Enough Putting Lipstick on the Pig: Why Moov Is Rebuilding Payment Infrastructure from the Ground Up. Featuring CEO Wade Arnold

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Wade Arnold: Marc Andreessen is famous for saying every business is going to become a software company. And then my board member, Angela Strange, said, “Every software company will become a fintech.” And I said, “Not if they have to learn payments.”

 

Dan Blumberg: That’s Wade Arnold, founder and CEO of Moov, a fintech that’s building systems for the way money moves today. Payments seem incredibly simple, but when you get into how exactly money moves from here to there, it’s wickedly complicated, and that’s before you add in the internet and all the modern businesses that no one envisioned decades ago.

 

Wade Arnold: I want to sell a million pairs of shoes in one second; that underpinning technology doesn’t work as well as it did when it was designed for brick and mortar.

 

Dan Blumberg: Wade knew the only way to advance was to take the whole stack apart and rebuild it from the ground up.

 

Wade Arnold: Being a part of financial services for the last 15 or 20 years, it seemed like we were always putting lipstick on the pig.

 

Dan Blumberg: On this episode, Wade shares how Moov emerged from an open-source project, how their embrace of developer communities has become a competitive advantage, and why he always reminds his team to respect the craft. Welcome to Crafted, a show about great products and the people who make them. I’m your host, Dan Blumberg. I’m a product and engagement leader at Artium, where my colleagues and I help companies build incredible products, recruit high-performing teams, and help you achieve the culture of craft you need to build great software long after we’re gone.

So, the podcast is called Crafted because at Artium, we really focus on the craft of building great software and we try to help our clients do the same. And I understand that you’re fond of reminding teams to respect the craft, and I’d love if you could just start by just sharing what you mean by that.


Wade Arnold: What that’s about is creating space so that software engineers can do their life’s best work and giving them the tools and the opportunities in order to both educate themself and then also the time and kind of the environment for that to happen. So, when you have a software engineer coming into the team, what are we doing in order to make sure that they can become the type of engineer they want to eventually become? Frankly, a lot of companies say that they do continuous education, but then they don’t send anybody out into the real world or give them the materials necessary in order to have that time to up-level themselves. And so, I think by investing into individuals, and creating that space for them to actually execute on that time is critically important for you to track the right people and then keep them around in your organization.


Dan Blumberg: How did you discover this love of engineering and the craft thereof?


Wade Arnold: Computer science was just something that was a hobby for me. So, I had a BBS board with an ISDN online going into my parents’ basement in middle school. I was the guy in college trying to install Linux on a perfectly good Windows computer. But for me, it was really this hobby that I felt was something that allowed individuals to create. So, I’ve always been fascinated by the art of software engineering and the art of delivering software quickly, and for me, it’s one of the coolest opportunities in order to have your actual job match up with your hobby.


Dan Blumberg: One of Wade’s first gigs was an open-source project where he reverse-engineered the Action Message Format used by Flash.


Wade Arnold: And this AMF PHP project really took off. It allowed me to fly around the world and speak at Web 2.0 conferences. But for me, more important than the actual technology was the community that got developed. I think that’s something that I continue to be passionate about, is how open source draws like-minded software engineers together, and open source is just this incredible tool that allows you to focus on libraries, and then this community develops around it. And that’s something that I’ve brought into Moov as well.


Dan Blumberg: Can you paint a picture for us of the payments and money transfer landscape today? What it was built for and why it’s insufficient for the way that we transact today?


Wade Arnold: So, money movement in the United States was built before the internet. Every dollar settled on a daily basis settles on an IBM zSeries or an AS/400, all technologies that were designed before the proliferation of the internet, or more importantly, business use cases that were designed for the internet. And so if you kind of fundamentally think about a backend system for a bank, it really is designed for walking into a branch and making sure that experience works, whether or not they have an internet connection between the other branches. And in payments, that same model is applied to brick and mortar. That’s really what that technology was fundamentally designed for, and then everything really over the last 15 years has been wrappers around that same low-level infrastructure. And now when you try and apply new internet based two-sided marketplaces, or I want to sell a million pairs of shoes in one second, that underpinning technology doesn’t work as well as it did when it was designed for brick and mortar.

