In the summer of 2020, as pandemic-induced volatility gripped the market, SoftBank Group shocked Wall Street with a series of huge options bets on U.S. technology stocks. Akshay Naheta was behind these trades that gave SoftBank the nickname “The Whale of Nasdaq.” Akshay Naheta is an executive whose career has been marked by bold bets on disruption.
Now, after closing multibillion-dollar deals including the merger of Nvidia and ARM, Naheta is making perhaps his most ambitious bet yet. That means the global payments infrastructure is ripe for reinvention.
His Zug, Switzerland-based startup, Distributed Technologies Research (DTR), seeks to bridge the gap between traditional banking and blockchain technology, and is a company aiming to modernize global payments infrastructure. joining the group.
The company claims its technology can eliminate a variety of payment inefficiencies, from remittance costs and exchange fees to foreign exchange exchange fees and payment delays. “Current payment networks are plagued by inefficiencies such as transfer costs, exchange fees, currency conversion fees, payment delays, and other opaque fees,” Naheta said in an interview with TechCrunch.
DTR’s core technology, AmalgamOS, essentially connects banks to blockchain networks. Through APIs, businesses can integrate payment functionality while complying with local regulations. The system can handle everything from merchant payments to financial management, and supports both traditional currencies and major stablecoins from 48 countries.
The startup is building what Najeta calls an “international orchestration network” that automatically routes transactions through either traditional banking rails or blockchain rails, depending on the path that provides the best combination of speed and cost. We have built something that can be described as: “We are connected to 12,000 banks in Europe,” he said in an interview. Businesses that integrate DTR's API will be able to enable their customers to initiate money transfers directly through their banking apps.
At first glance, DTR's foray into payments infrastructure appears to have come at the perfect time. Visa and Mastercard both charge 2% to 3% swipe fees, typically the second-highest cost for merchants after payroll, but their duopoly has come under increased scrutiny. A proposed credit card competition law in the US could require banks to offer alternative cards to merchants. dominant network.
DTR's early customers say its infrastructure fills a significant gap. Philip Lord of cryptocurrency wallet startup Orbit said the system enabled his company to move funds from a cryptocurrency wallet to a UK bank account within 30 seconds on Christmas Day. This remittance would have taken several days using traditional routes.
Akshay Naheta Image: DTR
Najeta's interest in payments infrastructure stems from an unlikely source: SoftBank's acquisition of Fortress Investment Group in 2017. The transaction put approximately $20 million worth of Bitcoin on SoftBank's balance sheet.
Naheta said that while researching the underlying blockchain technology, he saw an opportunity to apply his background in wireless communications to payment networks. While still at SoftBank, Najeta began building what he hoped would become DTR's founding team. He reached out to his undergraduate thesis advisor Pramod Viswanath, a wireless communications expert who now heads Princeton's Blockchain Center, and Sreeram Kannan, who would later go on to found Eigen Layer.
The research team saw blockchain as essentially a peer-to-peer communications network that could revolutionize payments by applying decades of research in wireless systems. Naheta said he nearly resigned from SoftBank in the summer of 2018 to focus on DTR and cryptocurrency venture Bakkt, but was persuaded to stay by senior executives including Rajeev Misra and Masayoshi Son. .
Najeta's previous forays into payments included investing in SoftBank's Wirecard, which later went bankrupt. SoftBank was still making money from its investment in Wirecard. “I had a lot of failures,” he admitted. “I looked at it from the perspective that there are companies around the world that have all these regulated licenses and obviously have payment technology in place.”
These experiences likely influenced DTR's emphasis on compliance and organizational reliability. This cautious approach also applies to the company's growth strategy. “Even if we increase headcount to 60 people by the second quarter, we will still have positive free cash flow,” he said.
Stablecoin growth will surge 55% in 2024, with Bernstein predicting the market cap will reach $500 billion this year. Image: Bernstein
The startup faces competition on multiple fronts. Wise has found success in the business of matching currency flows between countries, Ripple is offering blockchain-based payments despite legal issues, while traditional banks are also gaining momentum through initiatives such as SWIFT. They say they are upgrading the system. Last but not least, Stripe's recent $1 billion acquisition of Bridge will help the world's most valuable fintech startup move deeper into the payments space.
But Najeta sees potential in serving companies in between these worlds, particularly those operating across digital nomads, creator economy platforms, and emerging markets.
“Banks do not have the capacity to perform KYC/AML at a small scale level where payments are made to $200 to 10,000 people a month,” he argued. The fragmented nature of national payment systems creates special challenges for companies operating around the world, as each jurisdiction maintains its own rails and regulations.
The payments industry is notoriously difficult to disrupt due to high profit margins and network effects. Despite the recent decline, PayPal has a market capitalization of $70 billion, while Visa and Mastercard are worth more than $1 billion combined.
“I really think retail customers are screwed with payments,” he says. “And it's not the banks' fault. These are connected to legacy systems and it's very difficult to spin the Titanic.”
Lord Orbit said in an interview that the scope remains wide. He said that as recently as a year ago, the only option for businesses that needed to transition between cryptocurrencies and traditional banking systems was to “go to something like an OTC shop and have them send money to you, maybe one He pointed out that the company had to pay around 3%.
“Over the years, even though so many startups have been born and so many coins have appeared, whenever I wanted to do an on-ramp or an off-ramp, there was no other formal legal idea system. It's crazy that there weren't any 'people around,''' he said. DTR's solution is “1 block faster” than other solutions.