Rate Caps, Stablecoins and the New Credit Infrastructure with Rhett Roberts, CEO of LoanPro

The financial system has run on basically the same payments rails for the past several decades. But there is new infrastructure being built today that takes advantage of the unique capabilities of stablecoins. In some ways, the future is already here as Visa has processed several billion dollars in transactions that have been settled in stablecoins. But who will build the infrastructure needed for credit when we move to this new system?

Today’s guest is Rhett Roberts, the CEO and Founder of LoanPro. I last had Rhett on the show back in 2021 and needless to say, a lot has changed since then. Part of Rhett’s thesis is that this talk around interest rate caps could actually be a catalyst to hasten a movement away from the traditional credit rails. And his company is already working on the systems and protocols to create a new credit infrastructure that runs on stablecoins.

In this podcast you will learn:

• How LoanPro has evolved over the past five years.
• Why most fintechs are now moving into credit products.
• Why both banks and fintechs are using LoanPro to launch new credit products.
• Why the idea of an interest rate cap on credit cards is resonating today.
• What would happen if a 10% rate cap went into effect.
• Why this could be great news for BNPL and the other alternative lending products.
• Rhett’s thesis around stablecoins and the value proposition.
• The elephant in the room for a stablecoin payments network.
• How a line of credit backed by stablecoins could work in reality.
• Where the card networks will sit within this new system.
• How LoanPro is helping to create these processes and protocols.
• Where we will be in five years time with this new infrastructure.

Read a transcription of our conversation below.

FINTECH ONE-ON-ONE PODCAST NO. 569: Rhett Roberts

Rhett Roberts

So stablecoins are fascinating. And if you have the opportunity, anybody listening to read the Genius Act, at least summarize it in some AI tool. like I’ve read it multiple times. And if you think about after reading the Genius Act, you think about the folks who build the technology to facilitate the stablecoin issuance, and then think about the difference of what that technology will be versus a modern deposit and payments platform.

And as far as I can tell, they look nearly identical. A modern payments and deposits platform slash stablecoin issuance. Now there’s some nuance to it. There’s some current rules that will probably change over time of what assets can be backed by, you know, primarily treasuries. They can also be deposits, but basically everybody’s going to do treasuries with this.

Peter Renton

This is the Fintech One-on-One podcast, the show for Fintech enthusiasts looking to better understand the leaders shaping Fintech and banking today. My name is Peter Renton and since 2013, I’ve been conducting in-depth interviews with Fintech founders and banking executives.

Today, I’m delighted to welcome back to the show the CEO and co-founder of LoanPro, Rhett Roberts. Now LoanPro has been at the center of credit innovation for more than a decade, growing to where today they are processing billions of API requests and powering loan balances that rival the GDP of a major country. In this conversation, Rhett and I dig into several timely topics. We start with the trend of most major fintechs now offering some kind of credit product and how LoanPro is enabling both traditional banks and fintechs to launch innovative new lending products.

We then deep dive into the proposed 10 % rate cap on credit cards, examining what this would actually mean for the roughly 46 % of Americans who carry a balance and why this policy would likely backfire politically. But perhaps the most fascinating part of our discussion centered on stablecoins and how they can reshape consumer lending infrastructure. Rhett lays out a compelling vision for how stablecoins could provide an alternative rail for payments and credit while maintaining consumer convenience. We explore where Visa and MasterCard fit to this future and Rhett details where he thinks we will be in five years. Now let’s get on with the show.

Welcome back to the podcast, Rhett.

RR: Great to see you again, Peter. Thanks for having me.

PR: My pleasure. So I was looking at my records, it’s been almost five years since we last had you on the show. So quite a bit has changed in the fintech lending space in that time. So give us a quick look back at the last five years at LoanPro.

