Transcript 0:00 [on-hold music] Welcome back to the Sport in Crypto podcast. 0:14 Back again with another episode, and this time, a returning guest, John Tinami Gomez. How are you doing? I'm great, Petar. Happy New Year. Happy to be here. Happy New Year to you. 0:23 Thanks for doing this on what feels like most people's second working day, basically, right? Yeah. Depends who you ask. [chuckles] [laughs] And, um, just remind us about yourself and what UpTop do as well. Yeah. 0:37 So UpTop is a fan engagement wallet and platform. It's live, uh, now with two clubs in the NBA, the Detroit Pistons and the Cleveland Cavaliers in our second season. 0:49 Uh, we're also managing the reward program for LSU Athletics. 0:55 We build leveraging on-chain primitives, and that was the nature of our discussion, uh, last year when I was in London, so happy to be back here and, you know, having expanded the product and have some, some exciting updates, um, going forward as well. 1:11 And you've since that podcast been acquired. Tell us a little bit about the new company that owns UpTop. Rain is a, uh, fintech. Uh, they acquired us, uh, late last year. 1:23 The company is one of the major fintech enablers of stablecoins. 1:29 Um, our vision was always that on-chain primitives would proliferate in the sports and entertainment vertical, uh, at UpTop, and we're experimenting with loyalty and rewards. 1:41 Rain itself is the largest enabler of, uh, crypto-backed card programs globally, live in, you know, many markets and, and expanding. And they had a similar vision for how, you know, loyalty would be executed. 1:57 Through the acquisition, we're keeping the UpTop entity and brand and, and expanding, uh, in sports and entertainment through co-branded wallets and, and card programs. 2:08 But we're also, um, building out, uh, rewards infrastructure for Rain's core, uh, clients. That's really interesting. 2:16 And, uh, the, the stablecoin world has obviously exploded over the last 18 months, and, and Rain, I think, are one of the fastest growing companies in that space. 2:26 Tell us a little bit more about how UpTop is gonna help Rain and Rain is gonna help UpTop. Yeah. 2:33 So I guess philosophically, um, what's, what's happened over the last 18 months is really, especially in a consumer payment sense, people are trying to treat tokenized money or, or interact with tokenized money the same way they always have interacted with, with fiat, which is they expect it to just work in consumer contexts. 2:54 They expect merchants to accept it. Uh, that was the nature of, you know, Rain's strategy and partnership with the card network. 3:02 And, you know, the ability to use tokenized money, uh, you know, to transact was always the goal, right? 3:08 Adding a utility layer around a form of money that already had, uh, very interesting properties, uh, in terms of being able to settle instantly, et cetera. 3:18 Now, you know, the next step is what properties have been built around fiat money that consumers also expect and love, and one of those is, you know, really engaging and really rewarding loyalty programs. 3:31 This is no different. Uh, we're now the team that is supporting that kind of next, uh, feature build-out. We're excited. You know, we'll launch something, uh, this year to support all of those clients. 3:44 And our sports ent- entertainment build-out, um, has proven to be a really great testing ground for a lot of these features. 3:51 We're likely going live with stablecoin support in a major stadium, uh, in the United States sometime this quarter or next. Uh, so really excited about that. 4:04 And let's dig in a bit into some of the case studies that you've got. I think the Cleveland Cavaliers example is something that we've written a lot about on Sport in Crypto. 4:12 Talk to us a little bit about what Cavs Rewards is and why it's different to most other rewards programs. 4:18 W- what the on-chain piece of that has done for both you, the business, and also the businesses in Cleveland Cavs, and then the fans as well. Yeah. 4:31 So, you know, for us, it was really about building a rewards program that had parity with, uh, some of the best programs in the world. 4:40 I'm talking about brands like Delta Sky Miles that sell billions of dollars in miles per year. Starbucks that has a great, uh, loaded value, uh, system that is larger than many major banks in terms of deposits. 4:55 Yeah, it's pretty incredible what some of these brands have achieved with teams of, you know, thousands of people in the payments field, uh, especially, right? Because they're moving value. 5:05 We from very early on made the design choice that, that every, uh, fan should have, you know, a digital asset-based wallet. 