Get Paid in Crypto! This Payroll Solution will Boost Adoption! with Megan Knab

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includes Ripples, r L, USD. You can earn up the five percent on that stable coin and five point two five percent on USBC. So if you'd like to learn more about uphold and all the great services they offer, visit the link in the description. Hey folks, welcome into the Thinking Crypto Podcast. I'm your host, Tony Edward, and joining me is Megan Nab who is the founder and CEO of Franklin. Megan, great to have you.

a bit about yourself, where you're from, and your professional background.

at night. I would spend my weekends doing my grad school homework in a cafe in Bushwick that happened to be the Swallow Cafe, which was right below the Consensus Office which Consensus was an early venture product studio in the Ethereum space back in twenty sixteen, and happened to just meet some people that worked there and got hooked on crypto for a lot of different reasons, but one of them was proximity. So that's a very like quick

quick background on myself. AM a classically trained accountant, worked as a staff accountant for a couple of years and really like got excited about the Ethereum space, specifically initially as a way to create open source accounting standards and so have been doing a bunch of wonky accounting technology out of initiatives since since then.

while as well. You know you mentioned Consensus and the folks at etherorem and they're based in Brooklyn and been building for years. So it's so amazing how things have changed from small, small, startup, small industry to now this huge financial movement and new asset class.

founding of Franklin. Where did the idea come from.

outside of Crypto was using. And I was so frustrated by that, and I was really annoyed that, like, we are building this new kind of financial system and yet we're not using it. So, yeah, born out of frustration, and so you know, I had a little bit of a background doing startup be things myself and started prototyping Franklin within a company that I was working at called Serotonin, which is a Web three marketing studio as well as a venture product studio, kind of like you know, a

second generation. A lot of people that worked at Consensus were working at Serotonin, so it was like very easy for me to land there, but yeah, as the person running finance and you know, trying to help guide some strategy and how can we differentiate ourselves in market and how can we track Like the top web three to to come and work with us was, yeah, how do we start using this technology for ourselves internally? You know, what pieces of financial operations could we bring on chain?

We had a lot of issues with managing payroll we had you know, when I got there, there were ten people. We grew it to over sixty people all around the world. The pandemic happened, everybody moved to or was initially doing remote working. So it seemed like a really good use case to figure out, like how can we enable this borderless,

permissionless technology on our balance sheet. So prototyped it within Serotonin and then kind of before I knew it, we were spinning out, raising around, getting our first customers, hiring our team. Kind of a whirlwind moment.

it break down to different services and solutions you offer for those who may not be familiar with the whole payroll set up, and how finances work on the back end for businesses, and how you're integrating crypto there.

So there's some level of like how do we make this administrative overhead attainable and put it into these byte

sized pieces for companies that are just getting started. You know, three years ago when I started the company, you know, most of the businesses in the web three space were just like very early stage startups figuring out how to like bootstrap to get together or they're just you know, getting in their first round of VC funding, so figuring out how do we go from like that zero to one and help them just start doing everything above board.

The next piece is, yeah, like the money movement. So crypto companies have historically had trouble getting bank accounts and being able to maintain those bank accounts. So this is an area that like I have struggled with. We have these like telegram almost like support groups of people who work in crypto finance trying to figure out you know, which banks are we'll even talk to you in the first place. So there was another level of like, Okay, here is a set of vendors that we can create

repeatable processes with so that companies can start up. And then what parts of those processes can we be moving on chain in a way that is maintaining a good user experience, making sure that you're now creating a lot of accounting overhead, and then also yeah, it's just faster, cheaper, and also compliant from like a HR labor regulation perspective.

Sometimes companies, you know, I've seen kind of get into a tough spot where they are operating doing a lot of things on chain and then they have to go back and pay an outsourced accounting firm like one hundred thousand dollars that they don't really have or can't really ford just to clean up their books, and so figuring out how do we make sure all that stuff is easily kind of attainable from from day one was part

of our you know, go to market thesis. There are a lot of pieces, honestly, but those are some of the first ones that we kind of started trying to tackle.

some of these services or are you using other blockchains or do you have a layer two? How's that set up? Yeah?

a non custodial payroll product. And really all that Franklin is doing is helping you calculate an account for the payroll, but all of the money movement sits with you and your employees or contractors or whatever. So, yeah, smart contracts are awesome and they're the base of like our crypto kind of tech stack.