RR: Sure, it’s kind of crazy that it’s been five years. I know you and I have chatted many times, but not on this program in that period of time. Life is a little different five years compared to five years ago in the FinTech space. What, 2021 was a little bit of peak of a few things and then there was a valley that happened. A lot of maturing and growth has occurred in the FinTech space. Here specifically at LoanPro, we’ve seen it a big pivot of folks moving into variety of different kinds of credit products, unique different kinds of credit cards. And we’re going to talk hopefully a little bit about that today, but these hybrid different kinds of lending products, these multi-channel different kinds of products have been pretty interesting. We’ve seen significant growth and adoption of different technology stacks. we’ve seen the kind of the LoanPro serves really three different markets, credit card, the we call it private credits of non-depository lenders as well as financial institutions, banks and credit unions. And we’re seeing a slightly different story on each one of them. But a commonality is the the technology stacks, the improving products, the focus on customer delight has been a key component.

Now, regulatory environment’s a little bit different than it was before, but most of the rules are still on the books. So people are still, you know, making sure they need systems that are following all of the rules and the compliance with that. And we are seeing a to some extent, a consolidation that’s happening in this space, but we’re also seeing this adoption of moving the technology stacks forward across all of those categories. So it’s been a really exciting time as a business here. We continue to grow significantly and we’ve got a meaningful footprint. We did in just closing this last year, we actually had a board meeting this week earlier. And so one thing we track is kind of a footprint or level of impact. And if you took the loan balances on LoanPro today and compared those to the GDP of different countries, we’d be a top 50 country.

And so, and it continues to grow. you know, we’ll end this year significantly higher on the list. We have this last quarter, we did about four billion API requests that are coming into the primary application, not catching our microservices or anything that spawns on that. And if you keep track of bursts and things that happen, we have significant requests per second that’s happening in the platform and the resiliency. So much higher scale and scope, larger customers as we move up stack that way. But we’re also seeing in the FinTech climate, folks who are maybe focused on non-credit products. So go back five, six years ago, folks who were focused like on a debit card or capturing a customer with other kinds of user experiences, just about everybody is adding credit products, but they already have a large customer base and so it’s more of a cross-sell that’s happening versus them building that same thing again like they did five years ago.

PR: Yeah, it’s one of the trends that I’ve really been noticing too, is that there’s so many of the companies that didn’t offer a credit product potentially for the first five plus years of their existence. These are FinTech companies and now I can’t think of many, many FinTechs that don’t offer some kind of credit product now. It’s really, it’s a great business if you know how to do it well.

RR: Right. And here in North America, the strategy is generally be in the fintech space, have a unique way to capture a customer, serve an underserved market of some kind, build a loyalty of a group of customers. And generally that’s happened with some kind of a deposit account and with some other kind of an attraction, some other reason they’re going to be part of the group as well. And then you cross sell them into credit products.

Really the primary exception to that is in Latin America, which has now come to North America in NuBank, where they start first with their credit product, and that’s the tip of the spear. They expand on credit, and then they expand into other kinds of products, cross-selling into deposits and so forth. It’s kind of a cultural difference, but it’s also the customers set you’re serving, depends on the balances that are gonna be in the deposit account, depends on the size of the credit that’s being drawn but we do see some different ways of addressing that market. We also see similar kinds of products being launched by the incumbents and larger players with new technology as well. So it’s kind of a tide that lifts all boats in that process. And I think it’s exciting to see what the future is gonna be and we hope to be a part of creating that future.

PR: So just on that, like with traditional banks who want to launch a new credit product, are they coming to LoanPro to launch these new products?

RR: Yes, that’s one of our playbooks is net new products that are being launched, kind of a office of innovation. If somebody feels constrained by their systems that they’ve been operating on, many of the platforms that run loans, that’s a secondary purpose. Their primary purpose was usually a deposits and then they added loans or credit products onto it. And so many folks are wanting to develop more bespoke or really custom kinds of lending products that’s not served super well by the systems that they’ve been using historically.