5:12 Um, and the goal there, uh, was essentially to be able to support value transfers that are very small or very large or, or based on logic and programmable and, you know, leverage digital assets to achieve the same kind of end state that maybe a Starbucks has but with far fewer resources. 5:33 You know, we were a startup and, and a small team and, and just betting on a better, in our view, infrastructure stack. 5:39 Uh, I think, you know, the world is starting to, to catch on to that design choice being the right one. 5:46 And, you know, most teams, uh, that are building now in some sort of value movement are sort of embracing these primitives. Um, and so we're happy we made that bet early on. 5:57 What it allowed us to achieve with the Cavs is essentially an assetized rewards program, something that actually generates revenue. Um, we enable them to be a points issuer. 6:08 We-Enable them to have an open loop system, so we sell those points to sponsors. 6:14 It's a rate card asset that's at a pretty interesting revenue run rate at this point, and, and the team over there is really considering it an important asset, right? 6:24 The same way you would sell a jersey patch or a stadium naming rights, um, the rewards program is becoming a, a significant line item that, that everyone's paying a lot of attention to. 6:35 And that's primarily been the basis of, of, of our expansion. You know, people aren't exactly super concerned about how we build. 6:44 It's, it's more what results we, we can achieve, um, the same way you wouldn't ask a SaaS company if they're a Google Cloud or an Azure project, right? 6:55 Um, we just have been driving good results with these rewards programs and, and we're growing them. 7:01 Um, and it's proven to be a really great set of experiences to jump right into to Rain and, and start building, um, value. And then of course, it's, it's expanded into another NBA team, Detroit Pistons. 7:14 You obviously mentioned the LSU rewards program. I guess that the Pi- Pistons program is, is quite similar. The LSU Athletics one might be a little bit different considering all the sports. 7:24 Walk us through those two case studies as well, because it's, it's fascinating. Have you seen the same success that you've seen at the, the Cavaliers as you have with your two new companies that you're working with? 7:34 What are some of the nuanced differences, the fan bases, and maybe the sports as well that have triggered product iterations? Yeah, look, I, it's, you know, the launch of the Pistons has been very successful. 7:46 There's a lot of really interesting brands. You know, Kroger is participating as their grocery partner. That's, you know, been incredible. People are loving it. 7:54 In the case of LSU, there have definitely been things that we're, we're adjusting. Um, you know, we're supporting a multi-tenant architecture in, in some sense. 8:04 Um, and what that means is like every team, you know, has different implications on how ticketing is done or what facilities they're using. So all of those integrations have to, have to be designed, um, in smart ways. 8:18 But the team, you know, is really excited about it. It's, it's a huge proving ground for us to kind of understand, uh, the college sports fan in the United States, which is an or- an enormous market. 8:30 There are slight nuances that are different between, you know, NIL and, you know, how sponsorship assets are, are sold in college versus professional in the US. 8:41 Um, and that's evolving very, very quickly, and we've had to stay, you know, on top of it. 8:46 Also, you know, there's a lot of new fans every year because new students show up on campus, so that's, that's been an exciting aspect and just trying to understand all the behavioral things there. 8:57 I think what's really interesting is it's a good proving ground for us. 9:01 We've been very excited about the idea of partnering directly with leagues as well that may have, you know, thirty-plus teams within the leagues and, and structuring a program that, you know, works well in that context. 9:14 And LSU, um, is a really, really good test case for that, right? For our tech stack. We can support many, many teams in one, you know, in one branded environment. Could we do similar with a league? 9:28 And so I think that will be an important step for us to go through and, and sort of test that design choice. 9:34 It's amazing to see a company in the space kind of working with so many big recognized brands with so many fans. The question I've got is: 9:43 What is the aha moment usually for rights holders when you're speaking to them or anyone in the entertainment space really? It's actually very interesting what we've seen recently in recent conversations. 9:55 Um, I think, you know, post, uh, joining Rain, people have realized the direction that we're, we're headed in, which is, um, to be a full end-to-end, uh, wallet-in-a-box solution for these brands. 