How to use Lightning for Retailers

Webinar Recording and Transcript

Date: 18/04/2024

Host: Kevin Whitmore, Business Innovation Advisor at Callaghan Innovation

Guests: Simon Collins and Brandon Bucher Co-Founder Lightning Pay

Webinar Length: 01:20:08

Kevin: All right. Good morning, everybody. Welcome to today's session on how to use Lightning for retailers. So we have the Lightning Pay team here. We're going to take us through a bit of a session just to be aware we are recording this. So this is going to be used for future people that would like to understand how lightning pay works, but also how lightning in general works.

So we are recording this at the moment. If you have any questions, I think the team are quite keen to make this interactive. So just pop your hand up and we'll go through that. We're off and ready to go, so I will stop sharing and hand over to the team to kick us off.

[00:00:41] Introduction

Simon: Thanks, Kevin I guess. It's nice to be recognized as friend of the pod status with more than one introductory slide. So, look, let's just kick off. We've got plenty to get through. I'll share my screen awesome. All right. Well, thanks everybody for coming to our introductory session on how to use Lightning for Retailers. We envision this as the start of a bit of a series because there's a huge amount to get into. On the opportunities for Bitcoin rails and payments.

By way of introduction, I'm Simon Brandon and Rob are both here. We are founders of lightning pay, which is a point-of-sale solution for New Zealand retailers who want to accept Bitcoin. And the idea is to fix a lot of the inherent issues that retailers suffer from in New Zealand at the moment which we'll get to as well in terms of how we look at Bitcoin.

The retail sector at the moment for the retail payment sector at the moment in New Zealand we'll talk about how we can address that using Bitcoin in particular the Bitcoin lightning network. We would love it if you guys would ask questions or have comments during the discussion.

There will also be a section at the end for discussion, maybe later on. on like a larger scale, but if you have something that burning that you'd like to address, please raise your hand and we could, we could chat through it at the time. We're scheduled for about an hour and a half. Without further ado, the market for retail in New Zealand is substantial, and it's substantial everywhere in the world because of course the taking of money for exchange of goods and services is one of the oldest and most enduring aspects of society.

[00:02:26] Current payment systems and issues

Simon: And as Jack Miller Maller rightly says you know, functioning money is the core of any economy in New Zealand. We do about 9 billion in electronic transactions every month. That adds to over 100 billion a year, because in certain months we go a bit nuts, like Christmas. 61 percent of electronic transactions are credit card transactions, right?

So those are non-EFTPOS, which means that they incur a cost to somebody along the line. 60 percent of all transactions are contactless as well which, Often, if it doesn't incur the same cost, it incurs extra cost. And as you can see in the chart below the value of electronic payments will continue to grow into the late 2020s, while the rate of growth may slow slightly the reality is, you know, electronic transactions are an emerging or growing sector.

I'm not quite sure if you can see past the strip of faces that I've got down the side of my screen, but in New Zealand, we have about 35, 000. Physical retailers and about 10, 000 online retailers. So, about 46, 000 retailers in New Zealand. For context, there's 140, 000 retailers in Australia. So we're actually slightly more retailer dense than Australia is per capita.

Contactless payments with their surcharges have probably shown quite a stark increase. Light onto the fact that we run a for profit retail payments system our entire Landscape is dominated by Intermediaries who do two things extremely well. They moderate their own risk, and they charge per transaction for their services.

And so what that adds up to is a whole lot of different individual businesses every time you swipe your card or even scan your phone, that take a small clip. And that's why Retail payment costs are so high in this country, so you can see from this, this diagram, which I haven't even bothered to recreate to make it prettier because it's so complicated we have about four layers to our payment system in New Zealand, the bottom two in the blue there, those are the ones that you might see and interact with.

Because that's credit cards and point of sale cash, ATM machines, and it's Apple pay and login accounts that you go into. Sitting behind all of that are things like switches and schemes clearinghouses and the different ones that have the SWIFT label next to them. Those are kind of aggregate ones that aggregate large amounts of transactions and then forward them on to the right places.

The important thing to understand about this is we have these switches and interchanges because not all of these systems are interoperable with each other. They don't play nicely. And that's another area that we've got a major issue within New Zealand because our systems are so non interoperable that we need to pay people to create interoperability in the system.

Another issue stemming from a system like this is that we've suffered from really long settlement times. So if you're trying to mediate your risk or moderate your risk as a provider of financial services, the best way to do that is to sit on people's money for as long as possible to make sure that nobody can claim it back from you.

If it was somebody claimed that it was a fraudulent transaction, you have to give it back, but you've already sent the money on, that's a liability to you as an operator of one of those services. So you're going to sit on that money for as long as possible until you're absolutely sure that nobody's going to try and take that money back from you.

And so, that means that people who are eventually going to receive your money, whether it's a shopkeeper, a bank, or somebody else up the system has to wait for it to arrive. They might know about the transaction, but they're not going to see the money until you're happy that you aren't going to have a suffer a claw back.

Yeah. We are also quite prone to outages, especially compared to the rest of the world, which means that all of these systems that are sitting together and are being forced to be interoperable are relatively janky on the back end. And yes, as I've mentioned, you know, there is a risk of fraud and reversal.

So if you're a shopkeeper and you take credit cards, there is always the opportunity for somebody to say that they weren't happy with what they received, didn't receive something. And credit cards. Usually, side with the user in this instance. I'm not saying or making a judgment call either way there, but there's an added risk to operating as a shopkeeper that you may suffer fraud through the reversal of transactions that have come to you.

New Zealand is relatively late to the open banking game, the incumbent banks were very resistant to implementing API based banking protocols in this country and still arguably haven't done a very good job of it, whereas in the rest of the world or in a lot of developed economies, open banking has become kind of a set of standard protocols.

Your user information is sold widely and consistently for profit particularly at the scheme level, which is what we call the basis for operating credit cards with that. So that's Visa, MasterCard, American Express, et cetera. And the incentives that they use to get you to use them like Airpoints or Flybuys, et cetera.

Those are the areas where they capture your data and use that for marketing or, you know, customer profiling, et cetera. So you don't enter this system anonymously or with any privacy, with the expectation of privacy. You actually have the expectation that your information is being used as well as your money to further the ends of the people who make their home in the system.

And it is like many banking systems around the world, not particularly inclusive. Banks can choose who they want to do business with the credit cards that run the best rewards. For people if that's what you're after in these systems are often exclusive to certain tiers of people, which means that people with bad credit or no credit or not very much money don't get to participate in the system to the same extent as somebody who, who is very wealthy and therefore will get free trips around the world on Airpoints or all sorts of benefits from the system.

And. The big issue in New Zealand is merchant services fees. So a merchant service fee is what you pay when somebody swipes a card at your shop or you pay to use, to have an EFTPOS machine in your shop. There are a bunch of charges, some of which are fixed and some of which are variable based on that you pay to have to use or to access the system.

So EFTPOS is technically free in New Zealand, but credit cards, which as we know are 60 plus percent of all the transactions in New Zealand, range from 1. 5 to 3 percent per transaction. An MBIE report recently found that in New Zealand, we pay higher merchant services fees than other similar countries, particularly Australia and the UK, where it's 0. 8 or 0. 6%. And banks, as I mentioned before, they incentivize these higher costs through reward schemes. So you might feel like you're being rewarded in AirPoints, but we can assure you that the cost of using a AirPoints credit card is never as high as the cost of the transaction that you are paying to transact.