So that’s one of the big areas that we win. We win lots of displacing homegrown platforms. Somebody built a platform that supports whatever their initial idea was for product, but they ended up maybe unintentionally painting themselves into a corner. Now fast forward X number of years, they want to launch another product of a different flavor and they can’t with their existing tech stack. And so we see a lot of those. We also see some really interesting things happening where folks are blending the concept of launching a net new product with a modernization path or a strategy for their overall technology. So breaking it up into like a crawl walk run journey rather than having it be really rigid product by product.

One feedback point that we’re hearing in the marketplace is most financial institutions, but also some private credit, they have their technology stacks organized by customer facing products. And they’ll have like siloed separate technologies per product. And that’s one of the reasons the lift is so large on launching a net new product is because it comes with almost its own business unit tied to that. And they have to build a bunch of things that will aggregate data across products to provide a unified customer experience and so forth.

And that’s one of the value propositions LoanPro is providing is all credit products, student loan to merchant cash advance, everything in between can be within the same platform configured at a program level. And so yes, we’re seeing not only net new interesting product launches, but it is becoming a key piece of modernization journeys for folks.

PR: So one thing I want to touch on now, because I’ve heard you’ve got some strong feelings and ideas about this, is the 10 % rate cap that’s been floating around. I mean, President Trump did an executive order. I don’t think there’s much that is actually going to happen when it comes to banks implementing this. It would need more than an executive order from what I’ve been reading, but it does at least bring up the idea of rate caps and what sort of impact that can have.

What do you think the impact of a 10 % rate cap would have on, it’s just on credit cards, but obviously credit cards are, you know, we’ve got tens of millions of people using that as a form of, of loans. And so what would happen?

RR: You know, let me back up just a little bit. It’s a very interesting thing. It’s interesting that there are several folks in the legislature who think this is a great idea and have been floating it for a long time. It’s an odd pair of folks coming together that may want to achieve this. But let’s think about why. Why is it resonating? Well, about half, it’s the last CFPB report was 46 % of folks carry a balance on their credit card rather than pay them off.

And credit card users are generally divided into two different types of categories. Those folks who do transactions and then pay them off, and then folks who actually are using it as a credit product that carry a balance. And if you think about how credit card programs work, generally the incentives are to increase the spend and you get some kind of free rewards or points based off of spend. And it’s all spend based, not necessarily did you repay your loan that you got paid based or tied to the financial instrument side.

And so what we end up seeing is that cards need to be more and more competitive against one another. And so they dial up the rewards that they offer to the point that the interchange that’s used, the discount that the merchant doesn’t get, somebody buys a $100 thing, the merchant doesn’t get $100 and they sold that thing, they get it shorted by interchange, and that interchange gets broken amongst multiple parties. The lion’s share of it goes to the issuer of the card. But there’s a few folks along the journey who get that, including networks and others, but most of it goes to whoever issues the card, which also happens to be usually the folks who are making an APR yield, they’re giving the loan as well, there are sponsor bank models where it might be somebody else or in a participating agreement and so forth.

But in that, they have dialed up the rewards so much that the interchange doesn’t fully cover the rewards in many circumstances. And so the only way for that math to work is that the trans actors, probably you and I, as we’re buying stuff and paying them off in full, we essentially get subsidized by the folks that who carry balances because the issuing bank is making money on interchange as well as on interest or APR on the balances that are being carried. And they’re paying the transactors more than the interchange. And so it’s getting subsidized by that other group.

So just kind of taking that step back and looking at it. Well, there’s some pain that happens in the ecosystem and why is everybody using their credit cards? Well, it’s wildly convenient. It’s a great product. It’s an amazing solution that the networks have created with the merchants and the convenience of your phone, or you physically pull out a card and tap or swipe it. And you you’ve got people waiting behind you in line and you’re in and out super fast. I think one of the best things about the cards is the trust that comes with them, the brand recognition, but also the hassle factor of deal with it later.