10:09 And they sort of have the aha moment that they've loosely been thinking about for a while, which is what's been tried in the past just hasn't really been executed well. 10:20 But doing it right would be a major undertaking, right? 10:23 So there's in, in the sports industry that's notoriously understaffed, there's, there's all these competing priorities constantly, and really the main focus, as we've spoken about in the past, is fielding a great product through the team and the, and the management. 10:38 Figuring out how to reward fans and have them feel appreciated on a continuous basis is super, super challenging. 10:48 But you do participate in these programs in your day-to-day if you're, you know, loyal to an airline or to a quick service restaurant, so people understand that it can be executed well, and they just know that it requires a ton of resources, a lot of fintech experience, and then you can, you know, licensing and other capabilities, then you can, you know, really achieve parity with those programs. 11:15 So now people have seen that that is the direction that we're taking, and it kind of clicks for them that, like, our goal is to really be an end-to-end provider that makes no compromises on the experience for a sports fan. 11:29 And talk to me a little bit more about the aspect of kinda like on-chain or tokenized loyalty, because I think there's been a lot of attempts to kinda create something in that space across the kind of sports entertainment, music as well has, has been a big one. 11:47 Film. Why hasn't it taken off yet? Yeah. I think a lot of the previous attempts, um, we've recently been having discussions about the retrospective on how the market evolved. 11:59 I think a lot of the previous attempts were overly focused on collectability. 12:05 That appeals to a certain subset of fans, a certain community that may be really, really deeply engaged with collecting and, and maybe embracing-Digital assets, uh, simultaneously or in other ways, and this is kind of their interest just happens to intersect. 12:23 And we always, from the inception of our company, viewed that as, as sort of a limited TAM. 12:29 The real TAM is, you know, the people who are already engaging through very va- various channels, uh, with the clubs that they support and love, whether they go in person, which is, you know, a small, small subset of time, but, but a very important interaction, whether they're following along on social media or, you know, watching through the broadcasters. 12:52 And we always viewed that population, just the person who's engaged and spending and, you know, has a sort of deep fealty as the addressable market and try to understand them and, and what they want. 13:08 And it's really, really simple things. So it's like, you know, one thing we hear is, uh, often is, you know, "I struggle to renew my season ticket every year because prices are, are getting pretty high in sports," right? 13:21 It's the accessibility is an issue, and it's not just the ticket price. The ticket price is fine, but, you know, I have to go drive to a location. I have to find parking. 13:31 Parking is, is expensive and the, and, and surcharging, and concessions are expensive. 13:36 So it's really the, the total kind of overall cost, and I think, you know, this has been a common theme in the UK as well, where people feel kind of tapped out in terms of the direct extraction of value from fans. 13:49 So we always felt that indirect value creation that doesn't put a burden on, on a fan is should be our number one focus. 13:58 The problem there, and, and this is a, a problem in loyalty and rewards in general, is that those consumers are the most frequent transactors. 14:08 And moving funds, moving money, moving value in the legacy fiat infrastructure is expensive, and it's kind of counterintuitive that your most loyal customers from a fixed cost perspective end up being the highest because they're moving small amounts of money inside a, a, or out of an application, or they're transacting often and generating high card fees, uh, for the receiver. 14:36 So how do you create an experience where more loyalty doesn't mean more cost for the rights holder, and it can actually reward the fan? 14:46 And so we've thought of use cases such as like what if a fan shopped at a sponsor within the, the previous week, and we could drop, you know, five dollars into their wallet before a game that could only be used for parking, right? 15:04 How would you build that interaction? And when you really start to analyze it, it's impossible, um, to execute with that level of high fidelity if you don't embrace modern approaches to money. So 15:18 that's what we decided, and so that's why we have sort of the foundation to really test sort of the cutting-edge features that we're bringing to market. 