The MBIE report identified that these merchant services fees have become just a cost of doing business. That is, they are part of how businesses structure their costs. Interestingly in New Zealand, we will pay, an average shop will pay 13, 000 more in merchant services fees than an equivalent shop in Australia every year.

But of course, like all good free markets. Smaller businesses are unable to negotiate rates for these merchant services fees, unlike large players. So, you know Noel Leaming is able to negotiate a lower rate on contactless fees. Small businesses like Edrei have to be price takers in this area.

And there have been efforts to legislate this. As you can see on the other side of the screen here there was a retail payment services bill in 2022. You can see how that reduced the interchange fee by an average of 0. 2%. So, of course, on this, stripe users account, their current pricing went from 2. 9 percent plus 0. 3 percent plus 30 cents on all card transactions to a astoundingly low 2. 7 percent plus. Plus 30 cents on domestic card transactions. So, you know, the effort to legislate out cost has been pretty soft in its in its outcomes.

[00:11:12] Innovation

Simon: Despite all of this, the market that is users of cards are very keen to see innovation in this space. 89 percent of. respondents to a survey would like to see real time payments, so that at the moment that you pay for something in a shop, that that money is available for the shop to use, right? No settlement times. It's the highest demanded, or most highest identified attributive payments that people would like to see.

They would like to see more information bundled in their transactions, so if you use Apple Pay to something people would like to see the itemized receipt on your phone. And in the same breath, they would like to see payment notifications come to their phones so if you use a physical card, they would have liked to see an account on their phone through an app or a notification or something like that. And not being, and not using things like account numbers or telephone numbers to identify you, they would like a username, their name, at Simon Collins etc etc. But of course, people want to make sure that these things are safe and secure, don't cost anything more, that they're easy to use, make life easier, and they're fast to make and receive payments, and that they can be done on a mobile phone.

So you know, we have a pretty stagnant market for these kinds of services in New Zealand. PayWave was probably the largest, the biggest, you know recent innovation in the space, otherwise it's been pretty mild despite the fact that people were signaling here that they would use these features if they were available.

And this is where we see opportunity for the Lightning Network, right? Lightning Network has fewer innovation through and through, and I've got Brandon here to take us through exactly why it is so.

[00:12:53] What is Lightning Network

Brandon: Yeah, thanks, Simon. Yeah, so I'm gonna just give you guys an intro to what the Lightning Network is, what the opportunity is for the Lightning Network and retail payments in New Zealand.

So, at a very high level we're not going to dive into the technical details to any significant degree unless, unless someone has a question that we want to chase down a particular rabbit hole, but in general introducing first the, the Bitcoin network and, and, and how it works. Obviously, if you know a little bit about it the main concept is we're creating peer to peer transactions.

In my diagram here, Alice is, is sending 0. 1 Bitcoin to Bob. And in doing so they can send that transaction to the network. Bob receives some notification that the, that the transaction has occurred. The network finalizes that transaction using the miners in the network which You know, ask for a small fee now, smallish fee now, growing fee going forward for finalizing that transaction on the network.

The Bitcoin network itself is optimized for security decentralization and can only really conduct a limited number of transactions at a time seven transactions per second is what it does on average. And that's because it's optimizing for that security decentralization and censorship resistance and it's maintaining that as a first principle.

So we see, the way that we see the light, or the Bitcoin network evolving is you know, focusing on that robust settlement layer. These are some really interesting charts that I came across a couple of months ago when they were produced. Comparing the Bitcoin network to the largest settlement layer in the world, which is, which is Fedwire in the US the Federal Reserve settlement system being the, you know, most significant in terms of value and the most significant in terms of transactions and this is you know, what we consider, you know, in the way that things are evolving in Bitcoin, an equivalent system to where Bitcoin is going.

It's obviously not equivalent today. But in this comparison has a couple of interesting, interesting insights. One is that the Bitcoin network in terms of, this is the chart on the bottom right. If you want to see these closely, I've sort of put a reference there at the bottom. You can, you can find it if you go look around.

This is from Porcopolis Economics. The Bitcoin network is currently doing more transactions, on a transaction number perspective. FEDWIRE So the number of transactions that the Bitcoin network can currently handle is already you know, larger than what the FEDWIRE system is doing.

Obviously where the big difference lies is in the amount of volume or the amount of value that's being transacted where currently FEDWIRE is conducting about, 800 times more value on an annual basis in the Bitcoin network. However, that is down starkly from just a few years ago where it was a million times more value.

So the Bitcoin network is evolving and growing. Already conducting more transactions and you know, again, an order of magnitude better in terms of the total value, the network settles. And the Bitcoin, and so this is sort of introducing the Lightning Network by saying that the Bitcoin network is optimized for this, like, final layer of a transaction settlement, you know, similar to how we had a tiered structure in, in our system today.

This will further optimize. create or be the basis or foundation for what we build on top of it going forward. So, how is Lightning different We sort of introduced the idea of a peer to peer payment where Alice is sending Bitcoin to Bob and miners facilitate ten that transaction in a very rigorous High level in general sense.

What we're doing instead is that instead of Alice and Bob directly transacting on the Bitcoin network they opened what is called a light network channel. And that channel is effectively an agreement between the two parties. About who owes, who owns what balance between them. So they've agreed originally that Bob has zero Satoshi.

It's a different denomination of Bitcoin. There's a hundred million Satoshi in one Bitcoin. Where Alice owns 5, 000 Satoshi in this channel. So originally this agreement is that we can transact amongst each other, but out of the gate, Alice owns all of the Bitcoin and Bob owns nothing. But along the way.

They conduct lightning network transactions, and they adjust the balance that each owe each other. The first transaction is a million sats and Bob receives that. However, at this moment, disagreement is between the two parties. It has not been broadcast to the network. They can do another transaction that's much smaller, another thousand Satoshi.

And they update that agreed balance between each other, ultimately though this transaction can be broadcast to the network just like the standard Bitcoin transaction and that can be made final on that final settlement layer. And that's effectively how the lightning network works on a very micro scale.

But on a macro scale, the Lightning Network is made up of many of these agreements between different parties on the network and they're all connected to each other. So because these different small, you know, single party agreements are connected to each other, they can pass these transactions between people that they're connected to.

You're not just connected as Alice, you're not only connected to Bob, you're connected to other, other participants on the network as well. And that's how we can pass transactions between each other from one point on the network to another. Simply batching these transactions on a, on a, on a on a micro scale.

And from one node on the network passing the same transaction between these different agreements to reach the other side. So in a very, taking all that and wrapping it up. In a very simple way the definition of the Lightning Network is that we are taking many transactions between two parties or multiple parties, and we're condensing that down onto a single transaction on the Bitcoin network, so at a very high level.

That's the way the Lightning Network works, and that allows transactions to be extremely fast, and it allows them to be extremely cheap.

[00:19:12] Features and Benefits of the Lightning Network

Brandon: So, what that actually creates is an environment where we can get a lot of advantages over the Bitcoin network itself. One thing is that these payments are instant. As soon as this information is negotiated between the parties, the transaction can be completed, and it can also be completed in a way that is final.

So because these transactions are instanced you're going to get in a, you know, as a merchant receiving these transactions, particularly if you're interested in keeping the Bitcoin, the moment the transaction is completed, you have the cash in hand. This allows us to, to see a future where individual businesses can improve their cashflow situation where they're no longer waiting long periods of time to receive those transactions.