So if you imagine if you’re buying stuff with cash, and there’s potentially some kind of a conflict between buyer and seller. Everybody knows you better get that figured out inside of the transaction itself if you’re going to hand them physical cash. But if you’re going to use your card, there’s an element of, you know what, if it doesn’t work out, I’ll just figure it out later. I’ll return that thing. I have a charge back. There’s a protocol and a process to manage that later. So with that being the background and the landscape of why cards are so successful, why they’re a product that works, this concept of a 10 % essentially usury on cards is interesting because it’s an unsecured consumer loan. And that rate is simply not a profitable rate. So it’s kind of obvious. Everybody’s written about this. There’s lots of materials. What’s going to happen? It will significantly restrict credit.

In fact, Jamie Dimon at JP Morgan had something earlier this week that referring to a few different studies, but roughly 80 % of existing cardholders will have their cards either terminated or a material reduction in their available credit. So if you think of why would Trump sort of float this idea, well, maybe there’s a populist concept of, hey, you know what, there’s pain that’s happening, there’s inflation or perceived inflation.

Either one life feels more expensive than it was depending on how you measure the inflation, it may or may not be, but it definitely feels that way. And folks who are living on the edge have moved into using cards for convenience to using them for normal life cycle. And now they’re carrying a balance, not because they necessarily want to, but because their choices have led them into a spot where that’s the thing to use for beyond convenience or using it as a financial instrument as well.

And with that, they wanna blame somebody, they wanna have like, hey, where do I solve this? And so it could be a popular concept of, lower the interest rates, this is where you’re getting gouged. But if you look at it from an individual’s perspective, how much would they need to charge on interest to give an unsecured consumer loan to somebody and average that out over hundreds of thousands of people to see where it’s gonna be profitable with your charge off rates and so forth?

And the math just really doesn’t work at 10%. Most folks wouldn’t pull money out of their pocket to do that. And so because it doesn’t work that way, the lender has to restrict who they’re giving these loans to. And they’re only going to give them to the people who need it the least. They’re going to give it to the super, super prime customers that are more transactors, and they’re going to have to deplete the rewards programs. So we’re going to reduce the rewards programs.

We know what that looks like if you go look in Europe or other places. And they’re also going to, about 80 % of credit cards are either going to be terminated or significantly reduce their available credit. So I don’t think this happens if you’re sitting in politics. One of the strategies is, hey, this would be popular. And it might be popular at first glance with the populace, but you’re going to move people who are irritated about interest rates to level 10 irate that their cards got canceled. I don’t think it will turn out to be good for someone who’s floating this idea and wanting to influence elections because now you’re going to move people from annoyed to mad. And that’s never a good move to do that as a politician.

PR: That’s probably why we haven’t seen any significant moves from any of the major banks towards this. But it does bring up an interesting question though, because credit cards are like, they’re not just credit, as you mentioned, a lot of people use it for transacting, even people that wouldn’t qualify necessarily for a 10 % rate cap use it for transacting. So if rate caps end up like gutting card products, doesn’t that create a gap date in payment, in the payments infrastructure of this country?

RR: Yeah, you bet. So cards are certainly used for vertical integration, as you had mentioned, of we’ll call it a convenience factor, the payments function. But then it’s also kind of cool that it connects to a financial instrument. But absolutely. And the devil’s in the details, right? What is the definition of a credit card? If you’re going to be super broad and talk about any kind of system or network that is connecting, well, everything’s a credit card.

Right? Like any kind of way of transacting payments might fit into the category of a network. If it’s going to be narrowed to what people think of a Visa and MasterCard and, and Discover an Amex, if it’s limited to that scope where there’s like a signed up network of merchants and there’s issue and the protocol. I don’t know how that’s a tricky definition to talk about what it is a credit card. One of the things you think, you know, what it is until you get really into the weeds and it starts to get a little bit messy of the definition of a credit card.