15:28 So to summarize, the reason why a lot of these partners, sponsors don't have the kind of level of granular insight into the, the fan, but also ability to activate the fan is b- because the technology just isn't there, and the kind of modern rails using blockchain, using stablecoin payments allows you to, uh, reinvigorate all of those ideas. 15:52 We believe that every marketing message in the future will have some level of, you know, performance measurement that isn't just impressions. 16:02 And while there's tremendous value in brand affiliation in this industry, and that's been proven year over year with what the major brands do around activating during a World Cup or, you know, buying stadium naming rights. 16:18 It's, it's proven to work in, in many regards, but it doesn't give the CMO of that company one important thing that they care about, which is conversion attribution, right? 16:32 Um, and we think that category is gonna become just as big, if not bigger, in professional sports, so that when a CMO is deciding whether to spend more on running ads on Meta versus, uh, a relationship with a sports team, they have channels with that sports team that can prove the same ROI. 16:51 They can, like, literally measure the ROAS of their spend. Define ROAS for us. The return on ad spend, so they can literally measure the ROAS, you know, activating through a digital wallet. Really interesting. 17:04 Before we move on to part two to talk a few other things, we'll take a quick pause here to thank the sponsors that make this podcast possible. 17:12 I'm happy to remind you that this podcast is sponsored by the Hedera Foundation. The most beloved sports brands understand that what fans want is simple, a reason to be passionate. 17:20 The Hedera Foundation enables brands and fans to share their passion on chain using the Hedera network, the most used sustainable enterprise-grade DLT for the decentralized economy. 17:30 [upbeat music] I'm gonna ask you another question here. 17:37 There's, there's this whole idea of opening up the, the loyalty piece 'cause, 'cause right now, if you think about it, right, American Express need to do a direct deal with, uh, let's say a grocery store or a, let's say a, a, any realtor have to do a direct deal there. 17:55 There has to be Amex accepted on the terminal, and then when you pay, there's some sort of point back to you. 18:01 Talk to me about how blockchain, and especially in the context of sports, can open that up to make it a lot easier for that kind of like quasi-permissionless opt-in, but also the points themselves being able toEither be swapped, reimbursed more easily, exchanged to other participating partners, and so on and so forth. 18:26 And then how does that contrive with the idea that brands want to own that stack? Like the owned stack versus the kinda open, more egalitarian future of like tokenized loyalty. 18:40 How do those two things actually intertwine? So for us, what we've always thought about is sort of democratizing the access to these primitives. 18:48 So a lot of what you see in loyalty is you can't generate good margins unless you have an insane amount of scale. 18:58 And what a decentralized approach or, or an on-chain approach can give you is sort of the network effect of many, many participants generating scale, and you just bring it into your wallet or your branded environment, but really you're interacting with some larger protocol or larger network outside, and you're just borrowing those capabilities because they're composable. 19:25 Amex has the leverage to go to brands and cut major deals, whether they are incentives and value that, you know, they can give through statement credits, right? 19:35 There's been a lot of discussion about this in the reward space over the last year as the prices for some of these premium offerings have, have been going up. It's like, yes, but they come back in statement credits. 19:46 But they're leveraging these bilateral partnerships via the major distribution that they have through programs that they've grown over many, many years and merchant relationships that they've grown over the decades as well. 19:58 Um, we believe that on-chain primitives can be useful, you know, for a small neobank that's emerging in a frontier market or a sports team to benefit from the same kind of network effect. 20:11 And that's part of our strategy at Rain and Uptop is to create a network effect that's large enough for us to generate the value for the small guys as well, um, and so they can participate and start growing from the ground up with competitive offerings to, you know, major programs. 20:28 So that's how we're thinking about this philosophically. It's all about access. 