The settlement's also final. So it just as though you just like if you were going to be receiving a pile of cash in hand you know, in person for this transaction there is no way to reverse the transaction as soon as it's been completed. And because of that. You know, you don't have risks associated with those payments as you would with a credit card transaction you've taken online.

The, the claw back mechanisms are only what you as a merchant are, are willing to offer to, to the payer. And so that, that occurs on your terms. And so you can significantly reduce risk through using a settlement network like this.

And then. Obviously, one of the things we've mentioned about the Lightning Network is it's extremely inexpensive. On average, we're talking about a transaction fee natively on the Lightning Network of fractions of a penny, you know, typically I see transactions going through my node many, many times a day we're talking on the order of a hundred Satoshi on average, something like that, probably less in most cases, a couple of Satoshi, and, and this, these values are extremely small and the direct payments portion of this is the fact that, it was what sort of facilitates this, you know, as one participant on the network and another participant in the network, you are paying each other there are people that sort of, There are other nodes in between that are routing this payment and providing information on how it can arrive at its destination.

But there are no services provided in between the two participants of a transaction. The transaction is between two parties and that allows this sort of significant reduction in expense. So, allowing the business to, you know, keep more of the money it's asking for in the end and improve margins. And then obviously one of the, one of the things that we're looking for as, as payers is a, is a modern payments experience.

Today we have, you know, technologies like PayWave that You know, do incur an additional cost you know, there, there was a time that there wasn't, they always incurred a cost but perhaps not to the payer, you know, we're all aware of the friction involved in that situation at the moment, every time we show up to a particularly small, you know.

business. As, as Simon mentioned earlier being conscious of the you know, who's taking, who's soaking up the cost for that convenience is something that we're all, we're all aware of now. With the Lightning Network, we have the ability to build smarter transaction types really at no additional cost because there's no marginal costs to provide in that transaction.

There's no additional transaction infrastructure that needs to be built. maintained we're, we're fundamentally simply using the lightning network as it is today with, you know, some tools added on top. So because there's no additional marginal costs of these convenience features there's no costs applied to the users of those convenience features, which means we can do a lot more with this going forward.

[00:23:02] Payment & Business Model innovation

Simon: Thanks, Brandon. So yeah, so as Brandon is saying, you know, this is a very innovative payments network. It is, You know, built for innovation on the ground up, and it is built for being smart from the ground up and because it's smart, innovative, and cheap. It enables new things that simply would be impossible on a legacy payments network like the Swift network or a a credit card scheme or something similar because they simply don't have the programmability, the intelligence, the built from the ground up innovative potential.

And so what lightning offers. Us, as a company, as, as Lightning Pay, as a, as a group of users, as a society, are some really interesting opportunities for payment and business model innovation. Obviously, micropayments are all of a sudden possible. There's a interesting anecdote that it was Steve Jobs and Apple that enabled credit cards to be used on the internet.

Okay. Because prior to iTunes wanting to sell a song for 99 cents there was no way to make a credit card transaction of 99 cents viable from a cost perspective. And so they invented a means at Apple of batching transactions so that they could bundle up. Hundreds, thousands or even tens of thousands of purchases of songs and then build them in a bunch to MasterCard or Visa to various people's accounts at the end of the day.

And that started a trajectory of moving credit cards towards micropayments. But what's very clear is that rather than facilitating true micropayments, they've moved towards monetizing every payment in a way that kind of makes that impossible, but. Of course, now, on Lightning Network, when five sets isn't even worth representing in a two digit dismal representation of a dollar value.

You can imagine how It enables some really interesting new business models. Payment Automation is another one. Because it's a smart network, because it can be made to be programmable and contactless, you can trigger events or trigger events to occur based on certain conditions, which means that there is potential for, you know, the faster you are.

hands on experiences to reduce friction and payments. I would love to be able to buy a beer without talking to a person sometimes. That sounds like a dream to me. Streaming sets is another one which has really taken off particularly in content creation, podcasting, you know video streaming, et cetera.

You pay a content creator in a constant stream of money while you're consuming their content. And when you stop consuming, you stop paying. It incentivizes content creators to make content that people want to stay and engage with for a longer time, which obviously creates a really good incentive in content creation which probably goes in the face of a lot of what's out there at the moment and likewise on the user side it incentivizes you to pay attention and be engaged with the content that you're streaming but also not obliging you to stay if it's no longer are valuable to you.

I don't know anybody who hasn't wasted a couple of audible credits on books that they gave up on halfway through. They feel like wasted money when you do that. So here's a completely alternative business model that alleviates that pressure on both sides of the equation.

Machine to machine payments. I mean, again, this is ratcheting automation up another level. And it could be as simple as, uh, charging your electric car at a charge station, and the car knows how much you've charged, and the machine knows how much you've charged, and nobody has to worry about scanning cards putting in pins, using credit cards or anything to pay for that before or after, that just stream sets to the car, As the machine streams energy to the car or the car stream sets to the machine and vice versa.

Smart grids again, intelligent energy grids that are paid based on a stream of payments rather than a bulk bill at the end of the month. You can imagine how valuable that would be for improving things like utilization of grids, but also allowing people to prioritize. And improve their own consumption of energy, which is going to be one of the major challenges for grid management in the near future and probably in the long term as well.

And international payments. I mean, one of the things that Bitcoin has emerged as an extremely useful tool for has been international payments but as the fee basis for the main chain gets higher and higher small remittances become, you know, a kind of a major event and therefore if you're sending small amounts across countries Lightning makes perfect sense for that.

And so you can imagine a situation where people are migrant workers getting paid daily for their work and they can send small microtransactions back home. This improves the velocity of money in the countries that are both sending and receiving it. But it improves the security of the people who, or people who are sending money, who often, under traditional remittance services suffer barriers to receiving that money, they might not have ID, they might not be using a trustworthy service they might not have access to that service permanently so, You know, the Lightning Network means from its node basis that we can create frictionless, small transactions internationally that alleviate a huge number of distresses that often starve people of, of access to money in, in developing countries.

And rewards, again we have sort of tacked rewards onto the existing money system as an incentive base to use a particular scheme. On Lightning, rewards could be built in to a transaction so that first of all, you don't have to worry about finding your coffee card when you go down to your local cafe and getting it clipped every time, or you don't have to search through a little file for your name on a copy card on their counter, but it is simply programmed in, and the rule would simply, you know flag when you've reached a threshold and could cash it in.

But also rewards could be network and network wide and store agnostic. So you could be rewarded for using a particular service across a range of stores. You could be rewarded for spending a certain amount of money on a certain type of product. There's no limit now to what rewards could offer and therefore opening up new means of incentivizing both customers, but also shops to offer services and products that make spending or accumulating rewards worthwhile.

[00:30:00] 3 General Technology Categories

Brandon: This is the section of the talk that as we dove in and started creating content around this, realized that this is probably the next talk on its own. It's, it's a, it's a big task to cover the, the ways in which you can use Lightning today to accept payments.

And. I will say as I was, as I was thinking about this and doing it there, there was a time not that long ago, 18 months ago, maybe where I could easily keep on top of all of the options and advise people pretty specifically on what they could use. I clearly that's not the case anymore. As I was digging around, I came across new things and so this is an evolving space.