But if we narrow it to the four credit card networks that we’re familiar with, then absolutely. There’s a lot of us who are very used to the convenience of paying for things with a card, even if we don’t use it as a financial instrument. And that’s going to cause some challenges. So obviously, if somebody wants to stay in the space of providing unsecured consumer loans in a convenient way, card is a nice way to do that.

But there are some alternatives and Fintech’s been a big piece of these alternatives of how do you provide convenient unsecured financing and there’s all the buy now pay laters, there’s the point of sale embedded, this whole playbook everybody’s been speaking about of embedded finance. And now what do those financial instruments look like? Are they positioned to have the same financial attribution as a credit card? You know, a revolver or a minimum pay calculation and so forth? Maybe, but probably not, because that’s one of the mismatches in the marketplace. If you do an overlap of a Venn diagram, what most people want is the convenience of a card, but maybe a more bespoke financial product that matches the reason of why they bought the thing they bought. And so if you buy, you know, $2,000 mattress, maybe you want to split that into an installment loan over time. Or if you buy, you know, bubble gum, then you’re just going to pay that off in the next cycle.

So we’re already totally independent of this 10 % rate cap conversation. We’re already seeing a lot of these hybrid type lending products that folks are offering to roll them off of a line of credit into an installment loan or have a line of credit that is accessed via a credit card. And then that line of credit is a wrapper for an array of installment loans. And each installment loan has its own bespoke different terms. And so we’re already seeing that motion.

And one of our core theses is this concept of the future finance is highly personalized. I think this is a great example of that. It will create a catalyst in my point of view of creating alternate convenient ways of folks to buy things, but with bespoke lending products, if cards are restricted on their rates.

PR: Are you then implying that stablecoins might have a role here? I got to say, I saw you at you and your team at FinTech Nerdcon talking about stablecoins and I got to tell you, I was a little surprised. I didn’t think that was sort of on your roadmap, but I can see like listening to what you guys are talking about just a couple of months ago. Tell us a little bit about your thesis there.

RR: Sure. So stablecoins are fascinating. And if you have the opportunity, anybody listening to read the Genius Act, at least summarize it in some AI tool. But like I’ve read it multiple times. And if you think about after reading the Genius Act, you think about the folks who build the technology to facilitate a stablecoin issuance, and then think about the difference of what that technology will be versus a modern deposit and payments platform.

And as far as I can tell, they look nearly identical. A modern payments and deposits platform slash stablecoin issuance. Now there’s some nuance to it. There’s some current rules that will probably change over time of what assets can be backed by stable or that stablecoin is backed by, you know, primarily treasuries. They can also be deposits, but basically everybody’s going to do treasuries with this.

The value propositions of why it is spread kind of like wildfire is a handful of things. Brand is huge, right? This trust factor of you can show up to the other side of the planet. You don’t know the person you’re gonna transact with, but you see one of those logos and you’re like, cool, I got one of those in my pocket. And you pull it out and you can buy dinner or whatever item across the globe. And you are probably never gonna see this person again, but there’s a high level of trust that person is gonna get paid for the thing they gave and that transaction’s gonna go smooth.

Well, that network has come at incredible intentionality, investment, focus, and so forth, of building that network. And since the technology didn’t exist when they built it, they had to build the technology, which included the physical hardware of how the sides are gonna talk to one another. And so way back when, right, when cars just started, you had a physical imprinter that you would go ahead and basically take a picture, if you will of the card with a carbon copy in printer, and then you would key that in and submit it. Well, it’s modernized significantly in that journey, but there still is hardware involved where the merchant needs to receive that. And it’s got smarter and faster and smaller over time. And a lot of innovation has been focused. Think of what Square has done or Toast or many of these players on the merchants side of things. And that’s interesting.

Another component of why the network is, of what, if you’re going to build a network of what would be required is this concept of trust beyond can I transact, but is the money going to actually move between each other and where it lands in my good. So crypto has done a really great job of building this network and crypto has connected there. But one of the challenges with crypto is the exposure to the volatility of crypto itself. Most people are not buying food in crypto, they’re usually doing something else, maybe even holding it almost like a commodity of some kind.

