WEBVTT - Klarna CEO Sebastian Siemiatkowski Talks IPO Debut

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Shares of buy now, pay later firm Klana are set

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<v Speaker 2>to begin trading today. The company, in some of its backers,

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<v Speaker 2>sold over thirty four million shares at forty dollars each,

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<v Speaker 2>giving Klana a market value of about fifteen point one

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<v Speaker 2>billion dollars. We're joined now by Klana CEO Sebastian Shimmi

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<v Speaker 2>and Koski Sebastian. First of all, congratulations to you. Caroline

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<v Speaker 2>and I have quizzed you over the years on when

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<v Speaker 2>an IPO happens, why it happens. I just want to

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<v Speaker 2>bring you some news if I may. In the time

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<v Speaker 2>that we've come on air. There's a headline on the

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<v Speaker 2>Bloomberg terminal that the shares are indicated to open between

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<v Speaker 2>fifty and fifty two dollars each. You price the IPO

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<v Speaker 2>at forty. Just summarize your reaction to that and what

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<v Speaker 2>it means to you on a daylight today.

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<v Speaker 3>I'm happy I didn't hear what you said on the price,

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<v Speaker 3>or I pretend not to hear it so I don't

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<v Speaker 3>have to comment on it. We'll find out. Like I'm

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<v Speaker 3>you know, I'm very I'm wroteing my looking forward to

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<v Speaker 3>welcome new shareholders for the company, and I think there's

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<v Speaker 3>decades of growth and opportunity ahead of ourselves, So I

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<v Speaker 3>feel very excited about this.

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<v Speaker 2>Today we introdu you as a buy now, pay later

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<v Speaker 2>firm that increasingly when you've come on this program, we've

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<v Speaker 2>talked about Klana is an everything app. How does this

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<v Speaker 2>IPO reposition you into that domain?

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<v Speaker 3>Well, look, I think that was actually my biggest happy

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<v Speaker 3>moments from the IPO. There were two from the road show. One.

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<v Speaker 3>I got very few questions about buying Appy later, and

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<v Speaker 3>a lot about our card and how it's growing. We've

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<v Speaker 3>signed up seven hundred thousand new Americans in the last

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<v Speaker 3>six weeks to our card. We have five million people

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<v Speaker 3>on the waiting list. But the best part of the

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<v Speaker 3>road show, I tell you, was when we signed into

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<v Speaker 3>one to the reception and one of our investors, the

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<v Speaker 3>guy in the reception said, oh, you're from Clana. He's like, yes,

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<v Speaker 3>do you use it? I love it? I use it

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<v Speaker 3>all the time. And I was like, oh, but what

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<v Speaker 3>can we do better? He's like, nothing, just get me

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<v Speaker 3>the card. So that was that was the best moment

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<v Speaker 3>from the whole road show.

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<v Speaker 1>It's it's like a marketing event. When one goes public,

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<v Speaker 1>you get your name in other people's mindset. Here in

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<v Speaker 1>the United States, will you go for a banking license?

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<v Speaker 1>Talk us through where the growth story is going forward?

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<v Speaker 3>Sure? No, Look there, we have a bank license in Europe,

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<v Speaker 3>as you're well aware of. We've had it for ten years.

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<v Speaker 3>It's fantastic, gives us access to deposits. It's a very

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<v Speaker 3>effective way of funding. Our banag sheet allows us actually

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<v Speaker 3>to do it more cheaply than our competitors. But I

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<v Speaker 3>think the key thing is in the US there's this

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<v Speaker 3>group McKinsey showed us in a study already ten years ago.

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<v Speaker 3>They're called self aware of voids. These are people who've

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<v Speaker 3>tried the credit card. It actually makes slightly more than

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<v Speaker 3>your low income household and medium houses in household income.

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<v Speaker 3>They are they try the card, they tried revolving. They

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<v Speaker 3>say it's it's the product of the devil. They don't

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<v Speaker 3>want to get in four thousand dollars of credit card

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<v Speaker 3>debt with you know, twenty thirty percent interest. They love

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<v Speaker 3>by an appulator, and they love our card. They love

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<v Speaker 3>the opportunity to put most things on debit and then

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<v Speaker 3>occasionally put it on interest free installments very cost effective.

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<v Speaker 3>So that's the target audience, twenty percent of the American households.

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<v Speaker 3>And you know now we have twenty six million users

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<v Speaker 3>in the US, so we're seeing a lot of pickup, seeing.