And I think. You know, the best way to think about this is, is to think about the specific use case that you might have as a retailer and think about the different ways in which Lightning can facilitate the kind of payment improvements we've been talking about. But in, but in, we'll hit on it very lightly here, and I'll, I'll discuss some of the things you should be thinking about, but I think this is probably the, the place we need to you know, spend a bit more time in another talk.

So the big, the big message here is in general terms. All of the payments processor tools that you, you would need in a, in a regular or in your, in your payments experience today really already exists with the Lightning Network. And it's just a matter of working out what the what your use case requires and finding the right tools.

So in, in general terms, there's three product categories that you're going to find out there in the world. There's a lot of products that are focused on physical point of sale. And there's a, there's a growing number of them that will facilitate e commerce transactions this, this allows you to sort of embed a new payments technology into your, into your website giving, you know, people, visitors an option to pay with Bitcoin online.

And there are also some relatively specific invoicing platforms as well depending on, on your, your payments use case looking at tools that are specifically suited for each of those will be important. I sort of put this up as a placeholder to talk about what the what the considerations are, but I, I sort of, you know, stopped after I, I ran, I made a list of five or six of these things.

Really, this is all about choosing your app, as I mentioned in the last slide, and the considerations there are many. There are variables around the custody of Bitcoin where the Bitcoin actually resides who's holding it, is it you, is it the payment provider, is it your own wallet? There will be, in a retail setting concerns or considerations about dollar interoperability.

Thank you for listening. This is something that we came out of the gate trying to address at Lightning Pay, because we know that regardless, you know, you may be a reseller that wants Bitcoin, and that's awesome, like, that's what we want this is what we want you to want but the You know, the reality is as a, as a business with cash flows, incoming and outgoing, you're going to need access to both rails for, for the time, you know, for, you know, a long period of time going forward.

And when you accept Bitcoin payments, you're going to need interoperability with dollars. Eventually you can access the cash to pay your suppliers. So there's, unfortunately in New Zealand, there's limited options as far as that's concerned and that's, and that's why we started there first with Lightning Pay.

You need, you should think about your app infrastructure and hosting requirements. Do you want to run any of this infrastructure yourself? Do you want to give all of this off to the service provider? And, and how, and what the trade offs are there. Most of these systems can be deployed on hardware very easily, whether it's your mobile phone or a dedicated device.

And they also have some variable options in terms of product inventory management. Thanks. And, and, interconnectedness with your systems. So without going too deep into what the options are and what those look like in each of those concern categories, we'll save that for another time.

But that's the These are the main areas that you want to be thinking about, but the main message is there's an endless number of options out there, and I don't even know what they all are anymore, but we can, you know, we'll do our best to advise you if you need it.

[00:34:05] Lightning Pay

Simon: And the real reason we're here today is to show you on our product.

No, that's not true. But this is why we have built Lightning Pay. We've heard today that we suffer from some major issues if you're a retailer in payments processing in New Zealand we've heard that Lightning Network is an emerging and infinitely programmable, useful, and scalable alternative to existing rails.

And so the three of us have started Lightning Pay. In the first instance to enable merchants to take, Bitcoin over the counter in a way that fits in with the way already doing business that they can receive dollars if that's what they're after at the end of the day, because there are all sorts of requirements for tax for margin for paying suppliers that are still conducted in dollars.

But with the option to retain some of that in Bitcoin if they'd like and because Lightning is so incredibly cheap and so incredibly fast we will be offering all of this at no fees for merchants because we feel very strongly It's supposed to be your money. It's supposed to be the customer's money when they come into the shop and it's supposed to be your money once they leave the shop and that giving charge to access your own funds seems pretty cruel to be perfectly frank just for, um, being able to provide the service that fits between you and a person that's staring you in the face.

And again, because The Lightning Network settles immediately settlement times that can be relied on of a tenth of a second if you're receiving Bitcoin or the same business day. or the next business day for, for New Zealand dollars into your, into your legacy bank account. So we're running an exchange.

The beta for the exchange is live and you can sign up to that at lightningpay.nz. And by way of providing context with help from Web3NZ, we ran a retail simulation between December and February, December last year and February this year at a, Jewelry studio, retailer, tools retailer education provider in Wellington and Christchurch.

These were an ideal this was an ideal case study because they have both online and in person retail requirements. They're, they have relatively complicated Inventory system. They have two locations, which meant that we got to quite robustly test the differences in all of those different contexts.

And so what you can see here is a comparison for online service providers. They use Stripe and PayPal or physical merchant services. They use Kiwi bank. They pay an average of between 3. 8 and 4. 65% for online and 2. 9 percent for in person merchant services fees. Important to recognize that the in person merchant services fees also come with a 103 merchant account fee and a 50 EFTPOS fee per month. So that has to be covered before you are even out of the gate. Settlement times run between 8 and 11 days or 6 and 10 days for physical and so you can see how per 10, 000 of revenue, these fees really start to eat into your budget. If you've got pretty slim margins, there's not much left after your merchant services fees or you have to price that in and you're making a business decision there to be more or less competitive when you're pricing your products.

With Lightning Pay, that cost them 0 percent to take payments both online and in person. And we settled the same day. And that really is the difference between Lightning and TradFi technology. Retail Payment Services.

[00:38:15] Retailer's concerns

Brandon: Yeah, so the last thing we're gonna cover off is just some of the, you know, most common concerns that the average retailer has. I mean, a lot of people that that understand Bitcoin at a reasonably deep level have a pretty good understanding of this, but, you know, when we, when we do hear objections from regular retailers, these are the most common things that come up so we just thought we, we'd hit on a few of these first is just you know, the legality of, of using Bitcoin as payments, and, and this one's an obvious one, there, there's already advice out there from the New Zealand government and IRD that allow you to understand the tax implications in particular, but, but also understand that this is, you know, accepting Bitcoin for goods and services is something that is Available to you today, pretty clearly.

And, and tax advice is pretty reasonable. If you, if you go and take a look at it and troll through it it is, it's pretty straightforward to understand. And it's something you can, you can consume if you go take a look. So I've got a link there. If you, you know, it's a little bit long, but I guess if you pause the video, if you're watching this later, you can, you can type that out or, you know, just go look for it on the IRD website.

But Yeah, so conducting transactions with Bitcoin is I won't say that accounting for it is necessarily going to be easy for you. You know, it's going to be something you have to figure out, but it is a straightforward process to understand if you take a look. The other major concern that comes up is obviously the volatility.

You know, this is true. This is something that you know, over, over short periods of time Bitcoin can change in the dollar value of its price. And this means that if you're holding Bitcoin for a significant amount of time, that's a choice you have to make you know, if you, meaning, you know, if you want Bitcoin on your balance sheet, and you want to hold the Bitcoin on your balance sheet that's one decision you can make if you can accept the volatility, but if you have short term cash flow requirements it's important that you have that, that quick and easy you know, transaction that can allow you to get New Zealand dollars in cash and allow you to pay, pay your suppliers and, and, and conduct business as you need to.

So it is something that's a concern but, you know, hopefully we and others can, can help make that less of a concern and you can manage your balance sheet. As you see fit.

Another one is like, you know, how well does it work? You know, the Lightning network is an emerging technology and I'll be straightforward about that. But over the last couple of years it has seen a significant maturity from, from its early days. My, my favorite report on the current status of the Lightning Network comes from River Financial is an exchange in the United States and they do a great job you know, because they are one of the largest users of the Lightning Network they have a lot of their own data on, on the current status of the Lightning Network.

