Mahmoud Abdelkader, CEO of VGS, explains how AI agents are poised to transform how consumers interact with payment systems and merchants. He highlights the development of new 'agentic tokens' by card networks to enable secure AI transactions while preserving existing consumer protections.
Abdelkader also details how AI agents could disrupt established business models, particularly by optimizing consumer benefits and challenging traditional 'breakage models' in areas like credit card rewards. These Big Ideas are drawn from Mahmoud Abdelkader's interview on a16z.
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AI agents disrupting 'breakage models'. AI agents will thoroughly understand the terms and conditions of various offers and programs, disrupting 'breakage models' in commerce. Mahmoud Abdelkader notes that if agents consistently ensure consumers use the optimal card for points, the entire reward ecosystem, where consumers often fail to maximize benefits, could be undermined.
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New 'agentic tokens' for secure AI transactions. Card networks are introducing 'agentic tokens' as a new standard to enable secure payment credential transfer from digital wallets to AI agents. This ensures that the consumer's card is charged while preserving all existing rules for chargebacks and follow-on transactions. The goal is to integrate AI agent capabilities with current financial infrastructure securely.
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Merchant strategies for agentic commerce. Merchants will likely adopt diverse strategies towards agentic commerce. Companies like Amazon, which rely on advertising revenue from direct consumer engagement, may be antagonistic as agents bypass traditional ad placements. Conversely, smaller businesses, particularly those under platforms like Shopify, might be highly receptive, viewing agentic commerce as a new and vital sales channel.
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VGS's evolution: from vault to network broker. Mahmoud Abdelkader, CEO of VGS, describes the company's evolution through three overlapping phases. Initially, VGS served as a trusted vault for storing credentials. The second phase focused on managing the flow of information into and out of this vault. The current, third era positions VGS as a network that brokers credentials among various parties, including working with banks on tokenization.
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Crypto's lack of chargeback mechanisms. Unlike traditional card networks that offer chargeback protections, crypto transactions function as 'bearer instruments,' meaning payments are generally irreversible. This absence of a built-in trust mechanism can be a significant drawback for consumers, particularly if purchased goods or services are not delivered or are faulty, as Mahmoud Abdelkader points out.
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Asymmetry drives early AI agent benefits. Mahmoud Abdelkader notes that many initial consumer benefits from AI agents, particularly in saving money, stem from an inherent asymmetry. A small number of users currently employ these tools, and the merchants or counterparties involved in transactions are often unaware that an AI agent is being used to optimize outcomes.