What Happens When AI Agents Can Spend Your Money?

In the last three months, we've had this huge leap from agents being what I would call spectators to agents being actors, because they effectively have arms and legs, which are payment credentials. Amazon recently blocked Muse. And there are many reasons for this. You can either be antagonistic to agentic commerce, or you can be highly receptive. What's happened with the rise of Muse and Instinct is once they have access to payment credentials, their utility increases. So we sort of have kicked off what I kind of call the wallet wars, where every wallet is now rushing to connect to the agents. Everybody who's listening to this podcast, I almost guarantee you have a credential that's stored at VGS. The largest online merchants, the largest neobanks, and the largest frontier labs all use VGS to secure payment credentials. It's a really formidable position to be in. Where do you think VGS is going to go? I think we're... AI agents are moving from recommending what you should buy to actually buying it for you. That creates a deceptively hard question. How do you safely give an AI access to your money? In this episode, Pay16Z general partner Alex Rampel sits down with VGS chief strategy officer Terry Angelos to unpack the emergency payment infrastructure behind agentic commerce. They discuss the new wallet wars, how payment credentials could move safely between consumers, agents, and merchants, and why new agentic tokens could allow AI to transact without breaking the protections consumers already expect from credit cards. They also get into what happens when an agent buys the wrong thing, why some merchants may actively resist agentic commerce, and how the economics of everything from credit card rewards to subscriptions could change when an AI is constantly optimizing on the consumer's behalf. Because giving agents the ability to spend doesn't just make them more useful. It could reshape who controls the customer relationship itself. Hi everyone, I'm Alex Rampel, partner at Andreessen Horowitz, and I'm here joined by Terry Angelos. And I'm very excited about being joined by Terry because Terry and I started a company called TrialPay in 2006, a long, long time ago, 20 years ago. 20 years ago. Alex looked very different. Yes. You look the same. So I think you're insulting me and I'm complimenting you and hopefully not the other way around. But today, this is the really cool part. One of my first investments here was a company called VGS, which stands for Very Good Security. Some people might not get that's actually a pun or a joke because one of the most famous cryptography companies was called PGP, which is Pretty Good Privacy. And obviously it's very good privacy. It's not just pretty good privacy. It's incredible privacy. It's unbreakable privacy because it's very hard to factor very large composite numbers into their primes and pretty good privacy is actually very good. So that was kind of the original name for Very Good Security. So I led this investment a long time ago, TrialPay got bought by Visa, Visa under your leadership invested in VGS and now you're back and you're the chief strategy officer and board member alongside me at VGS. Yeah, it's been a very fun and incredible journey. And I think if you look at VGS today, it's a payment infrastructure business. We secure credentials for about a third of all e-commerce by GMV and we have the largest online merchants. We have the largest neobanks and the largest frontier labs all use VGS to secure payment credentials. And I think today, part of the reason why we want to talk about agentic commerce is because VGS is involved in helping agents get those credentials, helping wallets hand those credentials to agents and also to merchants who have to receive these credentials. So we're sort of in the middle of these really interesting conversations and handovers between credentials. But maybe we should dig into what a credential is. Credential is a fancy way of saying a credit card for laypeople. It's a little more complicated than that when you really dig into it. But you work with, I don't know which merchants I'm allowed to say that you work with, you work with all the big ones. But why don't we take an example merchant that you work with, kind of pre-AI, pre-agentic commerce and just explain what you do. Why do they use VGS? What do they use you for? And how pervasive is it? Yeah. Let's assume we're working with a very large online ordering platform. And so that company effectively has to store your credit card every time that you, every time that a new customer comes into that site and hands over a credit card. That company doesn't necessarily want to be exposed to that card number. And so VGS is involved in capturing that card, securely vaulting it, and storing it. And every time that the online ordering service wants to transact with one of its processors, it goes to the vault and retrieves the information in such a way that the online ordering company never actually has to touch the payment information. Now, one of the things that I think has made VGS a lot more interesting since the days that you first invested, it's been a decade of becoming sort of the most trusted vault online, is that the card networks have also introduced a form of tokenization. So that in our days back in trial pay, we would actually store a 16-digit PAN and we would encrypt it. A PAN is a primary account number. A PAN is a primary account number. It's the 16-digit number that you have on your card. We would encrypt it and vault it. And then when it came time to charge someone, we might unencrypt it and give it to, I think, Chase Payment Tech back in those days. Today that doesn't happen. Today instead what happens is, rather than store that 16-digit card number and use that, you actually go to the network that issued it. So Visa, MasterCard, Amex, Discover, and you say, I would like another version of this card that's actually domain-bound just to my merchant domain, which is safer because if there's ever a problem, the only number that I have only works on my merchant domain. And I am going to use this when I send it to Chase Payment Tech. So VGS, as a company, vaults all these credentials on behalf of the merchant, also gets