20:32 The same way stable coins are really about access to, you know, higher fidelity money, you know, an on-chain rewards platform is about the sort of the power of a network and what it can achieve. 20:44 Are brands ready for that, the kind of-- that kind of openness and access stability into their brand? 20:52 I think it's the same as, you know, what Rain philosophically has done, right, which is the point isn't for merchant acquirers to necessarily be ready to settle directly in stable coins. 21:02 The job of aggregating merchants is something that Visa has done for decades and done really well, and, you know, we don't need to reinvent the wheel. We feel the same way about rewards. 21:14 Uh, the brands don't necessarily have to do any bespoke integrations or lean in. 21:19 Uh, we should be a technology provider that completely abstracts that away, um, and helps them kinda tap into these primitives just as a performance marketing or conversion-based kind of relationship, right? 21:32 So that's how we see it. That's how we've designed our programs with sports teams today. And we'll probably be taking that direction, you know, as we test, uh, different verticals. 21:45 How many more do you think we'll see in twenty-six from your end, if you had to guess? So I would say various. Um, we're really excited to announce a few more clubs, uh, here in the coming months. 21:56 I'm particularly excited, like I said, about the opportunity to work with multi-team organizations. Um, we're starting with a college team, but I think that strategy can be taken elsewhere. 22:11 And yeah, our goal is to keep growing, you know, tens of thousands of users per team at a time, and perhaps this time next year we've more than doubled. So we're excited about that. 22:23 The last thing I wanted to close up on is there's this idea that there is so much money locked in unused loyalty points, and that's across all of commerce, right? How do you think about that from an Uptop perspective? 22:40 That's a really hot topic, I guess. Um, a lot of people discuss this idea that banks have these runaway liabilities, um, and that's because they're not the redemption side. 22:51 They're usually enabling these experiences in some sort of portal where you can, you know, book travel, or you can exchange into miles, and they have no way to play with the value of the points that they've been issuing, uh, because you can't go to the bank and redeem something that interesting. 23:09 So I guess the number one thing I would say is that, you know, across the portfolio of neobanks that, that we work with, they're actually experimenting heavily with that idea, right? 23:20 How do we create value on the redemption side? What does that mean in, uh, in layman's terms if you're not experienced on the financial side? 23:29 A lot of loyalty is about generating really rewarding and high perceived value experiences that have some delta to the true cost of being able to fulfill them. 23:40 And so if you're an airline, uh, you have an unsold ticket on a flight that is going to have to fill up with fuel and staff and clean and do all of the fixed cost things anyway if there's a person sitting in that seat or not. 23:57 So a lot of the profit margin of the loyalty programs, which in many cases is where the true profits of, of the whole brand are coming from, is about having someone spend miles on that seat that was gonna go unsold anyway. 24:12 So they manage the redemption inventory and as such can play with the pricing and optimize for it. 24:19 You know, in the case of a bank, no one's really going to the bank and saying like, "Hey, I really want..."A branded pen or something. And [laughs] you know, so a sports team has inventory, right? They have merchandise. 24:35 They have seats m- very, very similar to airlines. 24:39 Uh, they have money can't buy experiences that, you know, could be like your name goes on the Jumbotron when you are proposing to your significant other or- And they have huge sponsors as well, right? 24:51 Like airlines don't have sponsors. They are the sponsors. They are the sponsor, right. 24:55 It-- So they're the middle of a network, right, that we've been successfully tapping into with a lot of brand relationships that we're, we're generating. 25:02 So they can play with that redemption value, and banks historically have not been able to. 25:08 But what we're seeing from innovators, which is, you know, you know, these stablecoin-based neobanks or these other, um, you know, takes on fintech coming from fintech is there are certain things that you can do for your customer. 25:22 You can get really, really good at concierge services. You can get, you know, and manage all of this stuff via WhatsApp or, or another chat application. 