And they also have you know, a lot of friends that have shared data with them as well. So they have a pretty good overview on the maturity of the lightning network. You can see that, You know, the number of transactions that have occurred in the lightning network has grown rather significantly in the last two years as I said, but another thing that's occurring is that the failure rates are getting better.

You know, both, Because the technology itself is maturing, but also because the operators are maturing and their ability to use the technologies. You know, failure rates, you know, on, on River's side of things in particular you know, started to become well below 1%. And this is you know, we expect, we expect this to get better as the maturity continues forward.

The last one is how can I integrate this with, with my systems? The only, the only real advice that we, you know, we can't really offer too much accounting advice. However, we can say that in general most retailers are accounting for Bitcoin transactions. As a cash transaction, you know, so in terms of their, whether they're doing it in a, in a way that's relatively automated through CSV, or whether they're doing it in a manual way, because they're only getting a few payments a week or something like that in general terms, this is how they're doing it and that is, if you look at the IRD advice that is generally, you're, you're, you know, you're obviously looking at this, the Bitcoin payment as income in a, in a way that's You know, pretty comparable to what you're doing on your regular cash transactions.

You know, that's the best way to do it today. However, you know, your, the ease in which you can do this is going to be variable. It depends on the maturity of your, of your current systems. And there's another thing that we you know, we're gonna take a look at Lightning Pay as well. So, I mean, ultimately, that's probably the last thing that we'll say is you know, this, You know, getting people over these hurdles in a New Zealand context specifically is what we saw is missing.

When we started talking about what this business might look like. So addressing some of these things, making, lowering the friction for people to, to take on some of these challenges is ultimately what we exist for. And, and so we'll, we'll continue hitting on that as we go forward.

[00:43:02] Q&A

Simon: Hey I just see Jody's got his their hand up.

So did you want to ask something at this time or?

Jodi: Hi so I am a crypto tax specialist and I previously worked in the crypto team for Inland Revenue and I've now worked for myself. And a lot of, while my work is predominantly tax work, I am being asked more and more about and the potential of accepting payments in crypto. And I've even investigated this myself for my own business.

And came up to over massive stumbling blocks as you can imagine in New Zealand. So everything you're talking about for Lightning Pay sounds awesome. And the fact that you know, if you're trying to overcome the fact that the banks are charging massive transaction fees. If you've got a customer with New Zealand dollars and you're a business that wants New Zealand dollars, lightning pay in the middle will make that happen.

Awesome. But if the accounting for that is what's the major problem, and I know you've just skirted over that for, for point of sale, maybe a little bit easier if you're going straight NZD to NZD, but for those that are maintaining any sort of crypto It's, it's a massive problem in the accounting software world in New Zealand because you need, you need an appropriate crypto subledger that will link into your accounting system.

That's not like a tax software, like a coinly or whatever. And those systems are available globally. Nothing New Zealand specific, but the costs of them are massive. You know, a few hundred dollars a month, and so, you're either going to end up paying ridiculous amounts for your accountant to reconcile those, that information, or you're going to have significant software costs in automating that process, which then, to me, kind of, negates Lightning pay being free.

Are you, and that's the massive hurdle that I'm seeing for people out there that are wanting to get on board with accepting crypto. And then on top of that, for example, I am an invoice based, service based business. And so there are software out there that I can create an invoice out because I use Xero predominantly.

I can create my invoice. So that it can accept crypto, but then I have to manually reconcile that invoice back into, if I receive New Zealand dollars, again, back into my Xero accounting system. And it's those things in my mind that are the biggest hurdle because, for your not, Lightning Pay, implementing that crypto payment service has other massive costs that you're not, that New Zealand is not serving at the moment.

Simon: Yeah, those two are really fair points. The important thing is that basically, the key use case we see out of the gate for Lightning Pay is Bitcoin to New Zealand dollars, and The vendor will price the New Zealand dollars and will receive New Zealand dollars the next day, you know, in their bank account In the amount that is reflected on the New Zealand dollar invoice Our role is to facilitate the transaction in the background and make that completely seamless, right?

Yeah, we recognize the accounting software deficit in New Zealand too, and our genuine hope is that we can build, we either in house or, um, through collaboration with the right people is yeah, plug in for Xero that accounts for it in some way. What we'd like to do is have a sliding scale where you can say, well, I would like to retain 20 percent of my Bitcoin transactions in Bitcoin and then have a zero plugin that recognizes how to account for that 20%.

And we would, we would want to make that free as well because yeah, that's, that's the important bit. So no, we, we, we 100 percent recognize that. And Just have to build it into our roadmap to continue to improve that situation in New Zealand, because we see a lot of our role is in building the infrastructure that this has to work on in this country.

Right? Yeah. We are years behind United States, Uk, other kind of crypto or Bitcoin more bit more Bitcoin advanced countries. And this is something that we as first movers in this country are gonna have to work very hard on to address.

Jodi: Yep. Yep. I just thought I would, I would make those comments because so for lightning pay, for example, if I is one of the things that will happen for an invoice based business that you could, you know, like Stripe, you link Stripe up to your Xero.

And then when you send your invoice through Xero, it goes pay now and Stripe pops up and away they go. Is that. in the future for lightning pay that that will be an integration for kind of service based businesses that if they've got a lightning pay wallet and you click there will be a button that says you know an option to pay using lightning pay yeah i just it's it all just seems a bit far away and like when i so i approach pin about this option and they're the same scenario they have nothing to integrate, and it's all manual reconciliation, and if you're only getting a couple of payments a week or whatever, then it's not a massive deal, but if you want you know, massive uptake of this, that somebody is literally kind of running their business on it, it's not feasible for them to be manually reconciling every single transaction that they partake in.

Simon: Yep, 100%. No, I recognize that. I think, you know, the, so, yes, the roadmap includes invoicing for services businesses. It is, and it's our, our mission is to have a, we accept lightning pay sticker on every business in New Zealand's front door, window, till point of sale machine, et cetera. But we recognize that in the first instance, the low hanging fruit and the, the, the area that we have to expand into first is Bitcoin to New Zealand dollar payments, because that's what shops do.

Merchants want, they want New Zealand dollars in their bank account. I'm taking Bitcoin. Great, whatever, as long as it doesn't cause them, any extra friction. That'd probably be happy to sign on to it, right? That's, that's kind of the logic that works with what you're already using. It doesn't cost you anything more.

You don't have to do any manual reconciliation. Absolutely. Now, if you're a business that makes a decision to take Bitcoin as a proportion of your receipts of lightning pay, the manual reconciliation will be on you in the short term. Absolutely. And that's a decision that a Bitcoin centric business is probably prepared to take.

Because they see the value in retaining some of their wealth in Bitcoin or their, or reserving some of their savings in Bitcoin over time. But yeah, we 100 percent recognize the necessity and the difficulty in accounting for that. And the point is, I mean, like what was in your experience, what's the proportion of companies that use Xero as their You know, main accounting package.

Jodi: Oh, I am a Xero based business

Simon: but it's probably 90 plus percent right. With, you know, 5 percent MYOB and the other 5 percent using a spreadsheet. So, you know, I think the important thing for us is to get into Xero as a plugin that allows for that just, yeah, super easy accounting for it.

So, no, thank you. Amazing comments. Because yeah, this is a, You Because I think that's an area that we recognize as a major concern for businesses, because they have to reconcile this stuff every month, right? And doing a GST return is enough of a pain in the ass as it is, having to do, having to reconcile Bitcoin GST, when it's gone up or down in value and you don't know how much to pay, oh my god, what a nightmare, so yeah, we recognize that.

