revisit the early days of PayPal and the origins of a firm, including the pajama problem, the first experiments with paying using identity, and the moment the team realized financing wasn't just another checkout option but a way to materially change conversion. They also discuss why their credit card remains such a durable interface, how percent financing can hide very different economics, and what happens when AI agents begin participating in commerce.
Max is skeptical that we'll hand over every shopping decision to AI anytime soon. But he thinks the payment itself may finally be ready for reinvention.
So you guys go way back. I haven't co-founded a firm well before then. You guys are pioneers in FinTech. You've been thinking about the space, trying to make sense of the present, think about where the future is going for 20 plus years, 25 years, maybe even more. And I'm curious, given so much time has passed since you first got into the space, what has most surprised you about what has happened, what hasn't happened, what did you expect to happen in the early 2000s of how this space would play out? Alex, why don't you start.

**Alex Rampell** (2:30)
I think the rise of Apple Pay and Google Pay and the extent to which they've really penetrated, because it's very hard to change consumer behavior in general. And it was a bizarre set of accidents, if you will, where there is this merchant liability shift, because mag stripes were so easy to replicate, that you probably noticed a while ago, that your new cards had a little chip on them, and you had to dip the chip, and then the machine would be like, don't remove, don't remove, remove, remove, right? That's because the chip was being rewritten, it was much more secure than a mag stripe, and basically Visa and MasterCard, and then the Euro Pay, that's what the E is for. What is ECM for in EMV?
Euro Pay?

**Max Levchin** (3:06)
Euro Card?

**Alex Rampell** (3:07)
Euro Card. I don't know, the Europeans somehow got their savings, they always do.
They insert their cookies.

**Max Levchin** (3:12)
It's definitely not electronic.

**Alex Rampell** (3:13)
Yeah, it's Euro something MasterCard Visa. So it was called the EMV switch. So all of these machines, if you did not want to be liable, like I could go to Best Buy, buy a TV, and then get home, use my TV and say, nope, never bought the TV. And if I was using my mag stripe and Best Buy didn't have the machine switch over, then Best Buy would be like, oh shoot, we lost all the money on that TV.
And Alex gets the free TV. I'm exaggerating slightly for effect. So everybody had to get a new machine. And then it turned out that those new machines had a little contactless thing where you didn't have to dip the chip or swipe the card. You could just tap. Nobody was using taps when those machines came out. And now it's ubiquitous. So that's something where, I mean, generally speaking, it's hard to change consumer behavior. But I feel like between COVID and the fact that all these merchants independently had to switch over their machines, and the fact that, I mean, I wouldn't have guessed in, I mean, you obviously did because the Confinity was Palm Pilot sending money, so you're ahead of the whole PDA wave. But I wouldn't have guessed that those three things would have come behavior. It's like change of consumer behavior, ubiquitous new merchant payment terminal, plus ubiquitous mobile telephony. And that's certainly one thing that has changed the world a lot.