all of the network tokens, which is the primary way that these credentials are passed to the payment processor and to the network. And that's what we do today. So because of that complexity of interacting with the card networks and doing this across multiple processors. So actually, here's a question for you, Alex. If you're a merchant with over a billion dollars in GMV, how many payment processors do you have on the backend? Well, it depends. There are plenty that just have one, but you are better, I mean, but this goes to the use case of VGS, which is rather than being locked into one payment processor, you'd rather unbundle it. And you'd rather be able to pick and choose which payment processor you use. But also, if you have kind of a shared infrastructure that is storing credentials, what if one credential goes bad? What if I just had a Capital One card? Great example. Capital One bought Discover Card or Discover Network. And then my fancy Capital One cashback rewards 1.5% Visa card, it became a Discover Card. And every week I get notifications from very sad merchants, we are unable to process your card. Why are they unable to process my card? Because that old card number doesn't exist anymore. Even though I still have a relationship with Capital One, I just got a new card number from them. Granted, it's a little bit complicated. It's on a new network. There's also the possibility, like merchants can't just say, oh, we know that this card became that card. No merchant cannot do that. But a large vault can do that. And then the actual networks themselves, like Visa and MasterCard, and actually Discover too, they have these account updating tools. So you could say, hey, I'm a merchant, I have all of these card numbers. And I think, what is it? Every year, like 10% of cards expire? Yeah. So about a third of all cards get turned over every single year. No, even more. Like 25% mathematically, because it's a four-year expiration. And another 5% due to, in this case, Capital One buying Discover or fraud or something Back to that question. By the way, for a merchant of a billion dollars, it's about three to five processors that merchant will have. They don't have to. They don't have to. But they should. That is the point. That is the average that we see across the ecosystem. But there's a reason for them to do that. Because different costs, different approval rates, different regions, like you want to shard in computer science terms. You have all of your cards, and if you just say, I use the same processor every single time, that's just not a good idea, or it's not as good of an idea as I can have multiple processors. But in order to do that, I have to be able to securely send the card number to the processor that I've chosen. Yeah, that's right. And in fact, once you have multiple processors, then the job of vaulting and getting updates is multiplied by the number of processors. So maybe I have 100 million cards as a merchant, but I have to store 100 million with Chase and 100 million with Stripe and 100 million with Braintree. And each of those vaults have to be updated at their networks. And so what VGS does is serve as an independent vault, neutral infrastructure on behalf of the merchants for the vaulting and the updates, such that the merchant can then send a Visa token to the merchant via Stripe. Back to your kind of annoying Capital One issue, if you're a VGS merchant, that should not happen. So there are mechanisms when Capital One is switching from Visa to Discover to get those updates. And certainly that's the case if there's fraud or something else, and that's the role that VGS is playing. Yep, exactly. So hopefully everybody has a good understanding now of what very good security does, VGS does. So out of nowhere, and this was a good business years ago, I mean, I've been a believer for a long time. And then this whole thing called magenta commerce showed up. I guess, how does the world change? And you guys are at the center of this because, again, I don't know what companies that work with you have a lot to say or not, but let's just say like a lot of AI companies have decided to work with VGS. And for what reason? Well, the reason is you don't, if I say, hey, buy me flowers, if I go into my little chat tool and say, hey, I'd like to buy flowers for my wife, it's Mother's Day, she'll get mad at me if I don't buy them and she'll be happy if I do buy them, please buy them. I don't want to give my credit card, maybe I do want to give my credit card number to, we'll call it chat app, but they don't want to store it. And then even if they do store it, they have to communicate it to the merchant. And how do they do that? And like the better option is you have a third party that already knows how to do this. Yeah. So you take out of scope. I mean, it's interesting. Like, I don't know if most of our audience knows what the PCI DSS rules are, but that's the Payment Card Initiative Digital Security System, if I remember correctly. Very good. Did I get that right? Yes. So if you've heard of PCI compliance, that says, well, if you're going to be a merchant and you accept credit cards, there is a document, I think last time I read it, it was over a hundred pages of all of the rules that you have to do and maintain in order to be PCI compliant. And why is being PCI compliant very important? Because every bank demands it. You cannot process credit cards unless you are PCI compliant. You cannot issue credit cards unless you are PCI compliant. That's why it's this Payment Card Initiative. It's all of the, you know, Visa and MasterCard might be enemies, but on this they agree. You have to be PCI compliant. One of the nice things that VGS takes PCI compliance out of scope. So you don't, you basically say, I can just run my business like a normal business. I don't have to follow these hundred pages of rules. VGS just focuses on that. Which kind of goes back to like, I want to buy flowers for my beloved wife and I want to have my chat application do that for me. Turns out VGS is pretty well positioned here just by being the backend infrastructure, but now can take a pretty vital role in this whole process. Yeah. I mean, I think, you know, in the last three months we've had this huge leap from agents being what I would