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<v Speaker 1>Pickup, You're seeing pick up in your shares. You are

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<v Speaker 1>significantly oversubscribed, as we told you, and you chose not

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<v Speaker 1>to hear that you're currently seeing shares being indicated much

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<v Speaker 1>higher than even that they priced. That did you sell

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<v Speaker 1>too low? I know you're a man that's had to

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<v Speaker 1>stomach variations in your market capitalization in history. What does

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<v Speaker 1>it mean to you to have evaluation out there in

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<v Speaker 1>public more broadly every day.

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<v Speaker 3>Well, look, to be honest, personally, I'm not selling a

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<v Speaker 3>single share in this IPO. I am, you know, a

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<v Speaker 3>long term shareholder. I love this company, been doing this

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<v Speaker 3>for two decades to a long period of time. But

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<v Speaker 3>fortunately I was twenty three when we started, so I'm

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<v Speaker 3>not that all yet and I hope to continue for

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<v Speaker 3>a few decades. And if you're truly going to disrupt

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<v Speaker 3>treata banking and you know, and change this industry that

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<v Speaker 3>has you know, a mass so much excess profit because

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<v Speaker 3>of the lack of competition, the lack of customer focus,

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<v Speaker 3>and you want to bring that back and you want

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<v Speaker 3>to create a better service for customers. That's going to

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<v Speaker 3>take some time, though. This is not something you do overnight,

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<v Speaker 3>and I just look forward to doing that, and then

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<v Speaker 3>investors will occasionally lean more into the future and occasionally

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<v Speaker 3>lean more into profit today and so forth, and that

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<v Speaker 3>will vary, and you know, it's up to everyone to

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<v Speaker 3>take that decision for themselves.

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<v Speaker 2>Sebastily. The mechanism in this IPO is really important because

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<v Speaker 2>you didn't raise like a huge amount of money, and

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<v Speaker 2>on this program recently we've done all the reporting on

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<v Speaker 2>some of your peers, like Revolute, doing transactions to stay

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<v Speaker 2>private deliberately. So you faced a choice and you chose

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<v Speaker 2>to go public. What was the main motivation?

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<v Speaker 3>I think that you know, again, to your point, we

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<v Speaker 3>only raised two hundred million dollars right in this IPO

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<v Speaker 3>because the company is, you know, self sustainable from a

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<v Speaker 3>capital perspective, doing really well, so there's no real need.

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<v Speaker 3>I think that the key thing is we've had twenty

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<v Speaker 3>years of private investors, employees bought into the stock, and

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<v Speaker 3>over time it became quite an effort to keep track

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<v Speaker 3>of private transaction in Google sheets, right, So now it's

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<v Speaker 3>a little bit more efficient to trade the stock on

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<v Speaker 3>the market. Gives people who's been with us for many

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<v Speaker 3>decades the ability to get some liquid out, but most

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<v Speaker 3>people are not selling much. And at the same point

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<v Speaker 3>of time, fantastic to welcome new shareholders to the cap

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<v Speaker 3>table who want to join what we're trying to revolutionize

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<v Speaker 3>in retail banking. So I'm super excited about So.

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<v Speaker 2>Which you kind of illustrate outline what the competitive landscape

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<v Speaker 2>looks like to you, who your competitors are, and also

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<v Speaker 2>the regulatory headwinds that you're bracing. For sure.

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<v Speaker 3>I mean people will always mention a firm revolute, and

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<v Speaker 3>we are very impressed by those companies, very inspired by them.

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<v Speaker 3>But the truth is credit card industry is a one

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<v Speaker 3>point three trillion dollar revenue market. So I would say

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<v Speaker 3>it's mostly the incumbents, the old banks that are you know,

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<v Speaker 3>the opportunity and where the competition is and what we

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<v Speaker 3>can grab market share. And the problem for them is,

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<v Speaker 3>you know, if you have a credit card program that's

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<v Speaker 3>running at thirty percent interest and you're revolving people at

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<v Speaker 3>four thousand dollars and you look at Klona's payment model

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<v Speaker 3>where our average outstanding balance is one hundred dollars and

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<v Speaker 3>zero percent interest. You're not too keen. You don't want

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<v Speaker 3>to jump into that. You don't want to lose all

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<v Speaker 3>the profit you're making. But for us, it's just opportunity.

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<v Speaker 3>It does upside, you know, grab more market share, become larger.