Thanks, Jodi!

Jodi: If you want any help testing any of these things, sing out, I'd be keen to get involved. Yes, please.

Simon: Oh my god, amazing. Thank you. That's awesome. All good.

Jodi: Thanks.

Simon: Well, this is probably the perfect time to continue on with Q& A. Any other thoughts?

Kevin: Maybe I can riff off the tax chat but flip it on its head a little bit. Yeah, thanks for that question, Jodi. I think that was sufficiently uncomfortable. These are the types of questions we really want to get out in terms of the real-world use cases and rubbing up against, yeah, what happens in the, in, in, in reality, right?

So that was really good. Just going to flip it on its head as well, a little bit on the tax piece. Again, this is not an advice or seeking. Sort of that sort of tax feedback, but just also interested in, obviously from the consumer's perspective as well, there is an aspect of when you are using Bitcoin or transacting in Bitcoin, there will be a A little bit of inertia in terms of, yeah, if you are, if you are paying and transacting that way and income tax and, and all those sorts of things, what's sort of the general suggestion or, you know, who, who should go talk to in terms of individuals in terms of how they're transacting that way as well.

Simon: So you mean that people could potentially be spending Bitcoin. That has appreciated in value and therefore they're spending an appreciated asset. Yeah, that's a very good point. We're entering, I mean, as, as you know very well, Kevin, we're entering a very interesting space for governments around the emergence of private money into general economies in a way that has never been seen before.

And so at the moment, we think it's really important that people pay their tax on Bitcoin often carefully and with as much fanfare as possible because we need IRD and government to notice that this is occurring in the sector and that this is how this is a trajectory that we're on and it's not going away because yeah I would flip that question on its head and that I would say if you had New Zealand dollars that were and this will never happen, right? Increasing in their purchasing power, should you be paying tax on the increasing purchasing power? Or are we simply being silently taxed into the ground through inflation and reduced purchasing power over time? If governments had their settings right, it would be worth it. their own money. Things would be costing less because you're purchasing power would be increasing. And that is the same question. Should you be paying tax on appreciating currency? Yeah. It's a philosophical question really, isn't it.

Kevin: It's the catch 22 in terms of, if it's currently being deemed a property and taxed appropriately, then people are less likely to use it as a medium of exchange, therefore, it stays a property, as opposed to I mean

Brandon: that's one of the, it's one of the, I mean, we've, I've thought about this personally quite a bit because I, you know, just a few years ago entered a period of time where I have started spending Bitcoin on things whether it's a, you know, beer at a meetup or I pay for, you know web services via Bitcoin as well pretty regularly.

My You know, again, there's like, there's not much I can provide here that's official advice, but we are, like the, my, my approach to this is one of the reasons that I wanted to, I liked the idea of building Lightning Pay and I want this to exist is because I would like to have more of my money sitting in Bitcoin, appreciating in value.

And one of the reasons that I can't do that is that, you know, my ability to spend it you know, is, is somewhat limited. Buy Bitcoin, to spend it, you know, people say they, you know, spend their Bitcoin and then replace it. I actually try to take the other tap buy Bitcoin, I try to spend it, that limits my, my tax liability, it, you know, in most cases, it's, you know, it can completely minimal but it does, it does require an attempt to account for those things. Unfortunately, but it, but it does limit my concern about my tax liability, if that makes sense. So, you know, buying Bitcoin to spend it on a short period of time is generally my approach to dealing with that problem. And, and I guess one of the, one of the things that we want to achieve is making both sides of that process easy.

Loading up your lightning wallet to spend, even for the day, if that's frictionless enough you know, we can, we can allow that to happen, right?

Simon: It'd be good to create a distinction between the Bitcoin that you've got in cold storage as your investment Bitcoin and your sats that you've got in a lightning wallet as your spending sats.

And your tax liability being different across both of them because you've got a FIFO you know, first in first out for the sats. Which reduces your liability, hopefully, and a and then a taxable basis for the cold storage Bitcoin. There's an argument, of course, that no Bitcoiner ever spends their cold storage Bitcoin, right?

Kevin: Yeah, I guess that's a good distinction as well. Yeah, around the two different use cases and whether we can move to that as well. And I think you've raised another question as well. Is there, is there potentially a NZ dollar to NZ dollar opportunity using lightning as the intermediary. To kind of get the, the savings on fees, but potentially some of the, the asset, the asset that's used from consumer to merchant might, might stay the same at some point without a conversion.

Simon: Yeah, yeah, well, you've struck a a hot topic of internal discussion at Lightning Pay. I think probably, you know, one of the great things about Okahu is that it lets us poll a user's bank account for New Zealand dollars on request by them. And so that's actually what comes out of their accounts. So, you know, there is a potential for us to just facilitate New Zealand dollar to New Zealand dollar transactions through Lightning pay using the same technology. It would just bypass the Bitcoin lightning network. Most likely, though because the cost of conversion would start to accumulate fees that would get us into a range Where you might start seeing the kind of costs that you'd associate with you know fairly cheap, but still noticeable you know, existing legacy payments cost, especially for smaller transactions.

Kevin: Right, so potentially viable for larger numbers, but not so much for coffees and, right.

Simon: We, you know, As we've discussed, Lightning is so programmable you know, there is an emerging shitcoins on Bitcoin you know, space, and New Zealand dollar is certainly one of those shitcoins, and so, you know, if it became easily programmable, and it was a demanded feature, then, you know, there's, there's an ecosystem to be built on Lightning and you know, I would love to see one day an ecosystem that is New Zealand dollars and Bitcoin being exchanged on Lightning which means that you could pay New Zealand dollars to somebody who wants it, or it would be in Bitcoin if they wanted it in Bitcoin but that slowly that, The balance of New Zealand dollars to Bitcoin swapped over so that, you know, Bitcoin became the thing that everybody wanted and New Zealand dollars became the thing that they didn't.

And it would be amazing if Lightning Pay was at the center of that. So we can certainly see it. But the yeah, the, the Bitcoin maxis in us also have an internal philosophical struggle about enabling the continuation of, you know, fiat money for longer than is necessary.

Brandon: I'll just add something to that because I would, I would answer that in a different way, like Simon's right, like what we can do today is great, but what we can do today with Bitcoin in the center, if we're doing New Zealand dollars to New Zealand dollars is somewhat limited, you know, currently we're not considering any, we're not customizing any user funds.

If we maintain that situation it's, you know, the costs that are incurred to us on the dollar side of this equation are just too high for us to do something that's, that's significant around that. However we have spent, as Simon said, a significant amount of time talking about what the options are going forward to create a seamless experience between dollars and Bitcoin, you know, in a way that in a way that we would want to see.

Obviously, a significant part of the challenge is a significant number of regulatory questions about how we can do that in New Zealand specifically. I can see how this is going to happen in other places. In a way that that works really well. You know, there's a number of technologies that we've been interested in talking about to try and solve this problem.

But at the current moment, it's unclear to us which path we can take in a clear way without frankly, without, without the business being stopped. Right? So the You know, whether the technologies are, you know custodial in nature, looking a lot more like the traditional finance system, but making it interoperable with the, with the Bitcoin network, or whether it's Bitcoin technologies you know, like you know, e cash, or whether it's the sort of tokens attached to, to lightning thing that's emerging, we are looking at and interested in, you know you know, finding a way to, to make that connection between New Zealand and the Lightning Network, you know, more solid and better.