call spectators to agents being actors. And how do they act on my behalf? Well, if you give them a payment credential in a safe way, I can go from recommending the flowers for your wife to buying the flowers for your wife. So like, I'll give you an example. Just last night, my wife and I have been talking about getting a piano teacher for our seven-year-old son. And it's complicated because you have to know our schedule and he has soccer three days a week and we want someone who can come to the house. We have to know the schedule of the piano teacher. And I asked ChatGPT about this a while ago and I got some recommendations. But just last night, I asked an agent and it did the entire transaction task for me. It found a bunch of people, asked me a few questions, checked the schedule, and booked someone for the very first lesson. So that is infinitely more useful than dumping yet another task on my doorstep. So agents have all of a sudden become significantly more helpful and useful because they effectively have arms and legs, which are payment credentials. And so what's happened with the rise of Muse and Instinct and Town and other AI agents is once they have access to payment credentials, their utility increases. And so we sort of have kicked off what I kind of call the wallet wars, where every wallet is now rushing to connect to the agents. And of course, as an agent, I want a wallet that has sort of two things. One, the most number of consumers that already have a credential at that wallet, and a wallet that has a very broad merchant reach. And so right now, this is sort of companies like Stripe Link. They have about 300 million consumers who have an account at Link, about a million merchants use Link. You have Shopify with ShopPay, similarish consumer size, probably more like 1.7 million merchants. Then you have PayPal, which has got over 400 million accounts, depends on how that's actually measured. But they have on the order of 30 million merchants. So these wallets are connecting to the agents and I think are providing a lot more utility. So it's interesting, though, because wallet wars have been around for a while. So remember, not to speak ill of our old employer, remember V.me? Yes, V.me. me, but it was something before that. I forgot they changed the name to VeeMe, but there have been many attempts. Why were their wallet wars 10 or 15 years ago? Because it turns out that being the default stored credential for a consumer, if I can get trained in a Pavlovian way where it's like, oh, I see flowers, I use PayPal. Well, PayPal is better off for that. That's correct. Or one of the things that we worked on at TrialPay was how does a visa, it's very good for for visas issuing banks, if the default card in your Uber wallet, because Uber is a wallet too, you can store eight different cards or credentials within Uber. Being the top of wallet is very, very important because when digital wallets came out, I like to think before digital wallets, you had what I like to call dead cow wallets, an actual, I think I have one here. I'll give a demo to our audience. This is called a dead cow wallet. It has lots of credentials in there. But before Capital One would pay Samuel L. Jackson to say, what's in your wallet? Why would they do that? Because when you go to Chipotle, they want you to pull out your dead cow wallet and say, I'm going to pay with my Capital One card. Whereas when digital wallets emerged, it's like, I'm ShopPay, I'm PayPal, I want to be your default. And then actually, the interesting thing is within that wallet, there were other credentials and those guys were competing to be the number one. If you recall at Visa, when we were dealing with Uber and Airbnb, there was tens of millions of dollars paid by the issuers, so like Chase and Amex, to prefer their cards on those platforms. So that's one war, which is like, this is my card, I want to sort of promote this to the top of wallet. You're talking about the actual network war where Visa and we helped Visa become a default card at Uber. And now you have this other layer, this abstraction layer of, I am a wallet that actually processes the transaction, the ShopPays, the links and the PayPals. And so we talked about how a checkout looks like a bit like NASCAR, because you have multiple different buttons. Pay with PayPal, pay with Google. Remember Google Checkout came out along? They were yet another, but they're like, there are consumer wallets and then there are merchant. Because the interesting thing is that I kind of think of VGS as a merchant wallet to an extent. I mean, it's a strange metaphor to use because a merchant isn't paying for things, a merchant is receiving payments. But once I receive the payment, where do I put it, especially if I'm billing this customer again and again and again. And again, for PCI reasons and whatnot, I don't want to store scraps of paper with that secret three digit code that of course is not secret because it's on the back of your card, but I need it to process it. I don't want to store your 16 digit credential and just keep it in scraps of paper in my original cash register. I need something to go receive that for me. On the consumer side, it's like, I don't want to remember. What was the original purpose of a consumer wallet? It's that it's two o'clock in the morning. I want to buy flowers for my wife. My wallet's downstairs. I don't know where my wallet is. I want to go pay on 1-800-FLOWERS right now. And if I just enter my PayPal credentials, they were a wrapper and linked to all the credentials in my dead cat wallet. That was the purpose back then. But what I find interesting with all of agentic commerce is it's kind of the same thing. It's still two o'clock in the morning. You still want to buy flowers for your wife for something bad that you did or Mother's Day or whatever. Something good, Alice. Something good. Always time to buy flowers. We're sponsored by 1-800-FLOWERS, so make sure to buy there. You want to go buy and your agent doesn't have access. It's the same problem. The agent could say, hey, Terry, where's your credit card number? And that's more work and more friction versus it has access to it in the same way that you just gave access to all of your cards, all of your bank accounts to PayPal to