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<v Speaker 3>It works well for us. We make money out of that,

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<v Speaker 3>you know. So it's that's what we see is the

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<v Speaker 3>primary competition on the regulatory side. Look, I think at

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<v Speaker 3>the core of it, if ten years from now, less

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<v Speaker 3>people use credit cards and more people use debit cards

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<v Speaker 3>and occasionally buy an appy lator, that's a better that's

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<v Speaker 3>a better society. And as we get the chance to

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<v Speaker 3>sit down and take all the noise away from media

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<v Speaker 3>and so forth, to actually explain and show our losses

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<v Speaker 3>are thirty percent lower than credit cards, our consumers are

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<v Speaker 3>borrowing much less.

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<v Speaker 1>You know.

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<v Speaker 3>I had this conversation to add a conversation with a customer.

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<v Speaker 3>She was like, yeah, my mom called me and she

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<v Speaker 3>was like, are you using this dangerous thing called binacty

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<v Speaker 3>lated with Klana And she told her moms like, mom,

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<v Speaker 3>you have a credit card? Right? Yeah? How much depth.

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<v Speaker 3>Do you have four thousand dollars, what's your interest thirty percent?

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<v Speaker 3>Which is like Mom, I'm borrowing one hundred dollars a

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<v Speaker 3>zero percent interest? Who is financially responsible? And you get

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<v Speaker 3>those that message across, then you realize that regulators actually

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<v Speaker 3>start embracing and seeing value in that we're bringing competition

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<v Speaker 3>to a market that has, you know, extracted excess profit

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<v Speaker 3>out of customers by tactics that are not in the

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<v Speaker 3>customer's best interest.

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<v Speaker 1>Agree, and your tactic in many ways has been to

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<v Speaker 1>embrace efficiency, adopting generator AI in the workforce in particular

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<v Speaker 1>within the product. How much more can you focus in

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<v Speaker 1>on margins? How much more are you going to have

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<v Speaker 1>to keep hiring to scale and to sell?

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<v Speaker 3>Well, the truth is right, we haven't hired people for

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<v Speaker 3>two years. We've shranked the company from seven thousand to

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<v Speaker 3>three thousand, four hundred to three thousand people, which is fantastic,

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<v Speaker 3>but I would say we've probably over indexed a libit

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<v Speaker 3>on efficiency. And now the last six nine months we've

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<v Speaker 3>taken much more focus on how do we take all

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<v Speaker 3>the learnings We've used ourselves as employees as guinea pigs

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<v Speaker 3>for all these AI software, all these tools we took

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<v Speaker 3>out all the SaaS software to salesforce and all that,

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<v Speaker 3>and now what we want to do we want to

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<v Speaker 3>bring that to our customers. We want to bring that

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<v Speaker 3>to theirmercions. We're very excited in the coming weeks and

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<v Speaker 3>months to launch AI powered customer retail banking apps that

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<v Speaker 3>we believe are going to be tremendously more valuable and

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<v Speaker 3>create more values, save time, save money for our customers

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<v Speaker 3>and make them feel and control of their finances. So

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<v Speaker 3>it's very exciting to use AI now to create the

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<v Speaker 3>next generation of financial services.

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<v Speaker 2>So Sebasti, you're a public company now, so you have

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<v Speaker 2>coarsely earnings. But I want to end by asking what

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<v Speaker 2>the metric is that you will gauge plan as success

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<v Speaker 2>by what is the kind of milestone that you are

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<v Speaker 2>holding your company to from this point?

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<v Speaker 3>Well, it's very easy. You mentioned already resolute in the

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<v Speaker 3>firm clan has focused in the last few years has

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<v Speaker 3>been let's get as many users as possible. It's thet'll

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<v Speaker 3>be like Facebook, right, you want to get as many

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<v Speaker 3>users as possible. We're now at one hundred eleven million.

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<v Speaker 3>That means, you know, a firm I think is less

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<v Speaker 3>than thirty revolute fifty. We're one hundred eleven million uses,

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<v Speaker 3>but our revenue per customer is not like as much

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<v Speaker 3>as there, and that is it. You know, revenue per

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<v Speaker 3>customer is the one metric now because we know that

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<v Speaker 3>when we start launching things like the car and we

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<v Speaker 3>see massive pickup from our audience. So now obviously we

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<v Speaker 3>want to reach similar revenue for customers we're seeing our

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<v Speaker 3>main competitors and that has the potential of bringing us

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<v Speaker 3>from a revenue size company as well to a different level.

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<v Speaker 3>So that is the key metric right now. Revenue for customer.

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<v Speaker 1>I do know it's best in Shimunkowski plan a CEO

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<v Speaker 1>the Blockbuster hat I that bodes about the IPO rather

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<v Speaker 1>than the future business model. We say appreciate you being

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<v Speaker 1>here with us today live from the New York Stuck

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<v Speaker 1>Exchange