Being a part of financial services for the last 15 or 20 years, it seemed like we were always putting lipstick on the pig. So, you’re always trying to build this new great user experience and you would build these beautiful UIs, but user experience is the entire back and forth between client and server. And so you can build this beautiful UI, but if you can’t get the data or the data takes seconds if not minutes to return, it’s not a great user experience. And so I feel like the last 10 years has been kind of new UIs on top of the same old infrastructure, and it felt like if we were going to progress the industry forward, we needed new plumbing, new low-level primitives in order to build the new types of business cases that people wanted to create, and embed payments within that.


Dan Blumberg: Can you explain a little bit more what you mean when you say new primitives?


Wade Arnold: Yeah. So, at the lowest level on the internet, you think about things like TCP/IP, right? You don’t think about necessarily a web browser, but that’s kind of going up the stack from a technology standpoint, and ultimately you have interpretations, things like HTML that not always does Microsoft or Apple or Google agree on it, but it’s somewhat of a standard. That’s very true inside of financial services. So, at the lowest level, you still have a socket going into the card brands, you have a protocol called ISO 8583, which has been around since 1958, so very similar to HTML in the sense that MasterCard and Visa agree that that’s the standard, but they like to add their own proprietary things into it just like Microsoft and Google do. And then you kind of go up the stack.

But that creates the ubiquity that allows you to get a debit card go to anywhere in the world and it goes through in the same way it’s beautiful that you can bring your tablet anywhere in the world and it just works. And so the ubiquity of both systems, if we started over, we would all agree we maybe would build the internet a little bit differently, we’d build payments infrastructure a little bit differently, but the fact that it works everywhere across billions of devices is a pretty useful feature.


Dan Blumberg: So, where did you start when you founded Moov?

 

Wade Arnold: Moov actually started as an open-source project on my Wade Arnold GitHub. In the lowest level payments primitive, the one payment that all other payments cannibalize is ACH, and it’s what makes your payroll, or you pay your mortgage, things like that. It’s the cheapest payment. It’s a store and forward protocol. What was shocking to me was open-sourcing this library, then all of a sudden kind of all the polyglot programmers in the world started adopting this. And open source is fascinating in that I built it to do money movement, to do ACH, and people started using it for things like PPP loans, fraud detection, targeted marketing. And so you got all kinds of different use cases, which really found edge cases or hardened the library quite a bit, and I thought, “Here’s something super interesting, that there’s all these people going to GitHub in order to figure out how these low-level primitives and payments work, and they’re actually collaborating on it as well.”


Dan Blumberg: That’s fascinating that it grew in all those ways that you didn’t expect. So, how did it make the jump from an open source project of yours to a company?


Wade Arnold: The jump was really fascinating. I mean, today we have over 60 open source projects that are these really low-level primitives, so that side of the business continues to grow. We continue to get a lot of inbound, really for the reason we developed a company. It was people talk about fintech, and I joke that there’s a lot of fin in fintech, and so the technology or those low-level primitives is out in the public and in the open source Apache 2.0 public domain.

But when it comes to things like fraud and connecting to a sponsor bank and the legal agreements with the card brands, not everybody wants to take on that effort in order to make those connections, and most people don’t want to make sure it works 24/7, 365. That’s the interesting piece about payment infrastructure, is not everyone remembers who their payment provider is. It’s kind of like your internet connection or power. As long as it works, nobody knows, but once it doesn’t work, then people get upset pretty quickly when payroll doesn’t go through on Friday. So, that transition was really finding the majority of people that came to the open source project really wanted to understand how payments worked. They didn’t want to operationalize it and make sure it worked all the time.