reduce the friction when you were doing things manually 15 years ago. Yeah. Look, I think the word wallet is a bit overused. There's sort of different versions of it. One is the digital version of your dead cow wallet, which is that it just stores the payment credential. And when you go to a merchant, you hand that credential to the merchant. That's kind of what Apple Pay does. When I shop at Apple Pay or when I shop at a store with Apple Pay, Apple is effectively giving my Capital One Visa card, effectively tokenized in the wallet, to the merchant. The merchant receives this credential and it decides whether it processes it through Chase or Adyen or Stripe or Braintree. Then you have wallets that actually take care of the transaction for you. So think about Shoppay or Lync or PayPal, where the wallet is in fact transacting with me, collecting the money from me and remitting that back to the merchant. And what's happening with agentic commerce is we're sort of getting this sort of blend of the two. And it's such a new ecosystem that it actually has parallels for me back to the early days of the internet. And for those people who were around in the sort of AOL era, Stripe in many ways is like the AOL of agentic commerce. And I mean that as a compliment in the sense that they've figured out how to make agentic commerce just work in a way that's a very kind of, you know, sort of, you know, walled garden approach. So, you know, a few examples here would be if I use Stripe Lync, Lync's only available at a million merchants. So it's great if in fact the item that I want is available at one of those million merchants, but very often it's available at some place where there isn't a Stripe Lync connection. So a good example was, I think two weeks ago, I had this event at my house. I wanted to buy some outdoor lights and I asked Instinct to go and help me find these lights. And it found the lights at Walmart, which makes a ton of sense. Walmart has lots of inventory. And the agent went, loaded the cart, and when it came time to pay, Lync didn't have a connection to Walmart. Lync has my card, but it can't just give my card over to the agent and over to Walmart. So Stripe did something pretty interesting. They purchased the chandeliers on my behalf. They issued their own, actually this is like a Visa virtual card, one-time use card, made the purchase, and then they charged me, Terry, at a second transaction. This is a little bit how DoorDash works today. You spend a hundred bucks at DoorDash and then the dasher goes in and pays the restaurant. But in the case of this Walmart transaction, this is the point about it being the AOL, it worked just great. Actually, the item showed up, the transaction went through, I was charged the right amount. But if there's a problem with the chandelier, typically I call up my bank, Capital One, and I say, hey, I had this transaction with Walmart, something went wrong. And they say, well, we don't see a Walmart transaction here. We just see a Stripe transaction. We just see a Stripe transaction. In fact, you will find this pretty funny. I know someone who, in the testing phase, did this exact flow on their Amex card, called up Amex and said, hey, this transaction with the merchant didn't go through, but Amex only saw Stripe. So they gave them a phone number to call whoever this link merchant is. The person called them, it went straight to the cell phone of a Stripe engineer, because Stripe's not set up to run a chargeback. One of the reasons why Visa and MasterCard have such impregnable positions is because they intermediate everything and they set the rules and chargebacks are very important. What if I paid for something? It's a trust mechanism. I pay you for something. I pay you for lights. You don't deliver the lights. Like, oh, shoot, I don't have money anymore. What do I do? No, no, no. You actually have rules by which I can kind of lodge a complaint. And then there is a central intermediary that helps adjudicate those complaints in a way that is more or less fair, that both parties agree on. It's part of the problem. This is why crypto, cool, but it's a bearer instrument. I pay you with crypto. I'm never getting that back, which again can be a bug or a feature. But for your lights example, like what if the lights don't work? You want to have Visa and MasterCard in the middle. That's high, high utility, actually even for the merchant, because now I'm much more willing to buy with a merchant knowing that if they don't actually deliver a product that works, I can get my money back. So that trust mechanism is very important. But again, if you add all these kind of interesting and very clever engineering steps, it just, the purpose, it doesn't work as well. Yeah. So in fact, this is, I think, the right sort of direction of travel from the AOL ecosystem to the open standards ecosystem. The card networks have actually come out with a new type of standard, they're called agentic tokens, that will allow a wallet like a Stripe Link or a Shope or PayPal to hand over a credential to the agent in a safe way, and then have the agent hand it to the merchant in such a way that when that Walmart transaction occurred, it's my card. In fact, like one sort of, you know, addendum to the Walmart transaction, after I bought the chandelier, everything was fine. I got an email from Walmart to say, hey, Terry, you paid for delivery. It was like $6.99. Why don't you sign up to Walmart Plus? And here's an offer. If you sign up today, we will credit the delivery toward your Walmart Plus subscription. So I said, great, hit the button. And of course, the transaction failed, because the card that they had was the Stripe one-time use card. And part of the, you know, you mentioned like rules and norms, part of the norms of e-commerce is that Walmart spends a lot of money to get me as a customer, and then they have the right to try to have a relationship with me, upsell me, cross sell me. And in this case, because we were using the sort of AOL version, they weren't able to easily allow me to subscribe to this new service. With the new agentic standards, what should happen is if any of the wallets don't have a relationship with the merchant, but they have my card on file, my Capital One Visa card, that should be