Remy Blaire: Payment delays cost real money, and they hit the people least able to absorb them. Workers who need to cover the week, or restaurant owners who have a big weekend, routinely have to wait days for a settlement, and the push for instant settlement is growing. Stablecoins move hundreds of billions of dollars daily, but the rest of the world already leads the U.S. in this area. And as the U.S. expands [unclear: “fed down in instant meals”; likely FedNow and instant payments], enterprise payments are at a turning point. Joining us to weigh in this afternoon is Arpit Goel, founder and CEO of Root. Arpit, great to have you on. Thank you so much for joining us. When we look at the space, millions of independent contractors as well as gig workers live paycheck to paycheck and can’t necessarily afford to wait for batch ACH to clear. So are instant cash-outs becoming table stakes for employers to retain actual workers?
Arpit Goel: Instant cash-outs have been table stakes to retain gig workers. It’s just that the underlying rails are changing at a rapid pace right now. Instant cash historically has been a cash advance in the U.S. What is a cash advance? It’s basically someone taking the credit risk of advancing the cash as opposed to money actually moving. If I were to take a step back, the fact, Remy, and thank you for having me on the show, is that in the U.S. historically, money just moves slow. Over $100 trillion originates, and it takes on average 3 to 5 days to land at the destination, causing a massive cash flow crunch. You can calculate the [unclear: “hard ROI”] around here, which is almost $15 billion per day for 3 to 5 days, amounting to $50 billion lost in [unclear: “hard ROI”]. This causes a lot of bullwhip effects for SMEs, just like you mentioned. In the U.S., almost 40% of SMEs refuse to accept credit cards. A lot of people think the reason is the cost or the fees, but that’s not the reason. The reason is the SMEs would get that money 3 to 5 days later, and that creates a massive cash flow crunch. They have to rely on these [unclear: “weakened”] lines of credit at 15% APR just to survive and do their day-to-day work. That is the big issue plaguing the U.S., and other countries have solved it pretty neatly already.
Remy Blaire: I do want to expand on this while I have you here. Tell us a little more about this multi-day settlement lag for Main Street liquidity, especially when we’re talking about restaurants, for example.
Arpit Goel: Maybe your question is, why does it happen? The underlying issue is, I was recently on a podcast and we came up with this analogy. Historically, when the telephone networks used to operate, somebody used to sit down and connect the left line to the right line, and there were hops and hops and hops until you got to the ability to talk to the person on the other side. These were all done through batch mechanisms or manual mechanisms. Somebody was sitting there connecting the wires. That’s how the current banking ecosystem in the U.S. is. There are cutoff times, and somebody has to settle the batches and click buttons. It’s not driven by fully automated setups. That causes a lot of hops between the intermediaries and creates this massive 3 to 5 day delay. The rails haven’t been reinvented. They’ve been like that since the 1970s. Finally, the U.S. is at a very interesting cusp, with RTP and FedNow launching and taking a massive share of the volumes in the last three years. It’s ramping at a pace where it will have a very significant share of the ACH volumes. Although ACH is not the real thing at risk here. The real thing at risk is probably Visa’s and Mastercard’s push-to-debit programs, which were historical ways of advancing cash to the recipients, SMEs or gig economies, but money never actually settled.
Remy Blaire: I do want to ask you about the role of artificial intelligence. But also, Root does connect businesses directly to bank accounts across more than 180 countries. By bypassing some of those conventional guardrails as well as gateways, how much can enterprises actually cut out in terms of hidden fees as well as timing friction?
Arpit Goel: I think fees are less important here. Speed is way more important. In fact, people are willing to pay, just like I said. When there is a cash flow crunch, SMEs are paying 10 to 15% APR just to get money in a credit format. So if money just moves faster, it’s not the fees that we are fighting. It’s basically dramatic speed that we are promising. The way Visa and Mastercard are working is that the recipient bank is advancing the cash and taking on the risk. And even the bank has a cash flow problem here. It’s not only the merchant that has a cash flow problem. Imagine a big marketplace that is moving 100 billion per year. With a 3 to 5 day lag, easily a few billion dollars is sitting somewhere and not being utilized. It’s not earning them yield, or they, or their recipients, could have used that money to actually improve the cash flow mechanics. That is the real thing we are fighting here. Like you mentioned, there is a big role for artificial intelligence and agents to make it happen, and that’s how we are doing it. A good example is what Zelle did for consumers, but it ran into a lot of fraud and security issues. So if we solve it from a secure, instant bank transfer first mindset and give it to businesses, which can be large marketplaces to start with, because they are the ones sending money to a lot of gig workers or a lot of small SMEs, then we start improving the cash flow mechanics, and from there we can maybe even go to consumer payments over time.
Remy Blaire: And finally, before I let you go, you mentioned fraud. That is an area of concern, especially at a time when cybersecurity is front and center. How do you prevent instant payments from becoming a pipeline for fraud?
Arpit Goel: It’s less about instant payments. I think the pipeline for fraud is everywhere. Even with credit, one of the things I feel is going to happen in 2027 is that the large credit card companies will have to insert more friction to protect against AI agents’ unauthorized access to card networks and doing a lot of transactions. That is already happening, and they have to add more friction, because you cannot distinguish what is an agent versus what is not an agent. That has already gone. The way they will have to enforce a lot of layers is through what we call, and what we are building at Root as, a secure transaction-bound auth. It’s something that all the countries that popularized instant payments have built into the technology. With every transaction, whoever is the authorizer of the transaction, there’s a binding between the transaction and the identity of the person who is issuing or conducting the transaction, and that only allows the transaction to go through. For high-value transactions, we will start seeing more and more transaction-bound auth mechanisms. At that point, the playing field is already leveled, because credit cards are already tokenized. Walmart just accepted NFC, which means that very soon every transaction will technically be a card-not-present transaction, whether it’s an NFC transaction or an e-commerce one. At that point, everything is happening through a DPAN, a tokenized version of the card. There is another layer that takes care of the authorization and access to transactions, and they will inevitably embed this. If we embed the same thing on the bank transfer side, because we have the actual bank connected under the hood, it’s a lot more secure than a tokenized mechanism that cannot always take responsibility for the transaction.
Remy Blaire: Well, we will have to leave it there for today. Thank you so much for breaking this down and simplifying it for our viewers.
Arpit Goel: Thank you for having us. I really appreciate it.