They’re investing in it, the volatility is happening. And if you did all of your life in a single currency, that’s fine. But the problem is, is all of life doesn’t exist in crypto yet. You’re not making wages in crypto, you’re not eating in crypto, but you could do a few things in crypto. So that exposes people to an FX risk or essentially this concept of volatility of the interchange between currencies if they’re going to move back to whatever they eat in, whatever currency they’re eating in. So for me, I’m eating in US dollars. And so I probably don’t want to hold my grocery money exposed to some volatility of a different currency if I’m going to have an expense that I’m near term in US dollars. And so that’s one of the concerns of the adoption of it being purely in crypto, is they may trust the network, they may trust like the actual crypto itself and the ability to connect and move money. Blockchain obviously has huge improvements over many other ways of having this visibility and trustability of the transaction itself.

But there’s still a problem of do I want to hold the asset that I get? Maybe I have to immediately change it to something else. Well, as stablecoin came out, it solves that exposure to FX. This idea of I can get all the advantages of this blockchain, this transmission and transparency of moving money, but I’m still just exposed to a stablecoin that’s pegged to US dollars. And so I think that there’s some real value in that.

What we’ve seen kind of to date, the biggest take rates on stable coins have been folks, things across borders for the reasons I just described. Right? Hey, I get paid in a certain currency. I’d like to expose it to US dollars in a super easy, convenient way. Well, that’s an excellent use case. Well, there’s been lots of material written about when stablecoin framework and the Genius Act was released. Was it intended for this to create an alternate rail for payments? And there’s some debate if the answer is yes or no, what the intention was, but it clearly does. It creates this framework of an alternate rail of moving money, the whole licensing and all of that side to it versus going and getting money movement licenses and things.

And so it’s kind of a long answer, but imagine it will probably come down to this visibility of what’s the definition of a credit card. If the definition of a credit card is what most people think of a card on Visa, Amex, Discover, MasterCard. And if you’re saying, you know, I’m going to actually transmit on a different thing not called a network, this ability of stablecoin, I’m going to move money on that. That could be a very interesting way to say, you know what, let me provide you the convenience of buying stuff on stablecoin. And I’m going to link that stablecoin to a line of credit. It looks like a parallel credit card, but it’s perhaps not a credit card.

Now there’s one giant elephant in the room and that is the advantage of stablecoin and crypto is blockchain, real-timeness, transparency, this visibility, all of that’s amazing. But there’s still a problem with it of it looks like real-time wires. I can’t undo a transaction. Real-time has good things, but there’s also a couple bad things that come with real-time. so how does all the fraud going to work? And what’s the in-off fraud mitigation and controls? What’s the protocol and agreed upon rules of deal with it later? The equivalent of a chargeback and what are all of the networks have published really, really comprehensive rules of what it is to be a merchant and what it is to be an issuer and when there’s a dispute how all of it works. And so there’s that side of it that needs to mature in order for, think, a meaningful adoption. But something like this 10 % usury on credit cards could create a catalyst that I want to maintain the convenience factor. So let me find an alternate rail to do that. And that way you could offer a line of credit with a higher interest rate than 10 % that happens to do draws through something like stablecoin.

PR: You’ve painted a really detailed picture there and we’re not going to really talk about the fraud side, chargeback side in this conversation, but I’m curious about how you implement that line of credit, like who is the lender, how is it being funded, that sort of thing.

RR: Yeah, excellent. So the software platform we provide is really everything to manage the financial instrument, the line of credit, the card, the installment loan and so forth. So in this particular case, from the tech stack side, all that would be doing is using something like LoanPro for everything in the financial instrument. And then instead of connecting to an issuing processor that connects to a network, Visa, MasterCard, and so forth, you would swap out the issuing processing piece to connect with the stablecoin, where the wallet is at. So there’s a number of wallets out there. It’s a new kind of instrument that would be in a wallet. We’ll have to come up with a name for it, but you know, a coin credit or something.