I have the Thinking crypto podcast business. It's a small business, but I have a video editor, I have a podcast tech and they want to get paid in stable coins. Can Franklin help me to do that? And how would you help me to execute that?

or anything like that. That's another thing that's kind of unique about, you know, our architecture. And then when your workers sign up, like they sign up for any sort of payroll account or like build dot com account, they can connect a wallet and by that kind of like connection, it ensures that you're always paying the right person. Every single time we've seen crypto payments companies go through, you know, kind of like hacks or cybersecurity things by manual data

entry or needing to do file uploads. This on chain smart contract signature ensures that never is a problem. So that's that's roughly how it works. There are a lot of other ways it can work too. If your company only has FIAT like USD and a bank account and you want to settle it out and and stable coins, we can also do that. If you want to fund payroll in stable coins, then have it settle in your employee bank accounts in FIAT, we can also do that.

So there are a lot of different permutations of how it can work. We do work with some companies that are really they have absolutely nothing to do with crypto, and we are just moving stable coins under the hood for them to have a faster payroll cycle, which is something that I'm really excited about. I think it's the future of payments tech. But yeah, there's there's a lot a lot you can do.

there with making the payroll cycle faster. Even though those folks have nothing to do with crypto, they don't even know maybe that's happening. How are you pitching that though? Are you telling them that this is being settled or being moved with stable coins. I'm just curious, you know, how you present that to them, given that to your point, this is the future because people are going to be interacting with stable coins whether they know it or not. Yeah.

a lot of pressure on their business. We've seen an industry kind of like pop up around extracting value from those companies that are just trying to live paycheck to paycheck, so to speak. That should not be the case, you know, So the fact that you have all these middlemen between you and your workers or you and your customers, you know this idea that we can be using stable coins as a tool as a different kind of orchestration level

of USD and speed up fun flows. It can totally change business models, it can totally changed compensation models, and so that's like really what we're excited about. I think, like in terms of the messaging, I don't think we've cracked the right messaging for it yet. You know, there's so much kind of like fud I would say still

among like the general population around crypto. I think that stable points have a little bit of a different narrative as of like you know, maybe a month ago or with the advent of like the Genius Act, and it's just being in the headlines more in the United States, So you know, it is I think still kind of at this level of being like a little technical sciance.

Like if you're talking to an accountant who has some like level of familiarity, it's an easy conversation to have to say, hey, we can move some of this on chain. There's no intermediary, you know, like that's it. It's just you and your money, and we can help you figure out how to do that. But I would say, for like the population is really not something that is easily consumable.

it's helping their bottom line and end users. Actually, if you look at using stable coins on you know, PayPal or some of these others, right, which no offense to those technologists that are building that tech, but it's a lot more expensive for the end user. And where's the

innovation in that. The innovation of stable coins is that they can be non custodial and and I think that's something that we have to kind of keep a critical eye on as we see more of these trad fi companies starting to leverage stable coins, Like is it actually benefiting the end user or not?

let's say my podcast sech once you get paid in bitcoin or Salon or XRP, can you facilitate that as well.

United States. The criteria that we have for supporting assets is really we can whitelist them in our app and then you know, we do a check to see like is it classified as a security. We cannot help or do anything in the securities realm since we're not a broker dealer, so we'll never touch that kind of stuff. Yeah, that's kind of the criteria most people want to use USDC.

That's just like the reality of it. We do have some customers that will pay their employees in other kinds of assets, like we have one customer that pays their team and wrapped bitcoin. So the criteria does have to be from a technical side that it has to be an EERC twenty token, which is something that can interact with a smart contract in an automated fashion. Some things like we're going to add support for Solana. We don't have Ripple, never met anybody that wants to use Ripple,

would love to chat to anybody who does. We're really much more kind of like demand focused. Do you have a lot of these kinds of like issuers come to us and say, hey, can you make us the preferred stable coin or preferred asset, and the answers always know it's our customer's choice what they want to use. We're rinding for a second, just paying people in other kinds of like assets that are not tied to a fiat currency. There are a ton of regulations around how that needs

to work. And that's also one of the special sauces of Franklin, which is like, we will make sure that you are compliant with the labor regulations of your jurisdiction.