At the current moment, it's unclear to us, you know, which path is not full of booby traps. So we'll continue to work on it and figure out which one we can take.

Kevin: Awesome.

Simon: Yeah, that's a, that's a good point. And, and yeah, at the end of the day, the, you know, the question is, do you, do you spend time building, you know, an exceptional ecosystem in New Zealand that is you know, dominant or takes on the big boys. Or do you build a really great Bitcoin to dollars system that then you move into Australia and Asia and you know, other markets that kind of allow the business to grow and the acceptance of Bitcoin around the world to grow as well. So, you know, these are sort of right kind of resourcing questions as well for a very small business.

Kevin: Yeah, it's one of the things I've noticed from today's chat is yeah, it opens up a lot of questions around more rabbit holes, more interoperability. So maybe just a point as well, I tried Lightning Pay the other day, and you guys are doing an amazing job with the simplification of it all it was nice and slick.

The UI was good. The plugin into Akahu was really good as well. So yeah, just thought I'd mention that as well as, you know, whilst we probe you for hard answers to questions, you've done a good job there as well. Are there any other questions from people? I'm going to keep talking otherwise.

Jeff: Sure.

I've got one. I missed the beginning. Sorry about that. But Simon, what was the outcome of that trial? Right? You're like in December, January, February, we did a trial at these shops. What was your conclusion from that?

Simon: So you saw the, the slides that I showed earlier which was

Jeff: Yeah, with the fee breakdown?

Simon: Yes. So that's, this was, this was Workspace studios that we ran the trial through we would have loved to have put a little bit more volume through Bitcoin through to kind of really, you know, test can we actually consistently maintain the 0 percent fees aspect of this operation. But you know what we had in December was quite a hacked together version of what we hoped to offer retailers. you know, in a more polished way going forward. And so at Workspace they had just a phone with a well, it's a Satoshi point of sale app and online we put A BTC pay server point of sale payment option in Wix and Shopify. There two e-commerce solutions. And you know, like it went great even though it was a bit hacky. It was awesome. You know, it didn't interrupt their workflow at all really. Other than teaching everybody who works the shop how to use the phone to take payments they didn't see any volatility in the price of Bitcoin they didn't see any fees on those payments at all, and meanwhile it worked seamlessly alongside what they were already doing.

So yeah, we're just exceedingly happy with the outcomes of, of the trial.

Jeff: And just like kind of related here, do you think that you would end up dedicating a lot of time to people asking questions about this sort of thing?

Simon: Well, we certainly dedicate plenty of time to our support chats on Telegram and taking support questions online.

But do you mean about the sort of fundamental questions of taking Bitcoin or the does it work? I guess

Jeff: there's a learning curve here, right? But like, if people are putting up a sticker, and a lot of people are maybe curious, right? And, so not from your point of view, right? From the merchant point of view.

Simon: It's a good question. I think what we've identified in terms of our merchant side customer acquisition is that the first calves off the rank are going to be the types of places that Bitcoin is already frequent or are likely to frequent, so and not to, not to pigeonhole anybody too much, but butchers and craft beer bars and breweries and axe throwing You know, activity centers.

No, I'm joking about the last one there. But yeah, the, as we grow,

Jeff: They're more prepared for that sort of

Simon: they probably already had the conversation, do you take Bitcoin, why don't you take Bitcoin? So yeah, I mean, and you know, again, first calves off the rank are, are likely to be smaller businesses, where you can have a conversation with the owner about it and why before they sign up to it. And so they're probably better arms than average. You know, the average store manager at a warehouse to have the conversation as to why they're taking Bitcoin and how does it work?

Jeff: Well, I just signed up online and it was smooth with no hiccups for it. And I wish you, I wish you all the best.

Simon: Thanks, man.

Jason: Yeah, thanks Simon. Thanks guys for the chat. Very informative. I guess my question, a couple of things. One, how are you going to monetize this if, I understand your fee structure is currently zero. Is that kind of a trial or what's the plan there? And the second thing, I guess, there was a recent article by Cody Ellingham just around, you know, got all these centers around the world, whether it's Bitcoin Beach or it's Lugano in Switzerland, or how do you, how do you get that going? It feels like, you know, when I look on the Bitcoin or Lightning acceptance map, there's kind of four in Wellington and six in Auckland, and it's not, you need that momentum to make something happen.

So, you know, is Queenstown the spot, as he suggests? And how do you go around and actually get 15 out of 20 retailers on the street to accept this and get something going from there?

Simon: Yeah, that's so two really good questions. And so the first one how does this, how does this monetize as a, as a really good question.

So the secret sauce is that we run an exchange or brokerage in New Zealand, which is the current, you know, the first cab off the rank is basically the engine under the hood. And. We bank money there, right? So when you buy from Lightning Pay, you pay what are the New Zealand's cheapest rates to purchase Bitcoin at 1 percent and that, that's what we need to cover those costs.

So we, what we really need is matched buyers and sales across the market. And so we want to incentivize people buying Bitcoin with New Zealand dollars, so that we have New Zealand dollars to, for free, on our end, just push into New Zealand dollar, into merchants bank accounts. So, because merchants are selling Bitcoin into that same market we're just matching, ideally, we're matching buys and sells with revenue on the, on the buy side. And so that's, that's how we do it. And if we can get the volume high enough, That's the monetized portion of it.

The next is about critical mass and yeah, we totally recognize that. And we think that yes, you know, we think that it is about circular economies in small communities that makes sense to monetize or to build clusters of Bitcoin acceptance within.

And so I think, you know, if you walk around your town, Wellington, and I walk around my town, Christchurch You know Brandon's in Dunedin and Rob's in Queenstown I've got probably three or four little sets of shops that I think are probably ideal to approach in a cluster. And you, the aim is to build a bunch of these little Bitcoin clusters around New Zealand.

And then kind of demonstrate the value of being a Bitcoin cluster so that they kind of grow concentrically and hopefully eventually organically around the country.

Jason: How much also the converting people to this idea is you've got to get over the FUD hurdles of Bitcoin in the first place?

Brandon: I was gonna say is that we hope that we're gonna be able to create a value proposition that's compelling enough that people are willing to give this a shot. Right.

You know, just having the option to accept some of your revenue at lower fees, even if it's, you know, the one Bitcoin or who's going to show up three times a week to spend money with you is going to be compelling enough for you to, for you to try this out in your shop. Ultimately the value proposition we're offering here doesn't require you to care that much about Bitcoin.

You're going to be receiving New Zealand dollars. And, you know, you know that concentric circle idea that Simon mentioned, you know, these concentric circles will probably end up starting around Bitcoiners who want to, you know, use their Bitcoin to spend in their local community around themselves. Right.

And, you know, so fundamentally we're hoping to offer a better Dollar value proposition for merchants which means that they, you know, we hope you know, we don't know this for sure, but we hope that that objection around Bitcoin itself has less of a concern if that's not something that we were making them have to deal with.

And ultimately, that's, you know, why we're doing the things we're doing is to try to remove those hurdles to some degree.

Simon: I think it's important to note as well that the We see, I think we as a, we as a group, certainly in this conversation, are tuned into the fact that the narrative around Bitcoin is definitely changing away from the FUD, away from the scam and you know, ocean boiling nonsense narratives that have been around for such a long time.