Dan Blumberg: So, the promise of Moov is really simplicity. And I’d love if you could talk a little bit more about how you handle all the complexity, all those scary banking acronyms, on behalf of other developers.


Wade Arnold: Andreessen Horowitz is an investor in Moov, and how we got to that point was obviously Marc Andreessen is famous for saying every business is going to become a software company. And then my board member, Angela Strange, said, “Every software company will become a fintech.” And I said, “Not if they have to learn payments.” It’s its own crazy thing that you have to figure out, but it definitely is a better user experience when the payment is inside of the software application. And so the goal is really being highly opinionated with our API when it comes to things like onboarding, sending money from A to B, and really keep those opinions there, but then on the backend, be very specific to the payment rail. And that allows us to have that customization or flexibility on a per-customer basis, but it doesn’t make the developer have to learn, I could give you all kinds of acronym soup, but there are just as many acronyms inside of financial services as there are inside of a Kubernetes conference.


Dan Blumberg: What is it about payments? It seems simple, like I give you money, you give me goods. Why is it so complicated?


Wade Arnold: I actually think that it’s perceived to be easy because the user experience is so simple. Visa, MasterCard, American Express, and Discover could not be more different from one another, but to you as an end user, you have a rectangular piece of plastic with a chip and a mag strip on it. And so to you, it feels very similar. But on the back end, these are totally different networks, totally different message formats, and when you’re a user and you go into trying to learn payments, it’s really hard for you not to come from that end user experience. How a check clears between banks is totally insane, but you as an end user, you never have to think about that. Whereas, when you’re a software engineer and you want to embed payments, you have to start learning how that works, and so that burden doesn’t create enough value for you to have an entire team of people that understand how this stuff works.

 

Dan Blumberg: Tell me a little bit more about your customers. Who’s coming to you and who needs the new primitives that you’ve talked about? What are some of the most common use cases that Moov enables that you wouldn’t go to another processor for?


Wade Arnold: Most people don’t even understand that there’s only seven or eight processors in America. So, there’s lots of wonderful companies that help the internet work, things like Authorize.Net, Braintree, Stripe, but these different companies are designed to help you bring products to market even faster. And so for Moov, kind of going into that low-level primitive, was how do we take advantage of new technologies that allow new types of business models to work? And so our customer normally has 10,000 small businesses or more on their platform, but more importantly, they want to have real-time streaming via Confluent Cloud in a federated topic in order to get all of the data very quickly.

Our customer does things like bursting sales, so to get your full retail price, I want to sell a million things and everyone clicks the Buy Now button at the exact same time, which is somewhat of an incredibly hard problem in order to handle that. And then probably the most common use case is transactions are being split. So, I buy something for $20, $15 of that goes to the food delivery driver, $2 of that goes to my SaaS business, $3 of that goes to somebody else. And so those flow of payments that used to be really a one-to-one relationship, that’s much different than if you think about a food delivery service or any other marketplace that the buyer and seller are somewhat dynamic in the relationship.


Dan Blumberg: Community is obviously incredibly important to you. It’s how Moov got started in the first place and you still to this day maintain a very active Slack community and other ways for the community to be involved. Can you talk more about how you’ve continued to use the community, what you’ve learned from it, how you may have changed the product as a result of the community involvement?


Wade Arnold:
Yeah. It’s Monday morning, I’m the CEO of Moov, and I’m commenting on pull requests on GitHub this morning and asking for these crazy things called test cases. So, no matter how big your open source project gets, nobody ever supplies a test case. But all jokes aside, we felt like we wanted to position the company under a give-first mentality. So, whether that’s the 5,000 people in our Slack channel, the 60-plus open source projects, we also host Fintech DevCon, which this year had over 500 software engineers that attended. So, the thought process was we want the brand, number one, associated with openness and giving via education. We think a more educated consumer is a better buyer for our product, but it was also a way, how do we go really, really fast? And by leveraging kind of the scale of the community, having a community of all these software engineers that kind of love this low-level stuff and they’re using it in their own solutions, not only helps Moov, it helps them go faster as well. 