tokenized with the agent. There's a whole process by which the agent says, I'm about to make a transaction. I'm a verified agent. I'm going to spend no more than $100. The token is nothing more than a new 16-digit number. We give that safely to the agent. Agent gives it to Walmart, and then Walmart runs the transaction, but it's my card that is being charged. And that preserves this ability to have a follow-on transaction. It preserves all of the rules around chargebacks. And so three months ago, this was at zero. It did not exist. VGS is by far the largest provisioner of these agentic tokens. We do it for the agents. We do it for the wallets. We do it for some of the merchants. And this was zero three months ago. Now we're doing a few million of these tokens per week. So I expect that as we make this transition from the walled garden to the sort of open standards, this will be the way that agentic commerce evolves. Yeah, I mean, it's one of the reasons why this long, I mean this as a positive, but VGS has a very boring business. Why is it boring? Because we have a vault, and anybody who is in a vaulting business, it's not an exciting business. Your job is to be not exciting and be safe and be secure. And it's like, things go in the vault, and then every now and then things go out of the vault, right? It's not like a one-way door. Because the way that I always thought about VGS is there are these credentials that you store. So it's like you get these 15-digit Amex numbers or 16-digit Visa MasterCard Discover numbers. You store them. You give back a token. This is not a crypto token. This is just like, here's something that you can use. And then there are verbs that can be performed on those credentials. So if I am a big burger chain or something, hypothetically, we don't know which one, but you work with a big burger chain, I have a consumer app that has tens of millions of users. I know that whenever that user says, I want to buy a hamburger, VGS plays a key role. It's a very boring role. But I retrieve and charge. So I retrieve it with the purpose of sending that to a payment processor and saying, charge Terry $9 right now. But I never have to touch that credential again. Very, very boring business. But what percentage of cards do you think you've seen or touch or store? It's probably 80% of cards in America. We have like 10 billion credentials. I think you're touching on something really interesting, which is vaults are going from single-player to multiplayer. And that makes them a lot more valuable. So, for example, put aside agents. The fact that merchants have multiple processors means that the vault at VGS is effectively the vault for each of those processors, right? Because the network tokens stored in that vault now have to be sent to Chase, Stripe, Adyen, Braintree, Razorpay. That's multiplayer. With agents, if you have a vault, let's assume you're like a large frontier model. Here's a good example. You're a large frontier model. You're vaulting cards in order to charge for your subscription. But now the agent wants to use that same credential to make a payment. And so the vault used to be single-player, used to be just to make sure that you could pay for the subscription. But now you can effectively give that credential according to these open standards to the agent. It's now multiplayer. And so I think any business that is going from single-player to multiplayer inherently becomes more interesting. I mean, even 1Password, right? It used to be a single-player vault. And maybe I share my credentials with my wife and a few things. But now it's multiplayer because I'm trying to give it access to multiple different parties. Well, this is a really complicated thing, going back to the rules and procedures of what Visa and MasterCard have done, which is normally I just have to... There are almost like three steps to a transaction. Action I kind of think of number one is is this identity real right like in general like is this a real card number Right, that's important, but wait a minute. I can have a real card number, and you're a thief It's still a real card number So it kind of step two is once I validate it because they're actually there are two ways of validating a card number there's one there is a there's like a Cyclicality check right you kind of add up the yeah this check some right But it's this mod 10 check of the credit card number is it valid that doesn't mean it's a real card But it means that it's like a valid It's in the valid universe of cards, but I can go check with the bank is this an actual card That's step one step two is is the person that I'm interacting with the valid owner of this card So like if you if you went to a jewelry store 25 years ago, and you wanted to buy something for $15,000 They'll take the credit card number. They'll take your credit card your piece of plastic But they'll do two things as well Remember I used to be used to have to sign the signature of the back of the card Like I thought the first car that I ever saw that just got rid of that all together was Apple So the Apple card I mean even though they want you to use Apple pay if you get the physical Apple metal card There's no place to sign on the back None, but they would also say can I see your ID like I'm or I bought about something very expensive one time Might have been jewelry for my wife that I sometimes buy flowers for as well. This was probably 25 years ago and They wanted to see my ID they checked the signature why because they knew that the card was valid But they want to make sure that I am the actual owner of the card and then number three and you probably only see this in Vegas But it's like are you of sound mind to make this transaction? So like if you went to a to a casino in Vegas, and you pass you know number one cards valid number two It's like yep. Here's your ID. Here's your signature it matches entirely, but there's step three It's like if you've had 15 drinks, and you can't even speak properly They're probably gonna not let you pay Right, so this was kind of like the old world and if you bring that metaphor to the new world well It's like well is the card valid yeah does the person or the agent what but this is tricky, right? It's like the card is gonna be valid like that that part solve