So there's a lot of very interesting legal precedent for some of this kind of stuff, which goes back actually to Appalasia during the coal mining boom, where you had people working for coal mining companies that were getting paid and come any certificates and then could only use them at the company grocery store, and then you could never

get out of that economy. And so you know, West Virginia with one of these states that actually led a lot of the modern sort of labor compensation regulations you know in the twentieth now twenty first centuries. So you have a lot of places say you have to be paid in a USD denominated asset. Some states will also just explicitly prohibit crypto. They have these like blanket regulations

which we just can never touch. So that's why it's also important to have like this hybrid option where it's very hard to operate one hundred percent on chain natively right now, So having the spectrum of a flexibility and kind of like a nicer user experience packaged up in this piece of software is very effective.

you know you being a disruptor a startup essentially right, and with this new awesome solution, you know, like an ADP might come knocking your door saying, hey, we want to acquire you when we want to bring you into our network or whatever it may be.

economy around giving insights into private payroll data and employment trends. And that's just because they have such a massive reach. You know. There there's like they used to call them, I think, like the big four piece or the four piece something that paychecks, paycore whatever, like these guys take you know, the majority of the United States employees are

getting paid through one of these softwares. We you know, are going back to kind of like what I was mentioning before, Like I am so excited about cryptotechnology and have been for so long, and I'm so concerned about it getting co opted by these like big brands that are using it to extract a value. Like the real innovation of this technology and why it's interesting is it

because it can foster peer to peer transactions. And so that's that's our mission, you know, like we do not want to become another intermediary that extracts value along like the finance chain. But that being said, like we want to also kind of have a say in how this

technology gets deployed. And so you know, all of these company are looking at how do youse stable coins and if we can have a say and how they can use it to be able to facilitate peer to peer, non custodial types of transactions, Like we definitely want to be as part of those conversations to try and manage

those outcomes. So that's what I would say there. There is like a little bit of, to be honest, like a cultural difference where you know, you look at something like ADP and the software looks like something that was built in nineteen ninety nine and such. Working with such a legacy tech stack is really hard, but the distribution

channels are very appealing. So you know, it's I think the thing that every entrepreneur thinks about, whether you know, how do you get your investors or returned, and like how do you think about the rest of your professional career. Certainly, yeah, those are the considerations I have.

this moment. Okay, we need to figure out what we're doing here or we're gonna get disrupted. We're gonna lose market share. Because with the Genius Act pass, we should see a whole bunch of new stable coins. Banks are talking about launching stable coins like Bank of America and much more, and we'll see which ones survive. But obviously Tether's king of the held USDC right behind. So it's just fascinating to see how this is all going to play out.

I think that, like, yeah, it's tough. There's a lot of talk around tokenization of assets, which is very cool, but if these like the actual fundamental assets themselves are not living on a blockchain, a tokenized version of it is higher risk. You know, it's almost like a marketing asset in a lot of ways, and so, but it's

a great thing to experiment with. Like if we think about the earlier days of crypto or at least the etherorem space in twenty sixteen, the Ico boom, like it was a massive experiment and like, I think the industry learned a lot from it. And I almost see the same thing happening in with banks, with equities brokers, with all these kinds of things. So we'll see, we'll see what the outcomes are and the lessons.

that legislation which covers more uh you know, obviously because it's the market structure build it covers DeFi and tokenization on a lot of different things. That helps to put some guardrail in place. And hopefully we don't see any major collapses or anything like that. But you know, what would that mean for your business we're having that pass into law.

going through Congress. As a side note, I have a maybe hot take on US politics, which is like crypto is the thing that will make Congress work again where we have such a divided country, like the only thing that people can agree on is crypto and regulating crypto, and you know, maybe that's like build some goodwill to deal with other societal issues that Congress has to work on. Aside from that, we'll see. I think like the Market

Structure Bill is important. I think one of the things that's like a fundamental issue with how the US regulates financial markets and capital markets is like it is very much like by enforcement, and this bill is not going to change that so much. And it's really like can we have like more effective kind of enforcement agencies that

really go after the bad actors. It's almost like a little bit of a political problem like we think about, you know, in our recent history, like FTX was so involved in talking to regulators and we all know what happened there. So I'm not totally confident that this bill will like really change that, but I am hopeful that it will. It's hard, I think to look at crypto like only the crypto legislation without like some of the other pieces that need to fall in place, like across

capital markets. So you know, I think about accreditation rules that the SEC has. I think some of those need to change as well, and that can lead to enhanced access and also better consumer protection. So there's a lot of stuff that I want to see.

ten years from now, it's twenty thirty five. Are stable coins running through the rails of the economy from a payment standpoint, whether it be payroll or me sending you some money via an app, or I'm sending my cousin some money overseas, or I go to Starbucks and I buy some coffee. Our stable coins running behind all these things. And initially, you know, I guess where I get my money via payroll. It's powering the payroll, my paychecks and things like that.

powering payments, no question. How will that look like? Will they be in these walled garden payments networks, like in a master Card payments network using a master Card stable coin where you know you're not really seeing it as a consumer, or like will you really have these more non custodial type of fun flows. We'll see, you know.