The timing is right to be starting to build this business because we're, you know, we're coattailing that discussion. And so that when we start to emerge in a meaningful way. That narrative will have taken root in, you know, mainstream discussion and, and hearts and minds, for lack of a better word.

But you know, we're also proactive about it, right? Like we're, you know, I, I have run and we have funded the Orange Pillar Parliament campaign. So, you know, we want to make sure that the playing field for operating Bitcoin businesses is, you know, nice and level compared to other businesses, which it currently isn't.

And that messaging is coming from, you know, government. They're making sure that, you know, Bitcoin businesses can operate fairly and should be operating in New Zealand. So yeah, we recognize that there is an onus on us and Bitcoin is to make sure that the discussion in, in market is quite positive about this because it, it's certainly a headwind. That we have to overcome.

Jason: Okay. And one last thing just around, I guess, wallets and things, obviously a big difference between custodial and non custodial. And then, you know, just the fees sometimes around depending on what's happening on the base layer. You know, how you kind of pitch that to Retailer you know, which wallets you suggest. And then, you know, I can't see many retailers or even many consumers running their own nodes and then managing liquidity across channels and that kind of thing. So how do you kind of, you know, abstract away all that complexity and, and I guess it seems like the only real way to do it is to have a simple custodial wallet, like Wallet of Satoshi, and no one's running nodes or managing liquidity and channels. So is that kind of your base case of how you get someone on boarded?

Simon: Yeah, so important thing is for a pure NZD retailer, they don't have to have a Bitcoin wallet. They'll take Bitcoin over the counter. They'll never see Bitcoin. It will go straight to their bank account. For one that wants to receive a small portion of their Bitcoin and, and or a small portion of their bitcoin.

Jason: So what are they using at point of sale then to take the transaction if they don't?

Simon: They'll be using our point of sale app because we need to know how much Bitcoin has gone through their accounts. to then pay them in Bitcoin dollars. So we would take that Bitcoin that they received over the counter if they're a NZT retailer, and we put it into our liquidity market of buys and sells.

And it's gone away from them. And we just push New Zealand dollars to them. If they want to retain some, then yes, they would need a wallet. We don't custody any funds at all. So we have a wallet guide on our on our website, you know. And this is one of the things that we think is really important in our role in the market as well, is to make sure that we're and so we've just got a set of tiers of beginner intermediate expert wallets.

And, you know, wallop Satoshi is there for every, you know, first time of receiving lightning bitcoin and low fees, yes, it's custodial, but it does a good job at what it does well. And if people, you know, take the orange pill that we're offering, then, you know, breezes and the Zeus's and the everything else is there to continue to step through on their way through that journey and hopefully we're there to hold their hand.

Kevin: Well I'm just conscious of time if the Lightning Pay team are okay to hang around a little bit longer I think there might be a couple more questions to go. We have run time so feel free to jump if you need to go. I just had a quick question on, I mean, We've been throwing lots of additional development challenges at you guys, but one of the things I see that's missing as well is payroll solutions.

And I'm starting to see an emergent facilitation within the Lightning Pay solution that that could facilitate that. Any, maybe not on your roadmap for the immediate future, but any, any thoughts on that? I mean, obviously that's a massive conduit to. You know, the, the, the circular nature that we were talking about before, if you're receiving initially in New Zealand dollars versus if you're getting paid in Bitcoin, it's quite a fundamental shift in terms of whether you're going to be inclined to transfer things back and forth. Any thoughts on that?

Brandon: We haven't really thought about that one a lot. It has come up, and it has come up particularly since we started the beta program. I had one conversation in particular with someone who was interested in the idea of I think sort of the reverse of, of where you might be going with that, which is you know, a company that has Bitcoin in their hands whether it's from their own whether it's from their own customers or suppliers or whatever the case may be and they need to make payroll an easy way for them to make that payroll might be to use Lightning Pay as, as the intermediary between the two.

It, I know that, you know, strike is quite famous in the U S for having a campaign around and, you know, allowing people to get paid in Bitcoin. And it's something that, you know, obviously they're running a somewhat similar business model to what we're doing. It's a little bit different, but that is, I mean, look, it's certainly interesting, but it's, you know, not currently something, you know, that we're, we're thinking about building for yet.

But we are interested in. Listening to business use cases that are out there, right? I mean, we were pursuing this merchant angle because we believe that we can offer a good value proposition around payments, generally, you know, one of the things that started me on this journey was thinking about like, how do you use these technologies to connect with real people?

Not just Bitcoiners, right? And, you know, so recognizing these challenges is why we're headed the direction that we're headed, but ultimately what we wanted to do was connect New Zealand to the Lightning Network and find the ways in which New Zealand needs those tools, right? So we're happy to listen if, you know, if we encounter You know, a potential customer or someone who has these challenges, like, you know, we're an open door to have a conversation because, you know, the, the tools we've created here are new and, and, you know, the ways we can apply them are probably many.

So, yeah, I think we'd be open to having conversations, but it's, it's not currently something we're, we're building for it just yet.

Simon: Yeah, I would say, you know we're already seeing some really innovative use of Lightning Pay from our existing small pool of beta users Borex solutions and lots of interesting suggestions for how just the existing proposition could work in a range of different contexts.

And so, yeah one of the things we think is really interesting and we applied that. We're short of the funding well, the pool of funding was short for our application for the Trailblazer Fund last year is about making sure that we can build interoperability with different solutions into the system so that it can be a platform rather than a service, and perhaps the extensibility is market led rather than internally, you know?

Brandon: I mean, that's, that's fundamentally, we got asked a question once about why, why Bitcoin when we're talking about this business, right? You know, if we, if we're building a payment solution for merchants and potentially building a payment solution for payers, like, why is there Bitcoin in between at all?

And my answer to that question is because there's no chance in the world that we build every payments service that is required in a modern economy. Right. You know, the interoperability layer that the Lightning Network provides between the things that we're going to do you know, and the platform that we're building around New Zealand dollar to Bitcoin exchange are, you know, fundamental layers upon which other people might build a payroll solution, right and other people might build you know, other innovative payment solutions for other business contexts.

And those you know, that's how you, you change things broadly, right? Like, you know, we're not so, we're not so arrogant to believe that we'll, you know, Lightning Pay will facilitate all the payments in New Zealand one day. But, you know, Oh, whoa, slow down, buddy. But you know, creating an environment by which the Lightning Network can be the, the major place where commerce occurs is fundamentally where we're headed towards, right?

So. So I think, you know, that distinction between platform and service is a good one, Simon.

Simon: Somebody with the very privileged at the moment API access could probably build their own payroll integration at the moment. And we're happy to see that volume go through the platform. Amazing.

Kevin: Yeah, it could be a good one for students as well, in terms of projects and things like that. Just think about academia, universities. Yeah, again, Jeff, all good. Any other questions? Otherwise, we might wrap it up there. I'm sensing a follow on chat on tax with, with Jodi. Could be a good session as well.

Simon: Mm hmm. Talk through some of these. Oh, 100%. Yeah, amazing.

Kevin: Yeah, so yeah, I like the fact that more threads are sort of coming out of this discussion as well, but yeah, just want to thank the team for running through today's session.

I'll leave you guys with the final word, but yeah, appreciate everybody joining. And we will be obviously we've recorded this, the session and we'll be posting this online as well. So thank you very much for coming.

Simon: Thanks everyone. Thanks, Kevin.

Brandon: It's great. Thanks everybody.