problem, but the second part It's like what does that mean right like it is the person that I am interacting with is my interlocutor I love that word is is is the person that I'm interacting with are they the valid owner of this card? It was always a hard problem to figure out on the internet because I can't like signature picture like what does that mean? You're an IP address, and maybe I've seen you before and I've checked your login But now I have an agent and then that part three is pretty important as well from a liability Perspective because you do see these anecdotes on X and whatnot of people that are on instinct What do you mean you spent $900 you idiot and like who where does the chargeback come from so so I mean This is exactly what these open standards are Solving for so let's let's take an example where I instruct my agent. This is a real example. I was looking for a hotel For a trip we're making for my daughter's gymnastics tournament, and I said go and find a hotel In San Diego and and don't spend more than you know $500 So the first question when that when that agent is provisioned is to your question is like is this a real card? that's a sole problem the second one is is the request for the agent a Valid request and the way that this works with the networks is that agent actually has to be registered With Visa or MasterCard or Amex and so there's a whole sort of mechanism there The third question is like is the agent of sound mind like did it get it right right? And is it drunk you know exactly did it hallucinate and so? That part, I don't think we fully understand yet because if there's a mistake that the agent makes and The the card network did everything right they validated that this is your agent and your instruction in fact part of the way these Agent these these new standards work is you give it context you say I'm buying a home This is a hotel reservation at this amount It's hard for me to know the if you got the actual dates right if there's an error there then that dispute mechanism is sort of unresolved, but I think we will we will get to that point and Probably the agents will have to take on some responsibility. What's this idea of delegated authority? Yeah? But it's how do you how do you like who is liable? How does this change? I mean it might be something where if two agents are competing for your business like hey, Terry, please use me I'm use or please use me. I'm instinct. What is one of the value ads that I'm going to give you I will take on because if the merchants are smart They're not gonna be like I don't give a crap that like you got the wrong hotel room, or you did this It's like you told you gave your card You delegated authority to either an AI agent or your human assistant or your wife or whatever like it I don't care. I need to know if I'm accepting payments for something that there's no excuse at the end I mean this was called for for those that know this term friendly fraud once upon a time There's this concept of I can buy something we used to see this a trial pit all right I spent $10,000 on virtual gems My wife and I shared that I didn't actually do this just for disclosure But let's just say I did I spent $10,000 on virtual gems for some stupid game The credit card bill comes due at the end of the month. I'm like honey. I never spent $10,000 I thought that wasn't me I don't know like and you you refuse the transaction not because you didn't get the service that was offered but because it's so embarrassingly terrible and merchants had to deal with this all the time and in many cases like the the Banks would say well if it's a $10 transaction. It's not even worth fighting it We'll just give it to the consumer every time which created moral hazard, but delegated authority gets really tricky here I mean, maybe if I can ask a different question because this is probably the more important one You saw that Amazon? Recently blocked Muse and there are many reasons for this It's mainly that Amazon is an advertising company, and they want you and your eyeballs going to their website They don't want your agent is the agent you can't monetize an agent's eyeballs because the agent doesn't have eyeballs But I kind of think of it as you can either be antagonistic to agentic commerce Or you can be highly receptive to agentic commerce And I don't actually think I think it's an oversimplification to say anybody who's antagonistic is a light-eyed, and they're gone it's like well Amazon has a reason like a real financial reason to be antagonistic because Advertising is is so much more lucrative for them than just selling things like the highest value Skew is when they they get your eyeballs and they sell the eyeballs But I guess how do you think about this this kind of playing out? Because it feels like being enabling technology for merchants to be receptive To AI commerce is highly highly highly valuable and but by the way at the same time helping the antagonistic ones Filter out the agentic commerce is also highly valuable because again sometimes they have a reason to do that But if I can make it so that you know chat GPT services like yet You should buy here, and I make that as simple as possible it just it goes without saying like I'm probably gonna get a lot more transactions than somebody that inserts 15 captures and Says in order to proceed with this and then Muse is gonna say hey interrupt your your nap You got to go do these 15 things no no you're gonna go with the one that is receptive to AI commerce Yeah, I mean, I think this is one of the most fun Sort of fronts to watch in in a gent in commerce, and I think we're gonna get Multiple different versions of this we have Amazon which I think has many reasons to to block agents as you said they're effectively You know in the advertising business You have Walmart, which is very similar right now hasn't you know hasn't taken that step and in fact You might argue that if you are one of the largest retailers on earth with the best last-mile delivery that this is all good For you, and then you have the series of merchants that are sort of under the Shopify umbrella Which a lot of small businesses that really this is probably a new like vital channel So maybe there's like fear on the Amazon side maybe there's greed on the