This idea that it’s a different kind of instrument that’s within the wallet. At some point, they’re going to be all shaped a different way and we’re going to change the word wallet into a purse, right? Because we have coins and we have cards and we have all these different things that will fit within that. But it’s a new kind of instrument that instead of it being like a debit card, which most of those work that way today, is there enough money in your account for the transaction to clear? It will be a different one that was like a credit card of, I actually wanna borrow money to do this payment. Now, all of the lending side of it would be someone like a LoanPro customer. This could be a private credit party. This could be a bank that does this and then use a platform like mine that’s built specifically for these dynamic lending products.

Now, what’s the controls on those products of like, what are the rules of how the programs work? Well, you could do all kinds of things. You could have it be an installment loan based off of the draw and have different duration or minimum payment calculations, different interest rates and so forth. Something we call transaction level credit, a unique interest rate per transaction based off of attribution of that transaction.

Or you could have it go into a plain vanilla revolver that looks a lot like a credit card. So there’s a huge flexibility that happens. Now where the capital come from depends on what the lender wants to do. They could fund it themselves with their own balance sheet, or they could go ahead and participate that out to others and be the lender of record and have others participate in those similar to any many marketplace loans. Or of course they could go get like a credit facility as well.

PR: So where does Visa and MasterCard sit, or Amex and Discover for that matter? Because Visa’s obviously, they already are settling in stable coins today. Where do they fit in the picture you’ve just painted?

RR: Well, I think they’ll be the ones that help create it, to be honest with you. I think it’s a modernization. It reduces fraud. It adds transparency. I think it fits key within their strategy. It may sound like it’s competitive, but I think they’ll be the ones who build it. It’s a modernization track for simplification on how it works on the merchant side. Now everybody’s phone is a receiver of a merchant payment. That removes a lot of friction.

There’s an advantage of settling through stable coin, the real-time-ness that happens. I think Visa and MasterCard will be the writers of the rules, using the strategies that they’ve already done with all of that component of deal with it later. If you look at both Visa and MasterCard and go look at their public filings, the fastest growing section of both of those businesses is their value-added services. And so if you look at consistent growth, pick a Visa, 10-ish percent that continues to grow and you go double click into what are the components that’s creating a lot of that growth.

Well, you think of all that value added services and this could be a huge thing for both Visa and Mastercard to own and to manage of, here’s the platform to run these financial instruments and the programs, but also in off fraud abilities, everything around the controls around those, as well as continue to manage the things around how disputes work, all what I call deal with it later. They’ve clearly solved this problem well in the platforms of today, but I think this becomes the platforms of how it works in the future. And I don’t think that they’re gonna sit on the sidelines and have it be disruptive to them. But I think both Visa and MasterCards will be not only participating, but in the lion’s share, the creators of initiating this to happen.

PR: And so where are you at at LoanPro with all of this? mean, if you, are you still in development for the software to enable this or where are you at?

RR: Yeah, great question. So fully live in production for everything around the financial instrument. On the card side, we have full integrations with live cards in production, many, cards, a bunch of different customers. So fully live credit cards, line of credit, installment loans, and so forth. We have a few folks that are using us for stablecoin lending and quite a few that use us for crypto. Most of the crypto are more similar to a margin loan.

They have a basket of assets that likely appreciated in value and they’re borrowing against that basket of assets. Cool, we support that. That’s not necessarily what we’re talking about here. So it is, it’s more of the stablecoin as I described before that I think that we’re starting to see these alternate rails, if you will. And we are helping to create those processes around how do you deal with it later? You don’t undo one of those transactions. So how do we build the protocol for that?