25:29 You can get very good at selling other valuable things like cell phone plans or cell phone minutes and, you know, international SIMs and different stuff like that, that can all be part of how you reward and engage the person who's giving you their primary account and sort of using you as their daily financial services provider. 25:51 So we think that's evolving. 25:54 And then we, we think that we need to be able to en-enable anyone who's doing this, um, to tap into as much of our infrastructure as they want, whether they wanna hold the liability for points or not, they should be able to kinda design things their way. 26:10 And I think in sports and entertainment, UpTop itself will always be very forward deployed, uh, because of the nature of these businesses. 26:19 They, they are usually, you know, not as heavily resourced to build digital products. 26:24 Uh, so we will, you know, always kind of be working hand-in-hand with those partners, but always with the idea that our infrastructure should be reusable by anyone who wants a great loyalty program. 26:36 Let's, uh, quickly double-click in some of the numbers that you're seeing because from my perspective, this feels like only the beginning for you folks in terms of the teams that you're working with, the franchises that you're working with, and how deeply integrated you are and, and how big this can become. 26:52 How big has it been so far? Let's just say our customers are very happy with the results. We're, you know, one KPI that I would definitely feel very comfortable sharing is that we're the number one reason, 27:05 uh, why people are opening up mobile apps for teams in the first place. When you go in, you really wanna j- kinda check your loyalty balance. 27:16 This is happening, um, with tens of thousands of active users per property, and it's growing, and it's something that gets bigger year over year for each club. The revenue is, is quite interesting. 27:29 The unit economics or performance is something that, you know, we've always thought about as, you know, attracting fans, um, really at the end of the day. 27:40 If you look at the top four leagues in the US, there's, you know, 30 teams per league, more or less. The total number is small, but there's millions and millions of fans. 27:51 So we just need to create a product that the fans are, are happy with. 27:54 And when you're, which we will be, you know, in more than ten percent of one of these major leagues, uh, by footprint in the next quarter, then you can start to see how that adds up in terms of total fans just based on how, um, these folks engage with the properties that they love. 28:14 Anything that I haven't asked you that you wish I did? Not really. I'm just surprised you didn't, uh, check in on our constant discussion around, uh, European football- [laughs]... uh, soc-- uh, we call soccer, right? 28:25 Which is a sport that I also love. Yeah. Let, let's, you know, let's finish up on that. 28:29 Like, what's the big difference and how hard is it to break into European soccer compared to the NBA or a, or a college athletics brand, right? What are the nuances there? I've loved all the conversations that I've had. 28:42 In the US, there's always a, a healthy level of belief in the future, and there can be maybe perhaps an interpretation of skepticism in, uh, in Europe, which, [laughs] you know, is sometimes something that I have to work to overcome. 28:58 As of late, I've been really, really excited about sports in both Europe and the UK. The fandom is just so, so special there that for us, we're starting to see some green shoots, and we're really excited about it. 29:15 And, um, you know, hopefully, we can catch a few football matches in the coming months. Awesome. Well, that was great, John. Where can people find out more about you? Yeah. So we're still at uptop.xyz for our website. 29:30 You can request a demo in there, find out more about the offering, and Rain is at rain.xyz. Really excited to be wearing a couple hats now and, um, pushing here on digital asset-based innovation. 29:43 Uh, you can find me @peteborisha, LinkedIn, Twitter, and you can find us on sportincrypto.com, and you can sign up to the newsletter at newsletter.sportincrypto.com. John is a reader. 29:54 Without breaking any GDPR confidentiality rules, I do see his email on the list reading here and there, so that's good to see. 30:01 And, uh, just remember that none of what we've said is financial, business, tax, or any sort of advice. 30:07 And, uh, some of the subjects that we talked about, crypto, et cetera, blockchain, are not regulated in many territories that you may be listening to. 30:15 So stay safe out there, and thanks very much again for listening or watching. We'll have more Sportin Crypto content for you soon. [outro music]