Walmart side and maybe there's like You know no choice on the on the SMB side and each of these Actors or each of these merchants are going to Experiment with with how they deal with agents. I think this reminds me a little bit I know we sort of have a different view on this of how open banking You know was rolled out Which is do I have the right as an Amazon customer to delegate? My login to an agent and does Amazon have the right to say no This is what happened with plaid and you know chase and the banks and in the end what tended to happen was there was this like Long-negotiated settlement where the likes of chase said hey you can access You do have the right to this information But only on my API's and my API's limit what information I give you they tokenize the bank accounts And I might charge and I might charge you some money for it So actually I think the interesting question is I think we may have plenty of opportunities or plenty of merchants who just welcome agents We may also have merchants who have their own agents And in fact, this is what happens if I go to a Best Buy and I want to buy a flat-screen TV I assume there'll be a salesperson there with an agenda and he or she will say let me show you some flat-screen TVs Now their job is to help me, but their job is also to get a commission, right? So we might have in the case of chase and open banking It was much more a case of like security and control in the case of Amazon. It might be I am an opinionated API I have an opinion on what you should buy Alex based on many many different sort of, you know Data points about you and then my agent may have an opinion about what I want and so that's going to be a fascinating battle or Communication and in the end, I think consumers probably win But we don't know what that's gonna look like going forward, right? Well, maybe on that like what do you think is overhyped versus under hyped in terms of everything that's happening? I mean in general my rule of thumb is that Silicon Valley overhypes things but then the rest of the world under hypes things so, you know, everything here every conversation is AI And it feels like you go to Iowa Nobody's talking about AI but then you show it to them like holy shit. How is this real because they tried it three years ago and Like I just bought a new Tesla and I remember I had it. I had an old model 3 I think this is a good metaphor for what we're talking about Like I had an old model 3 in 2017 with self-driving didn't work at all It was a joke eventually got you know got a different car and now it's like it actually works But I was skeptical because I was used to the 2017 thing Yeah, right and I feel like a lot of that is playing out with AI right now where if you would try chat GPT with all the Hallucinations and everything in 2022 you're like, oh, it's a cute toy for like writing poems But we're doing my homework in English class or something. This is not gonna actually buy things for me This is not gonna write code. It does all these things right now So I guess what what do you think is under hyped versus overhyped in terms of everything that's going on? Yeah, so maybe maybe I'll start with with overhyped like I don't think we're going to get a bank run on savings deposits where agents are gonna sort of Maximize yield and move my money around between different accounts. I'm in a perfect example. I am a Very happy, you know mercury personal account customer, I'm also a chase customer and You know ideally I should put all my Savings in mercury where I get a very good savings rate and then at the last moment when I have to make bills sort of Pay bills on me. I'll move over the the cash to you know over to over to my existing bank chase But their bill pages works better and it's it has more integrations and I have more kind of setup so I I think there's enough friction in in the world where We we won't see some of the crazy volatility in in financial services I think maybe what's under hyped there is a lot of Demand that is unmonetized and this is both at the sort of Part of the world where you could expect more GDP an example of this is we actually have a group cycling Whatsapp group and we have a person on that group Who every bottom seems like every six months when you know our friend Seth? comes up with a new recommendation for what tires to get because he looks at rolling resistance and every time he does this I'm like Oh, I should remember to buy those tires because they're safer But I only buy it, you know every sort of you know Two years if my agent was in that group chat, I would be buying tires every time Seth makes a new recommendation You're dramatically under monetized on your on your bike equipment Alex if the agent could find things That could help you with cycling and just bought them for you There's more GDP coming out of Alex on cycling right that is under hyped At the same time agents are gonna save us money. So like, you know there's probably many places where I'm either I have some subscription and It's just been a hassle to cancel or I did some trial and I forgot about it So I think agents will simultaneously save us money Maybe use that that savings to to help us buy, you know buy sort of you know new new items so I I think we're have yet to experience the always-on nature of these agents and As far as I can tell human desires and needs are infinite. So there's always something else That I will want and so I I think that is that's maybe on this kind of antagonistic versus Conciliatory or whatever the opposite of antagonistic would be here I mean a lot of what people are very excited about with the agents is it gets something for you that is Intentionally hard and is not really subject to the laws of economics The laws of economics are like, you know The cure for high prices is high prices if it's really hard to get a restaurant reservation because you have to call at 7 a.m Well now everybody has a tool that calls at 7 a.m. And therefore The first five people that have the tool now, they have an amazing tool the last five people like no No, no, like it's it's you know, it's so crowded. Nobody goes through any more kind of thing. So How do you think the world? Changes because I feels like right now This is the weird This is the weird position that