Dan Blumberg: How has the community been a competitive advantage for you?


Wade Arnold: I think it’s competitive in that large, large companies like Bank of America and PayPal and neobanks like BankNovo and HMBradley have leveraged these open source technologies, and so they want to play at that low-level protocol level like Moov does. All of us want to go faster and have these hardened libraries that we’re building on top of. You have Fortune 500 companies that some PM tells them they need to go embed OFAC checks or ACH, and they go to GitHub, and it’s really that quintessential build versus buy. If we’re the company on GitHub that has the most popular open source projects and payments, first and foremost, they’re going to try and figure out how does this even work? And then they decide, “Do I build this myself or do I reach out to the company that helped me understand this problem domain and see if they can help?” And more times than not, they reach out.


Dan Blumberg: Cool. Can you talk about a, whether it’s a recent feature release or maybe it’s from the early days of Moov, but an example where you’ve listened to customer feedback or the customer or developer community feedback and you’ve really made some iteration to the product?


Wade Arnold: I think one of the biggest surprises for me at Moov was I thought all of our customers would be API-first, realizing that it’s kind of both. I need to build great backend software that’s usually being used more for the reconciliation and reporting and kind of the integration after the payment, but on the front end, making it very easy for the developer to theme and style and make sure it doesn’t look anything like a Moov-opinionated UI element so that they can build a great product but stay out of the scope of collecting card information or bank account information. And that was an area that I really did think people would want to build all the front end themself, and for sure our scope has expanded, where that’s almost a different buyer inside of our platform. That’s more the end consumer PM and the front end team. And then obviously, the team doing reconciliation cares more about how fast does this get into BigQuery, or how fast can I get a webhook so that I can mark that invoices as paid? Or whatever their business logic needs to do with that dataset.


Dan Blumberg: Going back to respect the craft, I’m interested if you could expand a little bit more on how you hire.


Wade Arnold: Yes. When it comes to hiring, I think we’re always looking for curiosity. I love it when software engineers have a pet project or they have an idea for a company that they want to build. I would say most of our best engineers want to start a company at some point, and they even at the beginning said, “I want to learn what it’s like to do a startup. I have this idea, but I’m a great programmer and I want to go through the startup experience with Moov.” That’s usually a good tell, because they’re inquisitive. And so I’m always looking for an engineer that’s pragmatic and says, “I want to figure out a way in a testable way to deploy code faster, and I’m not going to get hung up on the latest and greatest framework as my identity. I’m going to get hung up on what’s the best tool in order to ship faster.”

I think finding engineers that have that pragmatism where they’re entrepreneurial mindsetted, maybe they even want to be an entrepreneur, but that means they’re looking to solve problems and then they aren’t hung up on a specific language or framework. They’re just hung up on what’s the next best tool that I can utilize in order to ship value faster? I think if you can line those two things up, you have an incredible hire.


Dan Blumberg: That’s awesome. That tracks a lot, actually with what we look for here at Artium, is that curiosity and craft like we’ve talked about. What’s next? Could you look a few years out into the future? I am actually amazed I have yet to; neither of us have said AI yet in this conversation. I’m interested in how you are using it today or maybe, but also just what you see that’ll be a normal thing in the not-too-distant future.


Wade Arnold: I don’t know that you can build a software application without machine learning at this point. So, a rules engine was built a long time ago, and I think most business cases you try to solve with a rules engine, and in what we do, the edges of a rule engine are figured out by fraudsters very, very quickly. If that rule is sub $5,000, you get payments for $4,999 very quickly. And so take that same problem domain, you put machine learning on top of it, you take all your transaction history, now you don’t get false positives when a good actor tries to spend more than $5,000, and you don’t succumb to fraud when it comes below $5,000. So, at this point, I think things like machine learning are just part of software engineering at this point.