That’s kind of the step that we’re at, that it’ll make tons of sense to work perfect with a MasterCard or Visa in that process because of the frameworks that can be adopted from all the learnings of what’s happened on the existing systems. So today our software manages everything around the financial instrument and we have multiple crypto lenders, lots of cards, lots of installment loans on the system, but we’re still waiting to work with the right party. So we have some folks who give loans in stablecoin and transmit and move money in stablecoin, especially international ones that are doing that. But we don’t have anybody we’re yet working with. I think that’s probably a year or so out, not just a constraint on our side, but more of creating the frameworks and the rules of how it works between parties on both sides.

PR: Okay, so then maybe we can close with sort of a forward looking question. It’s great to see you’re live with so many players today, but when you look out sort of three to five years, particularly when it comes to consumer credit in this country, if we chat in another five years time, where do you think we’ll be when it comes to this infrastructure?

RR: I love that question. I think this is one of many things. If we think about convenience factor, what’s being solved, we see enablement of agentic agents, this idea that you can send a bunch of little agents to go do things for you. And one of the things they can do for you is go buy stuff. And so the protocols about are they authorized to do that or not? We’ve seen that released and sort of the turf war that will happen about which protocol is adopted in that process.

So that’s very interesting. That creates a whole new layer of fraud and visibility. In the specific one about stablecoin, I don’t think it’s going away. It seems like this will continue to grow. It’s good for the US government as they have the backings of stablecoin be treasuries. It’s less competitive to banks than it could be because it’s not just stealing deposits, although it likely will reallocate a fair amount of deposits over to stablecoin.

So you start to think about what vaults will work and is this a recreation of the technology infrastructure that supports banking because it starts to cascade. If you move money into stablecoin, it’s being backed by treasuries. For the US government by itself, that’s great, but that causes some problems at the bank. And the bank is using deposits to be the funds that they give their loans with, but everything else is getting routed over to treasuries that’s going to sort of rob Peter to pay Paul and that’s going to cause a challenge for them that I think will be figured out on the deposit side.

On the lending side of things, think increased visibility about performance of loans and more unique or market fit type loans. And so I think that a lot of folks have addressed like the underwriting pieces. How do you make a better decision of pricing and what loans you should give certain people? What we’re starting to see and hopefully being a very large part of is how do you design a better financial product to match what that customer needs? A single example, and I will wrap on time, is if you think, go back 200 years ago or 100 years ago, and if your business is to give loans to farmers, what are you gonna design that loan as? You’re probably not gonna create a loan that has equal installments due on the first of every month, because you have an awareness that their cashflow doesn’t do that.

And so, forever people have done bespoke lending products, it was only after capital markets wanted to put a rubber stamp in the cookie cutter that we moved into these cookie cutters. So I think we’re going to sort of break back out of cookie cutters. Capital markets will become more sophisticated and alternate funding sources and we’ll get more bespoke lending products that actually match the needs of folks. And the silver lining is bespoke portfolios are more performant than cookie cutter portfolios.

PR: Yeah, that’s a really good point. Rhett will have to leave it there. Really fascinating picture you have just painted there. And I think it’s exciting times in consumer credit and great to get an update on Lone Poe. I think it’s been fantastic to watch you guys mature over the last few years. So always great to chat with you Rhett and best of luck in the future.

RR: Thanks Peter, really appreciate your time.

PR: While I have been following stablecoins closely for several years now, I have been mostly skeptical about their impact on the broader financial system. Meanwhile, companies like LoanPro are building products based on stablecoins that are being used in production today. It has gone from a crypto-centric niche technology to one being adopted more and more by traditional finance.

I was reading just last week that the volume of stablecoin transactions being settled by Visa is now close to $5 billion and growing fast. So I am no longer skeptical of the picture Rhett just painted of a future financial system driven by stablecoins. I’m of the mindset today that it is not if, but when this future becomes a reality.

Anyway, that’s it for today’s show. If you enjoy these episodes, please go ahead and subscribe, tell a friend or leave a review. And thanks so much for listening.