I think like when we look at emerging economies that are like a digital base, so like areas of Africa, ors of South America, like they have had digital money, not crypto that is peer to peer for much longer than we have had in sort of like you know, the the US, Europe, things like that, Like I kind of think about that, like how did that emerge? How how will we see like our own version of like much more digital money kind of emerged. Yeah, we'll see,

but I'll certainly be powered by stable coins. Like what flavor of stable coins? I'm not totally sure.

we're all self custodying. I get my pay it's not on a weekly basis, maybe a daily basis, and then it's all in my same wallet and I could transact, you know, kind of all in one app thing, go make my purchases and my it's my bank account I earned yield, YadA, YadA.

Elon's building it. Other companies are building it, and I can say, hey, robot, whatever your name is, go to home depot and get me this, and it can go make the payment and it's done in stable coins.

through in general, where robotics is part of it. AI is obviously something that is in the news a lot, but crypto is really like perfectly suited for like agents AI agents to interact with, for automated technologies that are a little bit more advanced to be able to use. And I think, you know, sometimes listening to some tech podcasts, it's kind of like, yeah, you're just going to be managing a lot of agents who are actually doing a lot of the work though, like kind of grunt work.

And so we think about it now that you do now, So I think that that will be definitely something. I would love to have a robot like clean my house for me and like go whatever, which you know, we have some early steps like I have a rumba, I have an automated mop thing like what they're getting there, like they get smarter? Like sure. I think something else that is worth thinking about too, is just like when we have instant money, like instantly settled money, Like how

will that change business models? How will that change how we interact with our jobs, with our friends, like with our family. When you have things like Venmo and zell, like it seems instant, like it feels instant, but it actually creates a lot of float in the economy. With cash that's getting settled between financial institutions, it creates a lot of risk. There's a lot of chargeback risk, right that fintech companies have to or you know, normal financial

institutions have to eat. But I think that there's just some level of like transacting will fundamentally be a different thing, and like the technology under the hood will be different, but it's like almost the social context around it will be totally different too.

Things like that. But when we look at like that, the reporting infrastructure for it, the compliance infrastructure, like the IRS doesn't really have a way for us to report instant payments, you know, like they're like, well, there's a calculation if you do it daily, or a calculation if you do it weekly. Like there's a lot of this legacy crap that's going to have to catch up as well.

still have outdated processes and softwares and whatever it is. Do you think eventually they're plugging into these different blockchains and these different companies and kind of like an API set up, they're getting the feed and they have eventually a software that is Web three native that is like a chain analysis right, kind of like a data and analytics and it's aggregating everything, it's categorizing everything, and it's making it easier for them.

The government already has this information. They know exactly how much you owe. You have to kind of take a guess at it, and then you know, it leads to this very like annoying kind of like tax season where you wait for refund or whatever, like things go on for years. A friend of mine just got a notice from the IRS that said he was over refunded in twenty twenty one, and now he owes them a couple

thousand bucks, And it's just like this. You know, there is a big private industry that wants to keep this kind of chaos the same because they make money off of it. These like kinds of intermediaries, the biggest one is into it. You know, it's well documented how much money they spend lobbying Congress so that they can keep turbo tax, which is one of the most popular tax software is one of the richest sort of like software

revenue generating things by far. Will these private industries like co op this technology to like maintain their positions, you know, or can we get the government to like want to upgrade themselves instead of relying on these kind of private sectors, you know, I would, I would love the latter. But it's it's not a question of like the tech being there, it's a question of like the willpower to implement it and to use it in a certain way. I think in a lot of these kinds of instances.

So you know, your cost per unit for like an ADP customers like four to five dollars not very much. Your like profit on that is even lower, like probably fifty percent lowers. But you can make a lot more money by offering them healthcare and then you get a kickback from the insurance brokers or companies. You know. All that kind of stuff really bothers me. I don't I don't like it. And so one thing that we're trying to think about fundamentally is like how do we make

companies running payroll? Like how do we move that from an expense area of their their P and L up to you know, an asset on their balance sheet? Like can you be making money off of running payroll? You have massive treaturies at companies that are just sitting making no money while they're going through an extremely long fun flow process to settle payroll payments. Like faster payments also means you have a lot more opportunity to be earning

money off of that. And so that's something that like we're thinking about at the corporate level, like how do we help companies like actually make money instead of like you know, be paying these massive like opch op x expenses. And we have like a couple different theories about how to do that. We did just release a yield product where companies that have stable coins sitting in smart treasuries

could be earning yield through different DeFi protocols. Yeah, it's really kind of like how do we sort of try and bring about a business model shift and you know, really stay true to this kind of value of not being like an extractor along the way. So so that's kind of where my mind is at.

here for you, Megan. First, if you could create your own metaverse, what would the theme be?