When it comes to generative AI, I think it’s for us; we like Turing-complete computers when it comes to calculating how much you’re owed. A probabilistic computer and an LLM is not applicable to settling money at this point, but what do you do around the transaction? And I think that for the longest time, things like machine learning weren’t considered because we had 10,000 rules in our rules engine, and that versus this nascent model didn’t work very well. And so now I feel like we’re going to continue to get these new kind of use cases around the transaction. So, why did I get a chargeback here? Why wasn’t this transaction go through? All the why questions, I feel like financial services needs to embrace with generative AI. And yes, we still need the Turing-complete facts so that everything zeroes out at the end of the day, but what we do around the transaction hopefully shifts quite a bit.


Dan Blumberg: Awesome. What’s next for Moov?


Wade Arnold: Next for Moov, we just completed a Series B in January, so that was an interesting time to go raise $45 million. Our entire platform was really set up to bring money quickly into the system. So, we have a wallet infrastructure, whether that’s ACH or card-acquiring processing. And the big ask from our customers were, “Hey, you do that really well, and it’s really fast, but then you pay us three days later after we get the money over standard ACH.”

And so we’ve started investing kind of in Q2 of this year of adding things like corporate debit cards and faster ways so that when you sell something, you can spend that money maybe minutes after you actually complete the transaction, which is a really hard kind of technical problem, but it’s really easy if you think about a small business. I sold a bunch of this stuff this morning, I’m out of inventory, I want to buy more, I either need a loan or I need to wait three days. And so, just accelerating that acceptance-to-spend timeline, we think that will really help our customers and their end users provide more free cash flow into their businesses.


Dan Blumberg: You and I are both going to be at Money20/20, and that’s an enormous fintech conference, and it’s not mostly developers there, it’s bankers and businesspeople and others. So, I’m interested in how you’ve grown beyond engineering to all the other things that you do as a CEO.


Wade Arnold: I think I’m a technical CEO in the sense that we build and sell software for a living, and so I’ve never been a fan of there’s two tracks in life, the business track or the software track. If most great companies are software companies, maybe the CEO should know how to build software. But at the same time, my job is not writing software day in, day out. I try and keep close enough, and I utilize open source as a way where I’m not in the delivery path, but a way for me to still keep my chops, I guess when it comes to software engineering.


Dan Blumberg: And has selling or raising investment funds, is that stuff that’s come naturally to you, or is that stuff you had to work on?


Wade Arnold: That is definitely something I’ve had to work on. I was always happier with black lights and Paul Oakenfold blasting and writing code in my 20s, but I now feel like one of the best things I can do as an entrepreneur and as far as kind of respecting the craft of software engineering is creating that environment where there is demand, there is need for what we’re building, and now better software engineers can actually go and create that. And I think that that’s the pragmatism of software engineering that I enjoy. Even though I’m from Iowa, if you build it, they do not come. You have to go create that demand, you have to create that opportunity to create the net revenue so that you can pay engineers, and they can get better and you can pay them more, and we can continue to develop things. But I do think it’s an extension. Almost like as a software engineer, you get into product management because you kind of want to understand how we decide what we’re going to build, and the next really logical step from PM is more of the business case; what are the financials behind this?


Dan Blumberg: Wade, thank you so much for taking the time. This is really interesting stuff that you’re working on. I love it.


Wade Arnold: Absolutely. Thanks, Dan, for having me.


Dan Blumberg: That’s Wade Arnold, CEO of Moov. If you’re looking to build from the ground up, let’s talk. At Artium, we can help you build great software, recruit high-performing teams, and achieve the culture of craft you need to build great software long after we’re gone.

You can learn more about us at thisisartium.com and start a conversation by emailing hello@thisisartium.com. And if you’ll be at Money20/20, let’s connect in real life. Email me at hello@thisisartium.com and we can talk fintech in Vegas.

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Wade Arnold: It’s its own crazy thing that you have to figure out, but it definitely is a better user experience.

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