we're in is that a lot a lot of the early wins if you will the consumer successes Around like oh it saved me money. It did this it's because of the asymmetry Yeah, right like a very small number of people have the tool the merchant or the counterparty has no idea what's going on I can't wait, you know how like as a consumer I've been trained to say no No, I want to talk to an agent or press zero or it's like you can look up How do you get out of the stupid phone tree? I can't wait for the other side to say no I have to talk to Terry I ain't talking to me Yeah. Wouldn't that be funny? You call Comcast. You're like, I hate you. You suck. Your service is terrible. You went down 10 times. This is, I do this all the time. And then, but I of course have, I actually did this with Codex because it turned out Comcast is blocking Muse. They know the IP addresses or something, so it won't let you log in. So I just have chat GPT, you know, Codex, Astra, like log in on my computer, does everything. But I'm waiting for the day when Comcast says, we know this ain't you, right? Like put Alex on the line because I'm not giving something to his agent. And that's going to, because right now, again, that's what I mean by the asymmetry. It's like the small number of insiders have this tool, but you know what? It's not going to, you can't scale that infinitely because the world is going to adapt. Although I do have news for Comcast, the GPT, Astra, and Alex are about the same sort of foe. So be careful if you, if you get them on the phone. I think you're pointing out something that we have yet to appreciate, which is what happens when you actually read the terms and conditions and go to the edge of what is allowed and disallowed. So, you know, an example, the other day I was looking at flights. I wanted to buy a flight that was on the edge of the price that I could pay that would get me an upgrade. And that's kind of a hard thing to do. Sometimes I overshoot it. My agent did that perfectly. Or, you know, sort of any, any case where it's very difficult to uncover the terms and conditions. A good example might be, what happens to rewards? Rewards on cards are only there because I get you this very sort of big headline reward on dining, but then you also spend it on fuel. And if agents are intermediating all of our transactions and I'm only getting points on the card that gets me, I'm only using the card where I get points, the whole points reward ecosystem falls apart. So many, many of these things could start, anything with a sort of breakage model in it is going to start to fall apart. And then we'll have to have new terms and conditions. So maybe that's better. Maybe that's worse. I don't know. But it'll certainly be different. And maybe what are you, kind of with all of these themes, like where do you think VGS is going to go? Because I, again, I find it so interesting because it's the world's most boring business around it's this giant vault that stores all of the payment credentials for the most, like everybody who's listening to this podcast, I almost guarantee you have a credential that's stored at VGS because you interact with the merchant that uses VGS for storage of credentials. So that's a, it's a really formidable position to be in. And it's been growing remarkably just because like, yeah, you need to, every merchant needs to store the credentials of the consumers that they work with. But like, where do you think is the most exciting of everything that we've talked about for VGS's future? Yeah. So I think there's sort of three areas of VGS that are kind of overlapping and compounding. You talked about the first area, which is the vault. This is 10 years as sort of becoming the most trusted store for credentials across the internet. It's a very hard business to execute on, but that's, you know, that's the sort of privileged position that the company's in. The second area has been what you talked about, sort of, you know, information going into and out of that vault. So that's a third of those credentials have to be updated. That's become very interesting and complicated because each network has their own standard for how you update their credentials and each network has created multiple network tokens that represent the vault. If you were just storing the information, it'd be one thing. But you have to store it and get a series of tokens from the networks so that the data is effectively, you know, refreshed. The third area is what we call the network era, which is this role of brokering their credentials among multiple parties in a way that makes sense according to the rules and that adds value to all of the ecosystem players. And we're sort of starting to do that now with agentic commerce. There are other cases where VGS is actually working with the banks on the tokenization front. So if you're tokenizing the cards and you're storing the cards, you're on both sides of this ecosystem, which allows you to do some of the information swaps that you sort of talked about earlier. And all of these combined will continue to be a vault, will continue to add services. And as we add more services on more merchants and on more issuers, we continue to get this network effect where you can broker credentials, you know, among the parties. And I think agentic commerce is just fuel into that ecosystem. Well, Terry, this has been fun down memory lane, one of these days we should do. I think we actually did a history of TrialPay 1 a long time ago. Yeah, I think we should redo it. It was one of the first podcasts that we did. The studio wasn't as nice. But I think what's consistent between that first podcast and this one is you should be buying more flowers for your wife. I think that's a great idea. All right. Well, thank you very much. Thank you for having me. Thanks for listening to this episode of the A16Z podcast. If you like this episode, be sure to like, comment, subscribe, leave us a rating or review and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts and Spotify. Follow us on X at A16Z and subscribe to our substack at A16Z.substack.com. Thanks again for listening and I'll see you in the next episode. As a reminder, the content here is for informational purposes only. 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